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International arbitration in construction cases
January 2010
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1 Introduction
1.1 Arbitration is an inherently flexible process, as reflected in all of the major institutional rules and the arbitration laws of the vast majority of countries (see the paper at Schedule 1 for more detail). Such flexibility and the consensual nature of the process are two of the major advantages of arbitration, since one avoids what is typically a relatively fixed and inflexible procedure in litigation before the courts. Those advantages are also, of course, potential disadvantages if the arbitral process is not managed effectively by the parties, their counsel, the tribunal and any institution.
1.2 Since you will already be familiar with international arbitration in general terms, this paper does not introduce the topic as a whole. Extensive reference materials can be found in the Norton Rose Group Arbitration Manuals, for Europe, Asia, the Middle East and Africa.
1.3 This paper:
(a) comments briefly on construction disputes in an arbitral context; and
(b) looks at how a “typical” ICC arbitration might be run and which issues arise specifically in the context of arbitration.
2 Construction disputes in arbitration
2.1 The major internationally used rules apply in the same manner to construction disputes as to any other commercial dispute. Accordingly, to the extent that construction disputes present particular procedural issues and challenges, it is for the users of the process to be alive to how procedures might be adopted which are best disposed to determining construction disputes in particular.
2.2 As a generalisation, it is probably fair to say that most construction cases bear all or some of the following attributes which distinguishes them from many other types of dispute.
(a) There tend to be a vast number of facts and consequently documents relating to the facts at play.
(b) Consequently, in construction cases perhaps more than in other cases, proper case management is required to promote time and cost efficiency in arbitration and to prevent the process spiralling out of control.
(c) Expert evidence tends to be key to the outcome of the dispute. This is specially so in relation to delay and disruption disputes of the type discussed in the preceding paper. Subject to the facts being adequately evidenced by documents and/or witnesses, and subject to the legal case being adequately submitted and explained, such cases tend to have at their heart the analysis of any programming experts appointed and any quantum experts seeking to value the consequent prolongation costs.
(d) Partly as a reaction to the critical importance of the expert evidence presented by the parties’ expert witnesses, tribunal-appointed experts are also encountered relatively commonly.
(e) The dispute has very often been through some other form of dispute resolution before being submitted to arbitration. (e.g. FIDIC - DAB) and so parties are already entrenched.
3 “Typical” procedures in an ICC arbitration and th e issues encountered
3.1 Given the inherent flexibility of the process, there is (or ought to be) no such thing as a “standard” arbitration process used as a blueprint in all cases.
3.2 That said, there are of course common practices. The summary below runs through in very basic terms a “typical” ICC arbitration. ICC arbitration has been chosen since the FIDIC forms
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prescribe ICC arbitration as the final and binding means by which to resolve all disputes. In any event, leaving FIDIC contracts aside, the ICC is the most popular arbitral institution for construction/infrastructure disputes in many of the world’s regions, and some 30% or so of its total case load is accounted for by disputes emanating from construction projects of one kind or another. What follows does not describe in general terms each stage of the case in full, but rather picks up on points of interest which arise in the specific context of a construction case.
Request for Arbitration
3.3 Generally, a claimant in an ICC arbitration will face a choice when commencing the proceedings (by filing the Request) between:
(a) filing a very brief Request sufficient to satisfy the minimal requirements of the ICC Rules but not setting out the claimant’s case in any detail; or
(b) going far beyond what is required by the Rules in filing a full Request which sets out in great detail the claimant’s case (and which might even stand as the claimant’s complete and final legal submission subject to evidencing the claim via documents, witnesses and experts in due course) and which might run to many volumes.
3.4 To a large degree of course, this choice is down to a tactical decision. Questions such as the following arise:
(a) How much cost is the claimant willing to bear up front, and under how much cost pressure does he wish to place the respondent by forcing the respondent to respond at an early stage of the case to a lengthy and complex submission?
(b) To what extent does the claimant wish to reveal his hand at the outset of the case rather than “keeping his powder dry”?
(c) Does the claimant wish to set out its case in a way so as to justify the inclusion of certain issues in the terms of Reference and/or so as to justify certain requests for documents from the respondent in due course?
3.5 Given that the dispute in a construction case has frequently been the subject of less formal dispute resolution processes prior to being arbitrated, it is not unusual to see a relatively detailed form of Request adopted. Since both parties are already aware of the position being adopted by the other in general terms, it is often thought that there is nothing to be gained from re-stating what has already been set out before, and that the detailed approach is required to move matters along.
Appointment of the tribunal
3.6 The tribunal is of course appointed in precisely the same manner in a construction case as in any other arbitration.
3.7 Construction disputes can be well suited to the appointment of technical, as opposed to legal, arbitrators. Whilst this might not be particularly popular or common in the case of cases presided over by a single arbitrator, it is common in a tribunal to see (for instance) one party appoint an arbitrator who is known to understand programming, one party a an arbitrator who is known to understand quantum and then for a legal Chairman to be appointed.
3.8 This is of course dependent on the case and wishes of the parties. However, to the extent that it might lead to the appointment of inexperienced arbitrators, issues can arise. The hand of a strong Chairman and/or the assistance of the ICC can prove invaluable in these situations.
Answer
3.9 To some extent the format of the respondent’s Answer will be dictated by the format of the claimant’s Request. To the extent that the respondent, as is not uncommon in construction
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cases, has a counterclaim, he faces the same tactical choices as did the claimant as to the level of detail to volunteer at this early stage.
3.10 One consequence which can result in construction cases where a detailed Request has been filed is that a long period is agreed in which the respondent may prepare his Answer, so as to be able to meet the level of detail in the Request without suffering prejudice.
