Another common roadblock to an order being granted is the degree or extent of the change in circumstances of the opposing party's financial position between the time the arbitration agreement was entered into and the commencement of the arbitration. The argument here is that the risk of the counterparty's impecuniosity should have been investigated as part of the due diligence carried out before contracting and factored into the parties' commercial terms. The application will therefore be stronger if it can be shown that any change in the other party's financial position was unforeseeable at the time the arbitration agreement was entered into. In one recent arbitration, the tribunal hearing the application for security for costs noted that the applicant did not seem concerned when it entered into the agreement containing the arbitration clause that the opposing party was a special purpose vehicle with no sizeable assets. On this basis, the tribunal did not think that the opposing party's impecuniosity was sufficient reason to grant security for costs for the applicant. Conversely, in an application for security for claim where the writers successfully obtained an order securing a portion of the amount in dispute, the tribunal noted that our client (the applicant) was comfortable entering into the arbitration agreement because the opposing party's participation (and financing) was backed by a state party. However, by the time the arbitration was commenced, the opposing party had lost the state-backed financing. This change was considered by the tribunal to swing the balance in favour of granting security for claim. Of course, the weight attached to arguments such as this may vary from case to case: if, for example, the applicant can show why issues of this nature were not a concern at the time of the contract (or, at least, not a concern that could be addressed), it may be able to persuade the tribunal to attribute limited weight to this criteria.
iii. Relevance of the merits Whether the prospects of the applicant's claim should be a relevant consideration in granting these protective measures is often debated. Whilst the merits of a claim are usually a key factor in court applications (and indeed are specifically listed in the test under the English Civil Procedure Rules, for example), it is arguable that different considerations apply to arbitration proceedings. This is because the judge hearing the application in court is usually not the judge who will decide the merits of the dispute. Conversely, there is often a concern in an arbitration context that, as the same tribunal hearing the merits of the dispute will also decide interim applications, taking account of the merits could amount to a prejudgment of the merits of the case before any evidence has been heard. In a recent successful application, the tribunal even noted the paradox that the Chartered Institute of Arbitrators Guidelines refer to both the relevance of the merits of the claims and the need not to prejudge the merits of the case. On that basis, the tribunal stated that it did not consider the merits an appropriate factor in that case. Nonetheless, where a party believes it has a robust position on the merits, it may still be worth making the most of the merits position, as this could still influence the decision-making process implicitly, even if the tribunal does not wish to be perceived as prejudging the merits of the dispute.