Interim and Conservatory Measures in Arbitration

Interim and conservatory measures in arbitration are among the most important legal tools for ensuring that a final arbitral award does not become merely “ink on paper.” In the complex world of business, particularly in international commercial disputes, one party may attempt to dissipate its assets, destroy evidence, or alter the existing situation in a manner that causes serious harm to the other party before the issuance of the award terminating the dispute.

This is where the critical importance of such measures emerges, as they serve as a protective shield for commercial and financial interests.

For Egyptian companies, foreign investors, and multinational companies operating in Egypt or contracting with Egyptian entities, a precise understanding of the mechanisms for obtaining interim measures, whether from the arbitral tribunal or the Egyptian courts, represents a critical step in dispute management.

This article aims to examine the legal and practical aspects of these measures and explain how they may be strategically employed to protect your company’s assets as an essential and complementary part of commercial arbitration proceedings.

What Are Interim and Conservatory Measures in Arbitration?

Interim and conservatory measures (Provisional and Conservatory Measures) are urgent and temporary decisions and orders issued before or during arbitration proceedings for the purpose of protecting the rights of one of the parties until the dispute is finally resolved.

These measures do not determine the merits of the underlying right; rather, they are limited to addressing situations of necessity or urgency.

Principal Forms of Conservatory Measures in Commercial Disputes

Precautionary Attachment of Funds or Assets: To prevent the opposing party from transferring or concealing its assets.
Suspension of the Enforcement of Letters of Guarantee: In disputes arising from construction and supply contracts.
Prohibition on Disposition: In relation to certain disputed assets, such as company shares or real estate.
Preservation of Evidence and Recording the Existing Condition: Appointing an expert to inventory damaged goods or record the condition of a suspended construction project before its features are altered.
Orders for Continued Performance: Requiring a party to continue supplying essential goods to ensure that the supply chain is not interrupted.

Egyptian Legal Framework Governing Conservatory Measures

Egyptian Arbitration Law No. 27 of 1994 adopts a balanced approach consistent with international standards, such as the UNCITRAL Model Law, by recognizing “dual jurisdiction” (Dual Jurisdiction) in relation to the issuance of interim measures.

1. Authority of the National Courts (Article 14)

Article (14) of the Egyptian Arbitration Law provides that the competent court may order interim or conservatory measures at the request of either party, whether before the commencement of arbitration proceedings or during their course.

Recourse to the courts in such circumstances does not conflict with the arbitration agreement and is not considered a waiver thereof.

Important Note: Recourse is generally made to the Judge of Urgent Matters or the President of the court originally competent to hear the dispute in order to obtain ex parte orders in cases of extreme urgency.

2. Authority of the Arbitral Tribunal (Article 24)

Article (24) grants the parties to the arbitration the right to agree to confer upon the arbitral tribunal the authority to order such interim or conservatory measures as may be required by the nature of the dispute.

The tribunal may also require the party obtaining such a measure to provide appropriate financial security, by way of a guarantee, to cover any damage that may be suffered by the other party if it is subsequently established that the request for the measure was unjustified.

When and How Are These Measures Requested? Conditions and Procedures

For an application for an interim or conservatory measure to succeed, a number of strict legal and practical conditions must be satisfied.

Urgency (Urgency): It must be demonstrated that waiting until the final arbitral award is issued would result in irreparable harm.
Imminent Threat (Imminent Threat): There must be a genuine threat to the rights of the applicant, such as attempts by the opposing party to liquidate its business in Egypt.
No Determination of the Merits (Prima Facie Case): The measure must not determine the merits of the dispute and must instead be limited to temporary protection, while the claimant demonstrates a serious prima facie basis for its right.

Strategic Choice: Courts or the Arbitral Tribunal?

Recourse to the Egyptian Courts: This is preferable where the measure is required before the constitution of the arbitral tribunal, which may take several months, or where the measure requires coercive enforcement against third parties that are not signatories to the arbitration agreement, such as banks in cases involving attachment of accounts.
Recourse to the Arbitral Tribunal: This is preferable where the measure requires a detailed technical understanding of the dispute, such as in complex construction disputes, and is directed specifically at the other party for the performance of a particular contractual obligation.

Commercial and Operational Implications for Companies

Interim and conservatory measures in arbitration go beyond being purely legal procedures; they also represent advanced commercial risk-management tools.

Supply Chain Stability: For import and export companies, an interim measure may secure the temporary release of goods or the continuation of supply, thereby preventing interruption of operations (Business Interruption).
Protection of Cash Flow (Cash Flow): Preventing the abusive calling of letters of guarantee protects contractors and companies from sudden liquidity crises.
Strengthening the Negotiating Position: In many cases, obtaining a precautionary attachment affecting the opposing party’s assets may encourage it to reach an amicable settlement promptly in order to avoid the freezing of its business operations.

Special Considerations for International Clients and Foreign Companies

For multinational companies and foreign law firms seeking local legal counsel (Local Counsel) in Egypt, there are specific challenges that should be considered when dealing with interim and conservatory measures.

Enforcement of Orders Issued by Foreign Arbitral Tribunals: If an international arbitral tribunal, for example seated in London or Paris, issues an order for a conservatory measure against a company based in Egypt, that order does not automatically have coercive enforcement force within Egyptian territory. The foreign company will require an Egyptian lawyer to obtain a corresponding order or an enforcement order from the Egyptian courts in support of the arbitral tribunal’s decision.
Dealing with Banks and Government Authorities: Imposing precautionary attachments and notifying administrative authorities in Egypt, such as the Customs Authority or the Investment Authority, requires full knowledge of the Egyptian Code of Civil and Commercial Procedure and the practical practices of those authorities.
Drafting the Arbitration Clause: Foreign companies should take care when drafting their contracts not to include provisions that deprive them of the right to resort to national courts for interim measures.

