CHAPTER 14 THE ENFORCEMENT OF INTERIM MEASURE OF PROTECTION "AWARDS"

• Jurisdiction: United States

International Energy and Minerals Arbitration
(Feb 2002)
CHAPTER 14
THE ENFORCEMENT OF INTERIM MEASURE OF PROTECTION "AWARDS"
Cecil O.D.
Branson, Q.C.
Salt Spring Island, British Columbia
Canada

I. INTRODUCTION

The enforcement of international commercial arbitration awards is a favourite topic at international commercial arbitration conferences. This is understandably so as the ease of recognition and enforcement of international commercial arbitration awards has elevated this method of dispute resolution to the preferred position it finds itself in today. The present level of global trade and investment has to a significant degree been aided by the enhanced ability of those who have successfully resolved disputes with foreign parties through arbitration to recover the fruits of their victories. Uncertainty in international commercial relationships is counterproductive. Accordingly, to the extent possible, it is to be avoided or at least ameliorated. International business relationships are likely to involve aspects that are political, legal, and philosophical, and disputes thereunder can arise out of differences exacerbated by complexities brought about by the size of transactions, the multiplicity of parties involved, difficult technological issues, and the sophistication of financing schemes. The time span of business relationships is expanding, which can exascerbate problems brought about through economic and political fluctuations and the time limited value of the subject of the relationships.

II. THE NEW YORK CONVENTION, ITS HISTORY AND BENEFITS

The implementation of the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards in 1958 (the "New York Convention") has been the single most important factor which has made international commercial arbitration so successful. Article II requires the judicial authorities of signatory States to stay court proceedings and refer to arbitration those disputes in respect of which the parties have made an agreement, unless found to be null and void, inoperative or incapable of being performed. The efficacy of this provision lies in its ability to prevent those who improperly seek to avoid their wrongdoing from delaying an ultimate decision being made against them. Probably more important are the provisions in this Convention, particularly Articles I and V which support the recognition and enforcement of foreign arbitral awards. Article V mandates a competent court to recognize and enforce foreign arbitral awards subject to certain enumerated defences which are in essence limited to matters either of procedure or jurisdiction. Given that there is no comparable international treaty that deals with the recognition and enforcement of foreign court judgments, very few multilateral treaties outside of the Brussels and Lugarno Conventions, and given that the largest trading nation in the world, the United States of America, has not entered into any such treaties for the recognition and enforcement of court decisions relating to commercial matters, the value of the New York Convention must be abundantly clear.

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III. THE LIBYAN OIL CASES

An early major test of the effectiveness of international commercial arbitration arising after the completion of the New York Convention arose out of three arbitration involving four major international petroleum concessions in Libya. This country, which had been extremely poor, and mainly comprised of desert land with few known natural resources, was the beneficiary of a major petroleum discovery in the early 1950s. Major oil concessions were granted to a number of foreign multinational companies including British Petroleum Co. (Libya) Ltd. ("BP"), Texas Overseas Petroleum Company ("TOPCO"), California Asiatic Oil Company ("CALASIATICS"), and the Libyan American Oil Company ("LIAMCO"). Each of these concessions was supported by written agreements with the government of Libya requiring it not to alter the rights created thereby, except by mutual consent of the parties. These agreements contained arbitration provisions.

In 1969, Col. Muammar Khaddafi led a coup which took control of Libya, a country which by this time had 99.8% of its total exports in petroleum. Two years later, the Libyan Government commenced a process of nationalization of all of the interests and properties associated with the concessions; upon diplomatic intercession by Great Britain and the United States failing, three arbitrations were filed on behalf of the concession holders against the Libyan government. First in time was the one filed on behalf of BP in April 1972, followed by a combined claim from TOPCO and CALASIATIC filed in December 1974, and finally there was LIAMCO's claim filed in January 1975. The awards in these cases were made in October 1973, January 1977, and April 1977 respectively. The BP claim was settled with the Libyan government in November 1974, TOPCO/CALASIATIC in September 1977, and LIAMCO in March 1981. These disputes would likely have taken longer to process were it not for the fact that Libya declined to participate in any of the three cases, contenting itself to stand on the principle that there was no breach of agreement as the nationalization of the concessions in question arose out of a sovereign act which was not justiciable. Nevertheless, the circumstances surrounding the three cases were such as to raise important issues of international commercial arbitration law. As might be expected, much of the early planning by counsel for the companies looked beyond simply proving breaches of the concession agreements and damages; they sought to both maximize their clients' recovery and enhance the likelihood of enforcing the award in a timely manner. In order to achieve these goals much thought was given to the remedies sought, the issues which the claimants wanted the arbitrators to pronounce upon, and the most appropriate remedies. While each of the three went about its task in a slightly different way, they had a common interest and agenda for securing assets upon which they could ultimately realize the fruits of their awards. The earlier that they could convince Libya that it would eventually have to compensate them, the earlier they would be likely to recover and the more they would be likely to recover.

All three of the claimants were successful in having the arbitration process bifurcated. They also each asked for declarations in response to a number of questions put to the arbitrators. The claimants in all three arbitrations put forward a claim of restitutio in integrum. The major reason for doing this was that they wanted to be able to assert that the petroleum products being shipped by Libya were "hot" and therefore liable to seizure. By proceeding in this way, they hoped to avoid having to wait for a decision both on the substantive issues concerning whether there was a breach of a concession agreement, and for the damages to be assessed. The damages segment of the arbitration was expected to

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take a considerable amount of time and would therefore delay recovery. On the other hand, if Libya were to be held responsible on a continuing basis to perform its obligations under the Deeds of Concession the claimants would be in a good position, prior to the whole case being completed, to attach, both the petroleum, and the proceeds from the sale thereof. Of the three awards, only that which dealt with the TOPCO/ CALASIATIC claims decided that the Deeds of Concession were binding on the parties and that the Libyan government continued to be legally bound to perform them and to give them full force and effect. The arbitrators in the other two cases awarded damages only. The only claimant to seek enforcement of its award was LIAMCO which was granted exequator in France and Sweden, but was refused confirmation of the award by the United States District Court, District of Columbia, from which an appeal was taken to the United States Court of Appeals, District of Columbia. Before the appeal was heard and decided, a settlement was reached. What none of the claimants apparently sought was an interim measure of protection pending a final award on all issues before the arbitral tribunals. The reason for this may have been the lack of any legal regime for the enforcement of such orders, even if they would have been granted by one or more of the arbitral tribunals. These were remarkable cases, particularly given the number of issues raised and the paucity of legislation and court precedents available. The issues included applicable law, remedies available, sovereign immunity, arbitrability, jurisdiction, nationalization, and, perhaps most important of all, recognition and enforcement of arbitral awards.1

Thirty years on, international commercial arbitration has proved its value many times over. The former tensions existing between courts and arbitral tribunals have abated. There has been a positive and cooperative effort, led by the United Nations Commission on International Trade Law (UNCITRAL), to harmonize the law relating to arbitral procedures, many States have passed new legislation dealing with international commercial arbitration and the number of legal court precedents has increased substantially. All of this has led to a much improved climate for the use of arbitration for international commercial dispute resolution. It therefore may be an appropriate time at which to speculate on what might be available to astute legal practitioners seeking to protect an eventually favourable award at an early stage in the arbitral process.

Compared with the number of reported court decisions concerning the enforcement of final awards on the substantive merits, there have been very few touching upon the enforcement of arbitral decisions relating to interim measures of protection. Nevertheless, there are now enough to allow us to attempt an analysis of the subject of this paper...