On 15 March 2019, the Arbitration Practitioners Coffee Debate took place in Kyiv, Ukraine. The event was organized by Vasil Kisil and Partners, and Ukrainian Arbitration Association with CIArb Young Members Group as supporting partner prior to Ukrainian Vis Pre-Moot.

The Vis Moot is aimed at promoting professional training of law students to international commercial law and arbitration. Ukrainian Vis Pre-Moot is the preparatory practice rounds before the international rounds to be held in Vienna, during 12-18 April. The Vis Moot is the hugest and the most prestige international student competition in the sphere of international commercial arbitration gathering arbitration practitioners and 378 teams from all over the world.

The event was held in a form of an Oxford-style debate, being quite innovative for Ukrainian legal community (compared to the usual formal conferences and round tables). Though being quite popular in other jurisdictions, an Oxford-style debate has not been tried and tested in Ukraine before.

An Oxford-style debate is a form of discussion guided by the expert Moderator. During the debate, the arguments in favour or against particular motion are being presented within the allocated time. The results of the debate are fully determined by the audience through interactive voting. The audience votes both before the debate and after it, so that the effectiveness and persuasiveness of the arguments put forward can be visible. The audience is highly encouraged to ask questions and engage into the discussion.

Judging from the experience of Arbitration Practitioners Coffee Debate, such format creates lively discussions and ensures maximum engagement of all participants, outlining the different angles of the hot issues in the international arbitration.

Shall Arbitrators be masters of their own procedure?

During the first part of the debate, moderated by Oleg Aloshyn, Partner at Vasil Kisil & Partners (Kyiv), the issue of the arbitrators exercising powers not expressly granted by the parties was discussed.

As an introduction Mr. Aloshyn outlined the controversies of the matter. On the one hand, we have purely consensual nature of arbitration with arbitrators being granted the powers by the parties. On the other hand, sometimes the parties may not decide on particular powers of arbitrators, which creates the necessity to exercise not expressly granted powers.

Tetyana Nesterchuk, Barrister at Fountain Court Chambers (London), and Olga Hamama, Principal Associate at Freshfields Bruckhaus Derringer (Frankfurt), argued in favour of the arbitrators exercising broad discretion regarding which powers to exercise.

According to Ms Nesterchuk the arbitrators shall be masters of their own procedure due to three reasons. Firstly, the powers that are expressly granted are very few, because it is impossible to agree on all of the powers necessary for resolution of a dispute at the very beginning. An arbitration agreement just outlines general direction of arbitration. Secondly, if we are facing a reluctant litigant that does not participate in an arbitral process, the arbitration still has to proceed. If the powers are limited to those expressly granted, then the arbitrators might be sued for using the powers not granted by all of the parties or the award may be challenged on such ground. Further, an arbitration agreement may be defective, and the arbitral tribunal may have to actually decide on unregulated matters (such as the applicable law).

Therefore, keeping in mind that the aim of arbitration is to resolve the dispute finally and successfully, an arbitrator needs to be equipped with all the powers necessary to resolve such dispute.

Ms Hamama further emphasized that nowadays the disputes are becoming more complex and are not straightforward. New industries are being fastly developed, thus it is impossible to foresee and respectively regulate every procedural aspect of arbitration.

According to Ms Hamama, that is precisely why we should be flexible. We should not follow strictly agreed procedure that creates structures that often do not fit the dispute neither produce more regulations. The parties opt to arbitration looking for alternative dispute resolution for specific dispute with specific competence with transparency and efficiency. At the same time, the flexibility has to be exercised within the framework of expressly granted powers. Resorting to the inherent powers, the arbitrators have to ensure the procedural fairness, provide and the parties with the opportunity to present their case.

Therefore, we should concentrate of providing general framework under the law, staying flexible to react on specific circumstances of each and every case.

Christina Khripkova, Senior Associate at Integrites (Kyiv), and Ronan O`Reilly, Associate at White & Case (London), argued that the arbitral tribunal is and should be bound by the expressly granted powers, and the resort to inherent and implied powers should not be permitted.

Ms Khripkova stated that the party autonomy cannot be subordinated by the tribunal`s discretion. Arbitrators are equipped with the all the powers necessary under the arbitration agreement, the lex arbitri and the institutional rules. If to agree that the main objective behind the arbitration is just final and successful resolution of a dispute, in such case it is hardly understandable why the parties would prefer arbitration over litigation. On the contrary, the parties are interested in tailoring their dispute resolution procedure to their needs. Violations of an arbitration agreement puts an arbitral award at risk.

The powers of the tribunal should be limited to those carefully chosen by the parties. We are dealing with sophisticated parties in no less sophisticated legal relations, which are assisted by sophisticated lawyers, thus it is reasonable to presume that an arbitration agreement is carefully drafted and the language reflects the bargain of powers. The inherent and implied powers of arbitrators rather harm than ensure integrity of arbitration.

