Interim Measures in International Investment Arbitration
Medidas cautelares na arbitragem internacional de investimento
Summary: It is current practice today for arbitral tribunals to grant interim or provisional measures in international investment arbitration. Efficiency and impact of the measures are however largely debated in terms of legal grounds to grant those measures and because they are not self-executing, due to the fact that arbitral tribunals do not dispose of coercive power unlike state judge. This power to grant measures is then influenced by the will of the parties to respect the orders, even if non-compliance with orders can influence the decision making of the arbitrators in a final award.
In practice, the time between the commencement of investment arbitration and the rendering of the final award can be rather long, and events occurring during this time could threaten the conduct of the proceedings and render the final award hollow. Interim measures may prove critical to preserving a party’s rights pending the final award.
Keywords: International investment arbitration-Interim measures-ICSID-UNCITRAL-Urgency.
Sumário: É prática corrente e actual que os tribunais arbitrais adoptem medidas cautelares ou provisórias em arbitragens internacionais de investimento. A eficiência e o impacto das medidas são, porém, largamente debatidas a respeito do respectivo fundamento legal e, também, porque não são auto-exequíveis, devido ao facto de os tribunais arbitrais não gozarem, ao contrário dos tribunais estaduais, de poder coercivo. O poder para adoptar medidas cautelares ou provisórias é influenciado, portanto, pela vontade das partes em respeitar as medidas dos tribunais, mesmo se o desrespeito possa influenciar a decisão final dos árbitros.
Na prática, o tempo transcorrido entre o início da arbitragem de investimento e a prolação da decisão final pode ser bastante longo e os eventos que decorrem no entretanto podem ameaçar o normal decurso do processo ou mesmo tornar a sentença inútil. As medidas provisórias podem demonstrar-se críticas para preservar os direitos de uma parte enquanto a decisão final não é prolatada.
Palavras-Chave: Arbitragem internacional de investimento; medidas cautelares; ICSID-UNCITRAL; urgência.
The authority of arbitral tribunals to grant interim or provisional measures in international investment arbitration is today uncontested and represents current practice1. However, their efficiency and impact are largely debated as provisional measures are not self-executing. This is due to the fact that arbitral tribunals do not dispose of imperium, i.e., coercive power, which distinguished them from their state judges2. Their power to grant measures is therefore largely influenced by the will of the parties to respect the orders, even if non-compliance with orders can influence the decision making of the arbitrators in a final award. It remains that interim measures can be of immense importance to parties involved in investment arbitration proceedings and the recent reform proposed for the ICSID Rules will generate additional debates.
In practice, the time between the commencement of investment arbitration and the rendering of the final award can be rather long, and events occurring during this time could threaten the conduct of the proceedings and render the final award hollow. Interim measures may prove critical to preserving a party’s rights pending the final award. Securing interim measures in investment arbitration presents several particularities that arbitration practitioners have to familiarise themselves with.
I. Jurisdiction to Order Interim Measures
All the major institutional rules provide for the granting of interim relief. The rules surveyed here include rules commonly used in investment arbitration – ICSID, ICSID Additional Facility (ICSID AF), UNCITRAL (both 1976 and 2010) and SCC – as well as the ICC Arbitration Rules and the recently released SIAC Investment Rules3. All of the UNCITRAL 19764, UNCITRAL 20105, ICC6, SCC7 rules and the SIAC Investment Rules8 expressly condition the grant of interim relief on there being a request made by a party. Exceptionally, the ICSID and ICSID AF Rules allow a tribunal to recommend interim measures of its own initiative9. The ICSID AF Rules additionally specify that the tribunal may recommend measures other than those requested.10
All sets of rules examined also provide that parties may apply to national courts for interim relief11. However, the ICSID Rules additionally require that the parties must consent to recourse to national courts in order to be able to do so12. This requirement of party consent was introduced in the 1984 amendments to the ICSID Rules13 to engineer compatibility between the interim measures regime and the exclusive jurisdiction that an ICSID tribunal enjoys over a dispute submitted to ICSID arbitration14.
