New Solutions for Interim Measures of protection in International commercial Arbitration: English, German and Hong Kong Law Compared Jan K. Schaefer( National University of Singapore) Readers are reminded that this work is protected by copyright. While they are free to use the ideas expressed in if, they may not copy, distribute or publish the work or part ofit, in any form, printed, electronic or otherwise, except for reasonable quoting cleary indicating the source. Readers are permitted to make copies, electronically or printed, for personal and classroom use Abstract The new English, German and Hong Kong arbitration legislation has prepared the ground for shifting interim relief to the realm of arbitration. All legal frameworks now address the three main issues that call for solutions in the lex arbitri the relationship between the courts and arbitration, the arbitrator=s competence to grant interim relief and the enforcement of arbitrator-granted interim relief. Two different concepts can be identif ied underlying the new laws: on the one hand there is the court-subsid arity model of England and, on the other hand, the free-choice model of the Model Law which was adopted and refined by Germany and Hong Kong. England was the first country to adopt an elaborate court-subsid arity model; Germany the first country to provide for the enforcement of arbitrator-granted interim relief, even if the seat of arbitration is outside Germany. German law gives a unilateral answer to the question of cross-border enforcement of arbitrator-granted relief -a problem that has not yet received a solution in any international enforcement instrument. The New york Convention does not apply to interim relief. This article introduces the three main issues in a general manner, describes the new solutions of English, German and Hong Kong law in country reports and discusses the different solutions provided against this background on a comparative basis. The court-subsid iarity model will be criticized and the free-choice model recommended Keywords Arbitration Act 1996: Hong Kong Arbitration Ordinance, German Code of Civil Procedure: UNCITRAL Model Law; lex arbitri; interim measures of protection interim relief, provisional remedies; access to court; arbitrator=s competence to grant interim relief; enforcement of arbitrator-granted interim relief; cross-border enforcement; party autonomy; court-subsidiarity model; free-choice model mandatory provisions; arbitration rules >Referendar=(freiburg). Certificate in Comparative Law(School of Oriental and African Studies, London). Research Scholar(DAAD and Rotary )in Intemat ional Commercial Arbitration in Southeast Asia at the National University of Singapore. The author would like to thank Paramjit S Gill, Singapore for his valuable comments on the draft, whilst acknowledging that any errors or shortcomings remain wholly the authores
New Solutions for Interim Measures of Protection in International Commercial Arbitration: English, German and Hong Kong Law Compared Jan K. Schaefer (National University of Singapore)1 Readers are reminded that this work is protected by copyright. While they are free to use the ideas expressed in it, they may not copy, distribute or publish the work or part of it, in any form, printed, electronic or otherwise, except for reasonable quoting, clearly indicating the source. Readers are permitted to make copies, electronically or printed, for personal and classroom use. Abstract The new English, German and Hong Kong arbitration legislation has prepared the ground for shifting interim relief to the realm of arbitration. All legal frameworks now address the three main issues that call for solutions in the lex arbitri: the relationship between the courts and arbitration, the arbitrator=s competence to grant interim relief and the enforcement of arbitrator-granted interim relief. Two different concepts can be identified underlying the new laws: on the one hand, there is the court-subsidiarity model of England and, on the other hand, the free-choice model of the Model Law, which was adopted and refined by Germany and Hong Kong. England was the first country to adopt an elaborate court-subsidiarity model; Germany the first country to provide for the enforcement of arbitrator-granted interim relief, even if the seat of arbitration is outside Germany. German law gives a unilateral answer to the question of cross-border enforcement of arbitrator-granted relief - a problem that has not yet received a solution in any international enforcement instrument. The New York Convention does not apply to interim relief. This article introduces the three main issues in a general manner, describes the new solutions of English, German and Hong Kong law in country reports and discusses the different solutions provided against this background on a comparative basis. The court-subsidiarity model will be criticized and the free-choice model recommended. Keywords Arbitration Act 1996; Hong Kong Arbitration Ordinance; German Code of Civil Procedure; UNCITRAL Model Law; lex arbitri; interim measures of protection; interim relief; provisional remedies; access to court; arbitrator=s competence to grant interim relief; enforcement of arbitrator-granted interim relief; cross-border enforcement; party autonomy; court-subsidiarity model; free-choice model; mandatory provisions; arbitration rules. 