Arbitration Tips: Interim Measures

Arbitration Tips Interim Measures

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Arbitration Tips Interim Measures When a dispute arises which must, under the terms of an arbitration agreement, be referred to arbitration, the need might arise for urgent interim measures to protect a party’s position pending the outcome of the arbitration.

Interim measures, for example, to preserve evidence or assets may be crucial to the outcome of the arbitral proceedings and/or the enforcement of any award. Interim measures often require early investigation, swift decisions and prompt action if they are to be obtained and effective.

This note provides some practical tips on the measures available, who can grant them and where, when and how to apply.

John Abbott

Russell Beard

Partner john.abbott@laytons.com +44 (0)20 7842 8000

Partner russell.beard@laytons.com +44 (0)20 7842 8000

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Arbitration Tips | Interim Measures

What are interim measures?

Who can grant interim measures?

Interim measures comprise a range of possible orders, usually

Who can grant interim measures will depend on the terms of

sought urgently and at an early stage of proceedings, on a

the arbitration agreement, any applicable institutional rules

protective basis.

and applicable national laws. The list of potential bodies to which an application for interim measures can be made

The types of orders which a party may seek include: • To preserve assets, restraining an opponent from

includes: • The arbitral tribunal

removing or dealing with assets so as to try to protect

• An emergency arbitrator

itself from later enforcement action (a “freezing order”)

• A national court.

• To preserve evidence, preventing an opponent from destroying, damaging or losing evidence which might be important to the case • To preserve property which is the subject of the dispute,

Where to apply?

preventing an opponent from destroying, damaging or

Where an arbitral tribunal is not yet appointed

losing it (e.g. requiring the property to be delivered up

The need for interim measures often arises at an early stage,

and held safely)

before arbitral proceedings have begun. Where a tribunal is

• To permit access to property or goods which are

not yet appointed, there are two potential options:

the subject of the dispute (e.g. for the purpose of inspecting, sampling, testing, experimenting) • To restrain actions which risk irreparable harm which

• An emergency arbitrator • A national court

cannot easily be compensated in damages (e.g. the misuse of confidential business information, unlawful

The option of an emergency arbitrator is only available if

competition in breach of restrictions, infringement of

the arbitration agreement or applicable institutional rules

intellectual property rights)

permit one. An emergency arbitrator will typically have broad

• To permit the sale of perishable goods and to preserve the sale proceeds • To require an interim payment or the provision of security for costs.

powers to order interim measures, but generally will not be able to bind the tribunal, once appointed, so there will be a risk that an emergency arbitrator’s award may be set aside or varied. The strategic considerations immediately below will be equally applicable.

Other potential orders may also be available.

Where an arbitral tribunal is appointed The first step is to look at the arbitration agreement and any institutional rules which apply, to see what powers the tribunal has to grant interim measures. Where no institutional rules apply under the arbitration agreement, the agreement itself may confer such powers on the tribunal or the law of the seat of the arbitration may do so.

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Arbitration Tips | Interim Measures

It is then necessary to give strategic consideration to matters including:

• Will you need to make the application without notice, so as not to tip off the opponent and risk undermining the purpose of the application (e.g. an application to freeze

• Whether an order of the tribunal will be enforceable.

assets to prevent dissipation)? Some institutional rules

Arbitral tribunals are not able to enforce their own

preclude applications without notice to the other party.

awards, but the advantage of seeking an award through

Some tribunals may be reluctant to grant relief without

emergency arbitration is the ability to enforce the

first hearing the other party. Even where an order or

award under the New York Convention in any signatory

award is made without notice, there may be difficulties

state. However, not all interim arbitral awards may be

in enforcing it (the New York Convention provides that

enforceable under the New York Convention and you

a ground for resisting enforcement is where one party

will need to consider whether the nature of the award

was not given proper notice of the proceedings or was

you seek would be enforceable in the intended country

otherwise unable to present its case).

of enforcement. If there is any doubt, it may be better to issue an application for pre-arbitral relief in a national court.

• Will you need to provide security, in the event that it is later determined that the interim measures should not have been granted and to compensate any loss caused

• Give careful consideration also to whether you will

to the opposing party?

be able to enforce the order or award of the tribunal under the laws of the jurisdiction where enforcement

Consideration of such matters may render an application to

will take place (e.g. the country where assets which

a national court a more attractive option, where possible and

are to be preserved are located). Some national laws

subject, of course, to local advice on the pros and cons of the

may not recognise the arbitral tribunal as having the

law and procedure of the relevant jurisdiction.

power to grant interim measures giving rise to potential enforcement difficulties.