More generally, the parties’ freedom to have recourse to domestic interim relief after the arbitration tribunal is constituted is often limited. The ICC Rules stipulate that this may only be done in ‘appropriate circumstances’, while the as yet untested SIAC Investment Rules require ‘exceptional circumstances’15. Such circumstances would exist when the tribunal is not in a position to provide effective relief, for example, against third parties over which the tribunal has no jurisdiction.
Of all the arbitration rules examined, only the ICSID and ICSID AF Rules expressly require that the tribunal give each party an opportunity to be heard16. The remaining rules surveyed are silent on the issue. However, ex parte relief is probably not available in investment arbitration as this could amount to a fundamental breach of procedural fairness, leaving the award vulnerable to being set aside.
A different issue is whether tribunals have the power to issue orders maintaining the status quo pending a response from the party against whom the request for interim measures is submitted. The UNCITRAL Model Law expressly provides for such a possibility17, which is not uncommon in investment arbitration practice, irrespective of the set of arbitration rules applicable18. In the Von Pezold v. Zimbabwe case, the state ordered the claimants to allow an inspection of share registers of all companies linked to the ICSID proceedings, which was to take place two days later, and threatened criminal prosecution if the claimants refused to comply. Immediately upon receiving the state’s letter, the claimants filed a request for an order preventing such research. The president of the tribunal ordered, one day later and without inviting the state’s comments, the requested relief19, highlighting that he would ‘confer with [the other arbitrators] as soon as possible regarding the final determination of the Application, including the need, if any, for reconsideration of these instructions’. This approach, that can be understood based on the urgency of this specific matter, does not mean that Tribunals can rule on their own without a proper debate. Acting differently is dangerous for the validity of the final award and, in any case, the arbitrators have to motivate precisely why they step one way or another, in order to avoid further difficulties for the parties at the stage of enforcement.
Another difference between the various sets of rules is the availability of emergency relief, or relief before the tribunal is constituted. Given the time-sensitive circumstances under which most interim relief is commonly requested, parties may require relief prior to the relatively lengthy process of constituting the tribunal. Only the ICC, SCC and SIAC Investment Rules allow for emergency relief.
As a matter of fact, there is some uncertainty as to whether emergency relief is available in treaty-based investment arbitration conducted under the ICC Rules. While the SIAC Investment Rules require the parties’ express consent before the emergency provisions apply20, and the SCC rules do not impose any separate requirement of party consent, the ICC emergency arbitrator provisions require both parties to be signatories to the arbitration agreement21. Certain commentators consider that this excludes treaty-based investment arbitration22; given that the state’s offer to arbitrate is contained in the treaty and is accepted by the investor’s request for arbitration, there is no orthodox arbitration agreement.
Under the SCC and SIAC Investment Rules (but not the ICC Rules), emergency orders granted cease to be binding if the dispute is not referred to a tribunal within 90 days of their granting. This safeguards against abuse of the emergency process by a party that has no intention of commencing arbitral proceedings.
Only the SCC provisions on emergency proceedings have been tested in investment arbitration, with emergency relief granted in three reported cases23. Two questions of note were answered by the emergency arbitrators in these proceedings: (1) emergency relief could be granted even if the investment treaty had been concluded before the introduction of the SCC emergency provisions;24 and (2) emergency relief could be granted notwithstanding the requirement of a cooling-off period in an investment treaty.25
II. conditions for the Granting of Interim Measures
The conditions for the granting of interim measures are generally not expressly set out in the applicable arbitration rules. Indeed, the ICC and SCC Rules contain no further indication than requiring that the arbitral tribunal grant only the measures it ‘deems appropriate’26. For its part, Article 47 of the ICSID Convention merely states that ‘the Tribunal may, if it considers that the circumstances so require, recommend any provisional measures which should be taken to preserve the respective rights of either party,27’ and Article 39 of the ICSID Rules does not provide more details on the requirements that a request for interim measures must meet: ‘the request shall specify the rights to be preserved, the measures the recommendation of which is requested and the circumstances that require such measures.28’ This wording use the word ‘recommend’ has always lead to strong debates regarding the binding or non-binding nature of the orders rendered, the current discussions for the adoption of renewed INCID Rules does not seem to clarify.
