The courts undoubtedly have the power to grant provisional remedies in aid of a pending arbitration – including temporary restraining orders, preliminary injunctions, and attachments. As a recent Fifth Circuit decision reminds us, the courts also can grant such remedies in aid of an arbitration that has yet to be commenced. Indeed, those remedies may be available under state law, even if the future arbitration is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”), and even if the arbitration will be sited in a state other than the one in which the interim remedy is sought.
In Stemcor USA Inc. v. CIA Siderurgica Do Para Cosipar, 870 F.3d 370, 374-79 (5th Cir. 2017), the court held that a pre-arbitration attachment is available in Louisiana, under Louisiana law, in aid of an arbitration that would be subject to the Convention and was to be filed in New York.
America Metals Trading L.L.P. (“AMT”) entered into contracts to sell pig iron to Daewoo International Corp. (“Daewoo”) and Thyssenkrupp Mannex GMBH (“TKM”). AMT received payment from both companies and failed to make delivery. Daewoo commenced a federal proceeding in the Eastern District of Louisiana to compel arbitration and to attach AMT’s pig iron aboard a cargo ship in Louisiana waters. The district court granted Daewood a non-resident attachment under Louisiana law.
TKM filed suit in Louisiana state court and obtained a writ of attachment of the same pig iron. TKM then intervened in the federal proceeding, obtained a federal writ of attachment over the iron, and successfully moved to vacate Daewoo’s attachment. The district court concluded that a non-resident attachment was not available under Louisiana law because an action to compel arbitration was not an action for a money judgment, which was one of the statutory requirements. The district court ordered that the proceeds of the sale of the iron (which the parties had jointly requested) be transferred to the state court.
Daewoo appealed the vacatur of its attachment, and the Fifth Circuit reversed. Stemcor, 870 F.3d at 374-80. The court of appeals analyzed (1) whether the district court had jurisdiction over the proceeding under the Convention; (2) if so, whether the Convention permitted or prohibited the use of state-law interim measures in aid of an arbitration; and (3) whether the requirements of state law were satisfied. It was only with respect to the third issue that the court of appeals disagreed with the district court.
The court’s subject-matter jurisdiction seemed clear. Daewoo’s written arbitration agreements with AMT, providing for arbitration in New York between two parties that are not U.S. citizens, fell under the Convention, as required by 9 U.S.C. § 202. 870 F.3d at 374-75. But did the proceeding itself fall under the Convention, as required by 9 U.S.C. § 203?
The court held that it did. The court canvased the precedents nationwide, and reported that circuit and district courts in the Second, Third, Fourth, Fifth, and Ninth Circuits have held that there is federal subject-matter jurisdiction over a proceeding seeking injunctive remedies in aid of an arbitration under the Convention. 870 F.3d at 374-76 & nn.2-3. The court also noted that the courts of appeals for the Third, Fourth and Ninth Circuits had older precedents that reflected a contrary view, but that they had retreated from those positions in more recent decisions and came to recognize, in most circumstances, subject-matter jurisdiction to grant provisional remedies in aid of arbitration. Id. at 375 n.2. The court also pointed out that the Convention does not expressly forbid pre-arbitration attachment. Id. at 376.
Finally, the court examined Louisiana law. It agreed with the district court that a proceeding seeking to compel arbitration is not an action for a money judgment, and therefore a writ of attachment under La. Code Civ. P. art. 3542 (which applies to both residents and non-residents) was not available. 870 F.3d at 377. But the court held that a pre-petition writ of attachment may issue under La. Code Civ. P. art. 3502, which would apply to an action to confirm a monetary arbitration award. The court thereupon held that pre-arbitration attachment is available when (a) the future arbitration will seek a monetary award that is likely to result in a confirmation suit, and (b) there is an immediate need for an attachment in aid of an imminent arbitration or confirmation proceeding. The court concluded that Daewoo had proved its need for an attachment so that it later could return to Louisiana to collect on a successful arbitration award. 870 F.3d at 377-79 & n.6.
Stemcor contains valuable lessons for the arbitration practitioner. First, provisional remedies such as attachments and preliminary injunctions may be available in support of an arbitration that has not yet been commenced. The Convention, to which the U.S. is a party, reflects a strong policy in favor the resolution of disputes through arbitration, and that policy is advanced by the availability of provisional remedies that prevent a pending or future arbitration from being rendered ineffectual. Stemcor and the cases cited therein suggest that federal district courts have broad injunctive powers with respect to arbitrations governed by the Convention, as they do regarding arbitrations in general.
Second, as with any form of emergency injunctive relief, the practitioner should be ready to prove immediate and irreparable harm in the absence of the relief, and that the arbitration is imminent, is likely to succeed on the merits, and will be rendered ineffectual without pre-arbitration injunctive relief.
Third, Stemcor teaches that state law may provide a federal or state court with the power to issue a pre-arbitration attachment or other injunctive relief. The arbitration codes in some states, like New York, explicitly allow attachments and preliminary injunctions “in connection with an arbitration that is pending or that is to be commenced inside or outside this state, whether or not it is subject to the United Nations convention.” N.Y. CPLR § 7502(c). Practitioners therefore should check the civil procedure and arbitration codes of both the state in which the arbitration is pending and the state in which there is property to be attached. Even if an applicable state statute does not expressly reference arbitrations that are out-of-state or under the Convention, the statute may still apply to such proceedings as long as it does not expressly exclude them. It should also be kept in mind that federal district courts and state courts of general jurisdiction have broad, inherent injunctive powers that may be another basis of an application.
Finally, if the desired provisional remedy is an attachment (a type of in rem proceeding), it must be pursued in the state where the property is located. As Stemcor illustrates, that state can be different from the one in which the arbitration is sited under the parties’ agreement. Indeed, the very purpose of the attachment is to allow the claimant to return to the state where the attached property is located in order eventually to collect on an arbitration award.