1 >Referendar= (Freiburg). Certificate in Comparative Law (School of Oriental and African Studies, London). Research Scholar (DAAD and Rotary) in International Commercial Arbitration in Southeast Asia at the National University of Singapore. The author would like to thank Paramjit S. Gill, Singapore for his valuable comments on the draft, whilst acknowledging that any errors or shortcomings remain wholly the author=s
Contents 1 Introduction 2. On the need for interim measures of protection in international commercial arbitration 3. The three main issues 3. I The relationship behveen court-ordered interim relief and arbitration 3. 1. 1 Underlying concepts 3.1.2 Access to the courts 3. 2 The arbitrator=s competence to order interim measures ofprotection 3. 3 The enforcement of arbitrator-granted remedies 4. Country reports 4. 1 England 4. 1. 1 Background 4. 1.2 Survey of the solutions for the issues 4.1.2. I The relationship between court-ordered interim relief and arbitration 4.1.2. 2 The arbitrator=s competence to order interim measures ofprotection enfo 1.3 On the restrictions of party =s choice as prescribed in the mandatory provisions of the lex arbitri 4 Sumt 4.2 germany 4.2. 1 Backs 4.2. 2 Survey of the solutions for the issues 4.2.2. I The relationship between court-ordered interim relief and arbin 4.2.2. 2 The arbitrator=s competence to order interim measures of protection 4.2.2. 3 The enforcement of arbitrator-granted remedies 4. 2. 3 On the restrictions of party=s choice as prescribed in the mandatory provisions of the lex arbitr 4.2. 4 Summary 4.3 Hong Kong 43.1 Background 4.3.2 Survey of the solutions for the issues 4.3.2. I The relationship between court-ordered interim relief and arbitration 4.3.2.2 The arbitrator=s competence to order interim measures rotection 4.3. 2 3 The enforcement of arbitrator-granted remedies 4.3. 3 On the restrictions of party=s choice as prescribed in the mandatory provisions of the lex arbitri 4.3.4 Summary 5. Comparative aspects 5. 1 The relationship between court-ordered interim relief and arbitration 5. 1. 1 Underlying concepts compared 5.1.2 Access to the court 5. 2 The arbitrator=s competence to order interim measures ofprotection
Contents 1. Introduction 2. On the need for interim measures of protection in international commercial arbitration 3. The three main issues 3.1 The relationship between court-ordered interim relief and arbitration 3.1.1 Underlying concepts 3.1.2 Access to the courts 3.2 The arbitrator=s competence to order interim measures of protection 3.3 The enforcement of arbitrator-granted remedies 4. Country reports 4.1 England 4.1.1 Background 4.1.2 Survey of the solutions for the issues 4.1.2.1 The relationship between court-ordered interim relief and arbitration 4.1.2.2 The arbitrator=s competence to order interim measures of protection 4.1.2.3 The enforcement of arbitrator-granted remedies 4.1.3 On the restrictions of party=s choice as prescribed in the mandatory provisions of the lex arbitri 4.1.4 Summary 4.2 Germany 4.2.1 Background 4.2.2 Survey of the solutions for the issues 4.2.2.1 The relationship between court-ordered interim relief and arbitration 4.2.2.2 The arbitrator=s competence to order interim measures of protection 4.2.2.3 The enforcement of arbitrator-granted remedies 4.2.3 On the restrictions of party=s choice as prescribed in the mandatory provisions of the lex arbitri 4.2.4 Summary 4.3 Hong Kong 4.3.1 Background 4.3.2 Survey of the solutions for the issues 4.3.2.1 The relationship between court-ordered interim relief and arbitration 4.3.2.2 The arbitrator=s competence to order interim measures of protection 4.3.2.3 The enforcement of arbitrator-granted remedies 4.3.3 On the restrictions of party=s choice as prescribed in the mandatory provisions of the lex arbitri 4.3.4 Summary 5. Comparative aspects 5.1 The relationship between court-ordered interim relief and arbitration 5.1.1 Underlying concepts compared 5.1.2 Access to the court 5.2 The arbitrator=s competence to order interim measures of protection
