Article 17 of the UNCITRAL Model

Risha Sharma, Research Associate

The UNCITRAL is a core legal body of the United Nations system in the field of international trade law. It is a legal body with universal membership specializing in commercial law reform worldwide for over 40 years. Briefly, the UNCITRAL’s business is the modernization and harmonization of rules on international business. Trade means faster growth, higher living standards, and new opportunities through commerce. In order to increase these opportunities worldwide, UNCITRAL has been involved in the formulation of modern, fair, and harmonized rules on commercial transactions. These also include conventions, model laws and rules, which are acceptable worldwide, legal and legislative guides and recommendations of great practical value, updated information on case law and enactments of uniform commercial law, technical assistance in law reform projects and finally regional and national seminars on uniform commercial law.
On June 21, 1985 after years of analysis and discussion, the United Nations Commission on International Trade Law adopted a final trade model on International Commercial Arbitration, called the Model Law ((Saturnino Lucio, The UNCITRAL Model on International Commercial Arbitration, Vol.17 No.2, 1986, The University of Miami Inter- American Law Review)). The Model Law was adopted keeping in mind the manifold problems encountered by parties contemplating an international arbitral remedy. The uncertainties which thus are cast upon the parties in their efforts to develop a workable arbitration agreement highlight the reasons UNCITRAL has attempted to unify measures in this field. It was drafted and developed by the Working Group on International Contract Practices, which was entrusted with the project in 1981. The new model has been intended to serve as a model of domestic arbitration legislation, harmonising and making more uniform the practice and procedure of international commercial arbitration while giving international arbitration freedom from the parochial law of any adopting state. The UNCITRAL model law approach, rather than looking to national law, which is generally geared toward domestic arbitration as opposed to international arbitration issues, emphasizes the will of the parties as the governing principle. The model law leaves the parties free to determine the composition of the arbitral tribunal, to select the rules to govern appointment and challenge procedures, and to choose the rules of law applicable to the substance of the dispute ((Mcnerney Mary , Esplugues A. Carlos, International Commercial Arbitration: The UNCITRAL Model, Vol. 9 Article 3, 1986 Boston College International and Comparative Law Review)). This freedom is subject to certain mandatory provisions guaranteeing due process of law. The approach undertaken by the UNCITRAL model balances the national legal system with the freedom and the will of the parties. Model Law by virtue of its nature is flexible and allows the states to adopt easily the principles contained in the documents. Initially, UNCITRAL considered preparing a protocol to supplement and clarify the 1958 New York Arbitration Convention but UNCITRAL dropped this approach in favor of a model uniform law to serve as the basis for national arbitration laws ((Ibid)). The UNCITRAL provides for the harmonization and unification of the national laws regulating international commercial arbitration. The UNCITRAL model law, therefore, is designed to prevail over any domestic law limiting the scope of international commercial arbitration. This approach is in contrast with Article 1(3) of the 1958 New York Convention which limits the Convention’s scope to only those relationships which the state’s domestic law defines as commercial. The Model Law is intended to be interpreted in a non-restrictive manner and has a broad application.
Article 17 gives the arbitral tribunal a concurrent power to order interim measures of protection, although the range of such measures is more limited than those provided for under Article 9. The text requires that the interim measure pertain to the subject-matter of the dispute, and the measure may only be directed to a party. Additionally, the arbitral tribunal lacks power to enforce these orders. As a result compliance may require assistance of the courts, assuming the national procedural law gives the court the authority to act ((Ibid)).

Article 17 of the original UNCITRAL Model Law stated:

“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.”
It basically provided that based on the agreement between the parties, the tribunal was empowered to, at the insistence of one of the parties, to take an interim measure of protection such as requiring any party to provide sufficient security with regard to the subject matter of the dispute. This has been expanded by the new Article 17 of the UNCITRAL Rules.

The relevant part of Articles 17 reads:

(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures.

