THE POWERS AND JURISDICTION OF ARBITRAL TRIBUNALS TO ORDER INTERIM MEASURES OF PROTECTION

THE POWERS AND JURISDICTION OF ARBITRAL TRIBUNALS TO ORDER INTERIM MEASURES OF PROTECTION IN INTERNATIONAL COMMERCIAL ARBITRATION

By: Mofesomo Tayo-Oyetibo

Supervisor: Jonathan Hill Word count: 11, 877 A dissertation submitted to the University of Bristol in accordance with the requirements of the degree of Master of Law by advanced study in LLM in Commercial Law in the Faculty of Social Sciences and Law.

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ABSTRACT The reliance on international commercial arbitration as the preferred dispute resolution vehicle in international disputes means that the examination of certain elements within the international arbitration process is now important. This dissertation is concerned with the powers and jurisdiction of arbitral tribunals to order interim measures of protection in international commercial arbitration.

Bucking the historical trend of allowing arbitral tribunals little or no powers to order interim measures of protection, the jurisdiction of tribunals is now commonplace in many international arbitration systems.

The principal source of the authority of arbitral tribunals to order interim measures of protection which is the agreement of the parties is critically examined in light of arguments to the effect that the lex arbitri is the answer to the question of where the authority of arbitral tribunals to order interim measures of protection originates. The limitations which exist and may potentially operate to limit the authority of arbitral tribunals to order interim measures of protection are also discussed. Some limitations are absolute like where the agreement of the parties or the lex arbitri expressly forbids the arbitral tribunal from ordering interim measures while some others put the arbitral tribunal in a position where proceeding to order interim measures will be a fruitless exercise, like where there is potentially no scope for enforcement.

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I declare that the work in this dissertation was carried out in accordance with the requirements of the University’s Regulations and Code of Practice for Taught Postgraduate Programmes and that it has not been submitted for any other academic award. Except where indicated by specific reference in the text, this work is my own work. Work done in collaboration with, or with the assistance of others, is indicated as such. I have identified all material in this dissertation which is not my own work through appropriate referencing and acknowledgement. Where I have quoted from the work of others, I have included the source in the references/bibliography. Any views expressed in the dissertation are those of the author.

SIGNED: MOFESOMO TAYO-OYETIBO DATE: 13/09/2013

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INTRODUCTION Several reasons may exist for why parties agree to refer their disputes to international commercial arbitration. These reasons may range from the parties wanting a hand-picked and experienced tribunal to adjudicate their differences, to avoiding the publicity accompanying court proceedings which could damage one or both of the parties’ commercial interests 1. Whatever the reason may be, it has been documented that the usual expectation of the parties will be for their disputes to be settled within the singular forum of international commercial arbitration 2. Before this expectation of the parties can be actualized in the form of a final award by the arbitral tribunal, there will in many cases be a need for either elements material to the resolution of the dispute or the rights of the parties to be safeguarded.

Cue the need for interim measures of protection. Such measures are engineered to protect the rights and interests of the party in whose favour the measures are made 3 and to also preserve the integrity of the arbitral process4.

Interim measures of protection in international commercial arbitration have been described as ‘the tools to preserve and ensure the usefulness of arbitration’ 5. These measures of protection have also been judicially recognised as those ‘intended to preserve a factual or legal situation so as to safeguard rights the recognition of which is sought from the tribunal having jurisdiction as to the substance of the case’6. The essential effect of interim measures of protection is to reallocate the risk in the dispute

1 Redfern (1995) 72 2 Redfern (1995) 72 3 Runeland and Blanke (2007) 189 4 Born (2012) 203 5 Adhipathi (2003) 4 6 Case C-391/95 Van Uden Maritime BV v. Kommanditgesellschaft in Firma Deco-Line, [1998] ECR I-7091, para 7133

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between the parties by transferring it either entirely or otherwise from the party applying for the interim measures of protection to the other party to the dispute 7.

Generally, the processes and procedures of litigation in traditional legal systems are founded on the fundamental doctrine of fair hearing and several rules and safeguards usually exist to guarantee that the parties involved are given the opportunity to be heard 8. Consequently, inordinate delays inevitably creep into the system; thereby prolonging the time it takes for the courts to determine disputes between parties. Furthermore, it is not uncommon for such delays to prejudice and cause irreparable damage to the rights of one party. 9 For example, a party to an action may after the commencement of the action, realise or believe that any decision which will be rendered at the determination of the proceedings will be unfavourable to his interests and therefore proceed cynically to dissipate his assets.

In the same vein, crucial evidence could be tampered with or even destroyed beyond restoration, with the effect of adversely affecting or even terminating the chances of the other party to the proceedings.

The reasons why the above circumstances will be of genuine concern to the other party to the proceedings are apparent. These reasons have led to interim measures of protection being described as possibly being ‘more important’ 10 than the final award. It is respectfully submitted that while they may not always be more important than the final award, they will usually always be ‘as important’ as the final award. This is because where an interim measure of protection is secured by a party, the measure may on its own have the consequence of conclusively determining an issue between the parties irretrievably. For example, where an interim measure of protection is ordered to freeze the bank account or arrest the vessel of a party with limited financial strength, such a party will come under 7 Lew (2003) 586 8 Born (2001) 920 9 Born (2001) 920

10 Hartley (1999) 674 5

pressure as a direct consequence of the order. The pressure exerted on the party subject to the order may compel it to agree to a settlement on terms which it may ordinarily not have accepted in the absence of the order11.

Chapter One of this paper discusses the actual source of the powers of arbitral tribunals to order interim measures of protection in international commercial arbitration. Some commentators differ on what the actual root source of this authority of arbitral tribunals to order interim measures of protection is, but the general consensus is that for a determination of the source of such authority the agreement of the parties, the lex arbitri and any applicable arbitration rules are to be primarily examined 12.

Chapter Two considers the potential limitations to the powers of arbitral tribunals to order interim measures of protection in international commercial arbitration. While some of such limitations are inherent in the nature and practice of international arbitration, the fact that in many cases, tribunal ordered interim measures or relief will face potentially insurmountable enforcement difficulties is examined.

Chapter Three discusses the need for the protection of party rights in international commercial arbitration and also the types of interim measures of protection typically available from arbitral tribunal.

It identifies the need for the consensual jurisdiction bestowed upon the arbitral tribunal not to be eroded by either of the parties or external factors prior to the final determination of the disputes by the tribunal.

11 Lew (2003) 622 12 Born (2011) 814

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CHAPTER 1 1.0

Introduction

In international commercial arbitration, with regard specifically to interim measures of protection, the granting of such measures will generally be available through either the arbitral tribunal or the courts or both forums where there is concurrent jurisdiction. A significant thread that runs through several sources of international commercial arbitration conventions, laws and rules is that there is a general recognition of the existence of a concurrent jurisdiction; where both the arbitral tribunal and the courts are empowered to order interim measures of protection 13.

The fundamental principle of party autonomy in international commercial arbitration allows for a situation in which parties to the arbitration will in many cases, be in a position to choose between approaching the arbitral tribunal or the courts. However, this chapter specifically and critically examines the issues concerning the powers and jurisdiction of arbitral tribunals to order interim measures of protection in international commercial arbitration. The powers and jurisdiction of arbitral tribunals to order interim measures of protection is considered against the backdrop of the agreement of the parties, the lex arbitri and international arbitration rules. This chapter aims to unequivocally establish 13Gaillard and Savage (1999) 711

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the fundamental role that the agreement of the parties has to play as a source from which the powers and jurisdiction of arbitral tribunals to order interim measures of protection are derived. In the current sphere of international commercial arbitration, the powers and jurisdiction of arbitral tribunals to order interim measures of protection is seemingly assured as a result of an identification of the need for arbitral tribunals to be able guarantee the integrity of the arbitral process or protect the rights of the parties concerned.