Directions/Terms of Reference
3.11 Construction cases are complex and thus the procedural directions and timetable agreed or laid down by the tribunal needs to be carefully considered. The danger of insufficient time being allowed to permit the matter to be developed in sufficient detail must be avoided, as of course must the unduly long and over-elaborate procedure. Experienced parties, counsel and arbitrators can assist in bringing their experience to bear.
3.12 If the parties have filed detailed submissions by the Terms of Reference stage (which is of course relatively early in the overall procedure) it will be useful to have a detailed and carefully worded list of issues in the Terms of Reference.
3.13 Particular comment on the Terms of Reference is contained in Steve Abraham’s paper submitted to the 2008 ICC Arbitration Practitioners Symposium in July 208 in London. A copy of that paper is included at Schedule 1 of this paper.
Detailed submissions (if required), maybe with docu ments and witness statements
3.14 If the detailed form of Request and Answer has been adopted, there may be no need to develop mattes further by means of additional statements of case. However, the parties would ordinarily exchange both the documents on which they rely and their witness statements.
3.15 Given the potential level of detail into which the tribunal will need to delve in order to make a finding as to what events were occurring when on site, and why, and what their effect might have been, parties should to have to conduct this element of the case with particular care and attention. In particular, tribunals in construction cases tend to take a robust approach when it comes to a party discharging its burden of proof - the tribunal will expect every specific factual allegation made by either party to be supported by a contemporaneous document and/or by a witness statement.
3.16 The distinction between factual and opinion evidence tends to be observed closely in construction cases. It is for the facts to be established by contemporaneous records and/or by witnesses of fact who can give direct testimony from their personal knowledge and recollection. It is then for the experts to work from those facts to produce their expert opinions; it is not for the experts to assume the facts.
Disclosure/document production
3.17 As mentioned above construction disputes can be document-heavy. Accordingly, adopting a sensible approach to document disclosure/production is particularly important in construction cases.
3.18 Steve Abraham recently spoke at a conference in London on the topic of document production. A copy of the paper submitted to that conference is included at Schedule 2 of this note. Picking up on the points made in that paper, in our experience many construction cases in particular lend themselves very well to the IBA Rules on the Taking of Evidence in International Arbitration being applied for guidance purposes in relation to document production.
Expert reports
3.19 As already noted, tribunal-appointed experts appear relatively frequently in construction cases. In any other types of case, whilst the ICC Rules still permit the use of a tribunal-appointed expert, their use is uncommon.
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3.20 If such an expert is appointed, particular care must be taken to define his or her role and the procedures which will govern it. Can either or both of the parties instruct him or her, in addition to their own experts, to opine on issues? Are they to act as “mediator” between the party-appointed experts to eliminate unnecessary areas of disagreement between them? How if at all are they to provide reports and/or be cross examined in any hearings?
3.21 As regards programming experts, we have positive experience of using a tribunal-appointed expert in the “mediator” type of role described above. The party-appointed experts were taking diametrically opposed views on the appropriate analysis method. The tribunal-appointed expert was able to hold without prejudice meetings with the parties’ experts (the content of which would not be disclosed to the tribunal) to ensure that each expert understood the other’s position and considered whether there might be scope to agree on such questions. As it transpired, there was no such agreement on the fundamental questions, and the tribunal expert was required as one of the final steps prior to the hearing to serve a brief report dealing only with those issues which (after the service of their reports) remained a matter of disagreement between the other experts. One challenge in this scenario is to ensure that the tribunal does not simply take the easy option of agreeing with the views of the tribunal-appointed expert without having given proper consideration to whether their report is correct. This is one of the commonest complaints in relation to this process - that the tribunal-expert effectively becomes the tribunal on the issues with which he or she deals.
3.22 Whether or not a tribunal-appointed expert is used, joint statements between the parties’ experts are crucial in delay and disruption cases. These statements are produced following without prejudice meetings between the experts either (as can be very useful) prior to serving their initial reports or (more usually) having served their initial reports and prior to serving supplemental/rebuttal reports. It is crucial that the experts together sign an agreed document which sets out the issues on which they remain in disagreement, and that any subsequent evidence served (and oral questioning in a hearing) is directed only at those issues. This can save a considerable amount of time, and therefore cost, in the hearing. It also serves to ensure that proper attention is devoted to the issues that matter and as little as possible to those that do not.
Hearing
3.23 Witness conferencing (also known as “hot tubbing” of expert witnesses is common in construction cases. The traditional approach to hearing expert evidence is that only one expert is questioned at a time. Typically, either all of the claimant’s experts are questioned followed by all of those of the respondent, or the hearing proceeds issue by issue with the claimant’s expert being questioned first. Under the witness conferencing procedure, however, experts of the same discipline give evidence at the same time. The usual procedure is that the same question is asked of both experts, one after the other. Something of a dialogue then ensues and the tribunal is able to assess based on seeing both experts alongside each other which expert appears to be presenting the more persuasive analysis. For obvious reasons, this opportunity does not present itself in the traditional scheme, since the experts might be asked wholly different questions and might appear to give evidence many days apart from one another.
3.24 As regards witnesses of fact, construction cases can pose a particular challenge when it comes to recalling the details contained in lengthy witness statements when being questioned persistently in the hearing. There is simply no substitute for the witnesses having spent the requisite time studying their own witness statements and accompanying documents in great detail in advance of the hearing. Subject to certain ethical constraints, there are also steps which counsel can take to ensure that witnesses are as prepared as can reasonably be expected. Those ethical constraints vary from jurisdiction to jurisdiction, and particular care must be taken when dealing with a case involving US counsel since it is common practice in US litigation and arbitration to rehearse with the witness their evidence.
