“Creeping Americanization of international arbitration: is it the right time to develop inquisitorial rules of evidence?” A session of the fourth Russian Arbitration Association Conference in April 2017 stood under this title. Arbitration practitioners emphasized the need of an alternative set of rules on the taking of evidence. A year later, on 8 April 2018, a draft of the “Inquisitorial Rules on the Taking of Evidence in International Arbitration”, the so-called “Prague Rules”, was released. The draft was published for the purpose of discussion. The final version is to be approved in October / November 2018.
What are the “Prague Rules”?
Just as the IBA Rules, the Prague Rules shall provide guidance on taking of evidence in international arbitration. Parties to arbitrations may agree on the rules to be binding or as guidance. However, contrary to the IBA Rules, the Prague Rules follow an inquisitorial approach, providing a more active role of the tribunal.
The Working Group has the aim to officially launch the final set of rules on 15 December 2018 on the occasion of an arbitration conference in Prague. The eleven articles of the draft deal amongst others with the tribunal’s proactive role, fact finding, documentary evidence, fact witnesses, experts and assistance in amicable settlement.
According to Article 1 of the Draft, the Rules shall apply if the parties agree on their application or by the tribunal’s own initiative upon consultation with the parties.
What are the differences to the IBA Rules on Taking of Evidence?
The Working Group of the Prague Rules criticized that “[i]t has become almost commonplace these days that users of arbitration are dissatisfied with the time and costs involved in the proceedings. The procedures for taking evidence, particularly document production, and using multiple fact and expert witnesses and their cross-examination at lengthy hearings are, to a large extent, reasons for this dissatisfaction.” That means, the Working Group has identified three features of evidence taking in arbitration which – according to the Working Group – are mainly responsible for a dissatisfaction with the time and costs of arbitration proceedings: (i) document production, (ii) too many fact and expert witnesses, and (iii) cross examination at lengthy hearings. In the following, we will take a closer look at these three features and compare the respective rules in the IBA Rules and the Prague Rules:
Document production under the IBA Rules and the Prague Rules
While document production is a rather unknown phenomenon from a civil law perspective, it is not from a common law perspective and also not unknown in international arbitration. To a certain extent document production is regarded as an appropriate mean for taking evidence in arbitral proceedings. It is rather the extent of document production which is disputed. The IBA Rules aim to prevent extensive and expensive American-style discovery in arbitration.
Under Art, 3(3) IBA Rules, a party may request a specific document or a “narrow and specific requested category of documents”. In practice, the authors have rarely seen requests for specific documents. Mostly, parties exchange requests for categories of documents. What is more, the categories are often described in a broad manner so that hundreds – if not more – documents fall into such categories. Apart from that, it has become quite common to request at least some sort of e-discovery, i.e. to request the other party to produce all emails or other electronically stored documents which match certain search terms. As a result of all this, document production is very often a very costly and time-consuming exercise.
Art. 9(2) IBA Rules establishes reasons for tribunals to deny a request for document production. A tribunal shall for example deny a request if it lacks sufficient relevance to the case or materiality to its outcome (Art. 9(2)(a)) or if it would be an unreasonable burden to produce the requested evidence (Art. 9(2)(c)). In the authors’ experience, tribunals – in particular in Continental Europe – make extensive use of these rights to deny a request for document production.
Under the Prague Rules, document production will be more limited. The drafters of the Prague Rules aim to prevent extensive document production and explicitly establish in Art. 4.1 as a general rule that “the Arbitral Tribunal shall avoid extensive production of documents, including any form of e-discovery.” Moreover, under Art. 4.2, the parties cannot request a “category of documents”, but only specific documents. As a result, documents production requests referring to – for example – “all documents, meeting minutes, notes and memoranda regarding xxx” will not be admissible under the Prague Rules. Art. 4.2 states:
4.2. The Party, however, may request the Arbitral Tribunal to order the other Party to produce (a) specific document(s) which:
a)is relevant and material to the outcome of the case;
b) is not in the public domain; and
c) is in the possession of the other Party.
It is submitted that the difference in the approach towards document production is the most practically-relevant difference between the IBA Rules and the Prague Rules.
The number of witnesses under the IBA Rules and the Prague Rules
Under the IBA Rules “each Party shall inform the Arbitral Tribunal and the other Parties of the witnesses whose appearance it requests” (Art. 8(1)), i.e. ultimately, the parties decide how many witnesses will appear at the evidentiary hearing. As a result, often many witnesses testify who do not testify on relevant facts and do not assist the tribunal in resolving the issues in dispute.
As an alternative concept, the Prague Rules delegate this decision to the tribunal. The Prague Rules in Art. 5.2 and 5.3 contain two approaches for the purpose of discussion. Under Art. 5.2, it is entirely up to the tribunal to decide which witnesses are called for examination: “The Arbitral Tribunal, after receiving comments from the other Party, will take decision on witnesses to be called for examination during the hearing.” The alternative solution in Art. 5.3 is that the tribunal informs the parties about which witnesses should testify because they can assist the tribunal in resolving the issues in dispute. It is likely that this procedure will limit the number of witnesses.
Examination of witnesses under the IBA Rules and the Prague Rules
According to the Working Group, not only the number of witnesses is a point of criticism, but also the method to examine witnesses. Art. 8.3 IBA Rules sets out the general procedure of oral testimony and provides for cross-examination. In the end, the conduct of the proceedings, however, lies in the tribunal’s discretion (Art. 8.3 (f), IBA Guidelines). Theoretically, a tribunal could also under the IBA Rules follow an inquisitorial approach. In practice, this is, however, rarely the case.
Even though the Working Group criticized cross-examination, the Prague Rules do not explicitly rule out cross-examination. One has to read it between the lines that the Prague Rules favor an interrogation of the witnesses by the arbitrators. Pursuant to Art. 5.6, “the examination of the fact witness shall be conducted under the direction and control of the Arbitral Tribunal”. Moreover, it is stipulated in various provisions that the tribunal shall take a more active role in the procedure of establishing facts, taking evidence and applying legal provisions (cf. Arts. 3.1, 5.6, 7, 9, 12).
The Prague Rules are certainly a notable counter-project to the IBA Rules which are nowadays very often applied in international arbitration. The IBA Rules have a head-start, but it will be interesting to see whether the Prague Rules will after some time prevail in practice – in particular in arbitration proceedings where both parties come from civil law countries.