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Exam IMPS Essay
"Arbitration will not work effectively as a method…
Exam IMPS Essay
"Arbitration will not work effectively as a method of resolving cross-border commercial disputes unless it is possible for claimants to obtain appropriate interim measures of protection and evidentiary orders – either from the arbitral tribunal itself or from national courts. But, if such measures are sought from a national court, it is vital that the court avoids undermining the position of the arbitral tribunal.”
intro
- In any system of formal dispute resolution (such as litigation and arbitration) there will inevitably be a time delay between commencement of the process (by service of a claim form or the giving of notice of arbitration) and the final resolution of the dispute (by the court or arbitral tribunal).
- During this time delay, an unscrupulous respondent may take steps to undermine the effectiveness of the dispute-resolution mechanism in question.
- First, for example, a respondent who fears that it will lose the arbitration may seek to make itself award-proof by dissipating its assets or moving them from a country in which the claimant would be able to enforce an award to another country where the assets cannot be traced or where the award will not be enforceable.
- Secondly, by the same token, the respondent may be tempted to destroy evidence which has a bearing on the dispute, thereby reducing the claimant’s chances of succeeding in the arbitration.
- Thirdly, if the respondent’s ongoing actions are causing damage to the claimant’s interests, the claimant may benefit from an interim measure of protection which seeks to maintain the status quo pending the outcome of the arbitration.
- Although there is a wide variety of orders which potentially may be made during an arbitration, the three most important categories are:
- (i) freezing orders (preventing the respondent from disposing of assets), so that the claimant, if successful, will be able to enforce the award against those assets:
- (ii) orders maintaining the status quo, so that the disputed situation which has provoked the reference to arbitration is not made worse and
- (iii) orders relating to the preservation and production of evidence.
when should ct decide when it would be appropriate or inappropriate for interim measures to be granted by a non-seat court? [English case law indicates that two factors are relevant.]
- First, a non-seat court should not intervene unless there is a close connection between the forum and the subject-matter of the measure in question. In cases like MCN v PDV and Econet Wireless, the English court refused to grant a freezing injunction in support of a foreign arbitration on the basis that the assets which the claimant wanted to have frozen were not located in England. Unless the injunction-defendant and/or the assets in question are located in the forum, there is no basis to justify the court’s intervention. This English approach ensures that, as far as possible, the non-seat court does not grant measures which run the risk of conflicting with similar measures granted by the courts of the seat (which are the judicial authority playing the predominant role in supervising and supporting the arbitration).
- Secondly, even if the necessary connection with the non-seat country is present, the non-seat court should not exercise the powers it enjoys under its own law if such exercise is not consistent with the procedural framework to which the parties committed themselves. It is reasonable to postulate that parties who select country X as the seat of arbitration intend that the arbitration should be conducted in accordance with the procedural norms of the law of country X. It would not be appropriate for a non-seat court to grant provisional measures which ‘cut across the grain’ of the lex arbitri. This principle of self-restraint was advocated by Lord Mustil in the (English) Channel Tunnel case and was cited with approval by the Belize Supreme Court in Attorney General of Belize v Carlisle Holdings Ltd.
- Although interim measures and evidentiary orders are important in the context of both arbitration and litigation, the problems posed by time delay is even more pronounced in the arbitration context; this is a result of the gap between the dispute being referred to arbitration and the constitution of the arbitral tribunal. This gap increases the potential for respondents to make the agreed method of dispute resolution unworkable or ineffective. Accordingly, it is well-established that, in the world of arbitration, the arbitral tribunal and national courts share jurisdiction to grant interim measures of protection and make evidentiary orders.
model law
The concurrent jurisdiction model adopted by the ML goes a long way to ensuring that provisional measures are granted in appropriate cases – either by the tribunal or by a national court. However, the concurrent jurisdiction model runs the risk of creating problems of co-ordination. These co-ordination problems are exacerbated by art 17J – which applies regardless of the seat of arbitration. It is important, not only that courts do not tread on the toes of the arbitral tribunal, but also that the courts of more than one country do not make inconsistent or conflicting orders. Such problems of co-ordination are only partially addressed by the terms of the ML itself.
