Interim measures in arbitration: is it really an effective instrument?

As opposed to ordinary litigation arbitration has several pros: celerity, confidentiality and the management of the case by highly qualified professionals, just to mention a few. In spite of this, arbitration has also some drawbacks. The main one concerns arbitrators’ lack of coercive power, which may render the approach to courts necessary sooner or later. The topic may be at least twofold: 1) may arbitrators have the powers to issue interim measure? 2) If so, can the parties easily enforce these interim orders in the relevant jurisdiction and effectively benefit from their issuance?

According to the definition given by the UNCITRAL Model Law, an interim measure is a temporary measure aimed at protecting the outcome of the arbitration proceedings. An Arbitral Tribunal, therefore, may order 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”.

Arbitrators’ power to order interim measures is widely recognized by several jurisdictions and arbitral institutions and their relevant regulations (such as, by way of example,the UNCITRAL Rules, the ICC Rules).

However, there are still a few Countries where arbitrators are not allowed to issue interim measures, such as Italy, Greece and Austria.

Italy, in particular, has a conflicting position. In fact, article 818 of the Italian Code of Civil Procedure prevents arbitrators from ordering interim measures. As an exception to this general rule, article 35 of the Legislative Decree no. 5 of 2003 introduced the possibility for arbitrators to order the suspension of the shareholders’ resolutions, thus, confining the possibility of interim measures only within arbitration proceedings concerning corporate matters.

Some commentators did not construe this innovative provision as a real exception to the general rule that prevents arbitrators from issuing interim measures. Indeed, the order to suspend a shareholders’ resolution is a self-executing interim measure that does not need enforcement.

The United States, Federal Arbitration Act does not specifically contemplates the arbitrators’ power to issue interim measures but it does not even exclude this power. Parties may agree to entrust either arbitrators or ordinary courts with such power. However, if an arbitration clause exists, courts appear to be less incline to issue interim measures and may interpret such request as a waiver to arbitration (see McCreary Tire Rubber Company v. Ceat, 501 F. 2d 1032, 3d Cir. 1974).

The United Kingdom adopted the so called “subsidiary approach” according to which parties bound by an arbitration clause should request an interim measure within the arbitration proceedings, in the first place and, eventually, resort to courts only for those interim measure, such as ex parte mareva injunction, that can only be granted by courts.

In other jurisdictions, such as in Germany and in Hong Kong, the so called “free choice model” was adopted. This allows the parties of an arbitration to choose between requesting the interim measures to arbitrators or to courts.

Despite this big step forward, the problem remains the interim orders’ enforceability, which requires the parties to revert to ordinary courts.

Where interim measures needs to be enforced, ordinary courts may adopt different approaches depending on the jurisdiction and the relevant legal framework:

  1. Courts may order the enforcement of arbitral interim measures as any other court decisions (domestic and/or foreign), in accordance with the national procedural law (such as the Ecuadorian approach under its Law on Arbitration and Mediation, that represents a unique amongst the relevant legislations);
  2. Courts may provide execution assistance, enforcing interim measures when requested by the parties or the Arbitral Tribunal without any further examination (such as, by way of example, the State of Californian legislation under Section 1297(92) of the Code of Civil Procedure and the Swiss legislation pursuant to Article 183(2) of the Switzerland PIL);
  3. Courts may issue additional interim measures of their own taking into account the ones rendered by the Arbitral Tribunal (such as, by way of example, the German approach according to Article 1041(2) of the Code of Civil Procedure and the North Carolina’s approach under Section 1‐567(39) of the North Carolina International Arbitration Act).

In order to guarantee an harmonization among the national enforcement procedure, the UNCITRAL Secretariat draft a few proposals. The most successful enforcement criterion takes into account article 36 of the UNCITRAL Model Law on enforcement of awards. Such model (created by the New York Convention) has been already tested for the enforcement of arbitral awards with positive results.

In conclusion, in those instances and jurisdictions where arbitrators are allowed to issue interim measures, arbitrators lack the coercive power required to enforce them. Such limit significantly affects the benefits of arbitration as long as it forces parties to resort to ordinary courts.

Some commentators believe that the optimal solution would be to provide for an exequatur procedure similar to that provided for enforcing arbitral awards.

Would it be a suitable solution?

 

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