1.1

The Source of the Powers And Jurisdiction Of Arbitral Tribunals To Order Interim Measures Of

Protection The question of whether an arbitral tribunal has the power and jurisdiction to order interim measures of protection will always be of significance to parties to the arbitration. Therefore, where a party to an international commercial arbitration seeks to determine the status of the arbitral tribunal’s powers and jurisdiction with regard to ordering interim measures of protection in support of the arbitration, three main sources will be of relevance. According to Born, these sources are; applicable international arbitration conventions, chiefly the New York Convention, the applicable national law and the parties' arbitration agreement which in many cases leads to any relevant institutional arbitration rules that may have been incorporated14.

1.1.1

Arbitration Agreement

The logical genesis for any examination of the powers and jurisdiction of international commercial arbitral tribunals to order interim measures of protection should be the agreement of the parties to refer their disputes to international commercial arbitration. This is because the entire process of international commercial arbitration including all the applicable laws, rules and procedures stems out of

14 Born (2011) 814

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the exercise of the party autonomy principle which is the principal pillar of the international commercial arbitration process15.

Generally and also advisably, arbitration clauses which refer future disputes to international commercial arbitration are often concise and do not aim to provide specifically for all facets of the arbitration or all conceivable circumstances. To place the agreement of parties to refer their international commercial disputes in international commercial arbitration in proper context with regard to interim measures of protection, arbitration clauses that are typically obtainable in practice will be considered. This is because a review of the default or template arbitration clauses contained in major ad hoc and institutional arbitration rules buttresses the aforementioned point on the general purport of arbitration clauses. For example, the International Chamber of Commerce (“ICC”) has a basic model arbitration clause which states in its entirety that: All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules Similarly, the London Court of International Arbitration (“LCIA”) recommends the following as a model arbitration clause: Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause

15 Boog (2010) 416

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Likewise, The UNCITRAL Arbitration Rules provides in its Annex that: Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules The above provisions indicate that typical international arbitration clauses in their practical simplicity will not usually expressly provide for the powers or jurisdiction of arbitral tribunals to order interim measures of protection16 or in fact provide specifically for any other procedural powers.

Notwithstanding this, it is submitted that the agreement of the parties to submit their disputes to international commercial arbitration is the foundational basis and source of the powers and jurisdiction that arbitral tribunals possess to order interim measures of protection. The reason for this submission is that what is majorly obtainable in the practice of international commercial arbitration is for arbitration agreements to incorporate either ad hoc or institutional international commercial arbitration rules 17 which are to guide the practice and procedures of the arbitration process. The significance of this contractual incorporation to the agreement of the parties as a source of the powers and jurisdiction of arbitral tribunals to order interim measures of protection is the fact that pursuant to a pro-arbitration rationale, the major ad hoc and institutional international arbitration rules expressly provide for the powers and jurisdiction of arbitral tribunals to order interim measures of protection.

In the context of arbitral tribunals deriving their powers and jurisdiction from the agreement of the parties, the lex arbitri may also be of significance. This is because the question of whether or not an arbitral tribunal has the powers and jurisdiction to order interim measures of protection is determined

16 Yesilirmak (2005) 55 17 Boog (2010) 416

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according to the provisions of lex arbitri18. Notwithstanding this, it is submitted that this fact does not in any way controvert the position of the agreement of the parties pursuant to the party autonomy principle, as the fundamental basis for the powers and jurisdiction of arbitral tribunals to order interim measures of protection in international commercial arbitration. This is because before the dispute resolution process even begins and before the examination of the provisions of the lex arbitri to determine whether or not, or to what extent it permits arbitral tribunals to order interim measures of protection, the agreement of the parties will presumably be in existence. It is this agreement of the parties that dictates what the lex arbitri will be, by reflecting the intention of the parties to submit their international commercial arbitration to the law of the jurisdiction to which the lex arbitri applies, therefore making its provisions on the powers of arbitral tribunals to order interim measures applicable to the arbitration.

There is legal commentary of sceptical persuasion with regards to the preceding interpretation of the party autonomy principle in the sense that it is the bedrock of the powers and jurisdiction of arbitral tribunals to order interim measures of protection. For example, Karrer contends that the above interpretation of the party autonomy principle is one that contains only ‘a grain of truth’ 19 as it is an extensive and overly liberal interpretation of the party autonomy principle. He further contends that regardless of how liberally party autonomy is exercised, either expressly or indirectly through international arbitration rules, where the lex arbitri is restrictive in terms of its provisions as to the powers and jurisdiction of arbitral tribunals to order interim measures of protection, such liberal application of the party autonomy principle will ‘do no good’ 20.

18 Segesser and Boog (2013) 108 19 Karrer (2001) 99 20 Karrer (2001) 99

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Such a restrictive interpretation of the role of the agreement of the parties in determining the authority of arbitral tribunals to order interim measures of protection in international commercial arbitration can arguably be seen as one which overlooks the most significant aspect of the root of the authority of arbitral tribunals in this regard. When seeking the source of the powers of arbitral tribunals to order interim measures of protection in international commercial arbitration, an interpretation of the root of such powers which seeks to absolutely prioritise the lex arbitri over the agreement of the parties is one that gives little credence to the fact that it is the agreement of the parties through party autonomy that makes the lex arbitri even relevant at all. In international commercial arbitration parties will always through party autonomy, be at liberty to agree on the lex arbitri presumably with the provisions of such law in mind, including those that stipulate the powers and jurisdiction of arbitral tribunals to order interim measures of protection.

Where parties to an international commercial arbitration feel the provisions of any lex arbitri are unsuitable for their intentions and purpose regarding the powers of arbitral tribunals to order interim measures of protection, it is certainly conceivable that they will resort to agreeing on another more suitable lex arbitri as applying to their international arbitration. Boog supports the foregoing submissions as he is of the opinion that the author’s liberal interpretation of the party autonomy principle as above is the ‘prevailing view among commentators’. 21 Redfern and Hunter have also commented that the best approach to determining the powers and jurisdiction of an arbitral tribunal to order interim measures of protection is to look first at the arbitration agreement 22. The provisions of the lex arbitri on the powers and jurisdiction of arbitral tribunals in international commercial arbitration are certainly of great importance but the role of the agreement of the parties must crucially, not be relegated in this regard. The fact that the mandatory provisions of the lex arbitri take pre-eminence 21 Boog (2010) 412 22 Redfern and hunter (2009) 317

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when the arbitration commences must not be seen as operating to erode role of the agreement of the parties as the origin of the powers and jurisdiction of arbitral tribunals to order interim measures of protection.

1.1.2

Applicable National Law

In international commercial arbitration, where the parties have exercised their liberty under the principle of party autonomy to agree on the lex arbitri that will be applicable to the arbitration, the question of whether the arbitral tribunal can order interim measures of protection will have its answers mainly in the applicable law. 23 The impact of the provisions of the applicable law on the powers and jurisdiction of the arbitral tribunal to order interim measures of protection is crucial and can be determinant. This is because where by the agreement of the parties to the arbitration, the lex arbitri becomes applicable, it could be said that the fundamental role of the arbitration agreement as a source of the powers and jurisdiction of the arbitral tribunal to order interim measures of protection becomes subordinated and subject to the provisions of the lex arbitri. This is because regardless of the agreement and intention of the parties, where the relevant applicable law restrains or prohibits arbitral tribunals from ordering interim measures of protection, they will usually be loath to doing so 24. The reason for this is the fact that a national court will generally not enforce an interim measure ordered by an arbitral tribunal where that tribunal has been precluded by the provisions of the applicable law from having the powers and jurisdiction to make such an order and the tribunal proceeds ultra vires to make the order25.

Therefore international arbitral tribunals to the extent possible generally tend comply with the provisions of the applicable law with regard to their authority to order interim measures of protection 26.

