Interim, Provisional and Conservatory Measures in US Arbitration

Who May Provide Relief

Interim, provisional and conservatory relief in aid of arbitration may be provided by:

• The arbitral tribunal.
• An "emergency arbitrator" appointed by an administering body.
• A federal or state court.

The precise scope of the powers of each of these to act depends on:

• The arbitration agreement.
• Applicable arbitration rules.
• Applicable federal and state law.

Court-imposed Limits

Under the Federal Arbitration Act ("FAA"), a court may grant interim relief pending arbitration. The question of whether a federal court should grant preliminary injunction is generally one of federal law even in diversity actions, but state law issues are sometimes considered. Court-issued interim orders generally last only until the arbitrators have the opportunity to consider the request for emergency or injunctive relief. In effect, restraints issued by courts often serve the same function as temporary restraining orders. While some US courts have held that they lack power to grant interim relief where the underlying dispute is subject to an arbitration agreement governed by the New York Convention other courts have rejected this approach.

Whether to Apply to the Arbitral Tribunal or the Court

Parties generally can apply either to a court or to arbitrators for interim relief. Parties should consider applying to the court when:

• The arbitral tribunal has not yet been constituted and therefore cannot yet act. In these cases, unless the applicable arbitral rules contain emergency arbitrator provisions, an application to the court is necessary.
• The party seeking interim relief needs judicial compulsion. Although arbitrators can impose negative consequences on parties (for example, drawing adverse inferences if a party does not produce evidence), they have no ability to make a party carry out their orders and no power that can be applied to non-parties.
• The party needs ex parte relief. Under most institutional rules, a party seeking emergency measures of protection must notify the other parties. Notice of the application gives the party an opportunity to dissipate the evidence or assets that are the subject of the application. By the time the tribunal makes an order, it can be too late. By contrast, federal courts and most state courts (e.g., California and New York) permit an applicant to proceed without notice in urgent cases.
• The matter is urgent and the arbitrator does not act timely or does not provide an adequate remedy. Absent a showing of urgency, under the RUAA parties may seek relief only from the arbitrator after the arbitrator is appointed and is authorized and able to act.
• The arbitrator may not have the power to grant the relief sought. For example, arbitrators may not have the authority to appoint a receiver.

Parties should consider applying to the arbitral tribunal for interim relief when:

• The tribunal has been constituted and is available on short notice.
• The applicant is satisfied that the other party will respect orders issued by the tribunal.
• The federal or state courts at the place of arbitration are reluctant to grant provisional remedies in aid of arbitration.
• The parties' agreement or the applicable institutional rules empower the arbitral tribunal to grant broader interim relief than would be available in court.
• In in international case, the arbitrators are likely to consider an international standard, in particular the UNCITRAL Model Law. The revisions to Article 17A of the Model Law provide that the applicant show only "reasonable possibility" that the applicant will succeed on the merits of the claim and harm that is "not adequately reparable," which is a lesser showing than what would be required in a US court.

Interim Relief from the Arbitral Tribunal

No Ex Parte Applications to Arbitrators

The rules of the major arbitral institutions prohibit applications for interim relief being made without notice. In any event, proceeding before an arbitrator on an ex parte basis would be ill-advised because:

• Most arbitral tribunals are extremely reticent about proceeding without giving both parties an opportunity to address them.
• Any steps taken without notice may affect the enforceability of the ultimate award. Ex parte evidence submitted to an arbitration panel that disadvantages any of the parties in their rights to submit and rebut evidence violates the parties' rights and is grounds for vacatur of an arbitration award.

No Power to Bind Fully Constituted Arbitral Tribunal

Under the institutional rules considered here, the emergency arbitrator does not have the power to bind the full arbitral tribunal. The fully constituted tribunal has the power to vacate, amend or modify any order, award or decision by the emergency arbitrator.

The usual default position is that the emergency arbitrator cannot become a member of the full arbitral tribunal unless the parties agree otherwise.

Enforcing Preliminary Relief Awarded by Arbitrators in Court

Courts have held that they do not have the power to review an interlocutory ruling by an arbitration panel but have relaxed this rule when parties seek confirmation of provisional remedies awarded by arbitrators.

In Companion Prop. & Cas. Ins. Co. v. Allied Provident Ins., Inc., for example, the arbitrators issued an interim award requiring the respondent to post security. When the respondent ignored the interim award, the claimant made a motion in court to confirm it. The court reviewed the case law that supports the court's power to confirm interim awards of security and noted that "[w]ithout the ability to confirm such interim awards, parties would be free to disregard them, thus frustrating the effective and efficient resolution of disputes that is the hallmark of arbitration." Having concluded that it had the power to confirm the interim award, the court noted that it should confirm as long as there is a "barely colorable justification." On that standard, the court confirmed the award because the agreement between the parties required that the respondent provide collateral for its obligations.

Despite the well-developed case law, there are some outliers. In Al Raha Grp. for Tech. Servs. v. PKL Servs., Inc., a federal district court in Atlanta held that despite the jurisdictional grant contained 9 U.S.C. § 203, it lacked subject matter jurisdiction to enforce an interim emergency award issued by an ICDR emergency arbitrator to preserve the status quo. Especially when appearing before a court that may not have extensive arbitration experience, counsel should be sure to thoroughly brief the court's authority to grant relief as was the case in Vital Pharms. v. PepsiCo, Inc.

Where, on the other hand, a court is asked to vacate an interim award issued by arbitrators, the same considerations may not apply. In Chinmax Med. Sys. Inc. v. Alere San Diego, Inc., the court refused a request to vacate an emergency arbitrator's interim order for certain conservatory measures under the ICDR Rules. In Chinmax, the court in addressing a challenge to the interim order found that it did not have jurisdiction to vacate the order because it was not final and binding for the purposes of the New York Convention. The order itself stated that it would be subject to the consideration of the full arbitration tribunal, and on this basis the court refused to grant the motion to vacate.

Courts will only enforce that part of the interim relief that requires judicial intervention at that stage of proceedings. To determine whether to enter grant relief, a court must consider:

• The likelihood that the harm alleged by the party will ever come to pass.
• The hardship to the parties if judicial relief is denied at this stage in the proceedings.
• Whether the factual record is sufficiently developed to produce a fair adjudication of the merits.

A longer version of this Practice Note was first published by Practical Law Litigation web service at http://us.practicallaw.com/0-587-9225. For more information about Practical Law, visit us.practicallaw.com