Author

Mr Raúl Pereira Fleury

Senior Associate - Ferrere Abogados

Editors
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Irreparable harm in Provisional Measures

I. Definition

1.

Irreparable harm refers to one of several standards that a party seeking provisional relief or measures in international arbitration, must comply with,1 especially if the provisional relief sought is the preservation of the status quo or order performance of a contract.2

2.

Irreparable harm is defined as “harm that cannot readily be compensated by an award of damages…”3 A similar definition was given by the extinct Permanent Court of International Justice, which held that an injury is irreparable where it “could not be made good simply by the payment of an indemnity or by compensation or restitution in some other material form."4

3.

The requirement of irreparable harm was largely developed through arbitral practice. Most arbitration rules and laws do not elaborate on the requirements for granting a provisional measure. Rather, they only establish the power of the arbitral tribunal to grant them. For example, the ICSID Convention only establishes that the tribunal may recommend any provisional measures to preserve the rights of either party,5 without indicating the standards that such provisional measures must comply with. The same approach is taken by the ICC,6 LCIA,7 SCC,8 and SIAC9 arbitration rules.

4.

Notwithstanding the above, the UNCITRAL Model Law on International Commercial Arbitration, as amended in 2006, and the UNCITRAL International Arbitration Rules as amended in 2010, contain rules regarding the standards that must be met for the granting of a provisional measure, standards that were not included in their original versions.10 Article 17A of the Model Law now spells out the relevant requirements for granting a provisional measure, indicating, amongst other things, that the party requesting a provisional measure must satisfy the tribunal that “[h]arm not adequately reparable by an award of damages is likely to result if the measure is not ordered.” Article 26(3)(a) of the UNCITRAL Arbitration Rules requires an identical element.

II. Current practice and approach

5.

Some tribunals still adhere to the literal “irreparable” standard as defined above.11 As indicated by the tribunal in Cemex v. Venezuela, if “a loss could be readily compensated by a damages award […] the alleged harm is not ‘irreparable’ and there is neither necessity, nor urgency to grant the requested provisional measures."12 However, most arbitral tribunals now require a showing of “serious” or “substantial” harm, instead of “irreparable.”13 The tribunal in PNG Sustainable Development Program Ltd. v. Papua New Guinea held that “[t]he proper requirement is that the requesting party must establish the existence of a sufficient risk or threat that grave or serious harm will occur if provisional measures are not granted.”14 Similarly, the tribunal in Paushok v. Mongolia, explained that “[t]he possibility of monetary compensation does not necessarily eliminate the possible need for interim measures”.15 

6.

Commentators also say that the requirement of a literal “irreparable harm” would limit the granting of provisional measures only to cases where a party could become effectively insolvent, or where the enforcement of a final award would be impossible.16

7.

In this context, most tribunals, referencing the requirements established in the UNCITRAL Model Law and UNCITRAL Arbitration Rules,17 apply a “balance of interest” standard and consider: (a) the degree of claimant’s potential “serious” harm should the measure is not granted; (b) the extent to which such harm may be compensable in a final award; and (c) the extent to which it is fair for one party to bear the burden or risk of loss during the arbitral proceedings.18 In its Report of the 67th Conference, the ILA Committee on International Civil and Commercial Litigation indicated that one of the requirements for a provisional measure is that the “potential injury to the plaintiff outweighs the potential injury to the defendant."19

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