Only the UNCITRAL Rules 2010 expressly set out the preconditions for the granting of interim measures, namely (1) the threat of a ‘harm not adequately reparable by an award of damages’ (necessity), (2) that ‘substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted’ (proportionality), and (3) a ‘reasonable possibility that the requesting party will succeed on the merits of the claim’ (prima facie claim on the merits)29. These preconditions are also included in Article 17 of the UNCITRAL Model Law.30
Commentators and investment arbitration jurisprudence refer to most (or all) of the following criteria for the granting of interim measures: (i) prima facie jurisdiction; (ii) a prima facie claim on the merits; (iii) necessity; (iv) urgency; and (v) proportionality31.
i Prima facie jurisdiction
Even though none of the rules examined provide for this condition, tribunals often assess their prima facie jurisdiction before granting interim measures32. The assessment is prima facie only, as requests for interim measures must be dealt with as a matter of priority. Arbitrators are required to simply satisfy themselves that they do not manifestly lack jurisdiction over the underlying claim33. ICSID tribunals can rely on the Secretary General’s registration of a request for arbitration as a token of such prima facie jurisdiction, as he or she would not do so where the dispute falls manifestly outside ICSID jurisdiction34. Accordingly, the granting of interim measures does not prejudge the tribunal’s ultimate jurisdiction over the dispute, or preclude a jurisdictional challenge.
ii Prima facie claim on the merits
Only the UNCITRAL Rules 2010 specifically require this precondition. However, it has also been applied in arbitrations under other sets of rules35. It is not a stringent requirement, and the tribunal here needs only to assess a prima facie review of the merits36 to satisfy itself that the claims made are ‘not, on their face, frivolously or obviously outside the competence of the [t]ribunal’37.
One of the main criteria that arbitrators have to assess before ordering interim measures is whether these measures are necessary to preserve the rights of one of the parties to the arbitration.38
One of the main criteria that arbitrators have to assess before ordering interim measures is whether these measures are necessary to preserve the rights of one of the parties to the arbitration.38
Two standards on the requisite level of necessity have emerged in international arbitration practice. The higher standard is inspired by the International Court of Justice, which in LaGrand interpreted necessity as the prospect of irreparable harm.39 This standard was applied by the ICSID tribunal in Occidental v. Ecuador, which considered that a provisional measure is necessary where the actions of a party are ‘capable of causing or of threatening irreparable prejudice to the rights invoked’40. The claimant in Occidental v. Ecuador requested provisional measures to compel Ecuador to fund and preserve a particular oil field. The tribunal refused to grant the requested provisional measures on the grounds that the relief sought was merely aimed at reducing the amount of damages incurred by the claimant. Since the alleged harm was compensable by monetary damages, provisional measures could not be granted41. The tribunal in Quiborax v. Bolivia acknowledged the ICJ jurisprudence, and, by referring to Article 17A of the UNCITRAL Model Law (reproduced in the UNCITRAL Rules 2010)42, explained that irreparable harm is harm that cannot be repaid by the award of damages.43 This view was shared by the ICSID tribunal in Plama v. Bulgaria. The dispute involved the decision by a Bulgarian district court that had ordered that the company constituting the claimant’s investment in Bulgaria be declared bankrupt, and that its assets be sold and distributed to its creditors. The tribunal refused to order the discontinuance of the insolvency proceedings, as it considered that, regardless of the outcome of the Bulgarian proceedings, the claimant’s right to pursue its claim for damages in the ICSID arbitration and the tribunal’s ability to decide this claim remained unaffected.44
The lower standard requires merely that the applying party risk suffering significant harm should the provisional measures not be granted. In Perenco v. Ecuador, the tribunal considered that ‘where action by one party may cause loss to the other which may not be capable of being made good by an eventual award of damages, the test in [Article 47 of the ICSID Convention] is likely to be met. But the Article does not lay down a test of irreparable loss and the authorities do not warrant so narrow a construction.’45 The tribunal ordered that Ecuador refrain from collecting on certain taxes, because this would expose the claimant to imminent seizure of its assets in Ecuador and bring the claimant’s business in the country to an end.46
In City Oriente v. Ecuador, the tribunal noted that ‘it is not so essential that provisional measures be necessary to prevent irreparable harm, but that the harm spared the petitioner by such measures must be significant and that it exceeds greatly the damage caused to the party affected thereby.47’ Therefore, the City Oriente tribunal replaced the requirement of irreparable harm with a proportionality element.