23 Born (2012) 203 24 Born (2012) 205 25 Born (2012) 203 26 Yesilirmak (2005) 60

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Historically the powers and jurisdiction to order interim measures of protection in international commercial arbitration were widely exclusive to the courts or the powers of arbitral tribunals to order interim measures of protection severely restricted 27. Several reasons have been put forward as the cause of this historical court centric stance on the issuance of interim measures of protection in international commercial arbitration. One of such reasons is that national courts were assertive of their powers and jurisdiction over the dispute resolution process and the parties to the process before reaching a decision on the merits; this was considered an exclusive sovereign power 28. The practical issues inherent in ex parte applications and proceedings were also regarded as a concern and justification for favouring the exclusive of dominant powers and jurisdiction of national courts to order interim measures of protection.

A third reason and one that Born describes as a rationale that was ‘manifestly unsatisfactory’ 29 is that interim measures of protection are coercive measures and arbitral tribunals unlike national courts are not empowered to issue coercive measures. He agreeably argues that the issuance of interim measures of protection by an arbitral tribunal through an order or interim award which is directed at a party is no exercise of greater coercive authority than the rendering of a final award granting an injunctive relief. In practical terms, the purport of either an interim order of injunction or a final award granting an injunctive relief is to direct the party subject to the order to carry out or refrain from carrying out certain actions. In neither situation does the arbitral tribunal posses the authority to compel the party subject to either type of order to carry out the order without the assistance of the courts. Born concludes that this third reason for the prejudice against the powers and jurisdiction of arbitral tribunals to order

27 Karrer (2001) 97 28 Lew (2003) 588 29 Born (2009) 1950

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interim measures of protection is one that was founded on a ‘faulty characterisation’ 30 of the actual nature of such orders. This conclusion is certainly agreeable, as in the context of compelling a party subject to a decision of an arbitral tribunal to carry out the directions of the decision; it is difficult to contemplate a situation where an order for an interim measure of protection bears more coercive characteristics than a final award. Final awards in many cases will be decided one way or the other between the parties and will contain orders which will be required to be carried out. The distinction between coerciveness of orders for interim relief and final awards as a justification for the historical preclusion of arbitral tribunals from ordering interim measures of protection in international commercial arbitration is therefore one that is certainly suspect and consequently unjustifiable on this premise.

Maintaining the historical disdain for the devolution of the powers and jurisdiction to order interim measures of protection to arbitral tribunals in international commercial arbitration, certain jurisdictions still reserve the powers and jurisdiction to grant interim measures of protection exclusively to the courts thereby prohibiting arbitral tribunals from exercising such jurisdiction or powers. For example domestic arbitration laws in Argentina, Greece and Finland have been identified as having express provisions to this effect31. Also an arbitration law that is of similar effect and has been described as the ‘only major arbitration system today that prohibits such jurisdiction’ 32 is the Italian arbitration system as per the Italian Code of Civil Procedure. Until recently, an arbitration system in another jurisdiction that can be considered as ‘major’ also expressly prohibited arbitral tribunals from ordering or granting interim measures of protection, with only the courts being empowered to do so. This was the Inter-cantonal

30 Born (2009) 1950 31 Karrer (2001) 97 32 Landolt and Neal (2011) 670

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Concordat in Switzerland until it was repealed in 2011 by the Swiss Code of Civil Procedure which now allows for interim measures of protection to be ordered by arbitral tribunals.

This change in mentality and legislation in Switzerland is a prime example of the prevalent trend in international commercial arbitration with specific regard to interim measures of protection. In line with this trend, there is commentary suggesting that in situations where parties agree to have their disputes resolved and finally settled through international commercial arbitration, the widely accepted position in international dispute resolution is that the arbitral tribunal is the natural forum for interim measures of protection to be sought and granted 33. This is as over the last few decades the arbitration systems in several and the most developed jurisdictions have jettisoned the historic rejection of the powers and jurisdiction of arbitral tribunals to order interim measures of protection in international commercial arbitration34 in favour of more liberal structures.

For example the initial 1985 provision of Article 17 of the Model Law provided that: Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute This provision is still significantly relevant in international commercial arbitration today. This is because as earlier stated, according to UNCITRAL as many as 66 countries have relied on its provisions in the legislation of their lex arbitri35. While the 2006 revisions to the law are also significant in today’s practice

33 Yesilirmak (2005) 49 34 Born (2009) 1951 35 UNCITRAL Website: http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html

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and jurisprudence of international commercial arbitration it is pertinent to note that the fact that the 2006 version of the law as at 2011 had not been incorporated by any jurisdiction 36 makes the original version highly relevant in practice.

This original provision while expressly recognising the powers and jurisdiction of arbitral tribunals to order interim measures of protection has been described as being restrictive of those same powers 37 as a result of the interpretations it has been given in practice. This is because of the caveat that any such measure must be ‘necessary’ and ‘in respect of the subject matter of the dispute’. This restrictiveness is seen as arguably operating to exclude arbitral tribunals from ordering interim measures seeking to preserve evidence necessary for or relevant to the adjudication of the dispute on its merits 38.

Born argues that this original text of Article 17 ought not to be restrictively construed and permits an arbitral tribunal to order any interim measures it believes to be ‘necessary’ as long as such measures can reasonably be related to the subject matter of the dispute 39. It is submitted that while Born’s interpretation may be according to the spirit of the provisions of Article 17, the cautionary interpretation given to the provision by arbitral tribunals may be hinged on the fact that a broad interpretation of what constitutes the “subject matter” could lead to a scenario in which arbitral tribunals define the term in an all-encompassing manner to include things which fall outside the scope of the dispute40. When it is remembered that the brief of the arbitral tribunal is limited to the disputes referred to it by the parties, a liberal interpretation of Article 17 which goes beyond the scope of the subject matter of the dispute will invariably lead to the arbitral tribunal making an order for an interim 36 Born (2011) 838 37 Born (2012) 204 38 Landholt and Neal (2011) 671 39 Born (2009) 1953 40 Huntley (2005) 78

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measure ultra vires its powers and jurisdiction- an outcome which runs contrary to the consensual nature of arbitration.

Notwithstanding the foregoing, it is respectfully submitted that even with the old Article 17 possessing wordings that could operate to restrict the practical exercise of the powers of arbitral tribunals to order interim measures of protection, the fact that it provided for express the express authority of arbitral tribunals to order such measures must be construed as a liberal step forward in light of the general historical disposition.

The 2006 revisions to Article 17 of the Model Law means that Article 17(1) now provides that ‘Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures’. This provision has been described as having the effect of broadening the jurisdiction of arbitral tribunals in international commercial arbitration with regard to interim measures of protection 41 and according to Born is proof that the original provision should be given a more liberal interpretation 42 rather than one which seeks to limit its scope. The provision still possesses the ‘opt out’43 character of the former Article 17 and operates to automatically confer the powers and jurisdiction to order interim measures of protection on the arbitral tribunal unless the parties expressly agree otherwise. Article 17(2) dictates the categories of interim measures available to arbitral tribunals in international commercial arbitration by providing for a closed list of four categories of interim measures available to an arbitral tribunal in international commercial arbitration; (2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the 41 Landholt and Neal (2011) 671 42 Born (2009) 1953 43 Graham (2009) 547

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award by which the dispute is finally decided, the arbitral tribunal orders a party to: (a) Maintain or restore the status quo pending determination of the dispute; (b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or (d) Preserve evidence that may be relevant and material to the resolution of the dispute.

These categories aim to legislate for every conceivable circumstance in which such measures will be required in international commercial arbitration 44. While the wording of Article 17(2) is seemingly boundless, this is not necessarily the case as for any interim measure of protection ordered by an arbitral tribunal to be valid under the provision it must be one that is classifiable under one of the categories provided45. It is also noteworthy and welcome that this provision in subsection (d) provides for the preservation of evidence that may be relevant and material to the dispute to remedy the fact that under the former Article 17, arguments in practice frequently hinged on whether certain evidence was necessary in respect of the subject matter of the dispute 46.

