Kinds of Interim Measures in Arbitration.

Posted on 15/03/2016 · Posted in Arbitration

Arbitration is increasingly used as a form of alternative dispute resolution (‘ADR‘) as businesses seek to save time and money that they would otherwise incur through the court system. Arbitration is also becoming a more popular alternative to formal litigation because it offers more flexibility – parties can agree on the venue and timing of the arbitration and even have some influence over the choice of arbitrator used. Arbitration is also usually a private process so there is the option of confidentiality, and because the arbitrator’s decision is final and legally binding, there is limited room for appeal.

Peace cannot be kept by force; it can only be achieved by understanding”
Albert Einstein

The use of interim measures in arbitration proceedings has grown recently alongside the popularity of arbitration as a form of dispute resolution, and protects a party’s rights pending the outcome of a dispute. During – and even before – the arbitration process kicks off, issues may arise that could have an effect on the final outcome of the arbitration, and this may be when interim measures are requested or required. As arbitration cases become more complex and proliferate, including more international cases that add further complexity, interim measures are becoming increasingly more varied, and adapting to meet the practical needs of the parties involved in arbitration.

Applications for interim measures typically, but not exclusively, arise at the first procedural hearing attended by all the parties (and their representatives). Sometimes an application by one party in the absence of the other party (an ex parte application) may be required mainly because of the nature of the relief sought.

Common types of interim measures include those that facilitate the production of evidence, those that preserve the status quo, measures that facilitate the enforcement of an award, and injunctions.

The different types of interim measures available are explained below:

  1. Injunctions are court orders that may prevent a party from doing something such as publishing an article with defamatory content. Alternatively, injunctions may prevent someone from leaving the country or getting rid of their assets. These are applied when a party predicts that the other will go to great lengths not to pay the final amount in the arbitration award.
  2. Security for costs is an interim measure usually requested by the claimant if there is reasonable cause to believe that the claimant is insolvent and will not pay if he or she loses that arbitration. This includes the cost of the arbitration fees.
  3. Applications for the preservation or detention of property are less common, however they may be equally as important. Arbitrators should exercise great care in these instances as preservation or detention of property may have serious and adverse consequences for a party that needs to use or sell their property. What may be less detrimental is an application for the inspection of a property. Arbitrators must be careful to always evaluate the advantages and disadvantages of implementing an interim measure such as this one.
  4. Active interim measures (or ‘preserving the status quo’, as they are often referred to) require a party to take, or refrain from taking, specified actions. For example, arbitrators may order a party to continue the performance of contractual obligations (such as carrying out construction works), to continue shipping products, or providing intellectual property, or the adverse.
  5. Passive interim measures, on the other hand help both parties to formulate effective guidelines as to how the arbitration will be conducted, albeit in a more formal manner than an oral agreement.

The provision of these interim measures is essential in making the arbitration process – as well as the outcome of the arbitration – more effective, as they provide parties with the security and or relief that allow them to continue with the process. So a party may request an interim measure such as immediate protection of rights or property pending the arbitration outcome, or upfront payment of part of a claim. Across the world courts have developed processes for parties to enable them to apply for these interim measures.

Historically, the power to grant interim measures in international arbitration was solely reserved to national courts. Today, many countries have modified their national arbitration laws to expressly recognise that courts and arbitrators possess concurrent jurisdiction to grant these types of measures. One of the key principles of the Arbitration Act of 1996 is to minimise the need for the courts to intervene, so the courts may agree that the arbitrator may grant interim measures, and tribunals also have the power to issue partial awards (authorised by the courts) that are binding until a final resolution is reached.

One of the main challenges for arbitrators is that national laws and arbitration rules rarely provide any procedural rules or guidance on how interim measures should be dealt with or guidelines outlining under what circumstances interim measures should be granted. This is intended to give arbitrators a wide discretion as to the procedures they may adopt and the types of interim relief that they may grant depending on the particular circumstances of every dispute -validating alternative dispute resolution methods as a trusted alternative to litigation.

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Expert Evidence is a professional firm concentrating on the four main areas of dispute resolution; acting as expert witnesses in financial litigation, mediation, arbitration and adjudication. The firm has a civil, criminal and international practice and has advised in many recent cases. Areas of specialisation include banking, lending, regulation, investment, and tax.

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Disclaimer – Please confirm any of the above views with your solicitor. Expert Evidence takes no responsibility or provides any guarantee that the views above are correct for your particular case or jurisdiction.