Post hearing “briefs”
3.25 We see too many cases in which a party’s post-hearing briefs are used simply to regurgitate long tracts of evidence from the hearing transcript. This is neither useful no persuasive. These
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“briefs” should indeed be brief (or at least as brief as possible), and should effectively provide the tribunal with a draft award and point the tribunal to the key findings which it needs to make. It is our experience that a well drafted post-hearing brief is extremely important.
Award
3.26 After a complex and long drawn out arbitration, itself probably preceded by other firms of dispute resolution, the parties usually want to see a detailed and well reasoned award. To come to the end of that long process only to receive a document from which the reasons for the end result are less than clear is, to say the least, disappointing.
3.27 Experienced tribunals ought in theory to be trusted to be able to produce good quality awards, and broadly this is so. In construction cases, if one has appointed a mixed discipline tribunal then ordinarily the three tribunal members will each bear responsibility for drafting different sections of the award. This can work very well and contribute to the quality of the reasoning provided that the tribunal members work in a coordinated fashion.
3.28 In theory, an ICC arbitration offers additional comfort at this stage in view of the special procedure by which draft awards are submitted by the tribunal to the ICC Court for review. This is not to influence the findings on the merits, but to ensure that the award is readily understandable to an outsider to the case and absent obvious errors. The theory is that this assists in enforcement proceedings under the New York Convention by narrowing the bases on which an award might be open to obvious challenge. Unfortunately, it is our experience that the ICC Court’s scrutiny process tends to add little if any value (but can cause considerable delay) in cases where an experienced tribunal accustomed to writing awards has been appointed.
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Schedule 1
Revising the ICC Rules of Arbitration: Articles 13- 23
International Arbitration Practitioner’s Symposium, 3 July 2008
Steve Abraham, Partner, Norton Rose LLP
___________________________________________________________
1 Introduction and context
1.1 Before we look at the ICC Rules and some potential revisions to them, it is important to understand the context and importance of the Rules and therefore of any changes one may make to them from time to time.
1.2 We will all be familiar with the 2006 and 2008 PricewaterhouseCoopers / Queen Mary School of International Arbitration studies entitled “International arbitration: corporate attitudes and practices” (the “2006 Report” and “2008 Report” respectively). These were compiled following surveys and interviews with numerous in-house counsel at leading corporations around the world. For present purposes the following points emerge:
(a) Corporations generally prefer institutional arbitration to ad hoc arbitration (2006 Report: 76% of respondents). The 2008 Report found that 86% of awards were rendered in institutional cases rather than in ad hoc arbitration.
(b) According to the 2006 Report, the top three reasons for choosing institutional arbitration were (in order of significance): (1) a strong reputation for managing arbitration proceedings; (2) familiarity with proceedings; and (3) understanding of costs and fees.
(c) Respondents to the 2006 Report were asked to choose their top three institutional preferences from ten options. The report summarises the results as follows:
ICC 42%
LCIA 20%
“Regional” 15%
AAA 13%
SCC 4%
Swiss 3%
CIETAC 2%
HKIAC 1%
(d) The 2008 Report found that the ICC, AAA and LCIA are the institutions most commonly used by participating corporations, but that regional arbitration centres are of increasing popularity. The 2008 Report reconfirms that the ICC is the most popular institution with respondents - 45% of respondents indicated that they preferred to submit their disputes to the ICC, followed by 16% to the AAA and 11% to the LCIA.
1.3 These findings are largely borne out in the number of cases filed with the ICC as opposed to the other institutions (see Schedule 1).
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1.4 It follows that the ICC Rules are a key document for the end users of the international arbitration process. Accordingly, changing the ICC Rules is not something to be taken lightly.
1.5 However, arbitration is and must be a flexible process, and a consensual one. Parties have a choice between institutional and ad hoc arbitration, and within institutional arbitration between a wide choice of arbitral institutions and of sets of rules. It is important that regular reviews are undertaken of institutional rules to ensure that they continue to provide the end users of the service with what they want and need, and to encourage the just but also time and cost efficient determination of disputes in a manner which leads to an award which is capable of being enforced. Encouraging though the Reports may be for the ICC, it is not for the institution to rest on its laurels or to assume that corporate attitudes are not susceptible to change.
1.6 The current version of the ICC Rules has been with us now for some 10 years. The world of arbitration has seen some changes in that period. For example:
(a) Electronic disclosure, whilst certainly not a novelty 10 years ago, has become far more prevalent. Certainly it would be inconceivable these days for any substantial matter to be concluded without reference to email accounts and the like.
(b) Competition between institutions has increased and is set to continue to increase. As reflected in the Reports, the last 10 years have seen the birth, growth or revitalisation, as applicable, of numerous regional and other arbitral bodies such as.
• SIAC
• CIETAC
• DIAC
• DIFC
• HKIAC
• Swiss Chambers
(c) There has been a proliferation of investment treaties and so of potential claims. Whilst a great many treaties will specify ICSID as the applicable forum, those that do not will typically refer disputes to UNCITRAL or ICC arbitration. Others will leave the investor with a choice, typically between ICSID on the one hand and one of UNCITRAL or ICC on the other. Since the ICC does not have separate rules for investment disputes, they are governed by the Rules in the same way as is a conventional commercial arbitration. Thus the ICC and the Rules need to be ready to meet the challenges of these cases as well as the more traditional fare.
1.7 The ICC is not alone in undergoing a review of its rules. Several other arbitral institutions are similarly embarking on a process of possible rule revisions.
2 Party autonomy
2.1 Before looking at any individual Rules or steps in the ICC procedure, it is important to remember that Article 15(1) enshrines the principle of party autonomy:
“The proceedings before the Arbitral Tribunal shall be governed by these Rules and, where these Rules are silent, by any rules which the parties or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.” (emphasis added)
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2.2 The Arbitration Act 1996 provides in section 1(b) (a non-mandatory provision) that “the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.” This is in line with Article 19 of the UNCITRAL Model Law.