Legislating for the powers and jurisdiction of arbitral tribunals to order interim measures of protection the UK Arbitration Act 1996 in Section 39(1) provides that ‘The parties are free to agree that the tribunal shall have power to order on a provisional basis any relief which it would have power to grant in a final award’. Further to this, Subsection (4) of the same section provides that ‘Unless the parties agree to 44 Graham (2009) 550 45 Landholt and Neal (2011) 672 46 Landholt and Neal (2011) 672

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confer such power on the tribunal, the tribunal has no such power’. The purport of these sections is to clothe the arbitral tribunal with the powers and jurisdiction to order interim measures of protection where the parties so agree. Under this law, while the power to order such measures is vested in the tribunal by these provisions, the implication of subsection (4) is that the agreement of the parties is required to trigger subsection (1). For the provisions of the Act empowering the arbitral tribunal to order interim measures of protection to be activated and become applicable, the parties are required to exercise by agreement, their liberty under the party autonomy principle. This is unlike the position under the Article 17 of the Model Law which requires the exercise of the freedom afforded by party autonomy in the reverse, for the purpose of stripping the arbitral tribunal of its automatic powers and jurisdiction and foreclosing it from ordering any interim measures of protection.

The fact that Section 39 requires the trigger of the agreement of the parties to come into effect has led to the provisions being described as less desirable than that of the Model Law 47. It is respectfully submitted that this particular criticism of the Arbitration Act is largely inconsequential from a practical point of view. This is because in the practice of international commercial arbitration, clauses and agreements typically incorporate institutional or ad hoc arbitration rules, provisions of which are deemed to form part of the agreement of the parties 48 and most of which now invariably provide for the powers of arbitral tribunals to order interim measures of protection. For instance, the LCIA, ICC and UNCITRAL arbitration rules expressly provide in Articles 25, 28 and 26 respectively for arbitral tribunals to have the authority to order interim measures of protection and they will be sufficient to trigger the application of Section 39 of the Arbitration Act thereby empowering an arbitral tribunal to order interim measures of protection.

47 Born (2009) 1957 48 Boog (2010) 416

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A somewhat different arbitration system may be found in the United States where the Federal Arbitration Act (“FAA�) has been identified as not containing any specific provisions which expressly empower arbitral tribunals to order interim measures of protection in support of international commercial arbitration49. An interpretation of the FAA may suggest that prima facie, arbitral tribunals do not have the powers and jurisdiction to order interim measures of protection in international commercial arbitration where the FAA is the applicable law. However, in practice, this suggestion has not proven to necessarily be the case. According to Born, US courts have recognised the power of arbitral tribunals to order interim measures of protection where the FAA is the applicable law 50 with the position therefore being that even as the Act does not legislate on the powers and jurisdiction of arbitral tribunals to order interim measures of protection, unless the parties agree to the contrary, the tribunal will be in a position to order interim measures.

An illustration of this can be found in the United States Court of Appeals, Sixth Circuit decision in Island Creek Coal Sales Company v City of Gainesville, Florida 51 where it was held that the determination of whether an arbitral tribunal has the authority to order interim injunctive relief depends on an examination of the agreement of the parties to determine the remedial powers the agreement confers on the arbitral tribunal in respect of the arbitration. It was further held that unless the agreement of the parties expressly prevents the arbitral tribunal from ordering interim measures, an arbitral tribunal which proceeds to order such measures will not have exceeded its authority 52. It has been documented that this interpretation of the powers of arbitral tribunals to order interim measures of protection is

49 Waincymer (2012) 646 50 Born (2011) 817 51 729 F.2d 1046 52 At Para. 11

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certainly consistent with the fundamental principle of the FAA which is that arbitration agreements are enforceable53.

1.1.3

International Arbitration Rules

As previously identified, the foundational source of the powers and jurisdiction of arbitral tribunals to order interim measures of protection which is the express agreement of the parties through an arbitration agreement, will rarely explicitly dictate the powers of tribunals to order interim measures. It is pursuant to this fact that ad hoc and institutional international arbitration rules become important in the context of providing a source of powers and jurisdiction of arbitral tribunals to order interim measures of protection.

As a source of powers and jurisdiction of arbitral tribunals to order interim measures of protection, arbitration rules almost invariably and in generally liberal terms provide for arbitral tribunals to have the authority to make interim orders54. As already identified; the LCIA, ICC and UNCITRAL Arbitration Rules are international commercial arbitration rules which fall into the category of rules which do so. For example Article 28(1) of the ICC Arbitration Rules provides that: Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the arbitral tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The arbitral tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an award, as the arbitral tribunal considers appropriate 53 Born (2011) 817 54 Born (2009) 1958

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The China International Economic and Trade Arbitration Commission (“CIETAC�) Arbitration Rules is similarly noteworthy as it now falls into the category of arbitration rules that expressly provides for the powers of arbitral tribunals to order interim measures of protection. The CIETAC rules previously provided in Article 23 that arbitral tribunals could not order interim measures of protection but the position is now different as after the 2012 revision of the rules, Article 21 allows arbitral tribunals to order interim measures of protection by providing in subparagraph (2) that: At the request of a party, the arbitral tribunal may order any interim measure it deems necessary or proper in accordance with the applicable law The foregoing provisions show that the leading arbitration rules typically specifically provide for the powers and jurisdiction of arbitral tribunals to order interim measures of protection with deference usually given to the express agreement of the parties and the mandatory provisions of any applicable law. Where the applicable law is permissive of the powers and jurisdiction of arbitral tribunals to order interim measures of protection the case will usually be that under the major ad hoc or institutional international arbitration rules, bar any negative stipulations contained in the agreement of the parties, the arbitral tribunal will be empowered to order interim measures of protection 55.

The effect of this is therefore that international arbitration rules through the agreement of the parties will usually readily be a source of rather liberal powers and jurisdiction for arbitral tribunals to order interim measures of protection. In the practice of international commercial arbitration this conclusion has been acceptable to national courts. An illustration of this may be found in the decision of a US District Court in Maine in the case of Baychar Inc v Frisby Technologies Inc 56. In this case the applicant’s application for a preliminary injunction concerning the infringement of patented technology in footwear 55 Born (2009) 1961 56 01-CV-28-B-S (2001)

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apparel was rejected. This was because the court held that the arbitral tribunal which was operating pursuant to the American Arbitration Association Arbitration Rules had the authority to order the preliminary relief sought. The court in this case was readily disposed to recognising the powers and jurisdiction of the arbitral tribunal to order interim measures of protection in the form of a preliminary injunctive relief pursuant to the provisions of the relevant arbitration rules by refraining from granting the application which would in those circumstances essentially have taken away the authority of the arbitral tribunal to do so effectively or usefully under the arbitration rules.

1.1.4

Implied Powers

In addition to the foregoing, there is commentary which suggests that an arbitral tribunal may posses implied powers and jurisdiction to order interim measures of protection in circumstances where neither the applicable law nor the relevant arbitration rules provide for such powers and jurisdiction. Lew is of the opinion that where the laws or rules do not expressly provide for or exclude the powers of arbitral tribunals to order interim measures of protection, through the arbitration agreement the parties have vested the powers necessary to settle their dispute in the tribunal. He goes further to state that this includes the power to order any interim measures of protection necessary for the safeguarding of the rights of the parties and the effectiveness of the tribunal's decision making 57. Yesilirmak is also of this point of view as he has opined that the powers and jurisdiction of arbitral tribunals to grant interim measures derive from implied powers entrusted to arbitrators as the organ entrusted with the resolution of a dispute58. The fact that this implied source of authority is inferred and is not a product of express statutory or contractual stipulations, means that if it is considered as a source of the powers of arbitral tribunals to order interim measures of protection, it should be considered as subordinate to the

57 Lew (2003) 594 58 Yesilirmak (2005) 56

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other sources of authority. Also, enforcement issues may arise where an arbitral tribunal orders interim measures of protection based on this implied jurisdiction.

