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ON PRE-ARBITRATION PRESERVATION IN MACAO Lai Kin-kuok I. STATUS QUO OF PRE-ARBITRATION PRESERVATION IN MACAO A. Meaning of Pre-arbitration Preservation in Macao Macao legislators did not define the pre-arbitration preservation. In this paper, the pre-arbitration preservation is understood as the procedures and measures temporarily taken before the establishment of the arbitral tribunal, with the aim of avoiding the arbitral award becoming an unrealistic decision or avoiding the delay of arbitral award leading to unreasonable damage and loss of procedural justice. Even though there is no direct reference to pre-arbitration preservation, as a preventive measure, the judicial opinion of the collegiate bench of the Civil Appeal Case No. 6/2012 of the Court of Final Appeal of Macao is of reference value: preventive measures are designed to prevent any future favorable judgment from losing all the effect or partial effect arising from a change in circumstances while any action of declaration or action of enforcement is pending. The preventive measures can help eliminate the risk of delay so that the parties do not incur losses due to the inevitable procedure, and can avoid judgment becoming a decision of no practical significance. B. Judicial Practice of Pre-arbitration Preservation in Macao It is not easy to find arbitration cases in Macao, and the Appeal Cases No. 477/2013 and No. 37/2002 of the Intermediate Court found in the official website of the courts involve administrative arbitration. For instance, the former case discloses the appeal filed by the Macao Special Administrative Region (SAR) against the dismissal by the Administrative Court of the arbitral award on one monopolistic contract. The Civil Appeal Case No. 29/2010 decided by the Court of Final Appeal of Macao is a case related to arbitration preservation, which is one of the few cases involving civil and commercial arbitration in the region. One party to the litigation loses the lawsuit because the arbitral tribunal was ignored. The facts of the case show that: in accordance with the provisions of article 64, paragraphs 2 and 3 of the Statutes of the International Football Association, unless the mandatory law makes special provisions, it is forbidden, in principle, to resolve disputes within the club through the civil justice courts. The judicial opinion of the Court of Final Appeal of Macao took the above-mentioned provisions into full account, ruled that the original court ignored the arbitral tribunal, set aside its ruling on the preventive measures and dismissed the action in accordance with paragraph 2 of article 33 in the Code of Civil Procedure. C. Theories on the Application of Pre-arbitration Preservation in Macao The theoretical system of pre-arbitration preservation is inseparable from party autonomy. Party autonomy is the core idea that is integrated into the two legal systems and runs through the arbitration law. For the purpose of this paper and in conjunction with the jurisprudence of arbitration law and procedural law of Portugal and Macao, the proposition of “arbitration preservation applies, mutatis mutandis, civil litigation preservation” is particularly worthy of discussion, even though this proposition is not different from the general legal principle of the application of the local procedural law to the basic law of arbitration. Concerning the party autonomy, the Decree-Law No. 29/96/M of the Basic Law of the Arbitration Law of Macao (hereinafter referred to as the internal arbitration law of Macao) emphasizes in its Preamble that: “Among the great principles that shape this diploma it stands out the vast usage of the principle of the autonomy of the parties, by reducing, to the minimum, provisions of public order”. Under the theory of party autonomy, the parties may agree, through the arbitration agreement, on the place of arbitration, the arbitration institution, the arbitrators and the arbitration procedure. As to the aspect of arbitrators, the legal experts of the former Macao Office of Legislative Affairs pointed out that “the parties may also designate a legal person as an arbitrator in the arbitration agreement, which shall prepare and organize the arbitration in accordance with its regulations”. The place of arbitration is also an important aspect of the arbitration agreement. The Internet arbitration concept analyzed by Director Chen of Guangzhou Arbitration Commission is worthy of attention. Party autonomy in arbitration should not be narrowed, which is the attribute of arbitration and also the trend of the times. As to “arbitration preservation applies, mutatis mutandis, civil litigation preservation”, the Portuguese scholars indicated that: article 24, paragraph 2 of the internal arbitration law of Macao presupposes the preventive measures before filing the lawsuit (ante causam), whose basis of the related situations is similar to the situations as listed in article 334, paragraph 1, item (a) of the Code of Civil Procedure. The discussion of arbitration preservation in this paper mainly elaborates the provisions of the Code of Civil Procedure on the general preventive measure in the action of declaration, as well as the provisions on arrest commonly seen in certain preventive measures. II. ON APPLICATION OF PRE-ARBITRATION PRESERVATION A. Filing of Application First whether the initiation of the preventive measure depends on the application by the parties and whether the entity that has the right to decide the preventive measures can take the initiative to take protective measures in accordance with its functions and powers. In the Code of Civil Procedure of Macao, a judge is not empowered to initiate the preventive measure according to his powers. The judge only has the power to render a ruling which is different from the request of the party after the party has filed the application. In the Arbitration Law, the arbitral tribunal may, at the request of either party, take a preventive measure, except as otherwise agreed by the