Originally from Navigating Maritime Arbitration: The Experts Speak - Second Edition

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I. INTRODUCTION

Lawyers and their clients enter arbitration with the hope that if they win their case the losing party has the means to satisfy an award for damages. Unfortunately, the ability to secure a potentially favorable arbitration award is not always available to the claimant and an arbitration proceeding may outlast the most stable company. As one commentator has noted, “[u]nwilling debtors have become more creative over time on how to protect their assets” including through “financial engineering.”  Thus, claimants are often left weighing the cost of pursuing their arbitrable claims against the possibility that the losing party will become insolvent and judgment-proof.

Relief, however, is available to maritime claimants in the United States, where federal courts regularly sustain arbitrators’ authority to order pre-award security and other interim remedies. Awards by arbitrators that direct a party to post security in a pending arbitration are part of a continuing trend favoring the power of arbitrators to order interim measures in commercial arbitrations. Often in the form of an interim or partial final award, directives by arbitrators to post security (and other interim measures) are being seen with increasing frequency. Indeed, parties to arbitrations often have resort to security remedies that may be unavailable to litigants in a judicial setting.  

This chapter will examine the availability of pre-award security and other provisional remedies both from the practitioner’s and arbitrator’s perspective, focusing on the sources of the arbitrators’ authority to grant such relief and the factors that arbitrators will take into consideration in granting interim measures.