ICC Rules: 1988

Claimant: Syrian company

Defendant: German company

The parties entered into an agreement relating to Defendant's offer to a Syrian industrial organization that had invited bids for a contract. Under their agreement, Claimant was entitled to the prompt payment of 'monetary dues'. Defendant won the contract in question. A dispute arose upon Defendant's claim that the agreement between the parties was null and void (on grounds of absence of real consideration, fraudulent misrepresentation and violation of Syrian public policy) and its refusal to pay the 'monetary dues'. Claimant submitted a Request for Arbitration. A first partial award was issued in which the Arbitral Tribunal ruled that German law was applicable to the dispute, a ruling that was later challenged by Defendant, which argued for the application of Syrian law. The Arbitral Tribunal issued a second partial award dealing with a request for a provisional measure made by Claimant, a request for a conservatory measure made by Defendant and a second counterclaim submitted by Defendant. The extracts below relate to the two requests for provisional/conservatory measures.

With respect to Claimant's request for a provisional measure:

'The Claimant: The Claimant requests the Tribunal to order the provision by the Defendant of an irrevocable letter of credit in favour of Claimant for the full amount claimed plus the arbitration cost up to the date of his request . . .

This letter of credit would be payable to the Claimant by a sight draft accompanied by a copy of the arbitral award issued in favour of the Claimant and a letter from the ICC Secretariat attesting that said award is final and binding on the parties. According to Claimant, this request is justified by the fact that his right is based on a written agreement undisputed by the Defendant and that the Defendant's financial situation is flimsy since its net worth does not cover one third of the Claimant's debt. . . . Its sole source of revenue is the Syrian contract with [the Syrian industrial organization], and once the profits realized from this contract are distributed to Defendant's two shareholders, there will be no assets susceptible of guaranteeing the enforcement of the arbitral award. The 10% of that contract's price payable to Defendant in kind would be very difficult to trace as it would relate to small and pre-sold shipments. The Defendant has persistently used dilatory tactics during the present arbitration in order to render an award in favour of Claimant useless. The provisional measure sought by Claimant would guarantee the payment of Claimant's rights while it would not be prejudicial to Defendant even if Defendant is compelled to provide a 100% financial cover for the issuance of the letter of credit.

From the legal point of view, the Tribunal has jurisdiction to order the provisional measure sought by Claimant both under the I.C.C. Rules (Articles 8(5) and (11)) and the Swiss law (Article 183 of the Federal Code on Private International Law (CPIL)), according to which the arbitral tribunal may, at the request of a party, order provisional or protective measures. Moreover, the Tribunal's order would be fully enforceable at law both in Switzerland and Germany.

The Defendant: According to the Defendant, Claimant's request is non-receivable in the first place because of the lack of urgency, the pre-condition for any provisional measure. It is not true that Defendant is to leave Syria in August 1995 since the provisional handing over of the Project will take place at the end of 1995 and Defendant is to stay there for two more years until the final completion of the Project. Even if Defendant is to get out of Syria before the end of 1995, that would not create any urgency since 10% of the contract price is to be paid to the Defendant in kind and covers largely any eventual entitlement of Claimant. Moreover, and contrary to the Claimant's allegation, Defendant would not be able to distribute profits to its shareholders before deducting the amount which it might be condemned to pay to Claimant pursuant to an award in Claimant's favour. Secondly, from the legal point of view, the provisional measure requested by the Claimant goes beyond the Tribunal's jurisdiction since it involves a third party, the bank which would have to issue the letter of credit. It would also amount to a blockage of Defendant's money outside the scope of the contract subject-matter of the arbitration. Article 183.1 of the Swiss Law on Private International Law (CPIL) permits the arbitrators to order provisional measures. However, according to the Tribunal Fédéral's decisions, any provisional measures involving financial obligations or amounting to provisional enforcement are reserved to Swiss courts.

The measure requested by the Claimant is unknown in any law relevant to the dispute, be it the Swiss, the German or the Syrian law. Its legal effect goes even beyond that of a final award since the requested letter of credit would be payable to the Claimant despite any challenge of the award by the Defendant.

Finally, if the provisional measure sought by Claimant is granted, it can be enforced neither in Switzerland, whose law reserves such measure to State courts, nor in Germany whose law does not permit the arbitrators to grant provisional measures. Consequently the Claimant's request should be non-receivable for lack of legal legitimate interest (intérêt).

The Tribunal:

A. From a legal principle viewpoint, the Tribunal finds that it is entitled to order provisional or interim measures if the conditions required for the grant of such measures are fulfilled. Not only does Article 8(5) of the I.C.C. Rules establish, beyond doubt, the Tribunal's right to order such measures but it also confines the grant of such measures, by State courts to exceptional circumstances once the file is transferred to the arbitrators. "The implication is that, once the arbitrators have been seized of the file, applications for interim or conservatory measures should normally be addressed to them." (Eric Schwartz, "The Practices and Experience of the ICC Court", in Conservatory and Provisional Measures in International Arbitration, 1993, p. 54 & 55.) I.C.C. arbitrators' right to order provisional or interim measures cannot be seriously contested. A recent unpublished award has even ordered that provisional payment be made by the defendant to the [c]laimant (Schwartz, op. cit., p. 60).

