Interim Injunction.

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下午 06:25, 2007/5/7

Interim Injunction

An injunction is an order either compelling a party to take specified steps (a mandatory injunction) or restraining him from taking specific steps (a prohibitory or negative injunction). In a proceeding before the Court, an interim injunction can be sought before trial or, if necessary even before the issue of proceedings. The main purpose of an injunction is to remedy an injury already suffered or to prevent an injury occurring.

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Injunctions are often needed urgently. An interim injunction may therefore be granted at a special hearing pending the outcome of the main of the main hearing of the case. If decision is given for the applicant/claimant, a perpetual injunction is granted.

An interlocutory injunction is an order to preserve a particular set of circumstances pending full trial of the matters in disputes.

In Preston v. Luck (1884) 27 Ch. D. 497, it stated the object of interim injunction is to keep thing in status quo, so that if at the hearing the plaintiffs obtain a judgment in their favour, the defendant will have been prevented from dealing in the meantime with the property in such a way as to make that judgment ineffectual. In this case, the Court (or the tribunal in the case of arbitrator) will tip the balance on “just and convenience” as well as taking into account of the other guidelines to grant an interim injunction to protect the defendant.

In American Cyanamid Co. v. Ethican Ltd (1975) AC 396, Lord Diplock held “it is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavits as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature consideration. These matters are to be dealt with at the trial.”

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There are many kinds and forms of injunctions: For example:

A mandatory injunction to compel a party to take specified steps;
An negative interim injunction can restrain a part from making use a certain matter in dispute involving “trade secrets”, “confidential information” or “intellectual property” to prevent an injury occurring until the next step of the proceeding;
Anti-suit injunction: it may prove to be a useful remedy where a party has disregarded an arbitration clause and commence foreign proceedings which relate to disputes which do fall within the arbitration clause;
Mareva injunction (ex parte): one of the most powerful interlocutory injunctions which restrain a defendant or a third party from removing from jurisdiction or disposing of or deciding with the assets of the Defendant that will or may be necessary to meet a plaintiff’s pending claim. Its object is to prevent a defendant from removing his assets so as to frustrate satisfaction of the proceeding.
Arrest of vessel (ex parte): effecting the arrest of the respondent’s vessel represents another extremely common method of securing the claims which are being arbitrated.

Before the 1996 Ordinance came into force, the power to grant interim injunctions in connection with an arbitration proceeding was vested with the Court. The power to grant interim injunctions are now found in section 2GB and 2GC.

Power of arbitral tribunal to grant interim injunctions

Section 2GB of HKAO states::

When conducting arbitration proceedings, an arbitral tribunal may make orders or give directions dealing with any of the following matters:

(f) granting interim injunctions or directing other interim measures to be taken

Under ss(1)(f), an arbitral tribunal has power to grant interim injunctions and make ...

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Power of arbitral tribunal to grant interim injunctions

Section 2GB of HKAO states::

When conducting arbitration proceedings, an arbitral tribunal may make orders or give directions dealing with any of the following matters:

(f) granting interim injunctions or directing other interim measures to be taken

Under ss(1)(f), an arbitral tribunal has power to grant interim injunctions and make direction compelling a party to the arbitration to take specific steps or restraining him from taking specific steps.

With an interim injunction is granted by an arbitral tribunal, there will be no problem of enforceability as the court has the power under s. 2GG to assist an arbitral tribunal and on application of the parties or the tribunal itself, the court could make an order which may effectively convert an order of the tribunal into an order of the court

Power of court to grant interim injunctions

Section 2GC of the HKAO states:

The Court or a judge of the Court may, in relation to a particular arbitration proceeding, do any of the following –

(5) the powers conferred by this section can be exercised irrespective of whether or not similar powers may be exercised under section 2GB in relation to the same dispute.

(6) The Court or a judge of the court may decline to make an order under this section in relation to a matter referred to in subsection (1) on the ground that-

the matter is currently the subject of arbitration proceedings; and
the Court or judge considers it more appropriate for the matter to be dealt with by the relevant arbitral tribunal.

