Security for claims in international commercial arbitration: Underutilized or obsolete?

Introduction

Security for claims is a form of provisional measure that can be described as an anticipatory enforcement designed to guarantee that a future award will be honored. This remedy is distinct to conservatory interim measures, which are aimed at preserving evidence or the status quo pending a decision on the merits, and to regulatory interim measures, which organize the relationship between the parties up to the decision on the merits.

Arbitral tribunals have generally been reluctant to grant provisional measures securing the underlying claim. Even in the most recent commercial arbitration awards, tribunals often characterize this measure as ‘extremely rare’ and ‘exceptional.’ However, the potential utility of this tool remains underexplored by participants in the arbitration process, especially where factual circumstances of the case call for an urgent remedy against the foreseeable risk during proceedings of the debtor’s inability to pay its debts. 

Article 25 of the LCIA Arbitration Rules (most recently updated in 2020), which according to the latest 2025 International Arbitration Survey remains among the five most preferred arbitral rules worldwide, provides for the powers of the Tribunal in respect of interim and conservatory measures. These powers, such as the provision of security for claims or costs and preservation orders, are aimed at ensuring that a claimant’s claim is not frustrated, the status quo is maintained, or the dissipation of assets or evidence is prevented, pending a final award in the arbitration. 

However, despite the availability of these powers to the tribunal on a party’s application, few applicants apply, and even fewer applications are successful. According to the LCIA’s Annual Casework Report 2023, only 58 applications were made under Article 25 in 43 arbitrations, out of 327 LCIA arbitration referrals in 2023. Of the 58 applications, 21 were rejected, 18 were superseded or pending at the time of the report, 14 were granted and 5 were partially granted. The numbers are even more scant when looking at applications for security for claims under Article 25.1(i) (as opposed to other applications like for security for costs) where only 11 applications were made in 2023, of which 2 were granted, 2 were partially granted, 2 were superseded or pending at the time of the report and 5 were rejected.

Security for claims – the power of arbitrators under different rules

Other rules, including the UNCITRAL Rules that are most frequently used to govern ad hoc arbitrations, and many institutional rules, confer on tribunals the power to grant provisional or interim measures. These are often couched in general terms. For example:

• Article 26 of the UNCITRAL Rules 2021 provides that “[t]he arbitral tribunal may, at the request of a party, grant interim measures.”
• Article 28(1) of the ICC Rules of Arbitration 2021 provides that “the arbitral tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate.”
• Article 27(1) of the ICDR International Arbitration Rules 2021 provides that “at the request of any party, the arbitral tribunal may order or award any interim or conservatory measures it deems necessary, including injunctive relief and measures for the protection or conservation of property.”
• Article 37.1 of the SCC Arbitration Rules 2023 provides that “[t]he Arbitral Tribunal may, at the request of a party, grant any interim measures it deems appropriate.”

Some institutional rules include lists of example interim measures that the tribunal can order. For example, Article 23(3) of the HKIAC Administered Arbitration Rules 2024 provides a non-exhaustive list of interim measures including that a party should:

• Maintain or restore the status quo pending determination of the dispute.
• Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent hard or prejudice to the arbitral process itself.
• Provide a means of preserving assets out of which a subsequent award may be satisfied.
• Preserve evidence that may be relevant and material to the resolution of the dispute.

While security for claims is not explicitly mentioned in any of these formulations, the relevant tribunals enjoy broad discretion when considering an application for interim measures, that could be argued extend to providing security for the claim itself. 

Article 25.1(i) of the LCIA Rules is therefore distinct in affording the tribunal an express power upon the application of any party, after giving all other parties a reasonable opportunity to respond to that application, and upon whatever terms as the tribunal considers to be appropriate in the circumstances to “order any respondent party to a claim, counterclaim or cross-claim to provide security for all or part of the amount in dispute, by way of deposit or bank guarantee or in any other manner.” 

The rationale for this power is that an applicant (whether claimant in the arbitration, or a respondent bringing a counter- or cross-claim) can mitigate against the risk of expending time, costs and resources in successfully pursuing the respondent in arbitration only for the respondent to frustrate enforcement of an award. This could be, for example, by dissipating assets during proceedings. One drawback (in contrast to, for instance, injunctive relief available in some national courts) is that any application must be made on notice, giving the respondent the chance to respond before any order is made.

Although Article 25.1(i) refers to such security as being by way of deposit or bank guarantee, it is open to the tribunal to order that security should be provided by way of other methods. What is appropriate will be specific to the facts of the case and parties’ positions. 

