Tribunal's Power to Order Interim Measures in Troubled Waters

Apr 2 , 2022
By Yehualashet Tamiru Tegegn

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Ethiopia has a new arbitration proclamation established to create a more business-friendly environment. Unfortunately, it contains some worrisome issues on the power of arbitration tribunal to order interim measures, writes Yehualashet Tamiru Tegegn (yehuala5779@gmail.com), a lawyer, consultant and researcher.

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To demonstrate itself as business- and arbitration-friendly and attract investors, Ethiopia recently enacted a new arbitration, conciliation, and working procedure proclamation on top of the New York Convention's ratification on recognition and enforcement of foreign arbitral awards.

The existing case congestion and delay in the judiciary system and the needs to have a reliable alternative dispute resolution mechanism are some of the pressing factors that necessitate the demand for arbitration in Ethiopia. As indicated in the preamble of the proclamation, arbitration helps in rendering an efficient decision by reducing the cost of the contracting parties, protecting confidentiality, permitting the participation of experts in the process and simplifying the procedure.

The new arbitration proclamation established a dual tracked system: domestic and international arbitration. The legal framework governing the domestic one can be classified into four. The first and foremost legal regime is the Civil Code of Ethiopia for cases emanating from arbitration agreements signed before the coming into effect of the new arbitration law. The second legal regime of the Civil Procedure Code also deals with cases derived from arbitration agreements or clauses concluded before the effectiveness of the new proclamation. The third regime is the new arbitration and conciliation proclamation.

The fourth, arguably, is the Federal Supreme Court Cassation decisions. On the other hand, foreign-related arbitration cases are governed by the Civil Code and Civil Procedure Code for pending cases, arbitration agreements or clauses concluded before the effectiveness of the new proclamation. On top of cassation decisions, the new arbitration proclamation, the New York Convention and its ratification proclamation are also relevant and applicable for foreign-related arbitration cases.

A validly constituted tribunal has, among other things, the power to give interim order. A final arbitration award may be of no meaningful value to the award creditor in cases where the losing party's conduct renders the proceeding practically meaningless. This could be by selling the property or transferring it to another location, whereby enforcement would be impossible. Thus, an interim measure is vital to deter such behaviour and to save the integrity of the proceeding.

The United Nations Commission on International Trade Law (UNCITRAL), in its model arbitration law, defines the term interim as "any temporary measure, whether in the form of an award or in any other form, by which, any time before the issuance of the award, the dispute is finally decided.” The purposes of the interim measure as per the model law are to maintain the status quo, prevent imminent damage, and preserve property and assets.

Traditionally, the power to give interim order was only reserved for courts. However, under the new arbitration proclamation, the power is concurrent between courts and arbitration tribunal or arbitrator, as may be the case. Two kinds of interim measures are recognised: interim measures per se and precaution measures. There are two fundamental differences between the two procedures. While the purpose of the interim measure is, among other things, to preserve the status quo of the disputant parties, the purpose of the precaution measure is the prevention of hindrance in the enforcement of the interim measure by the other party. The former is a standalone measure; whereas the latter is a subsidiary or subordinate measure. The second major difference is that the interim measure can only be ordered after allowing the other party to present their arguments, whereas the precaution measure is ex parte proceeding, in the absence of the other party.

The new law empowered the arbitration tribunal to order interim measures either by the request of one of the contracting parties or by its own initiative. The order provided by the tribunal or the arbitrator can be modified, suspended and reversed. It is also binding irrespective of the country in which it was issued. The dual-track system is also applicable for interim measures coming from domestic arbitration and foreign-related arbitration cases. However, the New York Convention would not be applicable as it only applies to final decisions whereas the interim order by its very nature is a provisional measure.

Despite the fact that the new arbitration law seems to provide a comprehensive interim injunction relief during arbitration proceedings, some unanswered questions need to be examined.

The first is the deletion of ex parte proceeding during interim measure application. The wording of the proclamation seems to exclude the possibility of ex parte proceedings as it makes it mandatory for the tribunal to hear the other party. The first reading of this seems very logical and in line with the very nature of the arbitration. Equality of party and fairness of the proceeding is one of the defining features of arbitration, and this right is none other than the extension of this cardinal principle. As true as it is, there are instances whereby the nature of the interim measure sought by one party is so urgent and waiting for the opinion of the other party may nullify the whole purpose of seeking an interim order.

As stated in the proclamation, one of the four purposes of interim measure is “to allow the continuation of the existing conditions or to restore the status quo pending resolution of the dispute.”

This might not be achievable in some cases where the very nature of interim order is urgent and necessitates ex parte proceeding. The best example would be seeking an interim measure against the property being moved, and if the other parties are notified about this, chances are high the property would be moved.

The second worrisome point is the precondition for granting an interim order. The tribunal has the discretionary power in assessing the situation and providing an interim order. As described by prominent jurist Rosco Pound, discretionary power is an authority conferred by the law in certain conditions with once own considered judgment and conscience. The proclamation indicated a condition within which the arbitrators can use their considered judgment.

The proclamation only employs an irreparable damage test. Interim order should indeed be provided, considering that irreparable damage is likely to happen if an order is not issued or the impact it may have on the person against whom the order is issued. However, irreparable damage is a necessary but not the only criterion to grant interim measures. The requirement of the likelihood of the party that requests interim measure would be successful in the merit of the case on prima facie basis and proportionality of harm must also be considered.

These criteria are clearly indicated under the UNCITRAL Model law, which the new proclamation heavily adopted from, when it said, “such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted … there is a reasonable possibility that the requesting party will succeed on the merits of the claim.”

Another worrisome issue is the possibility of interim order by the initiation of the tribunal itself. This is perhaps one of the novel elements under the Ethiopian arbitration law.

To the extent I know, there is no international institution that empowers tribunal to give interim order by its own motion. For instance, UNCITRAL Model law stated that “…the arbitration tribunal may, at the request of a party.” In a similar fashion, International Center for Dispute Resolution (ICDR) stated that “at the request of any party, the arbitral tribunal may order or award any interim or conservatory measures it deems necessary.” Likewise, the International Chamber of Commerce (ICC) stated that the "arbitral tribunal may order any interim or conservatory measure it deems appropriate at the request of a party.”

In nowhere is it mentioned, either explicitly or by implication, that the tribunal has the power to order interim order by its own initiation. This is a deviation from the principle of party autonomy. In a case where the party does not seek temporary relief because they do not see irreparable damage to be sustained, there is no compelling reason for a tribunal to give interim order by its own initiation.

On top of this, the proclamation is silent about the possibility of emergency arbitration in connection with the interim measure. Typically, in the absence of a duly constituted tribunal, it is common to see parties resort to court seeking interim measures. However, recent arbitration practices and arbitration rules envisaged the possibility of emergency arbitration. Once a regular tribunal is established, the emergency arbitrator becomes functus officio, it will not have legal effect. As a matter of legal presumption, everything which is not forbidden is allowed. However, the court and arbitrators in Ethiopia all often resorted to  a precaution approach by prohibiting what is not expressly permitted.

In the end, there are many thing to celebrate from the new arbitration proclamation about the power of the tribunal to give interim order but some issues poses more questions than answers.

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PUBLISHED ON Apr 02,2022 [ VOL 23 , NO 1144]

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