(2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party 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.
(3) If an arbitral tribunal has granted an interim measure, the tribunal may, on the application of any party, make an award to the same effect as the interim measure.
Certain conditions have been laid down with regard to the grant of interim measures. The party requesting the grant of interim measures must satisfy the tribunal that harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted. Also, there must be a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination on this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination. The parties are empowered to make a request for an interim measure together with an application for a preliminary order directing the other party not to frustrate the purpose of the interim measure requested, without a prior notice to the party. The arbitral tribunal in its capacity may grant a preliminary order provided it considers that prior disclosure of the request for the interim measure to the party against whom it is directed risks frustrating the purpose of the measure. Immediately after the arbitral tribunal makes a determination in respect of an application for a preliminary order, the arbitral tribunal can given notice to all parties of the request for the interim measure, the application for the preliminary order, the preliminary order, if any, and all other communications, including by indicating the content of any oral communication, between any party and the arbitral tribunal in relation thereto. At the same time, the arbitral tribunal is empowered to give an opportunity to any party against whom a preliminary order is directed to present its case at the earliest practicable time. The arbitral tribunal can decide promptly on any objection to the preliminary order. A preliminary order expires after twenty days from the date on which it was issued by the arbitral tribunal. However, the arbitral tribunal may issue an interim measure adopting or modifying the preliminary order, after the party against whom the preliminary order is directed has been given notice and an opportunity to present its case. A preliminary order is binding on the parties but is not to be subjected to enforcement by a court. Such preliminary orders do not constitute an award. According to the amendment made, the arbitral tribunal may modify, suspend or terminate an interim measure or a preliminary order it has granted, upon application of any party or, in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative. The arbitral tribunal may require the party requesting an interim measure to provide appropriate security in connection with the measure. The amended Article 17 states that the arbitral tribunal requires the party applying for a preliminary order to provide security in connection with the order unless the arbitral tribunal considers it inappropriate or unnecessary to do so. If need be, the tribunal may require any party promptly to disclose any material change in the circumstances on the basis of which the measure was requested or granted. The party applying for a preliminary order has to disclose to the arbitral tribunal all circumstances that are likely to be relevant to the arbitral tribunal’s determination whether to grant or maintain the order, and such obligation shall continue until the party against whom the order has been requested has had an opportunity to present its case. The party requesting an interim measure or applying for a preliminary order is liable for any costs and damages caused by the measure or the order to any party if the arbitral tribunal later determines that, in the circumstances, the measure or the order should not have been granted. The arbitral tribunal can award such costs and damages at any point during the proceedings. Subject to the provisions given therein, an interim measure issued by an arbitral tribunal is to be recognized as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the competent court, irrespective of the country in which it was issued. As for the Courts, a court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the territory of a State, as it has in relation to proceedings in courts. Recognition or enforcement of an interim measure can be refused only in specific cases such as the non-compliance of the tribunal’s decision with regard to interim measures or when the interim measure has been terminated by the tribunal or the empowered court of the State or under the law under which the measure was granted in the first place.
The existence of the Model Law is deemed to be of particular value not only in countries which benefit from modernisation but also those which may be adopting or expanding their arbitration laws for the first time ((Hoellering Michael, The UNCITRAL Model on International Commercial Arbitration, The International Lawyer 20 (1) : 327 – 41)). The model law has been well-received by Government representatives and international arbitration organizations, and the majority of comments emanating from conferences and symposia on the subject have been favourable. This article can be effectively summed up with the quote of The Right Hon’ble Sir Michael Kerr, Lord Justice of Appeal of the Supreme Court of Judicature U.K., “We should accept the concept of the model law if our trading partners do so, and we should then use it as a basis for a comprehensive and explicit restatement of our law, which is at present far too diffuse and inexplicit.”

UNICTRAL Model Law Amendment 2006: An overview

Author: Pankaj Sevta, Research Associate

In recent times, the issue of grant of interim relief by arbitral tribunals has become center stage. The 1985 Model Law by UNICTRAL  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 effects 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 paper presents an analysis of the UNCITRAL amendments to the Model Lawand points out some problematic areas.

Historical Perspective

The rise of globalization and the expansion of trading frontiers, international commercial transactions have significantly increased in both number and complexity ((Katherine Lynch, ‘The forces Of Economic Globalization: Challenges To The Regime Of International Commercial Arbitration.’, 1-2 (2003).)). Not surprisingly, this resulted in an increasing number of disputes ((William Wang, ‘International Arbitration: The Need for Uniform Interim Measures of Relief’, BROOK. J. INT’L L. 1059, 1059 (2003).)). Although national courts are the traditional venues for dispute resolution, parties are more frequently turning to arbitration as a favorable alternative ((Thomas E. Carbonneau, ‘The Ballad of Trans border Arbitration’, U. MIAMI L. REV. 773, 778 (2002).)). In the context of contractual business disputes, international commercial arbitration provides a number of benefits not available through litigation ((Stephen M. Ferguson, ‘Interim Measures of Protection in International Commercial Arbitration: Problems, Proposed Solutions, and Anticipated Results’, CURRENTS: INT’L TRADE L.J. 55, 55 (2003).)).

