International Rules can improve efficiency of arbitration proceedings

By Doug Jones AM RFD.

Key Points:
The IBA Rules can be used in domestic and international arbitration, and parties need to consider making the Rules part of their arbitration agreements.

Choosing an established set of evidentiary rules, such as those of the International Bar Association, may make your arbitration proceedings more efficient. Such rules can mean that less time is spent discussing procedural matters and attention is more quickly focused on the heart of the dispute. The second edition of the IBA Rules on the Taking of Evidence in International Commercial Arbitration was released in 1999. Like the first edition, they were prepared by experienced arbitration experts and adopt the features of both the common and civil law traditions that are most suitable to international arbitration proceedings. Further, the best thing about the Rules is that the drafters were careful to respect and maintain the procedural flexibility that is so characteristic and important to arbitration. The Rules are freely available for use by anyone who wants to adopt them.

The traditional approach to procedural and evidentiary matters in international arbitration

In contrast to the detailed rules of procedure and evidence found in most domestic legal systems, especially in common law systems, arbitration rules and laws generally provide little, if any guidance.

If arbitrations are conducted under the UNCITRAL Model Law on International Commercial Arbitration, which is ordinarily applicable in Australia and some 43 other countries, Article 19(2) simply provides that, “the power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.” Articles 23 and 24 of the Model Law provide some further guidance as to the procedure, subject to contrary agreement of the parties.

Where institutional rules have been adopted, parties may find even less guidance. For example, Article 20(1) of the International Chamber of Commerce (ICC) Rules of Arbitration states that “the arbitral tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means”. Articles 22 to 27 of the ICC Rules provide some enlightenment with respect to witnesses and hearings, but generally it is up to the arbitral tribunal and the parties to decide what is meant by “all appropriate means”.

The reasons for this gap in arbitration rules and laws are twofold.

One reason relates to the need for flexibility in arbitration. The other is that parties in international arbitration inevitably come from different countries, if not completely different legal systems. A civil lawyer’s concept of taking evidence is strikingly different from that a common lawyer. For example:

• In the adversarial common law system the burden of establishing the facts lies with the parties and their lawyers. The common law judge only decides on the veracity, weight and admissibility of the evidence. In a civil system the judge plays a significant role and can often call witnesses and run the proceedings as he or she pleases. The civil judge may even question witnesses before the lawyers do. Thus, at civil law the concepts of “direct examination” and “cross-examination” of parties, witnesses and expert were traditionally unknown.
• It is a vital requirement in the common law system that parties disclose to each other documentary evidence during “discovery”. This requirement will be very familiar to any business that has been involved in litigation. Discovery is not a feature of civil law systems.
• There is, overall, in civil systems a preference for documentary rather than oral evidence. This is in sharp contrast to the common law where almost all witnesses will be examined orally.
• Independent advice in the form of a tribunal-appointed expert is virtually unheard of in common law courts (although it is becoming more common). But it is a regular event in civil systems; civil lawyers consider that so called ‘party experts’ are of limited value due to their perceived lack of independence.

In conducting proceedings, international arbitrators generally use a combination of these common and civil law features. Thus arbitral proceedings are often a hybrid process, tailored to the particular preferences of the parties and arbitrators involved.

Features of the IBA Rules

The title of the Rules is somewhat misleading because they cover a range of key procedural issues and not merely evidentiary matters. The Rules are specially tailored to the needs of commercial parties for use in international arbitration proceedings. Notably, they are flexible, simple and combine the strong aspects of both the common and civil law traditions.

Some of the features are:

• Disputes regarding the meaning of the Rules are resolved by the arbitral tribunal. Where the rules are silent, the tribunal and the parties fill in the gaps.
• Detailed provisions concerning the production and use of documents are prescribed, but these may be varied by agreement. There is a procedure for dealing with disputed production of documents. The arbitral tribunal itself may request a party to produce a document.
• Time limits for matters such as documents and witness statements are determined by the arbitral tribunal, and no time limits are set out in the Rules.
• Parties are permitted to interview their potential witnesses.
• Provisions are made for written and oral witness statements.
• Provisions are made concerning who shall appear as an oral witness and in what circumstances failure to appear will be excused.
• There are detailed provisions on expert evidence. A separate article deals with tribunal appointed experts, and includes a requirement that such experts shall report in writing to the tribunal and the tribunal shall send a copy of the report to the parties.
• There are provisions relating to hearings, including a basic structure for the order of appearances. This is flexible according to arbitrator and party choice. The arbitral tribunal may decide to call a witness.
• There are provisions relating to the admissibility and assessment of evidence, including a list of factors upon which parties may rely in arguing that a piece of evidence should not be admitted. Admissibility of evidence is ultimately decided by the arbitral tribunal.

The foreword to the Rules offers a clause that parties can use in their contracts if they would like the Rules to apply in their arbitration. Parties can also opt for their application later, such as in the early stages of the arbitral proceedings.

Even if not officially adopted, the Rules have already affected the way international arbitral proceedings are conducted. Many international arbitrators treat them with great respect, and will consult them when deciding questions of procedure and evidence. The parties to international arbitrations may also use them as a source of international general principles in relation to the taking of evidence.

There are several advantages for parties in adopting some structure in relation to evidence and procedure. The Rules provide a degree of predictability while maintaining full flexibility. Their application means that if a dispute arises less time is spent determining procedural matters and the focus is quickly turned towards the substance of the dispute. Finally, the Rules have the advantage of featuring cherry-picked procedures from the world’s best legal systems.

Parties should consider incorporating reference to the Rules in their arbitration agreements (whether for domestic or international arbitration) or using them as part of the arbitral process.

Thanks to Simon Greenberg for assisting in the writing of this article.

For further information, please contact Doug Jones AM RFD.