3 Controlling time and cost generally
3.1 The speedy and cost efficient handling of any arbitration is typically paramount in the minds of parties when agreeing to arbitrate and, so the parties would hope, in the minds of institutions and arbitrators.
3.2 This is not the time and place for the usual debate as to whether arbitration is or is not, either typically or inherently, a time and cost-efficient process. What probably goes without saying, however, is that institutional rules should do what they can to promote the time and cost effective resolution of the dispute. To be effective, they must do so without detracting from the need to have a valid and enforceable award at the end of the process (often despite local courts in the place of enforcement being somewhat unsupportive of the arbitral process and adopting a wide interpretation of Article V of the New York Convention). Notably in this respect, Article 35 of the Rules places a positive duty on the tribunal to “make every effort to make sure that the Award is enforceable at law.”
3.3 This potential clash between promoting time and cost efficiency on the one hand and enforceability on the other is something which is dealt with differently under, by way of comparison, the ICC and LCIA Rules.
(a) Whilst there is certainly nothing in the ICC Rules to promote time and costs being wasted in the determination of a dispute, neither is there a Rule specifying, in terms, that the tribunal must dispose of cases expeditiously and cost-efficiently. Perhaps the closest one comes to this is Article 20(1) which is more limited in scope and provides that “The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means.” One has to read that provision in the light of Article 24(1), which provides that, subject to any extension by the Court, the tribunal is to render its final award by no later than six months after the signature of the Terms of Reference (as to which more below).
(b) The LCIA takes a more direct approach on time and costs, by placing separate obligations on the tribunal and the parties.
(i) Article 14.1(ii) provides that the tribunal is to:
“…adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay or expense, so as to provide a fair and efficient means for the final resolution of the parties’ dispute.”
(ii) Article 14.2 provides that:
“… at all times the parties shall do everything necessary for the fair, efficient and expeditious conduct of the arbitration.”
At Article 32.2 the LCIA Rules set out an equivalent provision to Article 35 of the ICC Rules.
(c) It is interesting to note in this respect that according to the 2008 Report, the perceived benefits of international arbitration as a process overall are: (1) the enforceability of awards; (2) the flexibility of the procedure; and (3) the expertise of arbitrators. The 2006 Report had placed flexibility of procedure as the most widely recognised advantage, but with enforceability being ranked as the single most important advantage by the highest number of respondents. Certain findings in the 2008 Report suggest that enforcement proceedings are only required in a perhaps surprisingly small proportion of cases in which an award is rendered, with 49% of all cases ending in voluntary compliance with
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an award. In only 11% of cases did participants need to proceed to enforce an award. Indeed, 84% of respondents indicated that in more than 76% of their cases the non-prevailing party complied voluntarily. However:
(i) The fact that so few cases go to enforcement proceedings must at least in part be down to the perceived quality and reliability of the process.
(ii) For international arbitration to remain a viable process, it must have as its core and base aim to provide an enforceable decision which is not readily open to challenge.
3.4 So Article 35 seems to satisfy the end user of international arbitration. But what of the absence of an equivalent to LCIA Rules Article 14.1(ii)/14.2?
3.5 Since the 1998 Rules we have of course seen the publication of the ICC Commission on Arbitration’s report “Techniques for Controlling Time and Costs in Arbitration” (the “TCTCA”). This is not currently referred to in the Rules, but it is drawn to the attention of the parties and tribunal to encourage a thoughtful approach to the handling of the case.
3.6 In the author’s opinion, it would be neither necessary nor wise to make express reference to the TCTCA in the Rules. Indeed, to do so would be counter-productive since the TCTCA does not prescribe any particular procedures. It proper role is as an aide-memoire, but an important one, pointing parties and tribunals in the direction of a series of matters which ought to be considered when setting down the applicable procedure and in conducting a case. The TCTCA itself makes it clear that it is neither part of nor interpretative of the Rules and is not binding in any way on the Court.
3.7 Many national arbitration laws will of course impose some duty on the tribunal to dispose of the case expeditiously and cost-effectively. Our own Arbitration Act 1996 provides in section 1(a) (a non-mandatory section) that “the object of arbitration is to obtain the fair and reasonable resolution of disputes by an impartial tribunal without unnecessary delay or expense.” Section 33(1) (a mandatory provision) then goes on to define the general duty of the tribunal so as to include that it shall “(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.” Section 33(2) then makes it clear that the tribunal is to comply with that duty “in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.”
3.8 At least so far as English seated ICC arbitration is concerned, no revision to the Rules is required. It is the author’s view that the ICC Rules implicitly if not explicitly already promote time and cost efficiency even without a provision of the type discussed above. ICC practice also does so given the importance now given to the TCTCA. Whilst the author would not propose a change to the Rules on this issue, others might well do so and it is an issue which the author would suggest merits consideration at this time. A provision such as that found in the LCIA Rules would not be inconsistent with the ICC Rules as a whole. Whilst there might be a tension between saving time and costs on the one hand and enforceability on the other, the fact is that saving time and costs whilst achieving enforceability are the two main aims of any arbitral process; some may say it is time that the Rules reflected that expressly.
4 Terms of Reference (Article 18)
4.1 Among Articles 13-23 it is probably Article 18 concerning the Terms of Reference which attracts the most interest and commentary when it comes to assessing the effectiveness of the ICC Rules.
4.2 The Terms of Reference are of course a defining feature of ICC arbitration. Whether the Terms of Reference are either necessary or desirable is a question which tends to polarise opinion - especially as regards the list of issues required under Article 18(d) of the Rules, as to which more below.
