Author: Pankaj Sevta, Research Associate
In recent times, the issue of grant of interim relief by arbitral tribunals has become center stage. The 1985 Model Law by UNICTRAL contemplated grant of interim measures (Article 17) but it seemed half‐hearted, as it did not contain an enforcement mechanism and nor were any adverse effects sanctioned in the event of non‐compliance. The old Article 17 was essentially premised on voluntary compliance and therefore (not unsurprisingly) was rarely resorted to. At the same time, an approach to court (while effective) had deterrents (including the inconvenience of moving a different forum, perhaps through another legal team). Resort to courts also carried an inbuilt risk of the court pre‐determining (or influencing) parties’ substantive rights. With this backdrop, in the year 2006 UNCITRAL made extensive amendments to the Model Law and elaborate provisions now stand incorporated on the subject. This paper presents an analysis of the UNCITRAL amendments to the Model Lawand points out some problematic areas.
Historical Perspective
The rise of globalization and the expansion of trading frontiers, international commercial transactions have significantly increased in both number and complexity ((Katherine Lynch, ‘The forces Of Economic Globalization: Challenges To The Regime Of International Commercial Arbitration.’, 1-2 (2003).)). Not surprisingly, this resulted in an increasing number of disputes ((William Wang, ‘International Arbitration: The Need for Uniform Interim Measures of Relief’, BROOK. J. INT’L L. 1059, 1059 (2003).)). Although national courts are the traditional venues for dispute resolution, parties are more frequently turning to arbitration as a favorable alternative ((Thomas E. Carbonneau, ‘The Ballad of Trans border Arbitration’, U. MIAMI L. REV. 773, 778 (2002).)). In the context of contractual business disputes, international commercial arbitration provides a number of benefits not available through litigation ((Stephen M. Ferguson, ‘Interim Measures of Protection in International Commercial Arbitration: Problems, Proposed Solutions, and Anticipated Results’, CURRENTS: INT’L TRADE L.J. 55, 55 (2003).)).
However, arbitration is not free from downsides ((Stephen M. Ferguson, ‘Interim Measures of Protection in International Commercial Arbitration: Problems, Proposed Solutions, and Anticipated Results’,12 CURRENTS: INT’L TRADE L.J. 55, 55 (2003).)), such as difficulties related to the arbitral tribunals’ willingness and ability to order and enforce interim measures of protection during international commercial arbitration proceedings ((Richard Allan Homing, ‘Interim Measures of Protection; Security for Claims and Costs; and Commentary on the WIPO Emergency Relief Rules’, AM. REV. INT’L ARB. 155, 156-57 (1998).)). Notwithstanding the increasingly frequent use of interim measures, there is little consensus about the scope of the arbitral tribunal’s powers and how interim actions are enforced ((Gary B. Born, ‘International Commercial Arbitration: Commentary And Materials’, 3 (2nd ed. 2001).)). In an effort to encourage uniformity, the United Nations Commission on International Trade Law (“UNCITRAL”) amended its provision on interim measures in 2006 ((G.A. Res. 61/33, pm bl., U.N. Doc. A/RES/61/33.)). The revisions to the UNCITRAL Model Law (“Model Law”) elaborated on the powers of the arbitral tribunal to grant interim measures, defining scope of interim measures and the courts’ role of support and enforcement ((U.N. Comm’n on Int’l Trade Law [UNCITRAL], UNCITRAL Model Law on Commercial Arbitration, art. 17, U.N. Doc. A/40/17.)).
Changes brought by the amendment
The 2006 Amendment of the Model law brought about various significant changes. The old Article 17 stands completely replaced by an extensive scheme providing inter alia for ex parte orders and for interim measures to be binding and enforceable.
Interim Measures of Protection as Defined by the Amendment
At the most fundamental level, interim measures of protection are forms of temporary relief ((John Charles Thomas, ‘Selected Issues: Interim Measures In International Arbitration: Finding The Best Answer’, 12 CROATIAN ARB. Y.B. 213, 213-14 (2005).)), intended to safeguard the rights of the parties until the arbitral tribunal issues a final award ((UNCITRAL, Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration, Report of the Secretariat, 42, delivered to the General Assembly, U.N. Doc. A/CN.9/264 (Mar. 25, 1985). See also, HOWARDM. HOLTZMANN & JOSEPH E. NEUHAUS, ‘A GUIDE TO THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION: LEGISLATIVE HISTORY AND COMMENTARY’, 542 (1989).)). Interim measures of protection arise in a variety of circumstances in international arbitration and their uses vary depending on the context and forum ((GARY B. BORN, ‘INTERNATIONAL COMMERCIAL ARBITRATION’, 1943-2019 (2009); See also, Douglas D. Reichert, ‘Provisional Remedies in the Context of International Commercial Arbitration’, INT’L TAX &Bus. LAW. 368, 370-74 (1986).)). Still, they are a procedural necessity in both public and private means of dispute resolution ((LAWRENCE COLLINS, ‘Provisional and Protective Measures in International Litigation’, ESSAYS IN INTERNATIONAL LITIGATION AND THECONFLICT OF LAWS, 10 (1994).)). In many cases, interim measures determine the efficacy of the arbitral award ((Bernardo M. Cremades, ‘The Need for Conservatory and Preliminary Measures’, INT’L BUS. LAW. 226, 226-27 (1999).)). Interim relief can have “final and significant consequences ((UNCITRAL, Possible Uniform Rules on Certain Issues Concerning Settlement of Commercial Disputes: Conciliation, Interim Measures of Protection, Written Form for Arbitration Agreement, Report of the Secretary General, delivered to the General Assembly, U.N. Doc. A/CN.9/WG.II/WP.108))without which an adverse party may easily render an award meaningless ((UNCITRAL, Working Group on Arbitration, Possible Future Work: Court-Ordered Interim Measures of Protection in Support of Arbitration, Scope of Interim Measures that May be Issued by Arbitral Tribunals, Validity of the Agreement to Arbitrate, Report of the Secretary General, delivered to the General Assembly, U.N. Doc. A/CN.9/WG.IIIWF. 111 (Oct. 12, 2000).)).