In addition to the power of the tribunal to order security for a claim, Article 25.3 also provides that a competent state court or other legal authority has the power to make such an order, but only before the tribunal is constituted, or afterwards in exceptional cases and with the tribunal’s authorization.

The procedural law of the place of arbitration may provide further useful guidance for granting interim measures. The English Arbitration Act 1996, unlike certain other jurisdictions (for example,  Sweden) does not expressly vest tribunals with the power to order security for claims as an interim measure. The express wording in Article 25 of the LCIA Rules is, therefore, a helpful tool on which the parties can rely to seek the interim measure directly from the arbitral tribunal as opposed to referring to the supporting role of the curial courts. It also eliminates the uncertainty as to whether the tribunal in question has the power to grant such orders unlike other institutional rules which adopt much wider wording on interim measures broadening the arbitral discretion.

Contrast with litigation

Before turning to how applications for security for claims in arbitration are assessed, it is useful to consider how similar powers are exercized by the English courts in litigation. 
Litigation in the English courts is conducted in accordance with the Civil Procedure Rules 1998 as amended from time to time (CPR). Under CPR Part 25, parties can apply for interim injunctions such as freezing injunctions, and a wide range of interim orders, usually aimed at preserving the status quo, not dissimilar to the interim and conservatory measures in arbitration.

Applications by a defendant for security for costs under CPR Part 25 are widely known and commonly made in litigation. These applications protect a defendant from successfully defending a claim and being awarded costs, but then not being able to enforce that costs order against the claimant.

Security for costs applications are distinct from providing security for claims, the latter of which guards against the risk of not being able to enforce the final amount awarded, rather than being limited to the award of costs as in security for costs applications. 

There is however scope for an English court to make an order for an interim payment on account on the application of a claimant. The statutory power arises under Section 32 of the Senior Courts Act 1981 and Section 50 of the County Courts Act 1984, both of which refer to the CPR as making provision for interim payments. Under CPR 25.1(1)(l) (prior to 6 April 2025, CPR 25.1(1)(k)), a court has a discretionary power to make an order for a payment by a defendant on account of any damages, debt or other sum (except costs) which the court may hold the defendant liable to pay. CPR Part 25.23 (prior to 6 April 2025, CPR Part 25.7) sets out the conditions, any one of which must be met for a court to consider making an order for an interim payment. These conditions include:

• Where the defendant has admitted liability to pay a sum of money to the claimant.
• The claimant has obtained judgment for a monetary amount.
• That the court must be satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial amount of money (other than costs) against the defendant (whether or not there are other defendants to the claim).

The court must not order an interim payment of more than a reasonable proportion of the likely amount of the final judgment, taking into account contributory negligence and any relevant set-off or counterclaim.

CPR Part 25 does not refer to the power to order an interim payment as being limited to certain types of claims. However, such applications have tended to be made in the context of personal injury and clinical negligence cases rather than in commercial disputes, and may be seen as interim payments on account, rather than security for the claim. English litigation thus offers a narrower scope than arbitration proceedings offer in principle, to award security on the substantive sum in dispute. 

Security for claims – conditions

Why is security for claims rarely applied for and even less commonly obtained? The answer may lie in the fact that unlike in English litigation where the CPR sets out the conditions that an application for an interim measure, like an interim payment, must fulfil, the LCIA Rules provide no conditions or guidance as to what a claimant must establish to bring and succeed in an application for security for its claim.

Further, considering the few known examples of security for claims applications in international commercial arbitration, the available arbitral jurisprudence does not provide either a clearly defined or consistent framework of the conditions that need to be satisfied to warrant a security for claims order. It may be, therefore, that parties are reluctant to embark on a process where the applicable test is uncertain and there is limited guidance from publicly available precedent. 

In the absence of express criteria set by the applicable instruments, the starting point for a party who is prepared to pursue an application is that it will need to demonstrate that the general conditions for granting a provisional measure are satisfied, such as:

• Prima facie jurisdiction to decide on the requested interim measures.
• Prima facie establishment of the merits (based on the documentary evidence provided with the Notice of Arbitration, whether a reasonable case has been made which, if the facts alleged are proven, might possibly lead the tribunal to render an award in favor of the claimant).
• Urgency – the decision on interim measures cannot wait for the award, for example, the considerable and real risk of the party dissipating assets.
• Necessity – a risk of damage that is difficult to repair in monetary terms.
• Proportionality of the requested measure – that is, if the respondent will suffer significant harm as a result of the measure which would substantially outweigh any harm that the applicant may suffer, (for example, if the money is unavailable to be used for respondent’s business needs and activities affecting its going concern or the cost of security would be very significant, if not altogether impossible).
• The absence of prejudice to the merits of the case – for example, if the respondent has brought counterclaims which might be wholly or partially successful, granting an application might prejudice the case on the merits.  