Ronan O`Reilly emphasized that by allowing the arbitrators to resort to the powers not expressly granted, we license ignorance or overriding the will of the parties. This undermines the integrity of the very system of international arbitration. Legitimacy of international arbitration lies in consent. The parties have legitimate expectation that their arbitral proceedings will be shaped as they specifically agreed. The legitimate expectations are crucial, since the parties should believe in the fairness of the whole process, otherwise they will be reluctant to resort to arbitration again.

The arbitrators already have the powers, so there is no necessity to act in shadows. The regulation has done good job in prescribing powers and putting the limits. Moreover, it is not understandable what role implied powers can play, there is no definition what this powers are, and what they entail. Even if implied and inherent powers were allowed, the arbitrators will very likely be reluctant to exercise them. This is due to the so-called Due Process Paranoia, that is the risk of an award being set aside or refused recognition and enforcement.

Before the start of the Debate almost 70% of the audience voted for the motion, after the debate only one vote was lost. Thus, the audience believed that the arbitral tribunal is empowered to resort to the powers not expressly granted by the parties.

Is there the place for illegally obtained evidence in international arbitration?

The second part of the Debate was moderated by Olena Perepelynska, Partner at Integrites (Kyiv). Outlining the issue, Ms Perepelynska stated that sometimes the evidence is obtained through various illegal means, such as through hacking or leakage. Such behavior may even constitute a criminal offense. So the question is what do we do when such evidence is introduced by one of the parties in the arbitration.

Olexander Droug, Partner at Sayenko Kharenko (Kyiv), and Oksana Karel, Senior Associate at Arzinger (Kyiv), argued against admissibility of illegally obtained evidence opposed by Peter Riznik, Associate at Konrad & Partners (Vienna), and Kateryna Bondar, Legal Counsel at Petroforce Trading and Shipping SA (Geneva).

Mr Droug highlighted that sometimes in the course of arbitral proceedings one of the parties may seek to submit evidence that is quite dubious, the evidence that shall not be permitted. The underlying principles of submission of evidence in international arbitration are those of good faith, the tribunal`s power to exclude confidential or legally privileged evidence or take into account considerations of procedural fairness, proportionality and equality. If the party seeking to introduce evidence actually obtained it through breach of these requirements and tries to benefit from such behavior, then such evidence cannot be admissible. The arbitrators should act negatively to such behavior not encouraging violation of procedural fairness, equality, and public policy matters. Further, such behavior may also be punished under the national law, constituting a criminal offense. Thus, allowing such evidence will basically be the encouragement of the parties to do whatever it is possible in order to collect the evidence, even through illegal means. This is something that is completely unacceptable.

Ms Karel elaborated further that the goal of arbitration is to receive an enforceable award. If the evidence relied upon was obtained illegally, it may constitute the ground for refusal of recognition and enforcement of an arbitral award as a violation of public policy. By way of example, evidence may be obtained through means of corruption, and public policy concerns the issues of corruption. The same equally applies to the issues of setting an arbitral award aside. This directly contradicts the aim of an arbitration to produce an enforceable award.

Mr Riznik pointed out that it would be unreasonable to submit that all illegally obtained evidence shall be admitted. However, depending on the circumstances of each and every particular case, sometimes the evidence may be admissible. Mr Riznik asked whether anyone in the audience did not care about the right to be heard with no one actually responding.

The violation of the right to be heard constitute the ground for refusal to recognize and enforce an arbitral award or setting it aside, which is contrary to the primarily goal of arbitration. Moreover, there may be circumstances under which the public policy would actually demand that the parties are given an opportunity to present their case, which is possible only with submission of illegally obtained evidence. Not allowing crucial evidence may lead to completely wrong decision as to the factual circumstances. The tribunal has the powers to decide whether or not to admit particular evidence in particular dispute. The client should not be punished if it did not participate in the obtaining the evidence. So the tribunal should maintain the balance between of the right to be heard and present one`s case and the considerations regarding illegality of the evidence.

Ms Bondar closing the discussions, focused on the balance between the two competing interests as was previously mentioned by Mr Riznik. The regulations applicable to international arbitration provide for flexibility, and tools for obtaining such balance. The balance is achieved by inter alia the requirement that the evidence shall be relevant and material.

Further, the rules of admissibility of illegally obtained evidence vary around different jurisdictions. For example, in Switzerland the interest of finding the truth may lead to admission of such evidence, and in such cases the public policy considerations may not be raised.

While deciding on the admissibility the tribunal shall take into account all circumstances of each particular case, such as participation of the parties in obtainment of evidence, the nature of illegal activity, timing and seriousness of offence, relevance and materiality, availability of other evidence and the like.

At the start of the Debate, the division in the audience was 50/50, after the majority voted in favour of admissibility of illegally obtained evidence in international arbitration.

Published: Yurydychna Gazeta, 21 March 2019