It is worth noting that the ICJ’s test in LaGrand was birthed in extreme circumstances, in which provisional measures were sought to stay the execution of a German national by the United States48. It is difficult to think of a more acute situation of irreparable harm. Such situations are unlikely in investment arbitration, and it is questionable whether this high threshold is adequate in that specific field49.
Although not expressly required by the arbitration rules surveyed, urgency has been referred to as ‘the most important (even a sine qua non) consideration for the granting of interim measures’50, as provisional measures ‘will only be appropriate where a question cannot await the outcome of the award on the merits’51. Thus, tribunals have regularly considered urgency as a requirement for the granting of interim measures.52
In practice, urgency appears to be the assessment of necessity in the prevailing circumstances53. This was well articulated by the tribunal in Perenco v. Ecuador : ‘[p]rovisional measures may only be granted where they are urgent, because they cannot be necessary if, for the time being, there is no demonstrable need for them’54.
The degree of urgency required before provisional measures should be granted depends on the circumstances and nature of the measures sought55. Typically, urgency is related to the prospect of potential harm being caused to the applying party before the final award is rendered by the tribunal56. In any event, the applying party is obliged to demonstrate that the threat to its interests is imminent and likely to occur. Mere possibility or hypothetical harm are insufficient grounds for such measures57.
It is generally admitted that ‘the risk of harm must be assessed with respect to the rights of either party.58’ Most of the institutional arbitration rules are silent on this requirement, except for Article 26 of the UNCITRAL Rules 2010, which expressly requires that the harm the applicant is likely to suffer ‘substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted’59.
This is akin to the common law doctrine of the ‘balance of convenience’, whereby a tribunal must compare the harm that would result to either party if it turned out at the stage of the final award that provisional measures were wrongly granted or withheld.60 Tribunals may consider proportionality either as a standalone requirement61 or, more commonly, as part of the requirement of necessity62
Tribunals pay heightened attention to the requirement of proportionality when potential impingement on the sovereign powers of a state is at stake. This is particularly obvious in cases involving applications for the stay of domestic criminal proceedings to protect the arbitral process. As the tribunal in Hydro S.r.l v. Albania considered, ‘criminal law and procedure are a most obvious and undisputed part of a State’s sovereignty’ and, therefore, ‘any obstruction of the investigation or prosecution of conduct that is reasonably suspected to be criminal in nature should only be ordered where that is absolutely necessary’63. The tribunal granted the measures sought, reasoning that the state’s threat to incarcerate the claimants would affect their ability to participate in the arbitration, while a stay of the criminal proceedings would merely postpone the state’s ability to bring those proceedings64
The question of irreparable harm can be rather specific when one party requests security for costs. This can occur when the petitioner will suffer an injury that is “neither remote nor speculative but actual and imminent” and cannot be made whole through monetary damages awarded at the end of the proceedings65. For example one can cite the impossibility for one party to pay an award allocating damages or even only costs due to the impecuniosity of the other party to the arbitration.
III. Types of Measures Granted by Investment Tribunals
There is generally no restriction on the types of interim measures available for the mere reason that the rules mostly use a very broad wording in order for the Tribunals to get flexibility in their potential rulings. Practically speaking, measures granted by tribunals are generally measures that: require the parties to cooperate in the proceedings or preserve evidence, or decide on confidentiality66; preserve the status quo between the parties and avoid further aggravation of the dispute through unilateral action; prevent the parties from seeking relief through other remedies, for example, by staying parallel proceedings; or secure compliance with an eventual award, for example, by ordering security for costs.67
i Measures to maintain the status quo and avoid further aggravation of the dispute
The principle that a dispute should not be aggravated is part of general international law68. It was the basis upon which Article 47 of the ICSID Convention (which empowers the arbitral tribunal to grant interim relief) was drafted69, and has been expressly acknowledged as a general obligation incumbent on disputing parties by several ICSID tribunals.70
The preservation of the status quo or the non-aggravation of the dispute, rather than being considered as a type of interim measure, may be considered as a criterion for granting interim measures, which applies to several types of measures. In practice, the preservation of the status quo or the non-aggravation of the dispute has been used as a ground for a very wide range of applications for relief, such as ordering the stay of proceedings in domestic courts71, preventing the respondent from publicising criminal investigations72, or preserving disputed contractual rights73.