Born points out that in the US, with only little case law on this point, the lower courts have generally been disposed to recognising and enforcing interim measures ordered by the arbitral tribunal where called upon to do so59. In light of the fact that the FAA is silent on the jurisdiction of arbitral tribunals to order interim measures of protection, the attitude of the lower US courts in the few cases may possibly be instructive on how to proceed where arbitral tribunals order interim measures of protection pursuant to implied powers and jurisdiction. However, whether this disposition to recognise and enforce arbitral tribunal ordered interim measures of protection in cases where the jurisdiction to do so is impliedly derived will reverberate beyond US jurisprudence is left to be seen. This is as a result of the dearth of authorities on this particular point and the fact that in many cases, either through the lex arbitri or arbitration agreements which generally incorporate international arbitration rules, the powers and jurisdiction of arbitral tribunals to order interim measures of protection will usually be expressly provided for.

CHAPTER 2 2.0Introduction 59 Born (2011) 844

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Sequel to identifying the fact that due to laws and rules which confer a wide discretion and powers, in the current international commercial arbitration climate arbitral tribunals can and will usually be empowered to order interim measures of protection, this chapter importantly examines the limits of those powers and jurisdiction of arbitral tribunals. With regard to interim measures of protection in international commercial arbitration, the powers of arbitral tribunals are subject to several limitations.

Some of such limitations are inherent in the nature of the arbitral process and as a result should be regarded as an inalienable part of the process. One of such limitations is that which may become operative upon the agreement of the parties. On the other hand, there is also a limitation which is external to the arbitration process itself but is derived from a lack of recognition of interim measures of protection by the New York Conversion.

2.1Limits To The Exercise Of Powers Of Powers And Jurisdiction By Arbitral Tribunal To Order Interim Measures Of Protection Some of the limits to the powers of arbitral tribunals to order interim measures of protection have been described as being in many ways down to the principle of party autonomy being the bedrock of the arbitral process. Lew points out that one of the basic limits to the powers and jurisdiction of arbitral tribunals to order interim measures of protection is the manner in which the powers are originally derived; the agreement of the parties. He argues that the consensual nature of the authority of the arbitral tribunal has the consequent effect of precluding the tribunal from ordering acts to be performed or cease to be performed by third parties who are not parties to the arbitration 60 and therefore not subject to the jurisdiction of the tribunal. It has been noted that the globalisation of trade and commerce as well as multi-site and multi-party manufacturing processes, increased foreign investment and complex corporate group structures means that in many cases there are now a significant number 60 Lew (2003) 594

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of commercial activities that inevitably involve the activities of more than two parties 61. This multi faceted characteristic of modern international trade brings forth a key limitation as it is presumable that an arbitral tribunal will not proceed to make an interim order of protection purporting to bind a third party entity not subject to its jurisdiction even where such an entity is seemingly very influential in the subject matter of the dispute . For example, ordering the attachment of or dealing with property held or owned by a third party62.

However, a way around the fact that arbitral tribunals can not compel compliance by third parties may be for the tribunal to make interim protective orders which affect and are contractually binding on a party to the proceedings with regard to his acts or omissions in connection with any relevant third party.

The fact that the arbitral tribunal is unable to persuasively oblige a third party to carry out certain acts or desist from performing certain acts should not operate to blind the tribunal from the fact that it nevertheless possesses a measure of control over the actual parties to the arbitration.

Also stemming from the argument that the powers and jurisdiction of the arbitral tribunal may be limited by the consensual nature of the parties’ agreement is the fact that the parties may agree to preclude the tribunal from ordering interim measures of protection. This is reinforced by the fact that the applicable law may also contain provisions (as Article 17 of the Model Law does) which allow the parties to do so. It has already been emphasised that the genesis of the powers of arbitral tribunals to order interim measures of protection is the agreement of the parties pursuant to the principle of party autonomy. Therefore it is clear that where such agreement serves to foreclose the powers and jurisdiction of an arbitral tribunal to order interim measures of protection there will usually be no way around the agreement. The position may however be different in a situation where the applicable law

61 Waincymer (2012) 502 62 Born (2012) 206

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mandatorily provides for the powers and jurisdiction of the arbitral tribunal to order interim measures of protection regardless of the agreement of the parties. In the course of the research for this paper no such law has been found. This is unsurprising as a lex arbitri which expressly provides for the powers of arbitral tribunals to order interim measures of protection regardless of the contrary agreement of the parties should be respectfully viewed as an anti-arbitration system. This conclusion is however not to state that such arbitration systems do not exist.

There is also the fact that the arbitral tribunal only exists and can only exercise powers and jurisdiction over the parties or the subject matter of the dispute after it is formed 63. This limitation is self evident as the tribunal will be unable to act until it is given life upon constitution. In ad hoc international commercial arbitrations this particular limitation may be construed as an absolute one as an arbitral tribunal which has not yet been constituted will invariably be completely powerless to render any form of assistance to the parties. In institutional arbitration, to remedy this, some arbitration institutions like the International Commercial Arbitration Court at the ICC provides an avenue for the interim protection of rights and the arbitration process before the constitution of the arbitral tribunal with the use of emergency procedures like the Pre-Arbitral Referee Procedure 64. However, even this remedy may itself be limited in its use and effectiveness as a result of several factors including the peculiar circumstances of each case, as some circumstances may not readily accommodate institutional emergency mechanisms. The provisions of the applicable law 65 will also be relevant as where the lex arbitri is unfavourable to such emergency mechanisms the efficacy of any interim measures of protection ordered pursuant to the emergency mechanisms will be questionable and possibly unenforceable. This particular limitation has crucial practical implications for parties to international commercial arbitration.

63 Lew (2003) 594 64 Dunmore (2012) 223 65 Yesilirmak (2005) 152

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This is because the process of constituting the arbitral tribunal can take weeks or in some cases months66 and in ad hoc international arbitration maybe an indeterminate amount of time for whatever reason. The party seeking protection in the arbitration proceedings will be constrained in the foregoing prevailing circumstances from seeking any form of interim measures of protection from the arbitral tribunal.

The consequence of the operation of the aforementioned limitations to the powers and jurisdiction of arbitral tribunals to order interim measures of protection is that the only recourse available to the parties in many if not all cases will invariably be to the courts 67. This is as a result of the fact that generally speaking, the powers and jurisdiction of arbitral tribunals to order interim measures of protection is not usually exclusive 68. This is because modern arbitration regimes around the world provide for a situation where arbitral tribunals enjoy powers and jurisdiction to grant interim measures running in parallel to those of the courts of the seat of the arbitration and indeed several cases, those of other courts69.

It is submitted that within that parallel jurisdiction is a further limitation to the powers and jurisdiction of the arbitral tribunal to order interim measures of protection in international commercial arbitration.

In many cases, even where the tribunal is constituted, a party may still approach the courts seeking interim measures of protection as the courts will have jurisdiction to grant them regardless of the stance of the tribunal. This may thereby create a situation where the court grants the application for interim measures and consequently fetters the powers and jurisdiction of the tribunal over the parties and the dispute. Also, the grant of an order for interim measures of protection by the court can operate to 66 Born (2011) 818 67 Yesilirmak (2005) 96 68 Poudret and Besson (2007) 525 69 Landolt and Neal (2011) 675

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pressure the party subject to the order to settle. In this situation, as the interim measure will be granted before the arbitration proceedings are concluded, where the party subject to the order accepts or proposes a settlement as a result of the court order, the integrity of the agreement of the parties to have their dispute settled by arbitration will have been compromised. The court order for interim measures of protection will have as a result of the settlement between the parties, effectively terminated the dispute resolution process, without giving the arbitral tribunal the opportunity to fully exercise its powers and jurisdiction over the parties by comprehensively adjudicating the dispute and rendering an award on the merits70.

In the United Kingdom, there are provisions within the Arbitration Act which may be seen as operating to preserve and protect the integrity of the powers and jurisdiction of the arbitral tribunal to order interim measures of protection. Section 44 of the Act provides that ‘Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders...as it has for the purposes of and in relation to legal proceedings’. This section preserves the jurisdiction of the court to order interim measures of protection, but as a non mandatory provision this section leaves open the option for the parties to oust the jurisdiction of the court in that regard 71.

