Author: Vedang Mishra, Research Associate
Parties are seeking interim measures in an increasing number of cases. This trend and lack of clear guidance to arbitral tribunals as to the scope of interim measures that may be issued and the conditions for their issuance may hinder the effective and efficient functioning of international commercial arbitration. . . . – Secretary General, UNICITRAL explaining the need for interim measures
The UNICITRAL Model law on International Commercial Arbitration (hereinafter ‘the model law’) was adopted by the United Nation Commission on International Trade Law (UNICITRAL) on 21st June 1985 in the view of the desirability of uniformity in the law of arbitral procedures and the specific needs of international commercial arbitration practice ((As adopted by the Commission at its eighteenth session, in 1985)). Article 17 of the 1985 Model Law empowers the arbitral tribunal to order any interim measures of protection on the request of the parties to arbitration agreement. This 1985 Model Law proceeded on an assumption that the parties would voluntarily accept the interim order of the tribunal and no need of any enforcement procedure was felt at that time. Article 17 read:
‘Power of arbitral tribunal to order interim measures unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. The arbitral tribunal may require any party to provide appropriate security in connection with such measure.’
This position was not satisfactory and after an elaborated process the 1985 model law was amended by UNICITRAL on 7th July 2006 ((As adopted by the Commission at its thirty-ninth session, in 2006)). The old Article 17 has been completely replaced by an extensive scheme providing inter alia for ex parte orders and for interim measures to be binding and enforceable. The purpose of amending Article 17 was to clarify following three aspects regarding the use of interim measures which were left underdeveloped and open-ended by the old provision.
- Tribunal-ordered interim measures protection, where a need was felt to overhaul the minimalist approach of old Article 17.
- Enforcement of such tribunal-ordered interim measures
- Court-ordered interim measures in support of arbitration
This amendment of article 17 on interim measures was considered necessary in light of the fact that such measures are increasingly relied upon in the practice of international commercial arbitration and the effectiveness of arbitration frequently depends upon the possibility of enforcing interim measures. This new provision has been incorporated in a new chapter of the Model Law on ‘Interim Measures and Preliminary Orders’.
Article 17 gives powers to arbitral tribunal in the widest terms. 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 prejudice the arbitral process; provide a means for preserving assets for satisfaction of the award, or preserve material evidence that may be relevant for resolution of the dispute.
Article 17A provides for the conditions for granting interim measure i.e. balance of convenience; irreparable harm and chances of the requesting party in succeeding on the merits of the claim.
Article 17 B introduces a preliminary order procedure which allows for an ex parte application in the case of the emergency. The scope of such orders is narrower and is essentially confined to maintaining the status quo. Under Article 17 C an ex parte order shall be valid only for 20 days from the date of its issuance. Such order shall be binding on the parties but shall not be enforceable by a court process. Further such order does not constitute an award. Under Article 17 E the tribunal requires the applicant to provide appropriate security in connection with the same unless the tribunal considers it unnecessary to do so.
Article 17 H expressly provides that “interim measures” are enforceable “upon application to the competent court, irrespective of the country in which it was issued,” unless otherwise provided by the arbitral tribunal. However, it is subject to the conditions provided under Article 17 I which means that Measures must be enforced, unless there are some reasonable grounds for its non-enforcement as set forth in article 36.
Finally the last part of this chapter i.e. Article 17 J deals with the issue of municipal court’s power to issue interim measures of protection. Before 2006 amendment, the issue of court ordered interim measures was touched on only by Article 9 of 1985 Model Law. This provision does not positively resolve the question of whether the court has express power to issue interim measures in support of arbitration and whether the Court can take cognizance if the arbitration took place outside the country in which the court is constituted. It was therefore thought necessary to address the issue in specific manner which led to the inclusion of article 17 J in 2006 Model law.
Indian Legal Framework
On 20th of January 1996 by way of a special Ordinance, India promulgated a new Arbitration and Conciliation Act, 1996 (hereinafter 1996 act). The act has been enacted on the line of 1985 UNCITRAL Model Law and the 1976 UNCITRAL Arbitration Rules with very few departures.
In relation to interim measures section 17 of the 1996 act empowers the arbitral tribunal to order a party to take any interim measures of protection in respect of the subject matter. This section does not confer any power upon the arbitral tribunal to enforce its order nor does it provide for judicial enforcement thereof. A provision is made for an appeal to court from an order of the tribunal “granting or refusing to grant an interim measure ((Section 37 (2) (b) of the Arbitration and Conciliation Act, 1996)).” This creates a grey area. A party is entitled to appeal if it feels aggrieved by the interim order but it is nowhere stated as to what will be the consequence if it simply chooses to disobey it. At the same time if the succeeding party wishes to enforce it, there is no enabling mechanism for it to do so. The power given to the arbitrator under this section is a limited one. This is because the power is restricted only to the extent of agreement between the parties and not beyond that.
Like the Model Law the Indian Act also enables an approach to a court for interim relief. Under Section 9 of the 1996 Act the court, may on application by a party, grant interim relief “before or during the arbitral proceedings or at any time after making of the arbitral award but before it is enforced.” But the powers of the court, under this provision are available only where the place of arbitration is in India.
Arbitration Amendment Bill, 2003
The Law Commission ((Law Commission’s 176th Report on Arbitration and Conciliation))proposed an amendment back in 2003 that generated ample debate. It was proposed to add to and elaborate the powers of the tribunal in relation to interim measure. It empowered the arbitral tribunal to direct a party to furnish security for the costs of the arbitration. It also provided explicit powers to the arbitrators to examine a party or witness on oath or affirmation. But still no mechanism had been proposed for enforcement of the same. A parallel committee proposed that interim measures of protection ordered by the arbitral tribunal be enforceable through courts.
However the Amendment Bill ran into trouble and in the end, the entire amendment was struck down because it was deemed not to bring any improvement, but additional confusion and additional litigation.
This new regime of 2006 Model Law provides a number of improvements in the area of interim measures of protection. However, achieving true harmonization seems to look difficult in this area of law. One of the main problems lies in the fact that the new provisions interfere more with the civil procedure of the adopting states than some states are prepared to permit. Nevertheless, it is undisputed that UNICITRAL made its very best effort to negotiate an internationally acceptable harmonized text ((Peter Binder, International Commercial Arbitration and Conciliation in UNICITRAL Model Law Jurisdiction, 2nd Ed 2005)).
The Working Group on Arbitration and Conciliation is currently drafting revisions to the Model Rules ((UNCITRAL Working Group II (Arbitration), Settlement of Commercial Disputes: Revision of the UNCITRAL Arbitration Rules)). The draft text proposed by the Working Group is modeled closely on Article 17 of the Model Law, based on the general consensus that the revision will further clarify the conditions, circumstances, and procedures for granting interim relief.
Till now, Many Countries like Mauritius, Slovenia, New Zealand, Rwanda, Georgia, Ireland, Peru etc. have incorporated the Model Law amendments into their national law ((UNCITRAL, Status of Conventions and Model Laws, Note by the Secretariat (As on 31St August 2013).)). While in India the arbitral tribunal still lacks the power to directly enforce such interim measures, leaving it with no effective way of forcing the party to obey the order. By adopting the amendments to Article 17, India will establish the uniform framework which its current arbitration law lacks. This will also ease the enforcement of interim orders because there will be uniform standards for the scope of power of arbitral tribunals.