By Prof Jonathan Hill, Professor of Law (University of Bristol Law School).
Interim measures of protection have an important role to play in international commercial dispute resolution. Because of the inevitable time delay between a dispute coming to a head and the resolution of that dispute by arbitration or another formal dispute-resolution process, a claimant (C) faces a number of risks. For example, the respondent (R) may attempt to make itself ‘award-proof’ by hiding or dissipating the assets against which C, if successful in the arbitration, might reasonably hope to enforce the award; or R might take steps to destroy evidence which is crucial to C’s claims; or R may engage in conduct which, if allowed to continue unchecked, will exacerbate the dispute or even render any arbitration of the parties’ dispute nugatory. Because of such risks, most systems of arbitration law confer on arbitral tribunals the power to order interim measures of protection, whose purpose is, depending on the circumstances, to maintain the status quo, provide a means of preserving assets out of which an eventual award may be satisfied or preserve evidence that may be relevant to the resolution of the dispute (see, eg, art 17.2 of the UNCITRAL Model Law on International Commercial Arbitration).
However, conferring powers on the arbitral tribunal may be inadequate. Unlike national courts, arbitral tribunals do not have coercive powers to back up their orders and have jurisdiction only over the parties to the arbitration. Furthermore, if interim measures are required as a matter of urgency, giving powers to the arbitral tribunal is frequently meaningless; once a dispute has been referred to arbitration, it may well be weeks or months before the arbitrators can be appointed. Accordingly, some mechanism is needed to fill the gap between C’s triggering of the arbitration clause and the constitution of the tribunal. The rules of an increasing number of arbitration institutions fill this gap by making provision for the appointment of an emergency arbitrator (see, eg, art 29 of the ICC Arbitration Rules; art 9B of the LCIA Arbitration Rules). Failing such a procedure, the gap can be filled only by national courts.
But, as with many issues involving the relationship between international commercial arbitration and national legal systems, there is a territorial issue to be addressed: which national court (or courts) should be competent to exercise the power to grant interim measures of protection in support of arbitration and which competent court(s) should actually exercise such powers? This is an issue which had to be addressed by the High Court in the recent case of Company 1 v Company 2  EWHC 2319 (QB).
Company 1 v Company 2
This case involved a dispute which arose from a joint venture agreement between C1 (a British Virgin Islands (BVI) company) and C2 (a Cyprus company). C2 was controlled by A, a US citizen. The contract, which included an arbitration clause selecting Switzerland as the seat of arbitration, established a BVI company (in which C1 and C2 had an equal interest) for the purpose of promoting, marketing and trading in pre-owned jet aircraft. In due course, when disputes arose under the joint venture contract, C2 purported to terminate the agreement; C1 claimed that the purported termination was wrongful and that it was entitled to various sums which had been paid to a third party.
The parties engaged in a certain amount of procedural wrangling, which included interlocutory proceedings in the BVI and the commencement of two sets of arbitration proceedings in Switzerland. C1 also brought court proceedings in England in which it applied for two provisional measures against C2 and A: (i) either an order requiring the disputed sums to be paid into a special bank account in the joint names of the parties’ solicitors or, in the alternative, a freezing order in respect of those sums; (ii) an order requiring C2 and A to provide copies of various documents (including sales management agreements and bank statements).
The English court’s jurisdiction to grant interim measures in support of a foreign arbitration
Section 44 of the Arbitration Act 1996 confers on the English court, in relation to an arbitration, the same power to grant provisional measures as it has in relation to court proceedings. Under section 44 the court may, for example, grant a freezing injunction or make an order for the preservation of evidence. But, one of the key questions was whether the English court had jurisdiction to grant the measures sought by C1 in support of a Swiss arbitration. Whereas most of the provisions of the Arbitration Act 1996 conferring powers on the English court are strictly territorial (in the sense that they are applicable only if England is the seat of arbitration: s 2(1)), section 44 is one of a limited number of provisions which apply in cases where the seat is abroad as well as in cases involving arbitrations seated in England. (The position is broadly similar under the Model Law: see art 17J.)
That is to say, the regime for the making of interim measures of protection is one of concurrent jurisdiction: an applicant may, in principle, seek appropriate relief from the arbitral tribunal, the courts of the seat or the courts of a non-seat country. Such a liberal position can potentially give rise to claimants’ forum shopping for interim relief; moreover, if conflicts are to be avoided, some system is needed for trying to ensure that decisions taken by different national courts and arbitral tribunals with parallel and overlapping powers dovetail with one another.