Therefore in the UK, unless the parties exercise their power to by agreement expressly exclude the courts from ordering interim measures of protection, the courts will alongside the tribunal, have the jurisdiction to order such measures 72. As a result, an avenue for parties to circumvent this indirect limitation on the powers and jurisdiction of the arbitral tribunal is for them to exercise their powers available under Section 44 of the Arbitration Act and to by agreement confer exclusive jurisdiction on 70 Lew (2003) 622 71 Donovan (2005) 213

72 Donovan (2005) 213 30

the arbitral tribunal with respect to interim measures of protection. For example in Mantovani v Caparelli SpA73 the English Court of Appeal held that an arbitration agreement which stated that none of the parties were to ‘bring any action or other legal proceedings against the other of them in respect of any such dispute until such dispute shall first have been heard and determined by the arbitrators’ was sufficient to amount to an agreement to oust the jurisdiction of the courts under Section 44 pursuant to preserving the powers and jurisdiction of the arbitral tribunal to order the required interim measures of protection.

As a practical point, the question of whether the parties will want to by agreement entirely exclude the courts in light of the coercive judicial powers the courts have is one that will have to be balanced against the desire of the parties to have their disputes resolved exclusively in the forum of international commercial arbitration and one that can have serious consequences. An illustration of how this may unfold and be of critical importance in practice has been espoused by the UK House of Lords in the case of Channel Tunnel Group v. Balfour Beatty74 per Lord Mustill: There is always a tension when the court is asked to order, by way of interim relief in support of an arbitration, a remedy of the same kind as will ultimately be sought from the arbitrators: between, on the one hand, the need for the court to make a tentative assessment of the merits in order to decide whether the plaintiff's claim is strong enough to merit protection, and on the other the duty of the court to respect the choice of tribunal which both parties have made, and not to take out of the hands of the arbitrators (or other decision-makers) a power of decision which the parties have entrusted to them alone. In the present

73 [1980] 1 Lloyd's Rep 375 74 [1993] AC 334 (HL)

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instance I consider that the latter consideration must prevail... If the court now itself orders an interlocutory mandatory injunction, there will be very little left for the arbitrators to decide.75 This balancing act which the parties may be required to carry out is one with potentially strong implications. The reluctance of the House of Lords in the Channel Tunnel case to acquiesce to the application for interim relief on the basis of preserving the right of the arbitral tribunal to exercise its full powers and jurisdiction over the parties will undoubtedly put a party seeking interim relief but without a constituted tribunal to seek it from in a tight corner 76 especially in ad hoc international arbitration.

In Brazil there is judicial authority which upholds and preserves the agreement of the parties to have their dispute settled by the arbitral tribunal and also removes the potential for the powers and jurisdiction of the arbitral tribunal to order interim measures to be eroded through a party who approaches the court after the constitution of the arbitral tribunal. The Brazilian Superior Court of Justice in held in Itarumã Participações S.A. v Participações em Complexos Bioenergéticos 77 that from the point the arbitral tribunal is constituted, it has the exclusive jurisdiction to determine any issue referred to arbitration, including any appurtenant issue on the granting of any interim measures of protection 78.

Furthermore, the court held that the only situation in which the national courts in Brazil will have the jurisdiction to order interim measures of protection is in exceptional circumstances in which the arbitral tribunal is unable to do so79. This approach may be regarded as one that is welcome, in terms of maintaining the trend of strengthening and broadening the control that arbitral tribunals have over 75 Lord Mustill at page 367 76 Redfern (1995) 85 77 S.A. – PCBIOS, Resp no. 1,297,974-RJ

78

Stuber (2012) 173

79 Stuber (2012) 174

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parties and the disputes submitted to arbitration at least to the extent of limiting external judicial interference.

The final limitation on the powers and jurisdiction of arbitral tribunals to order interim measures of protection to be considered here is one that lies in the enforceability of those measures when granted by the tribunal. This issue of the enforcement of arbitral tribunal ordered interim measures of protection is arguably one that is more complex than the aforementioned limitations. The fact that arbitral tribunals can order interim measures of protection is seemingly inalienable, however when it comes to the enforcement of those measures there is generally no predominant authority 80.

In the practice of arbitration, enforcement has been described a perennial issue 81. In the context and practice of international commercial arbitration the issue of enforcement therefore becomes increasingly complex82. Several conclusions have been advanced by commentators as the reasons for the enforcement of interim measures of protection issued by arbitral tribunals in international commercial arbitration being a knotty issue.

Firstly, an arbitral tribunal ordinarily lacks the authority to directly enforce the interim measures of protection that it orders83. This is because in international commercial arbitration, interim measures of protection ordered by arbitral tribunals are not ‘self executing’ 84 in contrast with those which may be ordered by national courts that carry direct coercive authority, for example the imposition of fines, penalties or criminal sanctions85. This lack of coercive powers by international commercial arbitration 80 Dunmore (2012) 225 81 Bergqvist et al. (2009) 939 82 Bismuth (2009) 774 83 Born (2009) 1966 84 Bismuth (2009) 788 85 Born (2009) 1967

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tribunals carries with it the consequential effect that domestic court intervention and assistance 86 is required and the manner in which this may lead to a further limitation of the authority of the arbitral tribunal over the parties and the dispute has already been considered.

Also, it has been stated that there is generally a vacuum in connection with the regime for the enforcement of interim measures.87 The reason is because in many cases arbitration statutes and systems generally do not expressly provide for the judicial enforceability of interim measures of protection ordered by arbitral tribunals 88. More particularly, many national laws on arbitration fail to legislate for the recognition or enforcement of interim measures of protection ordered in the course of international arbitration proceedings outside their jurisdiction 89. In the cases where arbitration systems do manage to legislate for the enforcement of interim measures of protection ordered by arbitral tribunals, such provisions are usually then limited to the enforcement of only those measures ordered by arbitral tribunals which have their seat within the jurisdiction in which enforcement is sought 90. In those cases, this has been achieved by giving orders for interim measures the same legal effect as an arbitral award under the New York Convention or their own more liberal national laws 91. A more liberal and what may be considered a notable exception to the narrow scope of recognition and enforcement of arbitral tribunal ordered interim measures of protection may however be found in the German arbitration system. This system has been described as the only one to expressly provide for the

86 Bismuth (2009) 774 87 Graham (2009) 543 88 Born (2012) 211 89 Lew (2003) 614 90 Lew (2003) 612 91 Branson (2003) 172

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recognition and enforcement of interim measures of protection ordered by international arbitral tribunals seated in a foreign jurisdiction 92.

In addition to and in the context of the foregoing, there is also the position of interim measures of protection when considered in light of the New York Convention. The New York Convention as already identified, is by far the most significant international convention in terms of recognition and enforcement of arbitral awards. Considering the fact that this convention makes the recognition and enforcement of international arbitral awards fast and predictable 93, the fact that the same can not readily be said for interim measures ordered by arbitral tribunals must be seen as a limitation on the powers of arbitral tribunals with regard to such measures. The reason is because the New York Convention provides exclusively for the recognition and enforcement of arbitral awards which are considered to be ‘final’94. This therefore seemingly leaves no room for the recognition or enforcement of interim measures of protection granted during the course of the arbitration as was decided in the Australian Supreme Court of Queensland in the case of Resort Condominiums International Inc. v. Ray Bolwell and Resort Condominiums (Australasia) Pty. Ltd 95 where it was held that the New York Convention is inapplicable to interim measures or relief.

Consequently, the question of whether an order for an interim measure of protection granted by an arbitral tribunal in international commercial arbitration can be recognised and enforced internationally will turn on the possibility of such an order being interpreted as a final award 96. As a result of the fact that interim measures of protection are modifiable and revocable during the pendency of the 92 Kojovic (2001) 520 93 Bergqvist et al. (2009) 939 94 Dunmore (2012) 225 95 (1993) 118 ALR 655 96 Dunmore (2012) 225

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arbitration, the enforcement of such measures prior to or after the constitution of the arbitral tribunal will be unobtainable under the New York Convention 97. As one commentator puts it ‘On a strictly formal plan, orders, procedural orders, or decisions adopted by arbitral tribunals are not “awards” and cannot intuitively benefit from the New York Convention’ 98.