5.3 The enforcement of arbitrator-granted interim relief 5. 4 On the restrictions of party=s choice as prescribed in the mandatory 6. Con provisions of the lex arbitri 1 Introduction The last few years have seen an increasing activity by legislators to improve the legal framework for arbitration both domestic and international. More than 30 countries all around the globe have reshaped their arbitration laws since the launch of the UNCITRAL Model Law on International Commercial Arbitration(henceforth Model Law)in 1985. And yet, there are many more to follow. among the latest legislations are English, German and hong Kong laws. The Arbitration Act 1996, applicable in England, Wales and Northern Ireland, came into force on 31 January 1997, the Arbitration Ord inance of Hong Kong as amended by the Arbitration( amendment) Ordinance 1996 on 27 June 1997 and the provisions on arbitration of the German Code of Civil Procedure on 1 January 1998. With regard to interim measures of protection they provide for solutions that go beyond any previous ones in sophistication and completeness The critical question with regard to interim relief in arbitration is: Who provides interim measures of protection? Shall it be the courts, the arbitrators or both? The answers given in national arbitration legislation and in arbitration rules have changed over the years. Some time ago it seemed to be a common understand ing that only courts provide any provisional relief. This was reflected in international instruments such as the >1961 European Convention on International Commercial Arbitratio Its article VI, paragraph 4 states that a request for interim measures to the courts is not a waiver of the arbitration agreement. Similar provisions are found in arbitration rules They ensure that a party can have recourse to the courts without fearing to chance the track of d ispute settlement by making the court application. No mention was made of an arbitrator=s competence to grant interim measures of protection. But a trend in favour of such an arbitrator=s competence emerged. It was first reflected in arbitration rules such as the >1976 UNcitraL Arbitration rules for International Commercial Arbitration=(henceforth UNCITRAL Rules), which provide for a choice of application. Article 26, paragraph 3 of the UNCITRAL Rules refers to court applications and deems them to be compatible with the arbitration agreement this reiterates the established view. But in paragraphs I and 2 of the article, the UNCITRAL Rules go further when making clear that arbitrators have contractual power to order certain kinds of interim measures such as the sale of perishable goods The arbitrators= order can be established in the form of an interim award under the rules. This prepared new ground and already addressed the three main issues that are at stake when interim measures of protection in arbitration are considered the relationship between court-ordered interim relief and arbitration, the competence of the arbitrator to order such measures and the enforcement of the arbitrators orders It is necessary to provide solutions for these issues in the lex arbitri as the national legislation plays the decisive part in making provisional remedies in the sphere of arbitration effective. It is the national legislator who provides for court assistance, a suitable legal framework with fall-back provisions and lays down the preconditions
5.3 The enforcement of arbitrator-granted interim relief 5.4 On the restrictions of party=s choice as prescribed in the mandatory provisions of the lex arbitri 6. Conclusion 1. Introduction The last few years have seen an increasing activity by legislators to improve the legal framework for arbitration, both domestic and international. More than 30 countries all around the globe have reshaped their arbitration laws since the launch of the UNCITRAL Model Law on International Commercial Arbitration (henceforth Model Law) in 1985. And yet, there are many more to follow. Among the latest legislations are English, German and Hong Kong laws. The Arbitration Act 1996, applicable in England, Wales and Northern Ireland, came into force on 31 January 1997, the Arbitration Ordinance of Hong Kong as amended by the Arbitration (Amendment) Ordinance 1996 on 27 June 1997 and the provisions on arbitration of the German Code of Civil Procedure on 1 January 1998. With regard to interim measures of protection they provide for solutions that go beyond any previous ones in sophistication and completeness. The critical question with regard to interim relief in arbitration is: Who provides interim measures of protection? Shall it be the courts, the arbitrators or both? The answers given in national arbitration legislation and in arbitration rules have changed over the years. Some time ago it seemed to be a common understanding that only courts provide any provisional relief. This was reflected in international instruments such as the >1961 European Convention on International Commercial Arbitration=. Its article VI, paragraph 4 states that a request for interim measures to the courts is not a waiver of the arbitration agreement. Similar provisions are found in arbitration rules. They ensure that a party can have recourse to the courts without fearing to chance the track of dispute settlement by making the court application. No mention was made of an arbitrator=s competence to grant interim measures of protection. But a trend in favour of such an arbitrator=s competence emerged. It was first reflected