Frontier International Shipping Corp. v. The "Tavros"

In this matter the Plaintiff commenced proceedings to obtain security by arrest for arbitration proceedings in New York. Once the security was obtained the Plaintiff brought an application to stay the proceedings. The Defendant questioned the fairness of an arrest to obtain security for an arbitration and also requested counter-security for its counter-claim in the arbitration as well as security for costs for the arbitration and security for the costs of the Federal Court proceeding. The Prothonotary reviewed the authorities relating to the use of the court’s in rem jurisdiction to obtain security for an arbitration and although he noted it had bothered judges from time to time he concluded that it was not open to the Defendant to urge any unfairness. He next considered the Defendant’s request for counter-security. He accepted that Article 9 of the Commercial Arbitration Code gave the court the power to order interim measures of protection such as mareva injunctions, garnishment and arrest, however, these measures are based upon the presence in the jurisdiction of an asset which might be moved against. In the instant case there was no asset belonging to the Plaintiff in the jurisdiction. He next considered whether he could order that the Plaintiff post security for the costs of the arbitration. He held that this was the purview of the arbitrators, that the Federal Court Rules did not allow such security and that, in any event, there was not a demonstrated need for security. Finally, he considered the Defendant’s request for security for costs of the Federal Court proceeding. Rather than ordering security for costs, however, he ordered that the Plaintiff pay costs to the Defendant as an interim measure of protection, including the costs of the security which the Defendant had posted. This latter part of the Prothonotary’s order was overturned on appeal on the basis that it was not "interim protection" but was a final order.