A review of the publicly available cases shows that the following additional criteria have been considered by arbitral tribunals as applicable to security for claims applications:

• The chances of success on the merits must be relatively high – This is a distinct requirement for security for claims applications, as this imposes a higher threshold than prima facie establishment of the merits, which is a general condition applicable to other applications for provisional measures. This may present a substantial and indeed uncertain hurdle for the applicants to overcome considering that at the early stage of the proceedings (especially before the evidentiary stage), the tribunal may not be able to conclude that there is a sufficient chance of success. As a result, in practice, the tribunal may feel reluctant to grant this interim relief because of the fear of being perceived as prejudging the merits of the matter opening up the risk that any award could be challenged for a party not having sufficient opportunity to put forward its case.
• The measure must be necessary to ensure the enforcement of the award, that is, it is necessary to demonstrate the risk of non-enforcement of a favorable award with the requisite probability. Here, the financial situation and conduct of the respondent are relevant considerations; however, it is not sufficient simply to argue that the respondent has financial difficulties or simply that it has failed to comply with past arbitral awards or other pecuniary commitments. The applicant must demonstrate with the requisite degree of probability that the respondent will not be able to pay the amount awarded or that there is a substantial risk that it will refuse to comply with it. At the same time, tribunals’ decisions indicate an acceptance that the applicant may be able to procure only limited evidence of the respondent’s financial condition and the probability that it will deteriorate during the course of the arbitration.

The above criteria are cumulative and hence need to be addressed to avoid the risk of the tribunal rejecting the application. However, the facts on which these conditions depend need not be proven at the time of the application but only demonstrated to be plausible.

The burden of proof lies on the party requesting the security for the claimed amount. However, the tribunal may be entitled to shift the burden to the other party if it is in the better position to produce evidence in relation to the factors identified above. For example, where the alleged impecuniosity of the respondent to the application is one of the reasons for bringing the security for claims application and that respondent unreasonably refuses to disclose evidence of its financial position, the tribunal may decide that the burden of proof should fall on the respondent and that it is entitled to infer that the respondent party is indeed impecunious even in the absence of evidence.

The standard of proof is the general civil standard applied in international arbitration denominated as ‘balance of convenience,’ ‘preponderance of evidence,’ or ‘sufficient likelihood.’ However, the parties need to stay cognizant of the fact that security for claims is an extraordinary remedy, which, in practice, often creates the perception of an elevated standard of proof for measures (similar to the famous Lord Hoffmann’s paradigm that where some things are inherently more likely than others, it takes more cogent evidence to satisfy the standard of proof of the less likely scenario, even where the standard itself remains the same). 

In practical terms, this might mean that the applicant will need to show a real risk of dissipation of assets based on persuasive evidence which will often not be publicly available and can be opposed by the respondent for the reasons of commercial sensitivity. Here, the applicant can benefit from the arbitral confidentiality and request that the tribunal orders production of evidence (such as bank or financial statements) which would otherwise not be subject to document production in the proceedings in strictest confidence either for the tribunal’s review or limited to confidentiality club members.

Key points

While applications for security for claims are rare in international arbitration, the measure is a tool that practitioners and users of the LCIA (in particular) should be aware is available, especially where there are concerns about future enforcement of an award.

Practical considerations include the following:

• Consider the financial position of the respondent from the outset of a potential dispute and think about what evidence exists and whether that will be sufficient to support an application for security for the claim.
• Consider any other difficulties that there may be with future enforcement (for example, location of assets) or any risks of dissipation of assets that there may be before the end of proceedings.
• Present the applicant’s underlying case on the merits with as much evidence as possible to meet the high threshold regarding success on the merits.
• If there is a particular event that triggers concern about the respondent’s ability to satisfy a future award, do not delay in making an application, as the tribunal will consider the urgency of the situation. Any unreasonable delay in making the application may indicate to the Tribunal that there is insufficient urgency.
• Any decision to make an application for security for costs should weigh up the risk of non-enforcement against the risk for the applicant, as it can be held liable for consequential costs and damages incurred by the respondent as a result of the ordered measures.  Indeed, the applicant may well have to bear the costs of its application itself.