Security Measures in International Commercial Arbitration: Matters of Law and Validity

Gennadii Tsirat, Doctor of Laws | JVS Law

The classic scenario that makes winning an arbitration pointless: while the tribunal hears the case, the respondent quietly strips its assets. The award comes out in your favour and there is nothing left to enforce against.

This paper examines what arbitration can do about that: the legal basis for interim measures, the force of a tribunal’s order granting them, and the role of state courts in the process. It was written in 2010, when Ukrainian law had no answer.

The answer has since arrived. The 2017 reform of the procedural codes expressly empowered state courts to grant interim relief in a case referred to international commercial arbitration — including before the claim is filed.

Parties to cross-border trade normally take disputes to international commercial arbitration. And they regularly find that, by the time an award is rendered in their favour, the respondent has disposed of the assets it held — making enforcement of that award impossible in fact.

The scale on which arbitration is used for trade disputes had outrun the unsettled state of the rules on securing those claims. That contradiction is the subject of the paper.

The author also notes the state of the literature at the time: most Ukrainian writing on interim measures dealt with their use by state courts. Interim relief in support of claims before international commercial arbitration was addressed by only a handful of authors.

The problem described in the paper was resolved systemically by Law No. 2147-VIII of 3 October 2017, which rewrote Ukraine’s procedural codes. The provisions took effect on 15 December 2017.

The key rule is Article 149(3) of the Civil Procedure Code: where a case has been referred to international commercial arbitration or an arbitral tribunal, the court shall grant measures to secure the claim on the grounds and by the procedure the Code establishes.

Two practical consequences:

• Relief is available before the claim is filed. An application may be made before the tribunal is even seised — that is, while the assets are still there, rather than after they have gone.
• Arbitration is no longer left to itself. A tribunal’s order for interim measures carries no coercive force of its own, but it is now backed by the state court mechanism, and that is what makes the eventual award worth having.

Separately the Code regulates recognition and enforcement of awards of international commercial arbitration seated outside Ukraine (Article 474 and following).

So the gap between how heavily arbitration is used and how little the procedure addressed it — the gap the paper identified in 2010 — has closed. The analytical part, on the nature of interim measures and the limits of a tribunal’s powers, still holds, and that is precisely why it remains worth reading: it explains why the mechanism is built the way it is.

Tsirat G. A. Security Measures in International Commercial Arbitration: Matters of Law and Validity. Part 1. — 2010. — pp. 63–73. Full text in Ukrainian: Part 1 (PDF, 11 pp.). Part 2 is not currently published on this site.