parties, as long as it considers the subject matter of the dispute appropriate. The analysis shows that the provisions of the Arbitration Law are similar to those provided in the Civil Procedural Law. The application for the preventive measure also involves the question of whether the party can directly refer it to the court, and the mainland Chinese law circle has been concerned about the issue. Such problem does not exist in Macao. In addition, there is a problem of repeated application: supposing the party who has promised arbitration files an application to a court for pre-arbitration preservation and the set-up of an arbitral tribunal while the case is pending, but the party files an application to the arbitral tribunal on an emergency basis and the arbitral tribunal accepts the application and renders a ruling, and the court subsequently also renders a ruling on the preservation application, and two rulings are different. Which of these two rulings shall prevail? The legislative intent relevant to this problem is not definitely conclusive. The law circle of Macao proposes to coordinately apply the mechanism of “pending action” as provided in article 413(J) of the Code of Civil Procedure. Worthy of discussion at the application stage, as to what the Portuguese scholars concerned about, is that before initiating the arbitration proceeding, the filing of an application to the court by the party promising arbitration for preventive measures is not to abandon the arbitration agreement or not to submit the dispute to the arbitration tribunal for its resolution. In accordance with the basic law of arbitration in Macao, filing an application to a court for preventive measures before the arbitral tribunal is set up does not conflict with the arbitration agreement and this kind of application shall not cause abandonment of arbitration under any circumstance. The earlier provisions of the basic law of arbitration in Macao indicate that the jurisdiction of the court in arbitration preservation is justified. However, a problem arises when the understanding of the basic law of arbitration coordinates the local civil procedural law: according to the provisions of article 18, article 31, paragraph 2 and article 33, paragraph 2 of the Code of Civil Procedure of Macao, the court of Macao shall exercise jurisdiction over the application for the preventive measures only if a suit may be brought in the court of Macao, unless the case shall be heard by the arbitral tribunal. In other words, is it true that the court has no jurisdiction over arbitration preservation when there exists an arbitration agreement and the case shall be heard by the arbitral tribunal? If the answer is yes, it does not correspond with the “not conflict” provision of arbitration law. Upon the analysis, the author takes the view that there exists confusion or deviation at the literal level of the provisions on the jurisdiction of the court by the arbitration law and the procedural law and it deserves to clarify the relevant meanings. Other important matters also need to be addressed. If the arbitral tribunal finds that the statement of the respondent was not heard before taking the arbitration preventive measures, the applicant shall, within 10 days after the receipt of the notification of ruling, take measures to facilitate the set-up of the arbitral tribunal in order to avoid the invalidation of the pre-arbitration preventive measures. The above 10-day period is the upper limit. When the arbitration law is applied, the period should be shortened with the shorter arbitration time agreed by the parties. In some jurisdictions such as Singapore, the parties may agree to complete the arbitration proceedings in a shorter period of time. After the earlier discussion on theories, an arbitration case shall be introduced to analyze the arbitration application: a Macao merchant entered into a contract with an engineering company to install a certain facility in his shop, and they agreed to adopt institutional arbitration to resolve dispute over the project involved; earlier in the insurance contract of the merchant, the adoption of “interim arbitration” was agreed to resolve disputes involving insurance, but there was no agreement on the method of appointing the sole arbitrator. A fire broke out during the performance of the contract by the engineering company, and the lawyer of the merchant informed the insurance company to terminate the contract and at the same time investigated the civil liability for compensation. Subsequently, the two sides failed to reach a consensus on the insurance compensation, and the merchant’s lawyer drafted two arbitration applications, one applying to institutional arbitration, the other applying to interim arbitration, so as to solve the disputes respectively specified in the contract; in addition, for the matters not covered within the scope of arbitration, a complaint of civil claim was filed with the court of Macao. Thus, in the same accident, means of institutional arbitration, interim arbitration and civil litigation were adopted at the same time to resolve the disputes. The system design of the appointment of the sole arbitrator is worth considering when the method of appointing an arbitrator is not specifically required. Take this case as an example, the merchant’s lawyer proposed one person to be appointed the sole arbitrator in the application of arbitration, and it seemed that this proposal was not easy to be accepted by the insurance company whose liability was under investigation. On the contrary, the probability of its raising objection or refusal to respond is quite high. Although there is a subsequent procedure for the appointment of arbitrators by the judge, it is likely to proceed according to the ordinary procedure for the action of declaration, thus sacrificing the principle of expeditiousness of arbitration. B. Application Requirements and Their Coordinative Application Lawyers are familiar with the prerequisites for the pre-litigation preservation. Although the legal provisions