On the other hand, the law of the seat of this arbitration (Swiss law) permits expressly the arbitrators, unless the parties have agreed otherwise, to enter provisional or conservatory orders at the request of one party, and the arbitrators may request the assistance of the judge having jurisdiction for the enforcement of such orders (Article 183 CPIL).

B. This being established, the Tribunal, after having examined all the facts of the case, is not convinced of the existence of urgency, the basic requirement for granting a provisional measure in the Claimant's favour. Apart from the fact that the grant of the measure requested by Claimant implies a pre-judgment of the dispute, the Tribunal is of the opinion that the Claimant would not incur any grave and irreparable harm if not granted the sought provisional measure before the Final Award expected to issued within 1995.

The fact that the Defendant is a company with a relatively small capital . . . and small assets, and that its balance sheet for the year . . . showed a deficit should normally have been investigated by the Claimant when he signed the "Agreement" dated . . . 1992. Likewise, the Claimant should have known that the Defendant's balance sheet for the year . . . showed a higher deficit. . . . The Claimant filed his request for provisional measure almost one year after the signature of the Terms of Reference, in the absence of any sudden or unforeseeable events justifying the grant of such measure.

Moreover, the Claimant admits that the Defendant is currently making profits. Even if all payments by [the Syrian industrial organization] to the Defendant are made before the end of 1995, still the 10% of the Contract price payable in kind would be due to the Defendant thereafter and would largely cover any amounts eventually awarded to Claimant.

For these reasons, and without having to examine the nature or the enforceability of the provisional relief sought by Claimant, the Tribunal is of the opinion that the grant of a provisional relief, of whatever kind, to the Claimant is not justified.

Therefore, the tribunal rules that the provisional measure requested by the Claimant is rejected.'

With respect to Defendant's request for a conservatory measure:

'The Defendant: The Defendant has given to the Claimant a letter for a commission of 4% of the Contract's price. This letter is undated and the name of its beneficiary is left in blank. Claimant admits that this letter has been given to him as a sign of good faith pending the signature of a formal agreement between the parties. Since Claimant has declared in the hearing that he is not claiming any commission and that he bases his claim in the arbitration on the Agreement dated . . . 1992, the Claimant should be condemned to restitute the said letter to the Defendant in order to avoid its misuse by Claimant in the case his claim in the arbitration is rejected. Pending the Tribunal's decision on the restitution of the said letter to Defendant, the Tribunal is requested urgently to order the deposit of the letter with the Tribunal as an urgent conservatory measure.

This request was made during the hearing on . . . 1995. The Defendant maintains his request despite the declaration by the Claimant [on the following day] that the said letter was no longer in his possession.

The restitution of the said letter to Defendant is a necessary consequence of the expected Final Award, whatever such final award may be, since the said letter has been replaced by the Agreement signed on . . . 1992. Such restitution would ensure the proper enforcement of the final award (Article 26 of I.C.C. Rules) and falls, therefore, within the scope of the Terms of Reference. The Tribunal is fully entitled, under Article 183 of the CPIL, to order such physical restitution of the said letter and may, in case of non-compliance by the Claimant, request the assistance of the Tribunal of Zurich having jurisdiction, in accordance with Article 183(2) of the CPIL.

The Claimant: The Defendant's request should be rejected for lack of jurisdiction as it does not, in any way, [form] part of the Terms of Reference. The only agreement subject to the present arbitration is the Agreement signed on . . . 1992, including the arbitration clause.

Moreover, there is no urgency to justify the requested measure. Had the Defendant considered that the said letter belongs to him, he would not have signed the Agreement without requiring its restitution to him. He would have also exerted any possible effort to get it back before . . . 1995 and would have, at least, mentioned the existence of such documents during the arbitration proceedings. The Defendant moved only during the last hearing when the authenticity of the document has been acknowledged. Three years have elapsed since Defendant issued the document without any claim whatsoever, and that proves the absence of any urgency in this respect.

The Tribunal:

The Tribunal is of the opinion that it cannot grant the conservatory measure requested by the Defendant for the following reasons:

A. The fact that the Claimant relies only on the agreement dated . . . 1992 and not on the undated letter promising a 4% commission puts this latter document outside the scope of this arbitration. The fact that the Claimant has attached this document as an exhibit to his submission dated . . . 1995 cannot, by itself, bring it within the scope of the arbitration as long as the Claimant does not rely on it for the purposes of his claim in the arbitration.

If it is true that the said document might be used improperly by the Claimant, such possibility cannot justify the grant of a provisional measure. The jurisdiction of this Tribunal cannot extend to the prevention of a possible misuse by a party of a document which remains outside the scope of the arbitration. Such prevention may be achieved only through State courts having jurisdiction.

Art. 26 of the I.C.C. Rules cannot, either, justify the grant of the requested provisional measure. If the arbitrators are required under this provision "to make every effort to make sure that the award is enforceable at law", such effort relates to the quality of the award itself and to its full procedural and substantive worthiness which guarantees its enforceability. It cannot encompass preventive remedies against endless external factors such as the possibility of misusing any other documents not [forming] part of the arbitration.

B. The essence of provisional measures, the urgency alleged by the Defendant, is clearly contradicted by the fact that Defendant has not moved towards the restitution of the said document for nearly three years while knowing of its existence in Claimant's hands.

For the above reasons, the Tribunal rules that the conservatory measure requested by the Defendant is rejected.'