Executive Summary

In recent times, the issue of grant of interim relief by arbitral tribunals has become centre stage. The 1985 Model Law contemplated grant of interim measures (Article 17) but it seemed half‐hearted, as it did not contain an enforcement mechanism and nor were any adverse affects sanctioned in the event of non‐compliance. The old Article 17 was essentially premised on voluntary compliance and therefore (not unsurprisingly) was rarely resorted to. At the same time, an approach to court (while effective) had deterrents (including the inconvenience of moving a different forum, perhaps through another legal team). Resort to courts also carried an inbuilt risk of the court pre‐determining (or influencing) parties substantive rights. With this backdrop, in the year 2006 UNCITRAL made extensive amendments to the Model Law and elaborate provisions now stand incorporated on the subject. This article presents an analysis of the UNCITRAL amendments to the Model Law and points out some problem areas. In the second part, the article sets out the Indian law and practice on the subject.

The paper consists of two parts. In the first part, I comment upon the amendments brought about in the year 2006 to the UNCITRAL Model Law in relation to interim measures. In the second part, I discuss the Indian law and practice of grant of interim relief by arbitral tribunals.

PART I [The UNCITRAL Model Law]

Survey of the new provisions:

The 1985 UNCITRAL Model Law provided for interim measures vide Article 17. The provision however contained two express conditions: The measure had to be shown to be "necessary" and be "In respect of the subject matter of the dispute". Besides, there were at least two inherent hurdles in the path. First, one has to await the constitution of the tribunal and allow for a reasonable opportunity for it to assemble at the seat and for the opposite side to respond to the request. This essentially ruled out relief in the case of urgency (and more often than not an application for interim relief cannot brook delay). Secondly, there was no mechanism to enforce an order of the tribunal.

The 1985 Model Law proceeded on an assumption that the parties would voluntarily accept the interim order of the tribunal and there would be no need to even contemplate of an enforcement procedure. On the other hand, if a party felt the need for an enforceable order, it would not be incompatible for it to approach a court with a request in this regard.

The position was not satisfactory and after an elaborated process, in December, 2006 the UNCITRAL Model Law stood amended. The old Article 17 stands completely replaced by an extensive scheme providing inter alia for ex parte orders and for interim measures to be binding and enforceable.

Article 17 now sets forth the powers of the arbitral tribunal in the widest terms. The earlier twin conditions have been done away with. The amended Article 17 inter alia empowers the arbitral tribunal to maintain or restore the status quo; direct a party to refrain from doing anything which may prejudicially affect the arbitral process; provide a means for preserving assets for satisfaction of the award, or preserve evidence that may be material for resolution of the dispute. The tribunal may do so by framing its order in a form of an award or otherwise as it may deem appropriate.

Article 17 A provides for the conditions which must be satisfied for grant of an interim measure. These conditions are universally recognised: balance of convenience; irreparable harm and "a reasonable possibility that the requesting party will succeed on the merits of the claim".

Article 17 B is somewhat revolutionary in the realm of arbitration as it introduces the concept of ex parte ad interim orders (called "preliminary orders"). The scope of such orders is narrower and is essentially confined to maintaining the status quo. An ex parte order shall be valid only for 20 days from the date of its issuance (within which time the tribunal may affirm or modify the order after notice and an opportunity to the opposite side to present its case). The general condition for ex parte orders is that the tribunal will require the applicant to provide appropriate security in connection with the same unless the tribunal considers it unnecessary to do so. An ex parte order shall be binding on the parties but shall not be enforceable by a court process. Further such an order shall not be in the form of an award.

Perhaps the most far reaching amendment to the Model Law is vide Article 17 H and I. This provides for recognition and enforcement of an interim measure ordered by the tribunal (i.e. other than an ex parte order). Article 17 H inter alia states that an interim measure shall be recognized as binding, unless otherwise stated by the tribunal. It may be enforced upon application to a competent court irrespective of the country in which it was issued.