in arbitration rules such as the >1976 UNCITRAL Arbitration Rules for International Commercial Arbitration= (henceforth UNCITRAL Rules), which provide for a choice of application. Article 26, paragraph 3 of the UNCITRAL Rules refers to court applications and deems them to be compatible with the arbitration agreement. This reiterates the established view. But in paragraphs 1 and 2 of the article, the UNCITRAL Rules go further when making clear that arbitrators have contractual power to order certain kinds of interim measures such as the sale of perishable goods. The arbitrators= order can be established in the form of an interim award under the rules. This prepared new ground and already addressed the three main issues that are at stake when interim measures of protection in arbitration are considered: the relationship between court-ordered interim relief and arbitration, the competence of the arbitrator to order such measures and the enforcement of the arbitrator=s orders. It is necessary to provide solutions for these issues in the lex arbitri as the national legislation plays the decisive part in making provisional remedies in the sphere of arbitration effective. It is the national legislator who provides for court assistance, a suitable legal framework with fall-back provisions and lays down the preconditions
for the enforcement of arbitrator-granted interim measures of protection. Neither the oreign Arbitral Awards(henceforth New York Convention) nor any other or New york Convention of 10 June 1958 on the recognition and Enforcement international instrument deals with interim measures of protection granted by the arbitrator or their enforcement The key function of the lex arbitri with regard to interim measures of protection stimulates a comparison of legislations. A comparative synopsis of different national solutions can highlight their strengths and weaknesses. It can also further the d iscussion about the most suitable solution for international commercial arbitration As legislators are competing to provide the most favourable framework for international commercial arbitration B they either want to defend their position as an international arbitration venue(e.g. England and Hong Kong), establish their country as such a venue(e. g. Germany )or signal a positive investment climate(e.g. India) there is a real chance that inadequacies can and will be remedied in future legislation The arbitration laws of the three countries compared follow different approaches Each approach is worked out in a very elaborate and sophisticated manner. They represent alternative role models for future legislators English law, on the one hand, provides an approach that can be called a court- subsidiarity model. Provisional remedies should in the first place be applied for before the arbitrator. Court intervention is the last resort The court=s jurisdiction is restricted it depends on the arbitrator=s power to act effectively and is therefore subsid iary to it. This approach shifts interim measures as far as possible to the realm of arbitration The English legislator is the first one to adopt this model. Parties can only opt out of it if they do not empower the arbitrator to grant interim measures of protection. German law, on the other hand, follows the free-choice approach of the Model Law Arbitration parties are free to apply either to the court or to an arbitrator. Legislation provides for mechanisms that make arbitrator-granted relief as far as possible equally effective as court-ordered relief. It provides a real alternative for the parties. Hong Kong law adopted an approach that is in between the free-choice and the court- subsidiarity approaches. The key lies with the courts to determine with which model Hong Kong will align itself. Germany is the first country which provided for cross- border enforcement of arbitrator-granted interim relief in its national law. Under German law, arbitrator- granted interim relief can be enforced in Germany even if the seat of arbitration outside Germany. This is a progressive, unilateral step to solve the cross-border enforcement issue especially relevant with respect to international commercial arbitrations. If all countries follow this example, the need for an international instrument to provide a cross-border enforcement mechanism for interim measures of protection can be relieved against a background of a general discussion of the three main issues involve m This article presents the new laws, examines their differences and evaluates the 2. On the need for interim measures of protection in international commercial arbitration