Common Mistakes in Dealing with Conservatory Measures

Delay in Taking Action: Hesitation in seeking a conservatory measure gives the opposing party sufficient time to transfer its assets or alter the corporate structure.
Insufficient Evidence: Submitting a vague application to the court or arbitral tribunal without documents establishing “urgency” and “serious harm” will result in rejection of the application.
Failure to Provide Security: In many cases, the arbitral tribunal or court makes issuance of the order conditional upon the provision of financial security. Failure to be prepared to provide such security delays the proceedings.
Exceeding the Scope of the Measure: Seeking a measure that determines the merits of the right, such as requiring the opposing party to pay the full disputed amount as an interim measure, is inconsistent with the nature of such measures.

Practical Best Practices for Protecting Your Company’s Assets

Proactive Action: As soon as a dispute arises and before sending the notice of arbitration, assess the risk of asset dissipation with your legal team and plan to obtain conservatory orders without prior warning.
Precisely Identifying Target Assets: Conduct a rapid due diligence review (Due Diligence) to identify the banks used by the opposing party and the locations of its goods, thereby facilitating the imposition of attachments.
Coordination Between Courts and Arbitration: Use the national courts for rapid measures, such as attachment, and the arbitral tribunal for complex technical measures connected with the project.

When Is the Intervention of a Specialized Lawyer or Local Legal Counsel (Local Counsel) in Egypt Required?

Professional legal intervention by an Egyptian law firm with international experience becomes indispensable in certain circumstances, particularly where speed or enforceability is a decisive factor.

Where orders issued by a foreign arbitral tribunal must be converted into orders capable of coercive enforcement through the Egyptian courts.
Where there is an imminent risk of asset dissipation and an ex parte order must be obtained within 24 to 48 hours.
For foreign companies requiring guidance on parallel judicial proceedings permitted under the Egyptian Arbitration Law without prejudicing the arbitration agreement.

How Can Specialized Legal Support Assist?

At El Rouby Law Firm, we provide a comprehensive and institutional approach to complex arbitration disputes and support our domestic and international clients through a range of specialized legal services.

Regulatory Compliance and Risk Management: Assessing the risks arising from potential disputes and identifying the most appropriate conservatory measures to protect cash flows and assets before the dispute escalates.
Contract Drafting and Dispute Prevention: Drafting precise arbitration clauses that preserve the client’s right to request interim measures from competent courts and arbitral tribunals with full flexibility.
Negotiation, Settlement, Litigation and Arbitration: Managing legitimate pressure strategies through precautionary attachments to encourage opposing parties to enter negotiations and reach prompt settlements.
Representation Before Egyptian Authorities: As trusted Local Counsel, we represent foreign law firms and multinational companies before the Judge of Urgent Matters and Egyptian courts to ensure the effective implementation of interim measures accurately and in accordance with the Egyptian Code of Civil and Commercial Procedure.

Conclusion

The success of any commercial arbitration is measured not only by obtaining an award in your favour, but also by your ability to enforce that award and recover your rights. This is where interim and conservatory measures in arbitration play a pivotal role in preserving assets and preventing opposing parties from manipulating them.

Whether you are seeking to protect your rights before arbitration begins or during the proceedings, making the correct choice between recourse to the courts and recourse to the arbitral tribunal requires a well-structured legal strategy.

Frequently Asked Questions

Does Resorting to the Courts for a Conservatory Measure Invalidate the Arbitration Agreement?

No. Pursuant to Article 14 of the Egyptian Arbitration Law, requesting interim or conservatory measures from the competent court does not conflict with the arbitration agreement and does not constitute a waiver thereof.

Who Has the Authority to Issue Interim Measures in Arbitration?

Both the national courts, such as the Judge of Urgent Matters, and the constituted arbitral tribunal have the authority to issue such measures. Each route has its own advantages depending on the nature of the dispute and the degree of urgency.

Can an Arbitral Tribunal Compel a Third Party, Such as a Bank, to Implement a Conservatory Order?

No. The arbitral tribunal does not have authority to compel parties that are not signatories to the arbitration agreement. In such circumstances, recourse must be made to the Egyptian courts to obtain a precautionary attachment order with coercive force.

What Is Security in Conservatory Measures?

It is a financial guarantee that the arbitral tribunal or court may require from the party requesting the measure to cover any damage that may be suffered by the other party if it is subsequently established that the request for the measure was unjustified.

Are Decisions on Interim Measures Issued by Foreign Arbitral Tribunals Automatically Enforced in Egypt?

No. Such decisions require intervention by the Egyptian courts and the issuance of local orders based on them in order to acquire coercive enforcement force within Egypt. This is where the importance of engaging a local lawyer (Local Counsel) becomes particularly apparent.

References

Egyptian Arbitration Law in Civil and Commercial Matters: Law No. 27 of 1994, specifically Articles 14 and 24.
Egyptian Code of Civil and Commercial Procedure: Law No. 13 of 1968, as amended, with respect to precautionary attachment procedures and ex parte orders.
Cairo Regional Centre for International Commercial Arbitration (CRCICA): Arbitration Rules and practices relating to interim measures.