The fact that relief may be ordered either by the tribunal or by a national court presents potential problems of co-ordination. National courts must be careful to avoid treading on the toes of the arbitral tribunal; moreover, the courts of a non-seat country should not make orders which would interfere with or undermine any decisions of the courts of the seat on the question of provisional relief. These issues of co-ordination are expressly addressed by the provisions of the English Arbitration Act 1996. In terms of the relationship between the English court and the arbitral tribunal, section 44(5) provides that the court can act ‘only if or to the extent that the arbitral tribunal ….has no power or is unable for the time being to act effectively’. The upshot of this provision is that the court’s power to grant interim measures is most likely to be relevant during the period before the appointment of the tribunal – when ex hypothesi the tribunal is unable to act. In Company 1 v Company 2, when C1 made its application to the English court, the arbitral tribunal had yet to be appointed (though it was argued that one could be constituted quite quickly). Accordingly, there was no jurisdictional obstacle to the court exercising its powers under section 44 of the English Arbitration Act 1996.
That still leaves, however, the fact that Switzerland, rather than England, was the seat of arbitration chosen by the parties. As for the relationship between the English court, as the court of a non-seat country, and a foreign arbitration, section 2(3) of the 1996 Arbitration Act states, in a rather open-textured way, that, although the English court may exercise its powers under section 44 in relation to an arbitration not seated in England, the court may refuse to exercise those powers ‘if, in the opinion of the court, the fact that the seat of the arbitration is outside England … makes it inappropriate to do so.’ So, in Company 1 v Company 2, would it have been inappropriate for the English court to grant provisional relief in relation to the Swiss arbitration?
The judge, accepting the defendants’ argument, had no hesitation in concluding that it would not have been appropriate. There were two factors that were particularly significant. First, the connection with England was tenuous. The only link of substance was the fact that A, although a US citizen, resided in England. Against that, the companies involved in the arbitration were formed in the BVI and Cyprus and the bank account in which the disputed funds were lodged was in Switzerland. Secondly, the parties to the English proceedings were already involved in litigation in the BVI. Given that the BVI proceedings were still ongoing when C1 made its application in England, there was no reason why the application could not have been made in the context of the BVI litigation. In these circumstances, the judge ‘struggle[d] to understand why proceedings were ever brought in England when the BVI court [was] seized of this matter’ (at ). Even if the BVI court had been unable to grant relief, the Swiss court (as the court of the seat of arbitration) was more appropriate than the English court for the granting interim relief.
To preserve evidence or assets
Among the other issues which the judge considered in Company 1 v Company 2, there is one which is worth mentioning. Section 44(3) of the Arbitration Act 1996 provides that, if the case is one of urgency, the court may order such interim measures of protection as it thinks necessary ‘for the purpose of preserving evidence or assets’. By contrast, if the case is not one of urgency, the court can act only with the permission of the tribunal or the agreement in writing of the parties other than the applicant: s 44(4). While it is clear that a freezing order is a measure for the preservation of assets for the purposes of section 44(3), was C1’s application for an order requiring the defendants to provide copies of certain documents an application for the preservation of evidence?
It was argued on behalf of C2 and A that such an application was more in the nature of an application for disclosure than for the preservation of evidence and that, as a result, it fell outside of the scope of section 44. Again, the judge agreed with C2 and A. One of the changes brought about by the Arbitration Act 1996 was to remove the court’s power to order disclosure. Accordingly, judges need to be careful to ensure that disclosure orders are not allowed to return by the back door in the guise of orders for interim relief. As the judge noted, there was no evidence to suggest that there was a danger that C2 and A were likely to destroy the documents in question – which in itself militated against the argument that their preservation was a matter of urgency.
In terms of policy, it is important that national courts of non-seat countries should be able to grant interim measures of protection; cases arise in which crucial evidence or assets are located outside the seat and the best way of guaranteeing their preservation is to enlist the support of the courts of the situs. However, such cases are likely to be rare; normally the arbitral tribunal or the courts of the seat will be able to make any orders that are necessary. As reiterated by the judge in Company 1 v Company 2, if the tribunal is not able to act, ‘the natural court for granting interim injunctive relief is the court of the country of the seat of arbitration’ (at ).
Company 1 v Company 2 follows in the wake of Econet Wireless Services Ltd v Vee Networks Ltd  EWHC 1568 (Comm) and Mobil Cerro Negro Ltd v Petroleos de Venezuela SA  EWHC 532 (Comm), in both of which an application for interim relief in respect of an arbitration seated abroad (in Nigeria and New York, respectively) was refused. Although the model of concurrent jurisdiction for the ordering of provisional measures creates a risk of judicial conflict, the cases decided in England show that, if the courts adopt a suitably restrained approach, the dangers can be avoided and inappropriate forum shopping for interim relief can easily be prevented.