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4.3 To some practitioners, the Terms of Reference are indispensable, and an ICC arbitration without them and the list of issues they contain would not be an ICC arbitration at all. To others, they are a time consuming and expensive stage of the proceedings which adds little or nothing of value in many cases.
4.4 The Terms of Reference have been a feature of the ICC Rules over various iterations of the Rules for many decades. They have always survived any criticism of them.
4.5 Whilst as discussed above the Rules as a whole live by the principle of party autonomy, the Rules present the Terms of Reference as a mandatory stage in any ICC case, and are prescriptive as to timing. Article 18(2) provides that “Within two months of the date on which the file has been transmitted to it, the Arbitral Tribunal shall transmit to the Court the Terms of Reference signed by it and by the parties. The Court may extend this time limit pursuant to a reasoned request from the Arbitral Tribunal or on its own initiative if it decides it is necessary to do so.” Thus, effectively as an exception to Article 15(1), the parties cannot agree to dispense with the Terms of Reference or to sign them at some later stage of the proceedings; and neither can the tribunal order it. Only the Court can defer the signing of the Terms of Reference, and the Court is at liberty to override any request to that effect which a tribunal might make.
4.6 Whilst it is never possible to please all of the people all of the time, it is now time to ask again whether the Terms of Reference and Article 18 represent what the end users of arbitration want. This is a question which is difficult to answer by reference to any empirical data. On one level, it is tempting to conclude that the continued popularity of the ICC among the users of arbitration is itself an endorsement of the Terms of Reference given the prominence of the Terms of Reference in the ICC procedure. This, however, is to assume that in opting for ICC arbitration parties are swayed to a large extent by the Terms of Reference as opposed to any other factor or factors. Given the number of factors in play, this is not a safe assumption to make, in the author’s opinion.
4.7 If one adopts the most positive perspective then there can be little doubt that the Terms of Reference can and frequently do make a substantial contribution to the arbitral process, particularly when accompanied by the traditional procedural meeting to debate any remaining points not agreed in drafts and sign the documentation.
(a) Assuming the tribunal takes a proactive role in drafting the terms of Reference (as in the author’s opinion is desirable), then the tribunal is from an early stage engaged in the case, able to test the parties’ positions and decide on an informed basis on the most appropriate procedure and timetable.
(b) The parties and the arbitrator(s) meet face to face and see the whites of each others’ eyes at an early stage. On an intangible basis, this can have the effect that a party who is perhaps involved in the process anything less than whole-heartedly realises the scope of the commitment it has made in coming to arbitration. It can also allow an early opportunity to see whether a party appears to be well prepared and to have a genuine conviction in its position. It brings the parties physically together (assuming principals attend) thus potentially providing an opportunity for dialogue outside the formal arbitral process.
(c) The process of agreeing a summary of each other’s claims/defences and defining the issues to be determined forces the parties to understand their own and other side’s position in detail early in the process. Thus arguments and issues which absent the Terms of Reference might not be addressed until an unduly late stage in the procedure ought to be identified early and addressed properly.
(d) It allows the parties henceforth to focus on the true issues in the case and not to be sidetracked into addressing irrelevant or trivial points.
(e) It can point to any evident pitfalls in a party’s case.
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(f) To the extent it has not already been able to do so, the Terms of Reference once forwarded to the Court can enable the ICC to set adequate and appropriate advances on costs.
(g) As a result of all of the above, the Terms of Reference and the procedural meeting which usually accompanies their signing are often said to amount to something of a prompt to reach settlement. Indeed, the 2008 Report found that 43% of settlements were reached before the first (usually procedural) hearing. In the context of ICC proceedings, that would typically mean at or around the time of drafting the Terms of Reference. A further finding was that such settlement is more likely in institutional than in ad hoc proceedings. A further 31% of settlements were reached after the procedural hearing but before the hearing on the merits. This cannot be measured, but inevitably, some of those 31% will have been prompted by what happened at the Terms of Reference procedural hearing.
(h) Article 18(a) can flush out any uncertainties as to who the correct parties to the action may be, for instance where names may have changed or questions of alter ego or the like arise.
(i) The process of summarising the claims, counterclaims and defences filed to date enables the arbitration to be “frozen” in the manner envisaged by Article 19. Article 19 provides that once the Terms of Reference are signed, no party may make new claims or counterclaims which fall outside the Terms of Reference unless authorised by the tribunal having taken account of all relevant circumstances.
(j) In some cases the opportunity is taken to insert wording into the Terms of Reference which has the effect of forming a new arbitration agreement, superseding whatever agreement was in place at the commencement of arbitration. This provides an opportunity to address any underlying deficiencies in the original arbitration agreement, thereby perfecting a clear consent to arbitration and potentially avoiding jurisdiction arguments within the arbitration and/or difficulties at the enforcement stage which would otherwise have arisen.
(k) Generally, the signing of the Terms of Reference, provided they are well drafted, shows some tangible progress in the case shortly after the constitution of the tribunal. If the list of issues is detailed and continues to reflect the true issues in the case as matters progress, it of course provides an invaluable guide to the parties in terms of knowing what to address in written and oral submissions and to the tribunal in drafting the award. There is a further benefit to the ICC Court itself in then using the Terms of Reference as a key document during the scrutiny of the award. This promotes the effectiveness of the arbitration and, ultimately, the enforceability of the award.
(l) In this last respect, Article 18 makes a direct and important contribution towards the principle set out in Article 35 mentioned above.
