‘I refer to the Claimant’s application ... for the granting of interim and/or conservatory measures against the Respondents on the basis of Article 23 of the ICC Rules and Article 17 of the International Commercial Arbitration Law, 1987 (No. 101 of 1987) of Cyprus.

I have given the Claimant’s application, and the submissions served in that regard by both parties, careful consideration, and formed a provisional view that it would not be appropriate to grant the relief sought by the Claimant at the present stage as interim and/or conservatory measures.

As some of the reasoning which has caused me to reach this provisional view has not been articulated or addressed in the parties’ submissions, I have decided not to dismiss the application outright at this stage, but to advise the parties of my thinking in this regard, and to give the Claimant the opportunity of making further submissions to address these matters, should he wish to do so. In such event, the Claimant is requested to serve his further submissions which address the points set out below [within four days]. Should the Claimant serve further submissions as aforesaid, the Respondents may respond thereto [within another four days].

I emphasize that the thinking set out below is entirely provisional, and will be reconsidered and, if appropriate, modified in the light of any further submissions received.

My provisional conclusions are the following:

1. In terms of the Amended Statement of Claim, the Claimant seeks the following relief arising from the alleged illegal dilution of the shareholding of [Company X] in its ... subsidiary ...

(1) An Order that the First Respondent purchase the Claimant’s shares in [Company X] at a fair value which the shares would have had if the dilution had not taken place ...

(2) Alternatively, an Order that the Respondents ... pay damages to the Claimant of [equivalent amount] in view of the aforesaid dilution, loss of control over the information and know-how provided by the Claimant, loss of business and potential earnings of the Company, and breach of the Founders’ Agreement.

(3) Further alternatively, an Order that the First Respondent cooperate with the Claimant in doing all necessary acts and things and/or taking all necessary steps so that the resolution for the increase of the share capital of [the subsidiary] and/or all consequential directors and/or company resolutions of that company whereby [Company X] was diluted from 67% shareholding to 22% shareholding be cancelled and/or revoked so that [Company X] be restored to its 67% shareholding which existed before the dilution and the commencement of this arbitration.

2. In his application for interim and/or conservatory measures, the Claimant seeks the following Orders under Article 23 of the ICC Rules and Article 17 of the International Commercial Arbitration Law, 1987 (No. 101 of 1987) of Cyprus:

(1) Interim Order A, which is in identical terms to the material part of the second alternative Order sought in the Amended Statement of Claim, which is set out ... above.

(2) Interim Order B to the effect that the First Respondent be prohibited from doing any acts and things and/or taking any steps for the further dilution of [Company X]’s shareholding in [the subsidiary].

(3) Conservatory Order C to the effect that the First Respondent cooperate with the Claimant in doing all necessary acts and things and/or taking all necessary steps to preserve the status quo of [Company X] before the dilution pending the resolution of the dispute.

(4) Interim Order D: any further interim and/or conservatory measures that the Arbitrator deems necessary.

3. In terms of Article 23(1) of the ICC Rules an Arbitral Tribunal has the power to order “any interim or conservatory measure that it deems appropriate”. Article 17 of the International Commercial Arbitration Law, 1987 (No. 101 of 1987) of Cyprus is in narrower terms, and empowers an Arbitral Tribunal to “take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute”.

4. As to the criteria to be applied in applications under Article 23(1) of the ICC Rules, I consider that these are correctly set out in Lew, Mistelis and Kroll, Comparative International Commercial Arbitration, para. 23-61:

International arbitration practice suggests that there are at least two widely agreed substantive requirements for the granting of interim relief by arbitral tribunals: no pre-judgment of the case, and the threat of irreparable or substantial harm which cannot be compensated for by damages.

5. The first requirement, i.e. no pre-judgment of the merits of the case, was articulated further by Dr Lew QC in his “Commentary on Interim and Conservatory Measures in ICC Arbitration Cases”, ICC Bulletin 11 (2000) 23 at para. 30:

In dealing with a request for an interim measure, an arbitral tribunal must refrain from pre-judging the merits of the case. By way of illustration, an arbitral tribunal will generally refuse to grant such a measure, where the request essentially covers what it is asked to resolve in the substantive arbitration. The underlying principle is clear: if the request for relief is made on both an interim and a permanent basis, only the latter will, in principle, be granted. A tribunal will always wish to leave the parties the opportunity for their full cases to be heard.

