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February 01, 2013
Returning Unscathed From the Battlefield of Provisional Measures
This commentator apologizes for his prolonged absence, explained largely in twoÂ words: provisional relief. In the representation of the Claimant in an ICDRÂ arbitration seated in New York, there has been occasion to apply successfullyÂ for (i) judicial Mareva freezing orders in aid of arbitration in three foreignÂ jurisdictions, (ii) an ICDR Emergency Arbitrator’s Partial Final AwardÂ directing access to the property in dispute; (iii) an arbitral Mareva freezingÂ order and order for security for the amount in dispute, given as an InterimÂ Award; (iv) judgments in the U.S. District Court and in the three foreignÂ Mareva jurisdictions, confirming the Interim Award under the New York Convention; and (v) an order of the U.S. District Court in New York finding aÂ Respondent in contempt of court for non-compliance with the Judgment enforcingÂ the Interim Award, and imposing escalating fines and coercive civil commitment.
I will focus here on the challenges involved in the U.S. arbitral and judicialÂ proceedings.
What law governs an application for provisional relief in an ICDR arbitration seated in New York, concerning a contract whose interpretation is agreed to beÂ governed by New York law, between disputants from New York (the Claimant) and Asia (the Respondent)? Here the arbitrator was persuaded that the source of hisÂ power to act was Article 21 of the ICDR Rules, which permits the Tribunal to Â grant any provisional relief it considers appropriate. The arbitrator wasÂ further persuaded that his power under Article 21 was not constrained by theÂ New York and U.S. federal law position that courts lack power to grantÂ provisional relief freezing assets of the Respondent, as security for theÂ judgment in a money damages case (except where the criteria under state law forÂ an order of attachment are satisfied). Â By adopting that view, theÂ arbitrator in effect held that ICDR Article 21 was not only the source of hisÂ power to act but the “law” governing the application, there being noÂ mandatorily-applicable New York or U.S. federal law concerning the provisionalÂ measures powers of an arbitrator. Â Readers will appreciate, however, thatÂ this correct but nuanced outcome was not inevitable, as considerable resourcesÂ were expended by the Respondents’ counsel in support of simplistic propositionsÂ that New York law applies in a New York-seated internationalÂ Â arbitration.
The arbitrator having given provisional relief in the form of an Award as permittedÂ by the ICDR Rules, the next question presented was whether a U.S. DistrictÂ Court would treat the arbitrator’s decision as an award under the New YorkÂ Convention, and recognize and enforce it unless a defense under Article V ofÂ the Convention were available. While the enforceability of arbitral provisionalÂ measures has been a topic of discussion for many years, the number of judicialÂ decisions directly addressing the subject remains quite small. Predictably,Â Respondents opposing confirmation attempt to distinguish the few cases thatÂ have granted enforcement, and courts accustomed to judicial notions of finalityÂ are tempted to classify arbitral provisional measures, even those denominatedÂ as awards, as non-final procedural orders that courts lack jurisdiction toÂ enforce.
But U.S. Second Circuit case law does hold that an arbitral decision that does notÂ resolve all matters but does finally resolve a “separate and independentÂ claim” is an award that may be enforced. There are few decisions applyingÂ this principle in an interim measures context,Â and the conceptual “fit” is not optimal as provisionalÂ measures are generally collateral to the merits rather than one of severalÂ “claims.” Â Further, the handful of Second Circuit decisions in which arbitral provisional measures have been enforced can be read as cases where the particular remedy granted by the arbitrator wasÂ specifically authorized by the parties’ contract. It was therefore ratherÂ uncharted territory in this case for the Court to decide, as it ultimately did,Â that the broad and categorical grant of arbitral power concerning provisionalÂ relief in ICDR Article 21 has the same contractual status, when the ICDR RulesÂ are agreed upon in the contract, as a specific stipulation for a particularÂ type of provisional measure.
Linked here is the Court’s decision granting recognition andÂ enforcement.
Also linked here is a transcript of the hearing on the motion toÂ confirm the award, in which you will read an initial decision of the CourtÂ denying confirmation, which was vacated by the end of the same hearing once theÂ Court had given more consideration to the contractual status of ICDR ArticleÂ 21.