4.8 So the benefits of the Terms of Reference are many and varied, assuming of course they are drafted well. Conversely, a badly drafted Terms of Reference and list of issues can serve to contaminate the arbitral process by, for instance, taking both parties and tribunal into areas of enquiry which do not in truth go to establishing liability or quantum. Best practice is to pay as much attention to the drafting of the Terms of Reference as one would to a statement of case or, perhaps more fittingly as the Terms of Reference is an agreed document, a contract.
4.9 However, at least in the author’s experience, it is often the case, especially in complex cases of the sort which the ICC would want to attract above all others, that attempting to draw up a definitive list of issues at the stage of the proceedings at which the Terms of Reference are required to be drawn up is simply not a realistic expectation.
(a) In a complex case it will often or indeed invariably be the case that the parties’ submissions will not be fully developed a mere two months after the tribunal receives the file. Accordingly, the issues in the case are yet to crystallise and are not capable of
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being reduced to a list which will guide the tribunal in the substantive hearing(s) and drafting of award(s).
(b) Many of us will have experience of the potentially lengthy and heavily negotiated list of issues which is preceded by introductory words such as “The issues to be determined are those which arise from the parties’ respective submissions filed to date and to be filed henceforth. They are many and various, but it appears from the summaries of the parties’ positions contained in these Terms of Reference that the following issues amongst others fall or may fall to be determined.”
(c) That is not to say that the drawing up of the list of issues is then a pointless exercise. However, in the context of a complex matter, one has to query whether it is the most effective use of the parties’ and tribunal’s time at that particular stage.
(d) At the other end of the spectrum is a purely perfunctory form of words such as “the tribunal will address all questions which arise during the course of the arbitration.” Something along these lines is sometimes all that can be done if only the most basic form of Request and Answer have been filed at the time of the Terms of Reference being signed.
(e) Many of us will also be familiar with the manner in which parties, and in particular claimants, will attempt to use the Terms of Reference as a re-formulation of the case set out in their initial summary statement(s) of case. Whilst it is useful to know that a party wishes to depart from or expand upon its previously stated position, this “pleading by the backdoor” process tends to be rather counter-productive. At best it gives rise to a situation where permission to amend is given such that a new statement of case is served shortly after the Terms of Reference are signed (rendering them immediately redundant). At worst, the tribunal, in testing the draft Terms of Reference wording, effectively ends up tipping off one or both of the parties as to how it/they may go about improving their position.
4.10 Overall, therefore, one has to query whether the expectation behind Article 18(d), i.e. that a relatively final form list of issues may be concluded at such an early stage of the case, is a realistic one in, on the one hand, a complex case or, on the other, a case in which the issues are yet to be explored in any satisfactory level of detail at this early stage.
4.11 Article 18(d) does of course envisage this to a degree by providing that the list of issues is to be included “unless the Arbitral Tribunal considers it inappropriate”. The Terms of Reference is far from being a pointless document even if it does not contain a list of issues. Far from it - the provisions of Article 18 aside from Article 18(d) all serve a useful purpose, as reflected above. However, the omission of a list of issues is a substantial omission, and the draftspersons of Article 18(d) deliberately put as the default position that there is to be a list of issues. Neither do the Rules provide for a list of issues to be concluded at any later stage if one is not included in the Terms of Reference.
4.12 The question for today is whether the arbitral process ultimately benefits overall from the Terms of Reference, including the list of issues. As food for thought, is it time to tweak the Rules so as to keep the Terms of Reference but change their timing and/or content? This could be done by either:
(a) deferring the Terms of Reference altogether until later in the case, but keeping the existing wording of Article 18 in all other respects; or
(b) keeping the timing of the Terms of Reference as it is now, but allowing for the list of issues to be deferred (whilst still requiring one).
4.13 One possible approach, reflecting (b) above, would be to delete the existing Article 18(d) and then insert a new Article 18(5) to read as follows:
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“The Arbitral Tribunal shall draw up, on the basis of documents or in the presence of the parties and in the light of their most recent submissions, a document containing a list of issues to be determined. Such document shall be agreed and signed by the parties [period] prior to any substantive hearing.”
4.14 This would have the combined effects that:
(a) There would still be a list of issues, but time and expense would not be incurred in drawing it up until such time as it is reasonably capable of being drawn up in terms which accurately identify the issues to be determined. The list of issues effectively become a separate obligation and a separate step from the Terms of Reference.
(b) The Terms of Reference and (separate) list of issues would still benefit the parties, tribunal and ICC Court in the conduct of substantive hearings, drafting of awards and review of awards as applicable. Whilst both parties and tribunals might well still shy away from a completely “binding” list of issues with no wording allowing new issues or modification of the issues, the issues would almost inevitably be defined in more final a manner than under the current regime. This would more closely fulfil what would appear to be the underlying sentiment of Article 18.
(c) All the benefits of the Terms of Reference (absent the list of issues) being signed at an early stage would remain.
(d) Given the inherent flexibility in the procedure, the parties and tribunal could still give thought to whether, in appropriate cases, the list of issues is to be included in the Terms of Reference. This would in no way be inconsistent with the proposed new Article 18(5).
5 Article 23 – Conservatory and Interim Measures
5.1 Article 23(1) provides, in summary that:
(a) The tribunal can order any interim or conservatory measure it deems appropriate.
(b) It may make the granting of such a measure subject to any appropriate security from the requesting party.
(c) The measure is to take the form of an order, giving reasons, or of an award, as the tribunal considers appropriate.
5.2 Article 23(2) provides for the right to apply to any competent judicial authority for interim or conservatory measures, either before the transmittal of the file to the tribunal or, in appropriate circumstances, thereafter.
5.3 Articles 23(1) and (2) are both entirely appropriate and sensible. It is essential that the parties to a dispute have access to interim relief both prior to and after the appointment of the tribunal, particularly given the length of time that may be required to constitute a tribunal, and the length of time between initiating proceedings and the handing down of any award.