The inapplicability of the New York Convention to interim measures of protection is clearly a problem in terms of the ability of arbitral tribunals exercising the full reach of their authority over the parties and the subject matter of the dispute. In the context of international commercial arbitration, it is not unlikely that any order or award rendered by the arbitral tribunal will be required for use and enforcement outside the jurisdiction of the seat of the arbitration. In situations where the law of the jurisdiction in which enforcement is sought fails to recognise interim measures ordered abroad, the measure ordered by the tribunal will be of little value to anyone concerned. In practical terms, what this means is that the party seeking the interim measures may be put in a position where he is forced to go before the courts of the jurisdiction in which enforcement of the interim measures is sought and represent his case or embark upon arguments over whether the order of the arbitral tribunal granting the interim measures possesses the characteristics of a final award to make it enforceable under the New York Convention or not99.

Asides the legal issues, there is also the fact that duplicated proceedings on the interlocutory issues of interim measures will inevitably add to the cost of the resolution of the disputes and also result in a convoluted process which the parties to the arbitration may have sought to avoid in the first place by submitting to international arbitration. The cross border nature of international trade and the speed with which the subject matter of the dispute sought to be protected may be affected, means that where 97 Bergqvist et al. (2009) 940 98 Bismuth (2009) 790 99 Bismuth (2009) 790

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the party seeking the interim measures fails to derive the full utility of the measure at the first opportunity (when ordered by the tribunal), the chance to do so subsequently may have irretrievably been lost. As a result, there have been calls for the formulation of an international instrument for the purpose of obliging national courts to give effect to interim measures of protection ordered by competent and duly constituted arbitral tribunals in the same way final awards are treated, subject only to international public policy100.

The harmonization of the international commercial arbitration process which will be brought about by an international instrument will significantly if not entirely remove one of the current limitations on the powers and jurisdiction of arbitral tribunals to order interim measures of protection brought about by the lack of potential for recognition and enforcement of such measures. It is also conceivable that the usefulness of any such instrument will be felt even outside the scope of tribunal ordered interim measures of protection. The current regime for the grant of interim measures of protection leaves some scope for abuse by recalcitrant parties who may proceed to approach the courts where there is concurrent jurisdiction or outrightly fail to carry out the orders of the arbitral tribunal. In a situation where interim measures ordered by arbitral tribunals are expressly internationally enforceable as a result of being backed up by an international convention, the prospects of a wayward party taking advantage of the lack of inherent coercive powers of the arbitral tribunal will conceivably reduce. Such a development will rightly put the powers and jurisdiction of international commercial arbitral tribunals in the same position with respect to interim measures of protection as it currently is with final awards as obtainable under the New York Convention. Born is also of this opinion, as he has commented that ‘there is no sound policy reason for withholding judicial enforcement mechanisms for tribunal-ordered provisional measures’101 100 Lew (2003) 615 101 Born (2009) 2023

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Practically speaking however, it has been noted that in international commercial arbitration, interim measures of protection ordered by arbitral tribunals usually come to be voluntarily complied with by the parties subject to such orders 102. The reason for such voluntary compliance has been suggested as being to some extent motivated by the fear of the party subject to the order that non-compliance with the order will have an adverse effect on the party’s position in the eyes of the arbitral tribunal with regard to the substantive issue in dispute 103. It is submitted that this voluntary compliance is crucial to the integrity of the international commercial arbitration process. This is because the aforementioned suggestion by some commentators for a unifying international instrument is one that requires a colossal amount of effort to actualise. The success of the New York Convention is hinged on the fact that its minimalistic approach allows for a situation in which it can readily be assimilated internationally into several systems with little scope for debate 104. Furthermore, it was promulgated pursuant to the widespread consensus and identification of the need for the international recognition and enforcement of arbitral awards105 and as already stated, the issue of the enforcement of orders for interim measures of protection by arbitral tribunals is one that can not yet be described as straightforward.

102 Bergqvist et al. (2009) 943

103 Craig et al. (2000) 460 104 Hara (2010) 20 105 Gaillard (2009) 692

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CHAPTER 3 3.0 Introduction Finally, the principal categories of interim measures of protection obtainable from arbitral tribunals in international commercial arbitration practice are discussed along with illustrations as to how they can prove beneficial and in some cases crucial to the arbitration process.

3.1Categories Of Interim Measures Of Protection In International Commercial Arbitration There are a variety of interim measures of protection typically available to arbitral tribunals in the practice of international commercial arbitration. Generally these interim measures are categorized into those which seek to preserve or protect evidence relevant to the arbitration proceedings, those aimed at maintaining the status quo to prevent irreparable harm (usually through injunctions or other similar orders) and those aimed at the facilitation of the enforcement of the award 106. These three categories of interim measures have been described as being the most prevalent in the 106 Gaillard and Savage (1999) 721

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practice of international commercial arbitration as a result of arbitral tribunals receiving a high number of requests for such orders 107. It is submitted that the reason why these categories of interim measures are highly sought is that they are the ones most germane to international commercial arbitration108 in terms of the protection of the integrity of the adjudication process and of the rights of the parties concerned.

3.1.1

Interim measures for the Preservation Of Evidence

Considering the fact that disputes arise usually out of one party’s reluctance to abide by the rules or be bound by agreements and contracts previously entered into, it is conceivable that such a party will even in the dispute resolution process exhibit recalcitrant tendencies. Such tendencies as with the need for interim measures of protection in other regards, may lead to the need for the preservation of evidence relevant to the arbitration process. Certain interim measures of protection are obtainable in international commercial arbitration for the purpose of protecting relevant evidence and the prevention of the dissipation of such evidence 109.

Such measures of interim protection and preservation of relevant evidence include those that order the inspection of a construction site prior to the carrying out of work on the site which would bring irreversible changes110 both to the site and any relevant evidence within the site. Also, an order may be made to allow experts enter a site relevant to the dispute and assess the conditions of the soil or other circumstances to enable the experts provide a thorough and efficient analysis, considering the 107 Gaillard and Savage (1999) 733 108 Gaillard and Savage (1999) 733 109 Ryden (2011) 16 110 Segesser and Boog (2013) 112

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fact that some technical assessments become expensive or even impossible to carry out once progress in the work on the site is made 111.

3.1.2

Injunctive Reliefs Or Measures

An injunction or an injunctive order is an order compelling a person or an entity to perform or desist from continuing to perform a certain action or actions 112. Various forms of injunctive reliefs or measures may be available in support of the international arbitration process. Several of them include but are not limited to anti-suit injunctions, mareva injunctions, freezing orders, orders for the transfer of goods, orders for the sale of goods or stay of the sale, orders for the supply of goods, orders for the establishment of an escrow account for holding the proceeds of a letter of credit and orders for the preservation of alteration of the status quo113.

It is noteworthy that injunctions granted by the arbitral tribunal, which have their origin in the will of the parties, like their agreement, posses a private law character. Therefore the consequence is that such injunctions can only bring forth private and contract law rights or obligations 114. This is in contrast to an injunction ordered by the court, which will be reinforced by the coercive powers of 111 Van Den Berg (2009) 576 112 Yesilirmak (2005) 208 113 Yesilirmak (2005) 208

114 Stalev(1994) 110 41

the state. The key difference is the fact that injunctions granted by the courts as interim measures of protection in support of the arbitration are devoid of the enforcement difficulties and issues inherent in orders granted by the tribunal as a result of the coercive judicial powers of the courts as provided by statutes.

3.1.3

Security For Payment

A security for payment or claim is one that has been defined as being ‘a kind of advance payment designed to guarantee the payment and/or enforcement of the final award where the applicant proves to be right on the merits of the case in dispute’. 115 Interim measures such as this are aimed at the facilitation of the enforcement of the award when it is finally rendered. The ordering of this category of interim measure of protection is hinged on the party seeking the relief showing that if at the end of the arbitral process a favourable award is rendered, there is a real possibility that he will be unable to enforce it against the respondent 116. An illustration of how interim measures of protection ordering security for payment may be crucial in practice is the case of one arbitration between a State Government and an Electricity Company.