However, arbitration is not free from downsides ((Stephen M. Ferguson, ‘Interim Measures of Protection in International Commercial Arbitration: Problems, Proposed Solutions, and Anticipated Results’,12 CURRENTS: INT’L TRADE L.J. 55, 55 (2003).)), such as difficulties related to the arbitral tribunals’ willingness and ability to order and enforce interim measures of protection during international commercial arbitration proceedings ((Richard Allan Homing, ‘Interim Measures of Protection; Security for Claims and Costs; and Commentary on the WIPO Emergency Relief Rules’, AM. REV. INT’L ARB. 155, 156-57 (1998).)). Notwithstanding the increasingly frequent use of interim measures, there is little consensus about the scope of the arbitral tribunal’s powers and how interim actions are enforced ((Gary B. Born, ‘International Commercial Arbitration: Commentary And Materials’, 3 (2nd ed. 2001).)). In an effort to encourage uniformity, the United Nations Commission on International Trade Law (“UNCITRAL”) amended its provision on interim measures in 2006 ((G.A. Res. 61/33, pm bl., U.N. Doc. A/RES/61/33.)). The revisions to the UNCITRAL Model Law (“Model Law”) elaborated on the powers of the arbitral tribunal to grant interim measures, defining scope of interim measures and the courts’ role of support and enforcement ((U.N. Comm’n on Int’l Trade Law [UNCITRAL], UNCITRAL Model Law on Commercial Arbitration, art. 17, U.N. Doc. A/40/17.)).

Changes brought by the amendment

The 2006 Amendment of the Model law brought about various significant changes. 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.

Interim Measures of Protection as Defined by the Amendment

At the most fundamental level, interim measures of protection are forms of temporary relief ((John Charles Thomas, ‘Selected Issues: Interim Measures In International Arbitration: Finding The Best Answer’, 12 CROATIAN ARB. Y.B. 213, 213-14 (2005).)), intended to safeguard the rights of the parties until the arbitral tribunal issues a final award ((UNCITRAL, Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration, Report of the Secretariat, 42, delivered to the General Assembly, U.N. Doc. A/CN.9/264 (Mar. 25, 1985). See also, HOWARDM. HOLTZMANN & JOSEPH E. NEUHAUS, ‘A GUIDE TO THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION: LEGISLATIVE HISTORY AND COMMENTARY’, 542 (1989).)). Interim measures of protection arise in a variety of circumstances in international arbitration and their uses vary depending on the context and forum ((GARY B. BORN, ‘INTERNATIONAL COMMERCIAL ARBITRATION’, 1943-2019 (2009); See also, Douglas D. Reichert, ‘Provisional Remedies in the Context of International Commercial Arbitration’, INT’L TAX &Bus. LAW. 368, 370-74 (1986).)). Still, they are a procedural necessity in both public and private means of dispute resolution ((LAWRENCE COLLINS, ‘Provisional and Protective Measures in International Litigation’, ESSAYS IN INTERNATIONAL LITIGATION AND THECONFLICT OF LAWS, 10 (1994).)). In many cases, interim measures determine the efficacy of the arbitral award ((Bernardo M. Cremades, ‘The Need for Conservatory and Preliminary Measures’, INT’L BUS. LAW. 226, 226-27 (1999).)). Interim relief can have “final and significant consequences ((UNCITRAL, Possible Uniform Rules on Certain Issues Concerning Settlement of Commercial Disputes: Conciliation, Interim Measures of Protection, Written Form for Arbitration Agreement, Report of the Secretary General, delivered to the General Assembly, U.N. Doc. A/CN.9/WG.II/WP.108))without which an adverse party may easily render an award meaningless ((UNCITRAL, Working Group on Arbitration, Possible Future Work: Court-Ordered Interim Measures of Protection in Support of Arbitration, Scope of Interim Measures that May be Issued by Arbitral Tribunals, Validity of the Agreement to Arbitrate, Report of the Secretary General, delivered to the General Assembly, U.N. Doc. A/CN.9/WG.IIIWF. 111 (Oct. 12, 2000).)).

