Marc J. Goldstein Arbitrator & Mediator NYC
January 22, 2010

Judicial Enforcement of Arbitral Provisional Measures

Judicial enforcement of arbitral provisional measures orders
remains an area of considerable uncertainty and anxiety. But United States law on the subject is becoming clearer.

On January 15, a federal district judge in Dallas, Texas entered an order based on Section 9 of the FAA confirming as an award a preliminary injunction order entered by a three-member tribunal. Western Technology Services Int’l v. Caucho Industriales S.A., 2010 U.S. Dist. LEXIS 3279 (N.D. Tex. Jan. 15, 2010). The Court was invited by the party seeking confirmation to find that it had jurisdiction to confirm the preliminary injunction order as an award on either of two grounds: first, that Section 9 of the FAA permits confirmation of interlocutory orders as awards because it contains no finality requirement, and second, that the issue decided in the preliminary injunction order was sufficiently distinct and separate from the remaining issues in this case that the order could be confirmed as a final disposition of that issue. The Court here elected the second option, and reached the conclusion that the order had sufficient finality based in part on the parties’ expressed intent to have judicial review of temporary injunction orders.

The Court’s analysis is not particularly elaborate, but the approach is an interesting one. The underlying merits of the case involved termination of distribution agreements, the Claimant having commenced the arbitration to obtain a declaration that its termination decisions were lawful. The preliminary injunction order held, based upon a showing of probable success on the lawful termination issue, that Claimant was entitled to enforcement of the non-compete provisions in the contracts during the pendency of the arbitration.

One can readily understand the Court’s reliance on the parties’ expression of intent to have the preliminary injunction order judicially reviewed. The ability of a terminated distributor to engage in a competing business venture during the pendency of the arbitration often will have enormous commercial significance. Given to uncertain and possibly lengthy duration of a complex arbitration, competition rights during the pendency of the case may be as important to the parties’ business interests as the final determination of the legality of the termination. The Court’s reliance on the parties’ intent to make preliminary injunction orders reviewable should not be seen as acceding to a conferral of power under the FAA by consent, but as the acceptance of convincing evidence that the competitive rights of the parties during the arbitration were of sufficient importance to the parties that the determination of those rights should be viewed as a separate and distinct issue capable of a final decision. While the arbitral tribunal might ultimately find in a final award that the non-compete is unenforceable, the preliminary injunction order has potentially significant and irreversible economic impact for the duration of the proceedings, and is effectively a final determination of the enforceability of the non-compete during that substantial period of time.

In reaching its decision, the District Court in Western Technology relied on decisions of two federal circuit courts of appeals, each having held that “‘[a] ruling on a discrete, time-sensitive issue may be final and ripe for confirmation even though other claims remain to be addressed by the arbitrators.'” Arrowhead Global Solutions, Inc. v. Datapath, Inc., 2006 U.S. App. LEXIS 2786 at *9 (4th Cir. Feb. 3, 2006), quoting from Publicis Commun. v. True North Communs. Inc., 206 F.3d 725, 727 (7th Cir. 2000).

Decisions like these are encouraging for users of arbitration. Greater certainty about the enforceability as awards of arbitral interim measures orders encourages parties to use the arbitral process rather than go to court for interim measures in the first instance, and encourages voluntarily compliance with arbitral interim measures by the affected party in view of the likely futility of an application to vacate an award.

(For a review of other U.S. case law, the reader is encouraged to consult Gary Born, International Commercial Arbitration, Cases and Materials (3d ed. 2009) at page 467, and to note the distinction drawn there in the case law between interim orders that deal in permanent fashion with a substantive aspect of the disputes, and those that address procedural or evidentiary matters).

Leave a Reply