The IBA Rules on the Taking of Evidence in International Arbitration (2010 revision)

1. The IBA Rules on the Taking of Evidence in International Arbitration (2010 revision) David Holloway Barrister -No 5 Chambers London Lecturer in International Trade and Dispute Resolution- University of Essex dh@no5.com

2. Original Purpose of the Rules The Rules since their original inception in 1983 give guidance to arbitrators on questions involving Document production- how many and when? Evidence of party witnesses- who when and how? Evidence of expert witnesses- Lack of any guidance on evidence and procedure in rules of major arbitral bodies (ICC, LCIA etc simply give arbitrators discretion in matters of evidence) Difficult for arbitrators to resolve questions of evidence Conflicting expectations of parties 1

3. Conflicting Expectations Common law- Anglo / US parties/arbitrators Extensive production of documents as a matter of course- discovery procedures- parties required to disclose all relevant documents Emphasis on oral testimony and extensive cross examination by advocates Civil law tradition Minimal document production- lack of formal or extensive discovery procedures More proactive role for decision maker (judge/arbitrator) 2

4. Lawyers Exploit Uncertainty- The “Dark Arts” As well as bona fide differences in expectations.. Lack of clarity in the procedure leads to......tactical behaviour on the part of parties.....and lawyers. Once a dispute has arisen parties will use every means necessary to gain the desired effect. For example disclosure is often used as a method of bullying an opponent into settlement (because of its expense) or to delay matters. Parties also may seek to set traps and ambushes for their opponent or to bombard them with irrelevant evidence.

5. IBA Rules (1983,1999 and current version) Aim to give guidance to arbitrators- a simple body of rules Aim to preserve not stifle arbitrators flexibility, they operate often as default , rather than prescriptive rules Drafted by eminent IBA committee of arbitral practitioners Reflect accepted practice in arbitration (eg that witnesses meet lawyers to discuss their evidence, that parties will wish to cross examine witnesses and that parties may request further documents from the opposing party which are relevant to the case). 4

6. When do the Rules apply? If the parties provide for their application in their contract- unlikely If the parties agree to their application after a dispute has arisen- quite common If the Tribunal decides to apply the rules- very common The rules therefore equate to soft law or best practice- they can be adopted in whole or in part or not at all by the parties (Preamble para 2). It is very unusual that the Rules will not be considered (if not adopted) in an international arbitration Sometimes seen as part of the harmonisation of international procedural law-widely used 5

7. Structure of the Rules Very simple structure of only 9 Articles. The main ones being Preamble, which contains general principles of fairness, efficiency and economy- and the principle of good faith Article 2 which provides for early consultation between Tribunal and parties on matters of evidence Article 3 which relates to the production of documents and provides a procedure for production of relevant documents, requests for production, objections to production and the resolution of disputes on documents by the Tribunal- this is effectively a disclosure procedure- albeit a very limited one and not called disclosure. Always called “production”. 6

8. Structure of the Rules Contd. Article 4 which provides basic rules for the taking of evidence of party witnesses, which allows for examination in chief and cross examination of witnesses, as well as the examination of witnesses by the Tribunal Articles 5 and 6 which provide for the taking of evidence from expert witnesses (whether party appointed or Tribunal Appointed) Article 8 which provides guidelines for the structure of the evidence at a hearing- although preserving the Tribunal’s ultimate discretion as to the order of witnesses 7

9. Structure • Article 9 provides rules for the admissibility and assessment of evidence • Article 9(2) sets out the grounds on which a party can object to producing a document (lack of relevant, privilege, confidentiality, sensitivity, document destroyed, production burdensome) • Articles 9(3) (a)-(e) give guidance as to how Tribunal’s should address questions of privilege. These provide express reference to legal advice privilege/settlement privilege for the first time. Privilege is an issue which has caused great problems in arbitral procedure.