for the enforcement of arbitrator-granted interim measures of protection. Neither the New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (henceforth New York Convention) nor any other international instrument deals with interim measures of protection granted by the arbitrator or their enforcement. The key function of the lex arbitri with regard to interim measures of protection stimulates a comparison of legislations. A comparative synopsis of different national solutions can highlight their strengths and weaknesses. It can also further the discussion about the most suitable solution for international commercial arbitration. As legislators are competing to provide the most favourable framework for international commercial arbitration B they either want to defend their position as an international arbitration venue (e.g. England and Hong Kong), establish their country as such a venue (e.g. Germany) or signal a positive investment climate (e.g. India) - there is a real chance that inadequacies can and will be remedied in future legislation. The arbitration laws of the three countries compared follow different approaches. Each approach is worked out in a very elaborate and sophisticated manner. They represent alternative role models for future legislators. English law, on the one hand, provides an approach that can be called a courtsubsidiarity model. Provisional remedies should in the first place be applied for before the arbitrator. Court intervention is the last resort. The court=s jurisdiction is restricted; it depends on the arbitrator=s power to act effectively and is therefore subsidiary to it. This approach shifts interim measures as far as possible to the realm of arbitration. The English legislator is the first one to adopt this model. Parties can only opt out of it if they do not empower the arbitrator to grant interim measures of protection. German law, on the other hand, follows the free-choice approach of the Model Law. Arbitration parties are free to apply either to the court or to an arbitrator. Legislation provides for mechanisms that make arbitrator-granted relief as far as possible equally effective as court-ordered relief. It provides a real alternative for the parties. Hong Kong law adopted an approach that is in between the free-choice and the courtsubsidiarity approaches. The key lies with the courts to determine with which model Hong Kong will align itself. Germany is the first country which provided for cross-border enforcement of arbitrator-granted interim relief in its national law. Under German law, arbitratorgranted interim relief can be enforced in Germany even if the seat of arbitration is outside Germany. This is a progressive, unilateral step to solve the cross-border enforcement issue especially relevant with respect to international commercial arbitrations. If all countries follow this example, the need for an international instrument to provide a cross-border enforcement mechanism for interim measures of protection can be relieved. This article presents the new laws, examines their differences and evaluates them against a background of a general discussion of the three main issues involved. 2. On the need for interim measures of protection in international commercial arbitration
Today, interim measures of protection form part of the regular litigation process Several reasons contribute to this. The main reason can be found in the long duration of court proceedings that call for interim solutions. But it is not only with litigation that the time span between the beginning of the d ispute and its resolution has increased in recent years; the same applies for international commercial arbitration According to Craig, Park and Paulsson(1990, pp 20-21), the average duration of International Chamber of Commerce (ICC)arbitrations is between one and two years The main reasons for the long duration of international commercial arbitrations lie in the special circumstances of the process. Among the special circumstances are the quently great geographical distances between the dramatis personae and the oord ination of the busy schedules of international arbitrators and party counsels. But the delay cannot only be attributed to inherent causes; it also finds its ground in the dilatory tactics applied by a party to which arbitration is not immune(Knoepfler, 1997 p 307). Thus, the need for interim solutions arises in arbitration as it does in commercial litigation Justice can only be done if efficient interim relief is available. Provisional remedies come under the principle that >justice is not to be evaded=(Andrews, 1994, p. 20) The means of recourse differ from country to country, but the system itself is regarded as >one of those general principles of law common to all legal systems=( Collins, 1994, p. 10). Interim relief, which has not received a legal definition, can be groupe as follows: To preserve the status quo in order to ensure enforcement, to shape the relationship between the parties during the process of dispute settlement and to preserve evidence(see Knoepfler and Schweizer, 1984, pp. 223-224, with reference German doctrine). It is hardly possible to make general remarks as to the kind of provisional remedies that is likely to be needed for what kind of legal relationships. It depends on the special circumstances of each individual