6. The request for Interim Relief A essentially covers various issues which I am also asked to resolve in the main arbitration. The terms of that relief are identical to the second alternative Order sought in the Amended Statement of Claim (para. 1(3) above). The basis on which Interim Relief A is sought is a central issue in the main arbitration, namely whether the cause of the dilution was the unlawful conduct of the First Respondent in that it acted in breach of his duties under the Founders’ Agreement, and colluded with [others] to deprive the Claimant of his rights. It follows that if Interim Relief A is granted on the basis on which it is sought the merits of the case will inevitably be pre-judged.

7. As to the second requirement, i.e. the threat of irreparable or substantial harm which cannot be compensated for by damages, the relief referred to in para. 1(3) above and in Interim Order A is sought as an alternative to a claim for damages, which is itself sought as an alternative to a claim that the First Respondent purchase the Claimant’s shareholding in [Company X] at a price of ... which has been calculated having regard, inter alia, to the dilution. Given the manner in which the Claimant has formulated its claim, it is difficult to see on what basis the Claimant contends that he will not have an adequate alternative remedy if Interim Order A is not granted.

8. It should also be pointed out that the basic premise of the relief referred to in para. 1(3) and Interim Order A is that [Company X] be restored to its 67% shareholding “which existed before the dilution and the commencement of this arbitration”. The latter part of this averment is factually incorrect. The dilution appears to have been effected by a general meeting of [the subsidiary]’s shareholders ..., and to have taken effect [subsequently] when it was registered with the [local] court. The Request for Arbitration herein was received by the ICC Court ... after the dilution had taken effect. The relief sought in Interim Order A, if granted, will therefore not result in the preservation of the status quo at the commencement of the arbitration as the dilution had already taken effect.

9. Interim Order A, if granted, will in effect compel the First Respondent to cooperate with the Claimant in doing all necessary acts and things and/or taking all necessary steps so that the resolution for the increase of the share capital of [the subsidiary] will be reversed. However, the Claimant has not shown that under [local] law the resolution [adopted at the subsidiary’s shareholders’ meeting] is capable of reversal, and has not (in his Reply) disputed the Respondent’s contention that as advised by [local] legal counsel to the Respondents, under [local] law it is not possible to reverse the resolution and undo the capital increase. On these facts, it would appear that an order in the mandatory terms sought under Interim Order A may not be capable of compliance and may, in effect, be a brutum fulmen.

10. For these reasons, it is my provisional view that Interim Order A should not be granted as interim or conservatory relief at this stage, and that the issues raised by the claim to this relief should stand over to the main substantive hearing, where they will, if necessary, be dealt with in the context referred to in paragraph 1 above.

11. I am also of the provisional view that Interim/Conservatory Orders B-D should not be granted and should be held over for the time being, as there is no evidence of an immediate threat of a further capital dilution which may require this protection. If such a threat does materialize between now and the issue of the main Award, it will be open to the Claimant to revive his claim to such interim relief at short notice.

As I have indicated above, these views are entirely provisional, and will be reconsidered and, if appropriate, modified if further submissions are received from the parties as directed.

Finally, I would request both the Claimant and the First Respondent to give careful consideration to the following observations which I trust will be helpful to them.

The Respondents have indicated (Response to the Application ...) that if the Claimant can show (e.g. by means of a legal opinion from a [local] lawyer) that the dilution can be successfully challenged, the Respondents are more than willing to cooperate with the Claimant to pursue this, as they also have an interest in getting back the original percentage of shares in [the subsidiary]. While the Claimant has not produced an opinion from a [local] lawyer showing that the dilution can be successfully challenged, I consider that he has raised serious issues as to the validity of resolution passed by [the subsidiary]’s shareholders ... and in particular (a) whether [an earlier] meeting ... did in fact lack a quorum, and thereby confer authority for the reconvened meeting ... and (b) whether the allocation of the new shares to [another company] without first offering [Company X] its prorata share of such new shares amounted to a breach of [Company X]’s pre-emptive rights under ... the ... Founders’ Agreement.

Irrespective of whether the cause of the dilution was the conduct of the Claimant or of the First Respondent (which is obviously a central issue between the parties in the main proceedings), and despite the general impasse in their relationship which has led to this arbitration, it is in my view in the interests of both the Claimant and the First Respondent to cooperate with each other in order to obtain legal advice on the rights of [Company X] under [local] law as soon as possible, and in particular (a) whether it is possible to reverse the dilution, or alternatively (b) to claim damages for breach of the pre­emptive provisions of the shareholders’ agreement relating to [the subsidiary]. It appears to me the Claimant and the First Respondent ought to give serious and urgent consideration whether, as directors of [Company X], they do not owe it a fiduciary duty to cooperate in order to protect its interests in this manner; and whether they ought not in any event to do so as shareholders in [Company X] in discharge of their duty to mitigate the loss which each of them alleges was caused to it by the other’s conduct in connection with the dilution.’