Working relationship between s.2GB and s. 2GC in the concern of interim injunction

Both the arbitral tribunal and the court have the power to grant interim injunctions. So far as this power is concerned, it follows the general philosophy of the Model law that the parties should be held to the arbitration agreement and that the authority of the arbitral tribunal is supreme (subject to party autonomy and to the limited residual powers of the courts). It also reflect the particular philosophy set out in Sch 5 art 9 of the HKAO that it is not inconsistent with the arbitration agreement for a party to seek an order from the High Court under this provision.

In accordance with the ruling in The Lady Muriel (1995), it is appropriate in most cases for a party first to apply interim injunction to the tribunal (such as: interim injunction to a ship owner to sell the vessel until the case is decided; or restrain a party making use certain trade secrets/confidential information/intellectual property to prevent an injury occurring until the next step of the proceeding etc) , there will clearly be a small number of cases where it is more appropriate for a party to seek the order from the court under s. 2GC(1)(c) than from the tribunal under s 2GB(1)(f). These include:

Where, arbitration proceedings having been commenced within the meaning of s.31 (domestic cases) or Sch 5 art 21 thereto (international cases), but no tribunal has yet been appointed;
Where an order must be direct so as to bind a third party as well as a party to the arbitration. For instance: Problem arises when a arbitral tribunal is asked to name an order which is intended to bind a third party. For example, a Mareva injunction which restrains a party from disposing of his assets in Hong Kong and due notice is given to a bank with whom an account of that party is held. If the award has been enforced under s. 2GG, the bank will be liable for aiding and abetting and contempt of court by that party if, having notice of the terms of the injunctions, he fails to freeze the party’s account but allow the party to dispose of the money in the account.

Arbitration is consensual and founded on the agreement of the parties. The mandate of an arbitral tribunal is predominantly contractual and the arbitration agreement establishes a legal nexus between the arbitral tribunal and the parties to the arbitration agreement. It follows, at least in principle, that the powers of tribunals are exercisable only in relation to the parties to the reference and equally, it is only the parties to the reference who are under a contractual obligation to obey the orders of the tribunal. The mandate cannot confer powers exercisable against third parties or the documents and property of third parties. In addition it is also unambiguous that an arbitrator cannot commit or otherwise punish a party, whether third party or not, for contempt.

Whether the arbitral tribunal should entertain an injunction without notice (i.e. ex parte)

(answer : see below)

Under s 2GC(6), it is for the court to decide whether the tribunal is the more appropriate forum in which to seek the order.

Should the arbitrator entertain injunction without notice?

There are queries like:

In 2GB(1)(f), the wordings do not limit the types of “interim injunctions” or “interim measures” that can be ordered by the tribunal. But the General responsibilities of arbitral tribunal under 2GA(1)(a) specified that the tribunal is required “... given then a reasonable opportunity to present their cases and to deal with the cases of their opponents”. In other words, the tribunal entertain injunction without notice will be a breach of the natural justice. Should the general responsibilities is the principle and spirits, it should override the other provisions in the Ordinance should there is any possible conflict;
In case to hear ex parte application for an interim injunction or interim award. What if the tribunal later found out the applicant did not made full and frank disclosure? The Tribunal is unlike the court, what sanction they can take against the applicant or his lawyers should full and frank disclosure was not observed by them? Whether the tribunal has the power to collect the undertaking of damages and/or in what form for this undertaking of damages are also problems.
Should the interim injunction is a procedural order, the tribunal have “liberty to apply” to amend it. But what if the an “interim award’, how can the tribunal change their mind?

Base on the above reasons, I personally do not consider the tribunal should deal with any ex parte injunctions.

In the English Arbitration Act, position is the same as in Hong Kong, the wordings do not limit the types of “interim injunctions” that can be ordered by the tribunal. But some leading books have emphasized on the principle of natural justice and considered the tribunal should not deal with any ex parte injunction.

In the book “The Arbitration Act 1996 – A commentary 2nd edition” by Harris.Planterose/Tevcks, it stated “It is to be questioned whether a tribunal may act in all respects the same way as a court can when it issues an injunction, e.g. ex parte; and whether it would have all the court’s ancillary powers , e.g. to make peremptory order equivalent to interim injunction, and to require undertaking in damages. Given the wording of the subsection and the fact that it appears in the part of the Act dealing with the award, we think these questions would be answered in the negative”.