case. Thus it is important to have the whole armoury of interim measures at hand once the need for them arises The impact of interim relief for the well-functioning of any method of adjud ication can be illustrated with regard to Mareva injunctions(after The Mareva). Mareva injunctions prevent the dissipation of assets. If such a mechanism would not be available for the time that passes until final ad judication takes place the winning party would only obtain a >Pyrrhic victory=(Van den Berg, 1981, p. 143) 3. The three main issues The three main issues are the relationship between court-ordered interim relief and arbitration, the competence of the arbitrator to order such measures and the enforcement of the arbitrator=s orders. The following expositio theoretical aspects of the three issues and discusses them broadly 3. 1 The relationship between court-ordered interim relief and arbitration 3.1.1 Underlying concepts Interim relief in arbitration is an interface between private dispute settlement and the court. It is one of these aspects of arbitration procedure that cannot escape court interference. The arbitrator has no power to enforce his orders. As the effectiveness of an interim measure of protection depends, in the end on its enforceability, court support may be needed. The critical question is how best to shift interim measures of protection with their need for enforcement sanctions to the realm of arbitration
Today, interim measures of protection form part of the regular litigation process. Several reasons contribute to this. The main reason can be found in the long duration of court proceedings that call for interim solutions. But it is not only with litigation that the time span between the beginning of the dispute and its resolution has increased in recent years; the same applies for international commercial arbitration. According to Craig, Park and Paulsson (1990, pp. 20-21), the average duration of International Chamber of Commerce (ICC) arbitrations is between one and two years. The main reasons for the long duration of international commercial arbitrations lie in the special circumstances of the process. Among the special circumstances are the frequently great geographical distances between the dramatis personae and the coordination of the busy schedules of international arbitrators and party counsels. But the delay cannot only be attributed to inherent causes; it also finds its ground in the dilatory tactics applied by a party to which arbitration is not immune (Knoepfler, 1997, p. 307). Thus, the need for interim solutions arises in arbitration as it does in commercial litigation. Justice can only be done if efficient interim relief is available. Provisional remedies come under the principle that >justice is not to be evaded= (Andrews, 1994, p. 20). The means of recourse differ from country to country, but the system itself is regarded as >one of those general principles of law common to all legal systems= (Collins, 1994, p. 10). Interim relief, which has not received a legal definition, can be grouped as follows: To preserve the status quo in order to ensure enforcement, to shape the relationship between the parties during the process of dispute settlement and to preserve evidence (see Knoepfler and Schweizer, 1984, pp. 223-224, with reference to German doctrine). It is hardly possible to make general remarks as to the kind of provisional remedies that is likely to be needed for what kind of legal relationships. It depends on the special circumstances of each individual case. Thus it is important to have the whole armoury of interim measures at hand once the need for them arises. The impact of interim relief for the well-functioning of any method of adjudication can be illustrated with regard to Mareva injunctions (after The Mareva). Mareva injunctions prevent the dissipation of assets. If such a mechanism would not be available for the time that passes until final adjudication takes place, the winning party would only obtain a >Pyrrhic victory= (Van den Berg, 1981, p. 143). 3. The three main issues The three main issues are the relationship between court-ordered interim relief and arbitration, the competence of the arbitrator to order such measures and the enforcement of the arbitrator=s orders. The following exposition focuses on theoretical aspects of the three issues and discusses them broadly. 3.1 The relationship between court-ordered interim relief and arbitration 3.1.1 Underlying concepts Interim relief in arbitration is an interface between private dispute settlement and the court. It is one of these aspects of arbitration procedure that cannot escape court interference. The arbitrator has no power to enforce his orders. As the effectiveness of an interim measure of protection depends, in the end, on its enforceability, court support may be needed. The critical question is how best to shift interim measures of protection with their need for enforcement sanctions to the realm of arbitration