5.4 The question is whether Article 23 should go further than it currently does, so as to provide additional protection to the party by whom prejudice may be suffered if the interim measure is granted.
5.5 In 1990, the ICC established a separate set of rules, the ICC Pre-arbitral Referee Procedures, to allow for the granting of interim relief pending the appointment of an arbitral tribunal. However, if parties wish to have recourse to the ICC Pre-arbitral Referee Procedure, a specific reference to it must be stipulated in the arbitration agreement. Parties rarely consider such matters when initially entering into a contractual relationship. Therefore, unless the party/parties is/are advised by an experienced user of the ICC system, it is not uncommon for the parties to neglect to adopt
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the model clause or include an extra contractual provision adopting the Pre-arbitral Referee Procedures.
5.6 The current ICC Rules follow the broad approach set out the 1985 edition of the UNCITRAL Model Law regarding the tribunal’s powers to grant interim measures, rather than the more prescriptive approach adopted in the 2006 re-draft of Article 17 of the Model Law. Whilst this issue remains of some debate within UNCITRAL, it is timely to consider whether Article 23 should at least incorporate provisions setting out the conditions which should be met for the grant of interim measures, along the lines of Article 17A of the UNCITRAL Model Law. The additional provisions would read along these lines:
“(3) The party requesting an interim measure under Article 23(1) shall satisfy the Arbitral Tribunal that:
(a) Harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and
(b) There is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination on this possibility shall not affect the discretion of the Arbitral Tribunal in making any subsequent determination.
(4) With regard to a request for an interim measure under Article 23(1), the requirements in paragraphs (1)(a) and (b) of this article shall apply only to the extent the Arbitral Tribunal considers appropriate.”
5.7 On balance the author is in favour of this approach. Of course, parties and tribunals would need to be sensible in implementing these rules so as to avoid the undue delay and expense of holding a mini-trial on the merits of the case. However, there is plenty of experience of how to do this successfully under various national systems of law. In any event, in extreme cases where the analysis of the merits is for whatever reason not possible or practicable or cannot be achieved in the time available for granting an emergency measure, the tribunal can invoke the discretion afforded to it by new Article 23(4).
6 Concluding remarks
6.1 This paper deliberately does not comment on each provision within Articles 13 to 23 of the Rules. Whilst much interesting debate could be had around various matters not covered above (for instance whether the Rules should say anything about the use of technology), it is the author’s belief, based on experience, that it is the issues referred to above which merit the lion’s share of the attention when looking at Articles 13 to 23.
6.2 Whatever may result from the current consultation process in relation to the Rules, the empirical data seems to show that the ICC is on solid ground with its clients, the end users of the process. The potential revision of the Rules is, however, an opportunity to strengthen the ICC’s position still further, provided any changes are made having listened to the views of clients and following careful debate.
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Cases registered with institutions (source: 2008 Re port)
Institution Type 2003 2004 2005 2006 2007 TOTAL
ICC International and Domestic
580 561 521 593 599 2,854
AAA/ICDR International 646 614 580 586 621 3,047 LCIA International 99 83 110 130 127 549
SCC International and Domestic
169 123 100 141 170 703
Swiss Chambers International 0 52 54 50 58 214 HKIAC International 287 280 281 394 448 1,690 SIAC International 35 48 45 65 70 263 CIETAC International 422 462 427 442 429 2,182 DIS International
and Domestic 81 87 72 75 100 415
ICSID 30 27 26 24 35 142* ICAC (Ukraine) International
and Domestic 389 262 366 323 319 1,659
CICA International 70 77 72 62 54 335 KCAB International 38 46 53 47 59 243 VIAC International 45 50 54 36 40 225 SAKIG International 46 55 48 40 32 221 NAI International 32 33 32 29 28 154 WIPO Arbitration and Mediation Centre
International 8 9 22 23 32 94
Chamber of National and International Arbitration Milan
International 15 11 18 20 23 87
Mongolian National Arbitration Court
International 11 13 11 22 12 69
JCAA International 14 17 10 11 14 66 PCA International 5 5 6 5 9 30 ACICA International 1 1 2 2 1 7
Total 3,023 2,916 2,910 3,120 3,280 15,249
*Including cases submitted under ICSID Additional Facility Rules
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ICC Rules 1998 extract: Articles 13-23
“THE ARBITRAL PROCEEDINGS
Article 13
Transmission of the File to the Arbitral Tribunal
The Secretariat shall transmit the file to the Arbitral Tribunal as soon as it has been constituted, provided the advance on costs requested by the Secretariat at this stage has been paid.
Article 14
Place of the Arbitration
1 The place of the arbitration shall be fixed by the Court unless agreed upon by the parties.
2 The Arbitral Tribunal may, after consultation with the parties, conduct hearings and meetings at any location it considers appropriate unless otherwise agreed by the parties.
3 The Arbitral Tribunal may deliberate at any location it considers appropriate.
Article 15
Rules Governing the Proceedings
1 The proceedings before the Arbitral Tribunal shall be governed by these Rules and, where these Rules are silent, by any rules which the parties or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.
2 In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.
Article 16
Language of the Arbitration
In the absence of an agreement by the parties, the Arbitral Tribunal shall determine the language or languages of the arbitration, due regard being given to all relevant circumstances, including the language of the contract.
