Form of Interim Remedies in English-Seated UNCITRAL arbitrations
In EGF v HVF and others  EWHC 2470 (Comm), the English Commercial Court dismissed the claimant's procedural challenges pursuant to s.24 (power of the court to remove an arbitrator), 67 (lack of substantive jurisdiction) and 68(2)(b) (exceeding arbitral powers) of the Arbitration Act 1996. We weigh in on the procedural ruling which concerns the remedy of interim payments under the 2010 UNCITRAL Rules.
In the underlying arbitration HVF and others were the claimant, and EGF was the respondent. In the Court case, EGF was the claimant and HVF and others were the defendants. The detailed facts of the underlying arbitration remain confidential, but it concerned a debt said to be owed by EGF to HVF, part of which was described by HVF as "undisputed".
Interim payment order
HVF's application in the underlying arbitration was for a partial award for the undisputed debt, alternatively an interim payment order for the same which if necessary could be revised later. HVF argued that the Tribunal could grant on an interim basis any remedy that they could grant on a final basis by reference to s.39 of the Arbitration Act and Article 26 of the 2010 UNCITRAL Rules. The Tribunal proceeded to grant a partial award including an interim payment order in the sum of US$250m to HVF (the "IPO").
Arbitration claim before the English High Court
EGF made an arbitration claim before the Court seeking, among other things, an order to set aside the IPO on the grounds that the tribunal had no jurisdiction or, alternatively, no power under the 2010 UNCITRAL Rules to issue interim relief in the form of an award.
The Court dismissed EGF's application, finding that the challenge in question did not fall under s.67; and that no substantive injustice had been or would be caused to meet the threshold of s.68(2)(b) of the Arbitration Act. In making its decision on the latter point, the Court took into account that EGF had not complied with the IPO and that there was no real threat of enforcement as the final award in the proceedings was expected to be issued in approximately three months.
Nevertheless, the Court did consider EGF's arguments on an obiter basis and made some useful observations on the powers of the tribunal under the 2010 UNCITRAL Rules.
Can a Tribunal appointed under the 2010 UNCITRAL rules order an IPO?
Pursuant to Article 26(1) and (2) of the 2010 UNCITRAL Rules, an arbitral tribunal may grant interim measures provided that these are temporary. In its submissions, EGF relied on this notion of 'temporariness' and argued that the payment of monies cannot be deemed temporary and therefore cannot be issued as a provisional measure.
Commercial litigators reading may be surprised by this, given the availability of interim payment orders in English Court proceedings (CPR25.6). In principle funds paid today can be reimbursed later and interim payment orders are as such deemed 'temporary' interim remedies. There may of course be practical issues around recovery once funds have been transferred from defendant to claimant, but that is a question of whether the enforcement burden should in each case be shifted from claimant to defendant. As to that, courts and tribunals should take into consideration relevant matters in the usual way, such as the solvency of the claimant.
Unsurprisingly, the Court disagreed with EGF's argument, finding that the payment of monies could indeed be made on a provisional basis and can be temporary because a provisional payment order "can be expressed as […] an order to the effect that the paying party is to make a payment on account of a money claim to the recipient party such that pending final determination of the claim […] there shall have been paid on account of the claim the amount thus ordered."
It is also worth noting that IPOs, whether made by courts or tribunals, should ordinarily be based on sums which are either undisputed, or plainly expected to succeed. The common expectation is that any final award/judgment will be for a greater sum than the IPO, but without prejudicing any defences available. For example, if a defendant has admitted liability in principle but quantum remains to be determined, there may be an identifiable 'floor' for the level of damages that the court/tribunal expect to award in any event. The purpose is to avoid unreasonable delays in the payment of sums which plainly ought to be paid. A potentially useful side effect of an IPO is to encourage settlement without the need for a hearing/trial.
Can a Tribunal appointed under the 2010 UNCITRAL rules order interim relief by way of an award?
The Court then considered EGF's alternative plea that any interim remedy can only be granted by way of an order of the tribunal and not an award. In this regard, EGF referred to Article 34(2) of the 2010 UNCITRAL Rules which stipulates that "all awards […] shall be final and binding on the parties". EGF contended that interim relief is by definition not final and therefore pursuant to this provision cannot be granted by way of an award.