Interim Measures generally fall into Two Broad Categories ((UNCITRAL, Working Group II, Settlement of Commercial Disputes, Preparation of Uniform Provisions on Interim Measures of Protection, Note by the Secretariat, delivered to the General Assembly, U.N. Doc. A/CN.9/WG.II/WP. 119 (Jan. 30, 2002).)).

Firstly, measures aimed at avoiding or minimizing loss, damage, or prejudice ((ibid at ¶ 17.)); secondly, measures facilitating the enforcement of arbitral awards ((ibid at ¶ 18.)). Measures meant to avoid loss, damage, or prejudice usually serve the purpose of preserving the state of affairs pending the final resolution of the dispute. They are functionally similar to court injunctions in that they may require a party to continue performance or abstain from taking certain actions that may frustrate the resolution of the dispute ((Julian D. M. Lew ET AL., ‘Comparative International Commercial Arbitration’, 1 (2003).)).

Effect of the Amendment on Art. 17.

The purpose of revising Article 17 was to clarify three important elements regarding the use of interim measures:

  • The scope of the arbitral tribunal’s power to order interim relief;
  • The enforcement of tribunal ordered interim measures; and
  • The role of the courts in supporting arbitration; all of which were left open-ended and undeveloped by the previous provision.

Article 17 now sets forth the powers of the 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 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 recognized; balance of convenience; irreparable harm and “a reasonable possibility that the requesting party will succeed on the merits of the claim”.

By amending Article 17, UNCITRAL sought to provide clarity and guidance. The amended version of Article 17 is intended to address the concerns, confusion, and criticisms surrounding the previous text by outlining in detail the procedural aspects of the use of interim measures that the provision lacked ((UNCITRAL, Working Group on Arbitration, Possible Future Work: Court-Ordered Interim Measures of Protection in Support of Arbitration, Scope of Interim Measures that May be Issued by Arbitral Tribunals, Validity of the Agreement to Arbitrate, Report of the Secretary General,delivered to theGeneral Assembly, U.N. Doc. A/CN.9/WG.IIIWF. 111 (Oct. 12, 2000).)).

Short Analysis of the amendment

UNCITRAL’s recognition of the inadequacies of the previous Model Law on interim measures of protection led to the development of what promised to be an essential text in arbitration ((Christopher Huntley, ‘TheScope of Article 17: Interim Measures Under the UNCITRAL Model Law’, VINDOBONA J. INT’L COM. L. & ARB., 69, 74-75)). However, despite predictions of widespread acceptance, the majority of states have not integrated the new version of Article 17 ((UNCITRAL, Status of Conventions and Model Laws, Note by the Secretariat, delivered to the General Assembly, U.N. Doc. AICN.9/674 (May 14, 2009).)). This, however, should not detract from the important purposes the amendment will serve ((Supra note 17, ¶¶ 10-11.)). There are a number of compelling reasons why states should incorporate the amendments to Article 17 ((Pieter Sanders, ‘Quo Vadis Arbitration?: Sixty Years OfArbitrationPractise’, 7-8 (1999).)). In particular, states should consider that the efficacy of arbitration proceedings depends on the use and enforcement of interim measures. Furthermore, arbitration is a practical and efficient forum for ordering interim relief, and adoption of the Model Law amendment will harmonize national arbitration laws. This will inspire the confidence necessary for the survival of international commercial arbitration as a prominent dispute resolution mechanism.

Conclusion

Considering the growing significance of arbitrations in resolution of international disputes, it is only appropriate that arbitral tribunals be empowered in relation to grant of interim measures of protection. The 1985 Model Law was quite inadequate in this regard. At the same time, in my respectful view, the 2006 amendments to Article 17 propose a leap tool on, especially in relation to the enforcement provisions. I apprehend that these provisions may not meet with the wide acceptance the 1985 version did. In my respectful view fresh proposals need to be mooted which would render the arbitral tribunal’s decision binding and also enforceable. An aggrieved party should be able to resist enforcement on narrow grounds such as patent illegality, irregularity or gross unfairness of the result but to render an interim measure the same degree of a enforceability as a final award is potentially unfair and jurisprudentially inappropriate.