Provisional remedies: an essential tool for acting early and decisively when a dispute arises

August 2023 | EXPERT BRIEFING | LITIGATION & DISPUTE RESOLUTION

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Disputes can occur in various contexts, including personal relationships, business transactions or international affairs; they are an inevitable part of human interactions. That said, those disputes that end up being pursued through a legal process may have negative consequences for the parties involved.

For example, from an economic perspective, dispute resolution can be expensive, involving costs such as attorney fees, arbitration and experts’ fees and other related expenses. For individuals and business entities with limited resources, the monetary burden of legal proceedings can potentially lead to financial strain. In addition, legal processes can damage relationships between parties.

But depending on how the parties initially move forward with their claims, they may be able to avoid or mitigate the negative consequences arising from such procedures. From the plaintiff’s perspective, an effective approach is to act early when a dispute arises.

Provisional judicial remedies can help mitigate risks by offering temporary protection or preventing further damage while the dispute is being resolved. For example, a judge may adopt pre-trial interim measures to freeze assets in order to prevent the other party from squandering them. Likewise, provisional remedies contribute to ensuring a fair resolution by maintaining the contractual status quo until a final decision is reached. A clear example of this would be a judicial injunction prohibiting parties from disposing of the disputed asset. If the measure is not ordered and the asset is sold, the legal process would become meaningless. Finally, provisional remedies can significantly impact the outcome of a dispute. By obtaining a favourable interim relief, a party may gain a strategic advantage that can increase the likelihood of receiving an enforceable judgment.

There are different types of interim measures under Mexican law. The most common types of provisional remedies include attachment, garnishment, notice of pendency and temporary injunctions.

An attachment (embargo) consists of a court order seizing and securing a specific property. Its function is to prevent a defendant from liquidating or transferring assets outside the jurisdiction of the court, ensuring the availability of funds to satisfy an eventual ruling favourably obtained.

Through a garnishment order, a judge instructs a third party that owes money to the defendant to deposit payment with the court. This is a useful measure that secures collection of debt, preventing assets from entering the insolvent debtor’s estate.

In cases involving real estate, the court may issue a notice of pendency as a provisional remedy. This notice is filed with the public registry to inform parties that the property certificate is subject to pending litigation. Its importance lies in the fact that it gives the plaintiff priority on the property rights over all unsecured creditors, making it virtually impossible to sell it.

Finally, an injunction is a court order that requires a party to either take or refrain from taking a specific action. For example, a preservation order used to secure documents that will serve as evidence during the process or preventing a party from executing a specific transaction.

These are merely a few examples of the typical interim remedies employed in conflict resolution. To choose the best course of action in a given situation, it is crucial to review the relevant legislation and obtain legal counsel. Depending on the jurisdiction and the regulations controlling the dispute resolution process being used, the availability and particular requirements for each type of remedy may change.

Interim measures are not automatically granted and there are some common requirements that must be fulfilled. Courts or arbitral tribunals typically demand that the party requesting a provisional remedy prove that there is a reasonable chance that their underlying claim will succeed on the merits. Accordingly, the party must show a prima facie case, or adequate proof, to establish that it has a legitimate claim or defence with a good chance of success.

The party asking for temporary relief must show that not granting the remedy will result in irreparable loss or impairment that cannot be fully compensated. The urgency and necessity of the provisional remedy are highlighted by this requirement.

When deciding whether to grant or deny an interim measure, courts weigh the balance of benefits that each party would experience. They consider the potential harm to both sides and try to balance the competing interests equitably. If the remedy is allowed, the court will determine whether the harm to one party outweighs the harm to the other party. In most jurisdictions, the law requires a guarantee to cover the possible damages that the measure may cause to the other party.

Acting early and decisively through the adoption of interim measures when a dispute arises is crucial for several reasons. Most importantly, it provides leverage to explore amicable solutions through alternative dispute resolution methods. Parties can engage in open dialogue, negotiation or mediation (with the assistance of a third-party mediator) to find mutually beneficial outcomes. Early intervention increases the probability of reaching a resolution that satisfies all parties involved. Also, adopting interim measures can benefit both parties as it allows them to resolve the dispute more quickly, avoiding the unnecessary delays and expenses associated with prolonged jurisdictional disputes and minimising the disruption to business operations.

Conclusion

When involved in a dispute, it is crucial to recognise the importance of acting early and decisively, especially from the plaintiff’s perspective. A preventive approach can make a significant difference in achieving a fair and satisfactory resolution. Provisional remedies are the ideal tool for taking early action when a dispute arises, since they mitigate risks, ensure fairness, and enhance the chances of securing material satisfaction, counteracting the negative impacts that can result from an unenforceable judgment.

José Covarrubias Azuela is a partner and Francisco Lobato Somuano is a law clerk at Pérez Correa González. Mr Azuela can be contacted on +52 55 5001 5408 or by email: jcovarrubias@pcga.mx. Mr Lobato can be contacted on +52 55 5001 5439 or by email: flobato@pcga.mx.

José Covarrubias Azuela and Francisco Lobato Somuano

Pérez Correa González