The Court agreed with EGF's argument, highlighting that "[Article 34(2)] does not contemplate or provide for, but to the contrary is inconsistent with, the notion that an award can be made the substantive relief granted by which is provisional or interim in nature."
As a relevant aside, the Court clarified that, unlike Article 34(2) of the 2010 UNICTRAL Rules, the Arbitration Act does in fact allow for IPOs (and interim relief in general) to be granted by way of an award subject to the parties' agreement. In particular, s.39(1) of the Arbitration Act provides that "the parties are free to agree that the tribunal shall have power to order on a provisional basis any relief which it would have power to grant in a final award" whereas according to s.58(1) "unless otherwise agreed by the parties, an award made by the tribunal pursuant to an arbitration agreement is final and binding." The Court found that the absence of a similar standing exception to the provision in Article 34(2) of the 2010 UNCITRAL Rules further supported its conclusion.
It is worth mentioning that international arbitration practitioners and scholars have previously considered that tribunals constituted under the 2010 UNCITRAL Rules are empowered to order provisional remedies in the form of an award. Andrew Baker J, while mindful of this practice, expressed the view that it is inconsistent with the text of the 2010 UNCITRAL Rules: "Inconvenient though I apprehend it may be regarded in certain international arbitration quarters, in my view the language and the logic arising under Article 34.2 is clear. […] In those circumstances, and with great of respect to the very experienced and knowledgeable authors, I can say only that I disagree that if there is any such practice, it finds justification in the language of the UNCITRAL Rules." (see paragraphs 123-124 of the judgment).
Comment and practical implications
The Court's decision is yet another example of the high threshold applicable in challenges under s.68 of the Arbitration Act. In addition, and more interestingly, the Court's obiter observations provide useful guidance on the form provisional measures may take in arbitrations subject to the 2010 UNCITRAL Rules. Users of the 2021 UNCITRAL Rules should note that Article 34(2) remains as per the 2010 version.
It should be noted in this respect that, unlike the 2010 UNCITRAL Rules, the 1976 version explicitly stipulates both that a tribunal is empowered to issue interim measures in the form of an award (Article 26(2) of the 1976 UNCITRAL Rules) and that "[t]he award shall be […] final" (Article 32(2) of the 1976 UNCITRAL Rules). While the Court did not consider the underlying question under the 1976 UNCITRAL Rules, it is likely that it would not have reached the same conclusion given the language contained in the earlier version of Article 26(2).
By the same logic, and notwithstanding Article 34(2) of the 2010 UNCITRAL Rules, the parties could in theory make provision for the tribunal to issue interim relief by way of an award. This flows from the fundamental principle of party autonomy in international arbitration, which enables the parties to tailor the proceedings to their specific needs. The principle of party autonomy is enshrined both in Article 1(1) of the 2010 UNCITRAL Rules ("…such disputes shall be settled in accordance with these Rules subject to such modification as the parties may agree") and in s.1(b) of the Arbitration Act ("the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest"). With this in mind, the parties are at liberty to agree that the tribunal may order interim relief by way of an award before the commencement of an arbitration (e.g. in the arbitration agreement); or subsequently, should this issue arise during the course of the proceedings.
There is an obvious attractiveness to an interim measure order made in the form of an award, as it would then benefit from the advantageous enforcement regime of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"). However, as a key takeaway from the Court's decision, tribunals and practitioners should always take into consideration the interplay between the applicable rules to the arbitral proceedings in order to avoid any concerns on the validity of interim relief orders. This would include the law of the seat of the arbitration, the applicable procedural rules and, potentially - in case of administered UNCITRAL arbitrations - the rules and regulations of the arbitral institution tasked with administering the arbitration. Depending on the outcome of this exercise, the parties may decide that the specificities of their commercial relationship may be better served through the application of a different set of rules and mutually agree to amend the arbitration clause accordingly.
This approach may be warranted in circumstances where parties can reasonably anticipate the need for interim payments – such as in large construction projects where contractors/subcontractors are compensated according to a payment schedule or otherwise through stage payments. The same issue may also arise in charter disputes, when a party claims for unpaid hire prior to the tribunal addressing any counterclaims; and more generally in bifurcated proceedings when a party, having prevailed on part of the claim during the first stage of the arbitration, requests interim payment of arbitration costs associated with the same part of the claim, pending the tribunal's final decision on costs allocation in the final award.