Recognition and enforcement may be refused only on the grounds stated in Article 17 I. Sub ‐ Articles (i) to (iv) of Article 36 (1) (a) of the Model Law constitute the first set of grounds for refusal to enforce an interim measure. Further, an interim measure will not be recognised if the court finds that the grounds set forth in Article 36 1 (b) (i) or (ii) apply to the interim measure in question. Article 36 1 (b) (i) provides for refusal to enforce if the subject matter of the dispute is not capable of settlement by arbitration under the laws of the enforcing State and Article 36 (1) (b) (ii) provides for the public policy ground.

Comments on the 2006 Amendments to the Model Law:

The UNCITRAL has moved boldly to try and address the limitations and hurdles in the way of an arbitral tribunal in relation to interim measures. Though a new approach was warranted, I have some reservations on the amendments. I may elaborate my reasons as follows:

  1. To begin with Article 17 (2) states that the interim measure can take any form i.e. it can be in the form of an order simpliciter or in the form of an award. To my mind, these are two completely different types of orders and cannot be treated in the same breath or be made subject to the same set of rules. An interim order can of course be in the form of an interim award but then an award is a final pronouncement on the issues it determines. It cannot be called a "temporary measure" which the arbitral tribunal may modify or alter as it wishes as it goes along. Once pronounced it becomes final and the arbitrators become functus officio in relation to that issue. They cannot retrace their steps. Further, setting aside or enforcement of an award (final or interim) is already a subject matter of Articles 34 and 36 of the Model Law. There cannot be another (parallel) provision i.e. Article 17 (H) and (I) on the same subject. There cannot be two provisions for enforcement of the same award.
    Thus interim measures which take the form of an interim award ought not to have been included in the new Article 17 scheme.
  2. I also find the provisions for ex parte interim orders to sit uneasily with the role and standing of an arbitral tribunal in the eyes of the parties. Arbitration is not a dispute resolution mechanism by impersonal judges (akin to a court). The tribunal is a creation of the parties who perceive it as an amiable forum. It is out of character to expect the tribunal to receive a secretive communication from one party and pass binding orders thereon. It would be an embarrassment if later they have to turn around and reverse their decision (after hearing the other side). It certainly will not be the best start‐off for any arbitration. Further an ex parte order by the tribunal (though "binding") is not capable of being enforced in court under Article 17 C (5). It will have to undergo a waiting period of up to 20 days and if the order is maintained (after hearing the opposite side) the resultant order will be subject to enforcement by court. An ex parte order is usually warranted in rare cases where the aggrieved party cannot afford to lose any time. The process of issuance of an exparte order (first provisionally and then finally) renders the whole exercise of doubtful value and perhaps in the interest of efficiency and costs it may have been better to leave the subject of an ex parte orders to the courts.
  3. Further, I find the enforcement provisions (Article 17 I) to be too drastic. For all practical purposes, it clothes an interim measure with the same vigour as a final award (but the two are not the same). A final award is based on merits and evidence and follows the full legal process (including an obligation to give reasons). An interim measure is not and it is anomalous to give an interim measure the same standing and as a final award with little discretion with the court except to enforce, as it is obliged a final award.
  4. Under the Model Law if a challenge on bias is turned down by the arbitral tribunal one can appeal by way of an interim recourse ) to court (under Article 13). It is for this reason that a challenge on the ground of arbitrator's bias is not a ground for setting aside an award under Article 34 or for resisting enforcement under Article 36. However, in relation to interim measures, it should have been included in Article 17 I. Now one may have a situation that there is no adequate opportunity to challenge an interim measure on the ground of bias.
  5. The amended Model Law seeks to achieve what the New York Convention never attempted to i.e. give interim orders passed in another State the same enforceability as a final order.

For the above reasons I apprehend that the amended Model Law may not find the widespread favour which the 1985 version did. In India, courts are zealous of their role in dispensation of justice. The system is not very tolerant of the doors of the court being shut as Article 17 I seeks to. We still have to come to terms with Article 34 of the Model Law (which does not allow a challenge on merits in relation to a final award). A 2003 Indian Supreme Court decision1 (which has consistently been followed since) allows a final award to be challenged on merits. I therefore see little hope of Article 17 I being adopted as part of Indian law.

Click here to continue reading . . .

Footnote

1. ONGC v. Saw Pipes Ltd; (2003) 5 SCC 705

Originally published by TDM 4 (2012) in CILS – 7th Biennial Symposium on International Arbitration and Dispute Resolution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.