This large scope of measures that fall under the preservation of the status quo and non-aggravation of the dispute can be seen as contradicting the application of the high threshold for the necessity criterion. But preventing aggravation of a potential harm can also be analysed as avoiding aggravation of the dispute, therefore leading to this criterion being neutralized as least partially for this type of measures.
ii Measures to stay parallel proceedings
Many international tribunals have granted interim measures directed at the conduct of domestic courts74. The most controversial variety of such measures consists in injunctions against the state’s conduct of criminal proceedings against the claimant.
States’ power to prosecute has regrettably been used against claimants in retaliation for the commencement of arbitral proceedings, resulting in applications to the arbitral tribunal for injunctive relief. On the other hand, tribunals are reluctant to infringe on a core aspect of state sovereign power: the national judge’s ability to initiate criminal proceedings75. Relief will only be granted where there is a clear abuse of the criminal process, for example, where the criminal proceedings were politically motivated, initiated as a ‘defence strategy’ to the arbitration76, or as a means of compelling the claimant to comply with alleged obligations that are disputed in the arbitration77. In most cases, the principle of separation of powers when constitutionally protected limits the power of the arbitrators, specifically when the criminal action was initiated totally or partially before the arbitration started.
iii Measures ordering security for costs
The SCC Arbitration Rules explicitly provide for the possibility for tribunals to order security for costs.78 Security for costs can also be considered as provided for under Article 26(2)(c) of the UNCITRAL Rules 2010, which refers to measures that ‘provide a means of preserving assets out of which a subsequent award may be satisfied’79.
The new version of the ICSID Rules seems to be opting for a new regime of security for costs, independent from the set of rules applicable for interim measures80. Although investment arbitration tribunals have generally acknowledged their power to grant security for costs, even under other sets of rules,81 they are very reluctant to grant such measures. Tribunals have referred to various reasons for their refusals, including that it would be improper to prejudge the claimant’s case82, or because there is no imminent harm at stake.83
Tribunals have stated that security for costs might be ordered in the most extreme cases, such as where essential interests of either party stand in danger of irreparable damage84, or where abuse or serious misconduct is apparent85. Financial difficulties and third-party funding do not constitute in themselves exceptional circumstances justifying the granting of security for costs.86 Neither would the fact that the claimant investor is a ‘shell company’ without assets of its own, as special purpose or joint venture vehicles are common in investment making87.
The tribunal in RSM Production Corporation v. Santa Lucia ordered the claimant to provide security for the respondent’s costs, as it was satisfied that such exceptional circumstances were met, highlighting that ‘the difference between the present proceeding and previous ICSID arbitrations in which the request for security for costs was in every case denied, is that in this case the circumstances which were brought forward in other proceedings occur cumulatively.’88 According to the tribunal, there was a material risk of non-compliance with a cost award given the claimant’s non-compliance with cost awards in previous proceedings that it had initiated,89 combined with a serious lack of financial assets given that the claimant’s claim was financed by a third party.
RSM Production Corporation v. Santa Lucia paved the way for a more flexible approach in complex cases where a party can demonstrate the impecuniosity of a Claimant. In approaching security for costs, the CIArb Guidelines entitled “Applications for Security for Costs” (the “CIArb Guidelines”) has relevant citations for Tribunals consideration, namely (i) Article 1 (2) provides that “When deciding whether to make an order for security for costs, arbitrators should take into account the following matters: 1 – the prospects of success of the claim(s) and defence(s) Article 2); 2 – the claimant’s ability to satisfy an adverse costs award and the availability of the claimant’s assets for enforcement of an adverse costs award (Article 3); and 3 – whether it is fair in all of the circumstances to require one party to provide security for the other party’s costs (Article 4).”90
According to Redfern and O’Leary, “there are three criteria that an international arbitral tribunal should expect to be established before acceding to an application for security for costs: first, that there is a reasonable possibility that the requesting party will succeed in its defence to the claim; secondly, if the requesting party does succeed in its defense, that it is likely to be awarded costs; and thirdly, that there is a risk that those costs will not be paid unless some form of security is ordered. If these criteria are established, then the tribunal must consider whether it is fair and just in all the circumstances that the order be made.91” This element of fairness allows for the appropriate test to include a ‘reasonable possibility of success’. If one party can demonstrate that there is a reasonable chance that a cost award will never be paid (for example, because the agreement with a third party funder does not cover an adverse cost award or if it can be demonstrated that one party was never a company with proper financial capacity to pay) this element of reasonableness may be met.