In the book “Merkin 1996”, it said “The arbitrators themselves clearly do not possess any jurisdiction to grant a Mareva injunction and appoint a receiver, and so resort to the court will always be necessary.”

Common notes regarding the relation of interim measures between s2GB and s 2GC

Section 2GC provides for the exercise of a number of power by the High Court concurrently with those of the arbitral tribunal - “security of an amount in dispute” (s. 2GC(1)(a), “matters in relation to property” (s. 2GC(1)(b), “grant an interim injunction or direct interim measures” (s. 2GC(1)(c). The powers of the tribunal set out in s2GB “security of money in dispute” (s. 2GB(1)(b)), “matters in relation to property (s. 2GB(1)(e)) and “grant an interim injunction or directing other interim measures” (s. 2GB(1)(f)) are powers that are exercisable concurrently by the High Court under s 2GC(1)(a)-(c) respectively. The High Court cannot act in respect of those powers vested exclusively in the tribunal by virtue of s 2GB(1)(a – security for costs), (c – directing the discovery of documents or the delivery of interrogatories) and (d - directing evidence to be given by affidavit).

So far as those powers that are exercisable concurrently are concerned, subsection in s.2GC follows the general philosophy of the Model law that the parties should be held to the arbitration agreement and that the authority of the arbitral tribunal is supreme (subject to party autonomy and to the limited residual powers of the courts). It also reflect the particular philosophy set out in Sch 5 art 9 of the HKAO that it is not inconsistent with the arbitration agreement for a party to seek an order from the High Court under this provision.

Although it is appropriate in most cases for a party to apply initially to the tribunal for the exercise of one of this concurrent powers, there will clearly be a small number of cases where it is more appropriate for a party to seek the order from the court under the subsection of 2GC than from the tribunal under s 2GB. These include:

Where, arbitration proceedings having been commenced within the meaning of s.31 (domestic cases) or Sch 5 art 21 thereto (international cases), but no tribunal has yet been appointed;
where an order must be direct so as to bind a third party as well as a party to the arbitration. For instance:

It is for the court to decide whether the tribunal is the more appropriate forum in which to seek the order under s 2GC(6). Together with the ruling in The Lady Muriel (1995) and s 2GC(6), it underpins the primacy of the arbitral tribunal’s authority by making clear that in most cases the tribunal will be the appropriate first ‘port of call’ for a party seeking an order with matters under s2GC(1). In the majority of cases, however, the court will be unlikely to exercise its discretion in favour of making an order in lieu of the tribunal where a tribunal has been appointed and third parties are not involved.

The ss 2GB and 2GC seek to achieve three objectives:

to vest a greater number of powers in the arbitral tribunal and, as a consequence, to reduce the need for assistance by the High Court to the arbitration process;
in relating to international arbitrations conducted under schedule 5 of the Arbitration Ordinance (i.e. the UNCITRAL Model Law), s 2GB is to declare the interim measures of protection that the arbitral tribunal may order (UNCITRAL Model Law left this matter open in Article 17), and
to fill gaps in the Model Law as to the mechanics of receiving evidence. The role of High Court is restricted to:

making order in lieu of the tribunal in exceptional cases and only in respect of those powers which may be exercised collaterally by the tribunal and the court (s 2GC(1));
exercising those powers which are normally reserved to the court, such as ordering of subpoenas; and
enforcing any order of the tribunal, whether the power exercised by the tribunal is vested in it exclusively or shared with the High Court (s 2GG). Where, however, it is inappropriate for the tribunal to make an such an order or direction (such as an order under s 2GB(1)(b) ‘requiring money in dispute to be secured’ and s 2GB(e) ‘in relation to relevant property and s 2GB(f) ‘granting interim injunctions or other interim measures’ which is required to bind a third party), application should be made direct to the High Court (s 2GC(1)(a)-(c)).

The Court powers exercisable in support of arbitral proceeding in s. 44 of the English Arbitration Act are general similar to s.2GC of the Hong Kong Arbitration Ordinance. In practice, s.44(3) & 44(4) of the English Arbitration Act are also in line of the rulings in Lady Muriel..