That’s A Relief (Interim): The English Court’s Approach In Arbitrations

Arbitral tribunals (similarly to national courts) often have the power to grant interim or provisional measures pending final determination of the dispute before them. However, arbitrators cannot act until they have been duly appointed. In cases of urgency, the courts of the seat (the country where the arbitration takes place) may be empowered to support a nascent arbitration by ordering interim measures where the tribunal is not yet able to act. In such cases, the national courts 'hold the ring' until such time as the tribunal has been constituted. They may also assist a tribunal where it lacks the power to make a necessary order.

A classic kind of interim relief is an order 'preserving assets' that are in dispute. In a straightforward scenario, such assets may be physical property which one party claims belongs to it. A court or tribunal might restrain a sale or disposal of the property in question - for instance an irreplaceable painting. In international commercial disputes, matters are rarely so straightforward. The asset in question may be a contractual right - a chose in action.

An interim measure requested for the preservation of an asset might, upon closer inspection, resemble an order that one party should not act in a manner that is inconsistent with the other party's alleged contractual rights. Where is the line to be drawn, considering that the other party will be hotly contesting the contractual rights? This article looks at a number of recent decisions of the English courts on what amounts to an 'asset'.

Overview - interim measures in international arbitration

International arbitral tribunals will usually have been granted wide powers to grant interim relief. Generally, interim measures are aimed at preserving the position between the parties (the 'status quo'), or preventing the destruction of evidence or the loss or dissipation of key assets that are the subject of the dispute. Sometimes, international arbitral tribunals will grant interim relief to prevent conduct that would cause one party to suffer irreparable harm, that is to say loss that could not be made good by an award of damages, or where it is appropriate that a party should provide security for the claim.

Interim measures are often said to be 'conservatory' in nature, since they are intended to facilitate and preserve the effectiveness of the arbitral process, rather than giving one party an early taste of the relief it ultimately seeks in the arbitration. Measures that would materially prejudice or disadvantage the party against which they would take effect are unlikely to be granted.

The powers of any tribunal to grant interim relief will usually depend on three things:

The agreement between the parties set out in the arbitration clause. The parties might have conferred specific powers on their arbitrators; The provisions of any institutional rules of arbitration that the parties may have adopted; The law of the seat of the arbitration proceedings, which might limit or prescribe the powers of the tribunal regardless of the agreement between the parties. In many jurisdictions, national arbitration laws will not prevent the parties from giving their tribunals wide powers to order interim measures. The ICC Rules 2012 allow the arbitrators to "order any interim or conservatory measure it deems appropriate", and to request appropriate security from the requesting party (Article 28.1). The new ICC Rules also contain provisions for the appointment of an emergency arbitrator, who can grant interim relief expeditiously before the full tribunal has been appointed. However, the ICC's emergency procedure is not available where the parties entered into their arbitration agreement before 1 January 2012.

The LCIA Rules contain a little more detail, and refer to the provision of security for claims or counterclaims, the "preservation, storage, sale or other disposal of any property or thing under the control of any party and relating to the subject matter of the arbitration", and granting any relief that might be the subject of a final award on a provisional basis, including the payment of money or the disposition of property.

Both the ICC and the LCIA Rules permit a party to apply to a competent national court for interim measures where the tribunal has not yet been appointed, or in exceptional cases where the tribunal cannot act (see LCIA Rules, Article 25.3, and ICC Rules, Article 28.2). The powers of a competent national court will naturally be determined by the arbitration laws of the relevant jurisdiction.

The powers of the High Court to act in support of arbitration proceedings

The powers of the English Court to order provisional measures in support of arbitration proceedings are set out in the Arbitration Act 1996. A central objective of the 1996 Act was to limit the circumstances in which the court would intervene in arbitration proceedings, given that the parties chose to refer their disputes to an arbitral tribunal and not to the court. Nonetheless, as the report of the Departmental Advisory Committee on the bill that became the 1996 Act notes, in appropriate circumstances the court can intervene "... to support rather than displace the arbitral process" (see paragraph 22, February 1996 DAC Report). The court may properly act, for instance, where the tribunal has not yet been appointed, or where the arbitrators do not have the power to make the relevant order through statute or the applicable arbitration rules. For instance, the High Court may step in where relief is sought against a third party, who has not accepted the jurisdiction of the tribunal, and who therefore cannot be ordered to do anything by the arbitrators.

The supportive powers of the English Court are set out in Sections 42 to 44 of the 1996 Act. They were commented on by the High Court in Econet Wireless Ltd v Vee Networks Ltd [2006] EWHC 1568 (Comm). In that case, the claimant had asked for a freezing injunction pursuant to Section 44 of the Act, a remedy that the High Court can, in principle, grant in support of arbitral proceedings. Refusing to uphold the injunction in that particular case, Morison J noted that:

"Section 44 of the Act gives the court power to hold the ring until arbitrators become seised of the dispute."

The Judge considered that the legislative purpose underlying Section 44 was to "cover over the crack between the moment of the application and the time when the arbitral tribunal can be formed". Instead of coming to Court, the Judge was of the view that the claimants should have availed themselves of the expedited procedures in the LCIA...