- As regards the Model Law (ML), this regime of concurrent jurisdiction is provided for by the following provisions. First, the powers of the arbitral tribunal are set out in art 17 to 17C ML. These articles provide for the tribunal to grant both inter partes and, in appropriate cases, ex parte orders. Secondly, arts 9 and 17J deal with the courts’ powers to grant interim measures of protection; art 17J provides that the court’s powers to grant interim measures in support of an arbitration are the same as those that apply to court proceedings. Thirdly, art 27 confers a power on the courts to make evidentiary orders. Although, as a general rule, the courts of the seat are more likely than the courts of other countries to have a role in terms of supporting and supervising an arbitration, it is expressly provided that arts 9 and 17J apply regardless of the seat of arbitration. Accordingly, if England is the seat of arbitration, the Arcadian court may, relying on art 17J ML, grant an interim measure of protection to support that English arbitration.
evidentiary orders
- As regards evidentiary orders, art 27 ML provides a simple, some might think simplistic, solution. First, unlike art 17J, art 27 does not apply regardless of the seat of arbitration. That is to say, as regards an arbitration seated in England, the Arcadian courts cannot make an evidentiary order. A Canadian case (Delphi Petroleum) which (obiter) proceeds on the assumption that a non-seat court may make an evidentiary order under the ML is almost certainly wrong; the decision seems to have been based on a misinterpretation of the UNCITRAL Analytical Commentary on the ML. Secondly, art 27 ML expressly puts the arbitral tribunal in the driving seat by providing that the courts of the seat may make an evidentiary order only at the request or with the consent of the tribunal. Accordingly, there can be no danger, under art 27, of the court usurping the tribunal’s role to decide how the dispute should be determined.
imps
- The position with regard to interim measures of protection is left open by the text of the ML and it is up to the courts of each ML country work out the relationship between the arbitral tribunal and the national courts. There is little case law to date in ML countries on the issue, but the question has received some attention in England (under the Arbitration Act 1996, which makes more explicit principles which might be thought to be implicit in the ML).
ML case law
- In terms of the ML case law, there is a HK case (Leviathan Shipping) which (rightly) makes it clear that the court should not seek to intervene unless the arbitral tribunal is powerless to act. Although the tribunal and the courts may have parallel powers in terms of the types of orders they can make, the arbitral tribunal (unlike the courts) has no jurisdiction over third parties and does not enjoy coercive powers. Under English law (AA 1996, s 44), the court may grant an interim measure of protection in support of an arbitration only if the tribunal is unable to act or unable to act effectively. Although the legislative frameworks are different, the English approach, which gives priority to the arbitral tribunal and prevents conflict between the tribunal and national courts, is consistent with the Leviathan Shipping case and should be followed under the ML as well.
ML dealing with cts of seat vs cts of non seat countries
- There is also little case law under the ML dealing with the possible conflict between the courts of the seat and the courts of non-seat countries. It is clear from art 17J that the courts of a non-seat country may grant interim measures to support a foreign arbitration. In Sensation Yachts Ltd the NZ courts granted a measure in support of an arbitration whose seat was in England. The fact that non-seat courts may render assistance through the grant of interim measures does not mean, however, that they should do so. The English legislation imposes a limit on the English courts when invited to support a foreign arbitration. Section 2 of the AA 1996 provides that the court may refuse to exercise the power to support a foreign arbitration ‘if, in the opinion of the court, the fact that the seat of the arbitration is outside England … makes it inappropriate to do so.’ Of course, it is up to the court to decide when it would be appropriate or inappropriate for interim measures to be granted by a non-seat court. The English case law indicates that two factors are relevant.
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- If court assistance is needed, it makes sense for such assistance to be provided by the courts of the seat, if possible. The courts of the seat have the greatest interest in ensuring that the arbitration works effectively. However, as long as they do not impede the courts of the seat (or the tribunal), the courts of non-seat countries can play a useful role in ensuring that claimants obtain the interim measures that are needed. In this regard, the approach adopted by the English courts under the AA 1996 shows how tribunals, the courts of the seat and the courts of non-seat countries can work together effectively without getting in each others’ way or undermining the parties’ agreement to have their dispute resolved in accordance with the procedural law of the seat of arbitration.