regulating the application and approval are not exactly the same, the core content of the approval should be the same. In this section, only the elements of the application are discussed, and on the basis of stating the requirements of the application, and combining the characteristics of arbitration, the requirements for the pre-arbitration preservation are discussed. First of all, it should be noted that the preventive measures in Macao are divided into specific preventive measures and general preventive measures, and the application or approval requirements of these two types of measures should be supplementally applied under the special requirements of the law. For example, in accordance with the provisions of article 326 of the existing Code of Civil Procedure of Macao, where any person who has reason to fear that other person has caused serious and irreparable harm to his rights and no particular preventive measure applies, he may request specific and appropriate preventive measures or pre-applied measures to ensure that the right being threatened is realized. However, in article 351, the main provisions on this particular preventive measure of arrest, there is no requirement of “irreparable harm”. Judicial precedents in recent years also confirm the analysis of this paper. According to the understanding of the practice of Macao lawyers, the requirements for civil and commercial pre-litigation preservation include: first, there is the evidence (fumus boni iuris) to prove the existence of the right to be preserved. For example, the existence of the plaintiff’s claims, the contract concluded between the plaintiff and defendant before the case is filed, the establishment of a civil and commercial legal relations, the defendant as the debtor should repay the plaintiff five million patacas. The second requirement concerns two aspects, that is, to argue, from the objective aspect and subjective aspect, that the lawsuit will cause damage to the plaintiff because of the inevitable delay (periculum in Mora): the objective aspect concerns situations which make it difficult for the plaintiff to realize his creditor’s right. For example, the defendant has only one property to satisfy the plaintiff’s claim, the defendant sold the property in a number of property intermediary companies prior to emigration, or the sale was not intended to satisfy the plaintiff’s claim; on the subjective aspect, the plaintiff is also worried that his creditor’s rights are difficult to be realized. For instance, the plaintiff was further informed that the real estate company is negotiating the purchase of the property with the third party, and he is worried that the property will be sold at any time. In the practice of lawyers, there are also situations where the plaintiff has failed to mention the above-mentioned subjective aspect, leading to the application not being approved by the judge. The above requirements shall also apply to specific preventive measures and general preventive measures. There is a suggestion that the third element, the principle of proportionality, should be added, the interest that the plaintiff intends to preserve is greater than the interest the defendant loses. The author believes that it should be analyzed in detail: article 332, paragraph 2 of the Code of Civil Procedure of Macao reflects the “principle of proportionality”. It provides that “if the damage caused by the preventive measure to the person against whom the application is filed is significantly greater than the damage that the applicant intends to avoid through the preventive measure, the court shall refuse to take such measure”. However, the elaboration of specific preventive measures by Portuguese and Macao scholars should not be overlooked, that the principle of proportionality should not be supplementally applied to specific preventive measures such as arrest. Article 329 of the same Code regulates from the perspective of evidence, and provides that the applicant should provide concise evidence when filing the request for preventive measure to prove that the right has been threatened and explain the grounds for fear of being infringed. The judicial opinion of the Civil Appeal Case No. 15/2007 of the Court of Final Appeal of Macao points out that the preventive measures can be announced only when it is proved that the rights concerned possibly exist indeed and there is sufficient reason to fear that such rights may be infringed. The above requirements also apply to the application for preservation in proceedings after litigation has been filed. As to the pre-arbitration preservation, in the international arbitration circle, authoritative scholar Gary B. Born mentioned in his works that laws of most states do not provide on the applicable standards when the arbitrator is considering whether to take interim measures, so does article 17 of the original “Model Law”. This work lists the elements for the approval of arbitration preventive measures in the arbitration practice, which mainly include irreparable damage, greater damage suffered by the applicant than damage suffered by the respondent due to the preventive measures, and the reasonable prospect of winning the case. The principle of “arbitration preservation applies, mutatis mutandis, civil litigation preservation” is followed in Macao. Pre-arbitration preservation is the pre-determined matter of arbitration, and the requirements mentioned above should be supplementally applied to the application for preventive measures. Of course, in special circumstances subject to arbitration, the parties concerned shall prove the existence of the arbitration agreement, and the arbitration clause shall be disclosed accordingly. It is also worth noting that the Portuguese scholars have pointed out in their writings that the legislators did not clearly express their intention of treating the not identical circumstances for arbitration as similar to civil action, and then taking it as a basis for arbitration preservation. |
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