Making an application to a national court You need to give consideration to which court is most suitable

• Whether it will be necessary to compel compliance.

The tribunal has no power to compel compliance by

to grant the relief sought. Options include the court of the country in which:

third parties (e.g. a bank which might hold funds which are to be frozen). The tribunal might be able to impose sanctions on a party to the arbitration where there is

• the assets or evidence which you wish to preserve are located

non-compliance. For example, the courts of England

• the opposing party is located

and Wales have the power (section 44 of the Arbitration

• the arbitration has its seat.

Act 1996) to take steps to support the integrity of an arbitration seated within its jurisdiction, including issuing

It is generally advisable to seek local legal advice on the

protective orders before the arbitration has started.

practicalities of seeking relief, enforcing any order and whether the relevant national courts will entertain an application. You

• Where it is possible to enforce an order or award

will also need to consider whether such an application is

of the tribunal through a national court, what is the

consistent with the arbitration agreement and whether such

process and how long will it take? Delay in dealing with

action risks consequences before the tribunal or the courts of

procedural requirements before enforcement may well

the country where the arbitration has its seat.

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Arbitration Tips | Interim Measures

Making an application to the English court The English court’s powers to intervene to grant interim

When to apply

measures are intended to support, rather than displace, the

It is usually important to apply as early as possible. Delay may

arbitral process. It has the power to grant relief including

prejudice both your ability to obtain interim measures (a court

orders in relation the taking or preservation of evidence,

or tribunal may take account of delay in determining whether

the preservation of property or assets and injunctive relief,

or not to grant relief ) and your ability to enforce an award

provided the tribunal has no power or is unable for the time

(e.g. if assets or evidence are already lost).

being to act effectively. It may order that any relief it grants will cease to have effect on the order of the tribunal or when the arbitral tribunal has power to act.

How to apply

In practice, recourse to those powers of the English court

The procedural steps you will need to take will depend

may be helpful where the tribunal is not yet appointed or

in large measure on the arbitration agreement and any

where the tribunal lacks the powers necessary to grant the

institutional rules which apply or, if you are applying to a

relief sought. Where the arbitral tribunal is appointed and

national court, its procedural rules.

has the power to act effectively, the option of applying to the English court for interim measures is, in effect, ruled

An application will, in general, need to be made in writing,

out. Care also needs to be taken where the applicable rules

backed up with all available evidence to demonstrate the

permit an application to an emergency arbitrator, before the

strength of the case for interim measures and state very

tribunal is appointed, as that may render it difficult to make

precisely the order sought (an application which is formulated

an application to the English court, provided an emergency

too widely will be at greater risk of being dismissed).

arbitrator can act effectively.

Be aware that where an application is made without notice, there may be a requirement (as is the case before the English court) for full and frank disclosure of all matters relevant to the application, whether supportive or harmful to your case; a failure to disclose a matter which might have a bearing on the decision or award might risk it later being set aside.

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Arbitration Tips | Interim Measures

Arbitration Our team is experienced in resolving disputes through arbitration and committed to providing outcomes-focused, innovative and commercially minded advice to guide our clients through all stages of the arbitration process.

We represent clients from across the globe in arbitrations involving a range of sectors including construction, international trade and commodities, investment treaties and shipping.

Our experience spans arbitrations convened through the main international institutions such as the ICC, LCIA, LMAA, DIFC and SIAC as well as on an ad-hoc basis.

Our Team John Abbott

Russell Beard

Robert Clark

Simon Foster

Partner john.abbott@laytons.com +44 (0)20 7842 8000

Partner russell.beard@laytons.com +44 (0)20 7842 8000

Partner robert.clark@laytons.com +44 (0)20 7842 8000

Partner simon.foster@laytons.com +44 (0)1483 407 000

Richard Harrison

Paddy Kelly

Rebekah Parker

Will Slater

Partner richard.harrison@laytons.com +44 (0)20 7842 8000

Partner paddy.kelly@laytons.com +44 (0)20 7842 8000

Partner rebekah.parker@laytons.com +44 (0)20 7842 8000

Consultant will.slater@laytons.com +44 (0)20 7842 8000

Geraint Thomas

Ben Thorogood

Partner geraint.thomas@laytons.com +44 (0)20 7842 8000

Daniel Walter

Solicitor daniel.walter@laytons.com +44 (0)20 7842 8000

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Solicitor ben.thorogood@laytons.com +44 (0)20 7842 8000

This information is offered on the basis that it is a general guide only and not a substitute for legal advice.

We cannot accept any responsibility for any liabilities of any kind incurred in reliance on this information.

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