In that arbitration the State Government made a claim against the Federal Government owned Electricity Company for wrongful deductions from the account of the State Government as a result of a breach of a Barge Power Purchase Agreement by the electricity company and had to apply for an order for security for payment. This was because during the pendency of the arbitration it became apparent that the electricity company had been stalling the arbitration process and in all likelihood was going to be dissolved into several successor companies before the award would be 115 Yesilirmak (2005)213 116 Yesilirmak (2005) 205

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rendered and none of the successor companies would have honoured any final award rendered by the tribunal on the premise that they were never parties to the arbitration agreement or part of the arbitration proceedings. The application of the State Government was granted, as the Electricity Company was ordered to provide a security for payment of the claim should the state government succeed when the award is rendered. The electricity company accordingly provided security for payment in the form of a federal government bank guarantee and also proceeded to participate more willingly in the arbitration proceedings. This example also illustrates how interim measures of protection may be a useful tool for the purpose of securing the bona fide participation of a party who may otherwise seek to disrupt the arbitration process.

CONCLUSION In conclusion, the importance of the need to protect party rights in international commercial arbitration has been identified. Interim measures of protection serve not only to protect such rights but also to preserve the integrity of the arbitral dispute resolution process. The authority of national courts to guarantee this protection is not usually in doubt. However this has not always been the case in terms of the powers and jurisdiction of arbitral tribunals to guarantee protection. The standard now seems to be for arbitral tribunals to be clothed with the powers and jurisdiction to order interim measures of protection in international commercial arbitration.

While arbitral tribunals derive their powers and jurisdiction to order interim measures of protection in international commercial arbitration from several sources, in some cases those same sources could

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operate to limit the powers of the tribunal. When it comes to limiting judicial interference in the international arbitral process and particularly in the granting of interim measures of protection, potential pitfalls exist, which hinge on the agreement of the parties as to how to deal with such interference. In the area of enforcement of tribunal ordered interim measures, while there may be some scope for harmonisation through an international instrument, whether this will happen in the near future is left to be seen.

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Jacomijn J. Van Haersolte-Van Hof, ‘Interim Measures Of Protection - A European And Continental Perspective’ In Albert Jan Van Den Berg (Ed), International Commercial Arbitration: Important Contemporary Questions, ICCA Congress Series (2002) 150 - 162 Jean Francois Poudret And Sebastien Besson Et Al, Comparative Law Of International Arbitration (Sweet And Maxwell 2007) Jeff Waincymer, Procedure And Evidence In International Arbitration (Kluwer Law International 2012) Julian Lew And Loukas Mistelis Et Al, Comparative International Commercial Arbitration (Kluwer Law International 2003) Kaj Hobér, ‘Interim Measures By Arbitrators’ In Albert Jan Van Den Berg (Ed), International Arbitration 2006: Back To Basics? (Kluwer Law International 2007) Luis Enrique Graham, ‘Interim Measures: Ongoing Regulation And Practices (A View From The Uncitral Arbitration Regime)’ In Albert Jan Van Den Berg (Ed), 50 Years Of The New York Convention: ICCA International Arbitration Conference (Kluwer Law International 2009) Nael Bunni, ‘Interim Measures In International Commercial Arbitration: A Commentary On The Report

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Phillip Landolt And Barbara Reeves Neal, ‘Chapter 19: Provisional Measures Concerning Competition Law In International Arbitration’ In Gordon Blanke And Phillip Landolt (Eds), Eu And Us Antitrust Arbitration: A Handbook For Practitioners (Kluwer Law International 2011) Piero Parodi, ‘Interim Measures In Respect To Arbitration In The Construction Business’ In Albert Jan Van Den Berg (Ed), Preventing The Delay And Disruption Of Arbitration/Effective Proceedings In Construction Cases (Kluwer Law International 1991) Pierre Karrer, “Interim Measures Issued By Tribunals And The Courts: Less Theory, Please’ In Albert Jan Van Den Berg (Ed), International Arbitration And The National Courts: The Never Ending Story (Kluwer Law International 2001) Raymond Werbicki, ‘Chapter 8: Arbitral Interim Measures: Fact Or Fiction?’ In American Arbitration Association Handbook On International Arbitration And Adr (2nd Edn Juris Net Llc, 2010) William Craig, William Park And Jan Paulsson, International Chamber Of Commerce Arbitration (Oceana Publications, 2000) Yang Ing Loong, ‘Provisional Measures’ In Albert Jan Van Den Berg (Ed), 50 Years Of The New York Convention: ICCA International Arbitration Conference (Kluwer Law International 2009) Zhivko Stalev, ‘Interim Measures Of Protection In The Context Of Arbitration’ In Albert Jan Van Den Berg (Ed), International Arbitration In A Changing World (Kluwer Law International 1994) Journal Articles

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Per Runeland And Gordon Blanke, ‘On Provisional Measures In English Arbitrations: A Brief Overview’ Arbitration (2007) 73(2), 189-198 Lina Bergqvist, Emma Olsson And Krister Azelius, ‘Making Use Of The New Scc Rules On Emergency Arbitration. Why The Emergency Arbitrator’s Decision Cannot Be Enforced And How The New Rules May Be Made Useful Nonetheless’ Sartryck Ur Juridisk Tidskrift (2009-10) Nr 4, 936-947 Walter Stuber And Adriana Maria Gödel Stuber, ‘Brazil: Arbitration- Interim Measures’ J.I.B.L.R. (2012) 27(11), 173-174 Christopher Huntley, ‘The Scope Of Article 17: Interim Measures Under The Uncitral Model Law’ V.J. (2005) 9 69-98 Alan Redfern, ‘Arbitration And The Courts: Interim Measures Of Protection- Is The Tide About To Turn’ T.I.L.J. (1995) 30(1) 71-88 Regis Bismuth, ‘Anatomy Of The Law And Practice Of Interim Measures In International Investment Arbitration J.I.A. (2009) 26(6) 773-821 Michael Dunmore, ‘Interim Measures By Arbitral Tribunals: The Enforceability Conundrum’ A.I.A.J. (2012) 8(2) 222-231 Nakul Dewan, ‘Interim Measures In Arbitration: A Comparative Analysis Of Indian And English Arbitration Acts’ I.B.L.J. (2003) 6, 667-695 Michael Pryles, ‘Limits To Party Autonomy In Arbitral Procedure’ J.I.A. (2007) 24(3) 327-339 Tijana Kojovic, ‘Court Enforcement Of Arbitral Decisions On Provisional Relief- How Final Is Provisional?’

J.I.A. (2001) 18(5) 511 - 532

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Sandeep Adhipathi , ‘Interim Measures In International Commercial Arbitration: Past, Present And Future’ (University Of Georgia School Of Law, Llm Theses And Essays 2003) Trevor Hartley, ‘Interim Measures Under The Brussels Jurisdiction And Judgments Convention’ E.L.R. (1999) 24(6), 674-683 Websites, Blogs And Other Papers Brenton D. Soderstrum, ‘Litigation V. Arbitration: Pros And Cons’ (Winick, Graves, Gross, Baskerville & Schoenebaum P.L.C. 2005) <Http://Www.Brownwinick.Com/Images/Newsletter/Single/Litigation%20v. %20arbitration%20pros%20and%20cons.Pdf> Accessed 18 July, 2013 Oscar Ryden, ‘The Legal Frameworks And Substantive Standards Governing The Granting Of Interim Measures In International Commercial Arbitration’ (Lund University Publications 2011) < Http://Lup.Lub.Lu.Se/Luur/Download?Func=Downloadfile&Recordoid=2296168&Fileoid=2343343> Accessed On 17 July, 2013 Tomasz Hara, ‘Reception And Enforcement Of International Arbitration Orders And Awards’ (University Of Essex 2010)

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