IV. The Effeciency and Enforcement of Interim Measures
The ICSID Rules state that a tribunal may ‘recommend’ interim measures92. The ICC and SIAC Investment Rules use the more imperative term ‘order’93, while the remaining rules surveyed use more neutral terms such as ‘grant’ or ‘take’94. Notwithstanding the difference in terminology, interim measures ordered in investment arbitration are considered as binding on the parties95.
On the other hand, tribunals lack the coercive power of state courts, and have limited ability to compel enforcement of the interim relief granted. The tribunal’s own coercive powers extend only to costs sanctions, and the drawing of adverse inferences against a party on matters of evidence. For example, an adverse inference was drawn by the tribunal in AGIP v. Congo against the respondent for failing to cooperate with orders to preserve evidence.96
There are examples of respondent states pre-empting orders for provisional measures, by voluntarily undertaking to preserve certain rights for the claimant. For example, the government in Vacuum Salt v. Ghana undertook that it would not deny the claimant access to certain records requested. The tribunal considered that this satisfied the claimant’s concerns expressed in its request for provisional measures, and did not see the need to order relief.97 Another example is found in Italba v. Uruguay, where the claimant sought to restrain Uruguay’s criminal investigations against two of the claimant’s witnesses. The government of Uruguay undertook that these investigations would not impede the witnesses’ ability to participate in the claimant’s case and freely offer their testimony. The tribunal was persuaded by these undertakings, inter alia, and declined to restrain the investigations.98
On the other hand, and more particularly where anti-enforcement or anti-suit injunctions regarding proceedings against the claiming investor are concerned, there is an understandable difficulty with enforcing the interim measures, given that a state’s sovereign rights are implicated. Reportedly, out of 10 orders granted by ICSID tribunals between 2000 and 2010 for relief suspending domestic litigation, only two were complied with99.
If measures of enforcement are required, the requesting party must resign itself to turn to national courts for assistance. This can be a complicated exercise given that international conventions, in particular the New York Convention100, and domestic rules typically only provide for the enforcement of awards and not orders.
In this regard, in Chevron v. Ecuador, the tribunal re-issued interim measures previously granted in procedural order in the form of an interim award101, stating that such an award was ‘immediately final and binding’ upon the parties. The relevant interim measures sought to preclude the state from enforcing an anticipated judgment issued by an Ecuadorian court against the claimants. There is a practice among certain national jurisdictions to refuse to enforce interim orders as awards under the New York Convention 1958, no matter their title.102
On the other hand, jurisdictions that have adopted Articles 17H and 17I of the UNCITRAL Model Law 1985 with the amendments of 2006, specifically provide that interim measures issued by an arbitral tribunal are binding and shall be enforced by a competent national court subject to specified grounds for refusing such enforcement.
About the author : Benoit Le Bars
Lazareff Le Bars
Benoit Le Bars, co-founder and managing partner of Lazareff Le Bars, represents clients in international arbitration, mediation and alternative dispute resolution, and has specialist expertise in corporate law, international trade law, international contracts and OHADA law.
Benoit Le Bars’ practice focuses principally on commercial and investment arbitration involving complex trade relationships between businesses, investors and states, and spans a broad range of jurisdictions and arbitral institutions.
In addition to his work as counsel, he is often appointed as arbitrator and has extensive experience in arbitral forums worldwide.
His international arbitration expertise is recognised in the leading international legal directories, including Chambers and The Legal 500.
In 2018, Benoit published an exhaustive treatise of French law judgments in international commercial arbitration (International commercial arbitration: landmark decisions of French arbitration law, Lexisnexis 2018). He is also a professor of law in the United States and in France.