10. Why the 2010 revision? Many of the technical aspects of the rules have not changed greatly The reform of the rules is part of a general overhaul of arbitration provisions including New UNCITRAL Rules 2010 New ICC Rules 2011 Why is this A general perception that arbitration has become too expensive and inefficient? An attempt to cement best practice into the procedure 9

11. Good Faith Very interesting inclusion in the rules Preamble para3 States “The taking of evidence shall be conducted on the principles that each Party shall act in good faith and be entitled to know, reasonably in advance...the evidence on which the other Parties rely.” Neither the Model Law nor most arbitral rules (save Swiss Arbitration Rules) make express mention of good faith. This appears to be a first- is there an obligation to arbitrate in good faith? 10

12. Good Faith Article 9.7 of the Rules provides that the Tribunal may impose sanctions if the parties do not act in good faith in the taking of evidence “If the Arbitral Tribunal determines that a Party has failed to conduct itself in good faith in the taking of evidence, the Arbitral Tribunal may, in addition to any other measures available under these Rules, take such failure into account in its assignment of the costs of the arbitration, including costs arising out of or in connection with the taking of evidence” 11

13. Good Faith Article 9(7) means that failure to act in good faith can be punished Adverse inferences can be drawn for example from failure to produce documents as ordered (Article 9(6) of the Rules) The Tribunal may order the offending party to pay the costs wasted by its bad behaviour More drastically Article 9(7) appears to give the Tribunal a very wide discretion to punish bad behaviour in costs generally! 12

14. Good faith- Problems What does it mean? Perennial question, difficult enough in national law. How serious does bad behaviour have to be before being punished in costs Wont different Tribunal’s have different views on this? Examples of Bad Faith may illustrate the problem 13

15. Good Faith/ Bad Faith in the Taking of Evidence “Sandbagging” Witholding documents, evidence to” ambush” the other party. Preamble para 3 of the Rules states that parties should be aware of the evidence to be used against them Article 3.1 of the Rules states that parties should produce all the documents on which they wish to rely within the time set by the Tribunal Qu- Is this acting in bad faith? How common is it? What should the sanction be? 14

16. Bad Faith in the Taking of evidence Submitting overly long and burdensome document requests Article 3.3 of the Rules allows parties to submit requests for “narrow and specific categories of documents” explaining how these are relevant and why they are required. It is not uncommon for parties to submit lengthy and argumentative requests for documents. Leading to increased efforts by the other party to respond, disputes about relevance etc. While Article 3(7) of the Rules allows for the Tribunal to resolve these disputes it can lead to delay and expense. Is this acting in bad faith? How common? Sanctions? 15

17. Bad Faith in the Taking of Evidence Objecting to valid requests for documents Article 9 (2) of the rules provides the grounds for objection to a request to produce namely Lack of relevance Privilege, confidentiality or sensitivity Unreasonable burden/ procedural economy Yet parties often object to the production of documents on spurious grounds- leading to delay and expense Is this bad faith? How common is it? Sanction 16

18. Bad Faith in the Taking of Evidence Burying relevant documents amongst irrelevant documents Tampering with documents/falsification of documents/cutting and pasting and presenting misleading documents (Breaching Art 3.12 as to the form of documents) Examples of this might be the presentation of translations without the originals or without indication that the documents are translations (3.12 (d) Disclosing confidential documents in order to damage the opposing party or to pressurise the other party (Art 3.13 states that documents are to be used for the purposes of the arbitration only). Destroying documents- there is no obligation to maintain documents- but could this be a breach of good faith? 17

19. Good Faith- a Mixed Blessing From the examples above it is clear that the good faith obligation will be used a lot in the future. Parties will use it to justify applications for costs based on the alleged unreasonable conduct of the other party in the course of proceedings. This uncertainty can be solved by the Tribunal at the outset by means of early consultation. Early consultation is provided for in Article 2 of the Rules and is becoming a prominent feature of arbitration. The Tribunal should state at the outset its views on matters of evidence and how it will apply the good faith duty. Parties should be able to know where they stand. 18

20. Good Faith- Post Script- the Role of Lawyers Does the obligation to act in good faith in the taking of evidence extend to the parties’ lawyers and counsel? In principle yes as counsel act on behalf of the parties- there is no reason why a party should escape blame/sanction for the improper conduct of counsel in the taking of evidence in an arbitration. But what is improper conduct? Unfortunately there is no clear cut answer. This is a big problem in international arbitration Lawyers are bound by their own national codes of conduct/regulatory obligations Parties and their lawyers will be from different jurisdictions- the lawyers will have different codes of ethics and therefore there is no “level playing field” 19

21. The Role of Counsel- Examples Pleading the case- what if case inconsistent with documents not disclosed to other party? Meeting with witnesses to Discuss the evidence?(Art 4(3)) “not improper to meet and discuss evidence” Drafting the statements?- no rule though the reality is that the statements are lawyer written, is this a good thing? Practising cross examination with the witness? Common in the US- increasing in the UK- Hungarian code? What do we do when we know our opponents are doing this? Preparing answers for the witness in cross examination? 20

22. Many thanks. David Holloway dh@no5.com

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