Interim Measures generally fall into Two Broad Categories ((UNCITRAL, Working Group II, Settlement of Commercial Disputes, Preparation of Uniform Provisions on Interim Measures of Protection, Note by the Secretariat, delivered to the General Assembly, U.N. Doc. A/CN.9/WG.II/WP. 119 (Jan. 30, 2002).)).
Firstly, measures aimed at avoiding or minimizing loss, damage, or prejudice ((ibid at ¶ 17.)); secondly, measures facilitating the enforcement of arbitral awards ((ibid at ¶ 18.)). Measures meant to avoid loss, damage, or prejudice usually serve the purpose of preserving the state of affairs pending the final resolution of the dispute. They are functionally similar to court injunctions in that they may require a party to continue performance or abstain from taking certain actions that may frustrate the resolution of the dispute ((Julian D. M. Lew ET AL., ‘Comparative International Commercial Arbitration’, 1 (2003).)).
Effect of the Amendment on Art. 17.
The purpose of revising Article 17 was to clarify three important elements regarding the use of interim measures:
- The scope of the arbitral tribunal’s power to order interim relief;
- The enforcement of tribunal ordered interim measures; and
- The role of the courts in supporting arbitration; all of which were left open-ended and undeveloped by the previous provision.
Article 17 now sets forth the powers of the arbitral tribunal in the widest terms. The amended Article 17 inter alia empowers the arbitral tribunal to maintain or restore the status quo; direct a party to refrain from doing anything which may prejudicially affect the arbitral process; provide a means for preserving assets for satisfaction of the award, or preserve evidence that may be material for resolution of the dispute. The tribunal may do so by framing its order in a form of an award or otherwise as it may deem appropriate.
Article 17 (A) provides for the conditions which must be satisfied for grant of an interim measure. These conditions are universally recognized; balance of convenience; irreparable harm and “a reasonable possibility that the requesting party will succeed on the merits of the claim”.
By amending Article 17, UNCITRAL sought to provide clarity and guidance. The amended version of Article 17 is intended to address the concerns, confusion, and criticisms surrounding the previous text by outlining in detail the procedural aspects of the use of interim measures that the provision lacked ((UNCITRAL, Working Group on Arbitration, Possible Future Work: Court-Ordered Interim Measures of Protection in Support of Arbitration, Scope of Interim Measures that May be Issued by Arbitral Tribunals, Validity of the Agreement to Arbitrate, Report of the Secretary General,delivered to theGeneral Assembly, U.N. Doc. A/CN.9/WG.IIIWF. 111 (Oct. 12, 2000).)).
Short Analysis of the amendment
UNCITRAL’s recognition of the inadequacies of the previous Model Law on interim measures of protection led to the development of what promised to be an essential text in arbitration ((Christopher Huntley, ‘TheScope of Article 17: Interim Measures Under the UNCITRAL Model Law’, VINDOBONA J. INT’L COM. L. & ARB., 69, 74-75)). However, despite predictions of widespread acceptance, the majority of states have not integrated the new version of Article 17 ((UNCITRAL, Status of Conventions and Model Laws, Note by the Secretariat, delivered to the General Assembly, U.N. Doc. AICN.9/674 (May 14, 2009).)). This, however, should not detract from the important purposes the amendment will serve ((Supra note 17, ¶¶ 10-11.)). There are a number of compelling reasons why states should incorporate the amendments to Article 17 ((Pieter Sanders, ‘Quo Vadis Arbitration?: Sixty Years OfArbitrationPractise’, 7-8 (1999).)). In particular, states should consider that the efficacy of arbitration proceedings depends on the use and enforcement of interim measures. Furthermore, arbitration is a practical and efficient forum for ordering interim relief, and adoption of the Model Law amendment will harmonize national arbitration laws. This will inspire the confidence necessary for the survival of international commercial arbitration as a prominent dispute resolution mechanism.
Conclusion
Considering the growing significance of arbitrations in resolution of international disputes, it is only appropriate that arbitral tribunals be empowered in relation to grant of interim measures of protection. The 1985 Model Law was quite inadequate in this regard. At the same time, in my respectful view, the 2006 amendments to Article 17 propose a leap tool on, especially in relation to the enforcement provisions. I apprehend that these provisions may not meet with the wide acceptance the 1985 version did. In my respectful view fresh proposals need to be mooted which would render the arbitral tribunal’s decision binding and also enforceable. An aggrieved party should be able to resist enforcement on narrow grounds such as patent illegality, irregularity or gross unfairness of the result but to render an interim measure the same degree of a enforceability as a final award is potentially unfair and jurisprudentially inappropriate.