Article 17
Applicable Rules of Law
1 The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate.
2 In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages.
3 The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties have agreed to give it such powers.
Article 18
Terms of Reference; Procedural Timetable
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1 As soon as it has received the file from the Secretariat, the Arbitral Tribunal shall draw up, on the basis of documents or in the presence of the parties and in the light of their most recent submissions, a document defining its Terms of Reference. This document shall include the following particulars:
a) the full names and descriptions of the parties;
b) the addresses of the parties to which notifications and communications arising in the course of the arbitration may be made;
c) a summary of the parties’ respective claims and of the relief sought by each party, with an indication to the extent possible of the amounts claimed or counterclaimed;
d) unless the Arbitral Tribunal considers it inappropriate, a list of issues to be determined;
e) the full names, descriptions and addresses of the arbitrators;
f) the place of the arbitration; and
g) particulars of the applicable procedural rules and, if such is the case, reference to the power conferred upon the Arbitral Tribunal to act as amiable compositeur or to decide ex aequo et bono.
2 The Terms of Reference shall be signed by the parties and the Arbitral Tribunal. Within two months of the date on which the file has been transmitted to it, the Arbitral Tribunal shall transmit to the Court the Terms of Reference signed by it and by the parties. The Court may extend this time limit pursuant to a reasoned request from the Arbitral Tribunal or on its own initiative if it decides it is necessary to do so.
3 If any of the parties refuses to take part in the drawing up of the Terms of Reference or to sign the same, they shall be submitted to the Court for approval. When the Terms of Reference have been signed in accordance with Article 18(2) or approved by the Court, the arbitration shall proceed.
4 When drawing up the Terms of Reference, or as soon as possible thereafter, the Arbitral Tribunal, after having consulted the parties, shall establish in a separate document a provisional timetable that it intends to follow for the conduct of the arbitration and shall communicate it to the Court and the parties. Any subsequent modifications of the provisional timetable shall be communicated to the Court and the parties.
Article 19
New Claims
After the Terms of Reference have been signed or approved by the Court, no party shall make new claims or counterclaims which fall outside the limits of the Terms of Reference unless it has been authorized to do so by the Arbitral Tribunal, which shall consider the nature of such new claims or counterclaims, the stage of the arbitration and other relevant circumstances.
Article 20
Establishing the Facts of the Case
1 The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means.
2 After studying the written submissions of the parties and all documents relied upon, the Arbitral Tribunal shall hear the parties together in person if any of them so requests or, failing such a request, it may of its own motion decide to hear them.
3 The Arbitral Tribunal may decide to hear witnesses, experts appointed by the parties or any other person, in the presence of the parties, or in their absence provided they have been duly summoned.
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4 The Arbitral Tribunal, after having consulted the parties, may appoint one or more experts, define their terms of reference and receive their reports. At the request of a party, the parties shall be given the opportunity to question at a hearing any such expert appointed by the Tribunal.
5 At any time during the proceedings, the Arbitral Tribunal may summon any party to provide additional evidence.
6 The Arbitral Tribunal may decide the case solely on the documents submitted by the parties unless any of the parties requests a hearing.
7 The Arbitral Tribunal may take measures for protecting trade secrets and confidential information.
Article 21
Hearings
1 When a hearing is to be held, the Arbitral Tribunal, giving reasonable notice, shall summon the parties to appear before it on the day and at the place fixed by it.
2 If any of the parties, although duly summoned, fails to appear without valid excuse, the Arbitral Tribunal shall have the power to proceed with the hearing.
3 The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties shall be entitled to be present. Save with the approval of the Arbitral Tribunal and the parties, persons not involved in the proceedings shall not be admitted.
4 The parties may appear in person or through duly authorized representatives. In addition, they may be assisted by advisers.
Article 22
Closing of the Proceedings
1 When it is satisfied that the parties have had a reasonable opportunity to present their cases, the Arbitral Tribunal shall declare the proceedings closed. Thereafter, no further submission or argument may be made, or evidence produced, unless requested or authorized by the Arbitral Tribunal.
2 When the Arbitral Tribunal has declared the proceedings closed, it shall indicate to the Secretariat an approximate date by which the draft Award will be submitted to the Court for approval pursuant to Article 27. Any postponement of that date shall be communicated to the Secretariat by the Arbitral Tribunal.
Article 23
Conservatory and Interim Measures
1 Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an Award, as the Arbitral Tribunal considers appropriate.
2 Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunal thereof.”
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Schedule 2
Approaches to document production/discovery in inte rnational arbitration
Establishing your case in International Arbitration - Conference for up and coming arbitration practitioners
Hilton Park Lane, London, 18 September 2008
Steve Abraham, Partner, Norton Rose LLP
__________________________________________________________
1 Introduction
1.1 Documentary evidence typically plays a preponderant role in international arbitration. The approach taken to document production can often be a deciding factor in determining whether the arbitration is conducted appropriately and in a time and cost effective manner.
1.2 The subject is host to numerous complexities and dynamics, some but not all of which are examined in this note: common law versus civil law attitudes, the willingness of the tribunal to engage in the detail of the case at an early stage; the clarity of the parties’ written submissions; the clarity of thought which parties bring to bear both on marshalling their own documents and seeking those of their opponent; the degree of detail contained in the tribunal’s procedural orders. This list is by no means exhaustive.
1.3 Today Stephen Jagusch is addressing questions relating to the voluntary disclosure of documents on which a party relies in support of its own case and relating to e-disclosure. The scope of this paper is to examine some of the issues which confront parties, counsel and tribunals when it comes to the production of further, non-reliance, documents.
2 Party autonomy and the inherent flexibility in ar bitration
2.1 The starting point in any discussion of these issues is the flexibility inherent in the major sets of rules, and in arbitration laws, when it comes to the arbitral procedure generally and document production in particular. By way of example from some of they key sources, the approach taken is as follows:
(a) ICC Rules
Article 15:
“1
The proceedings before the Arbitral Tribunal shall be governed by these Rules and, where these Rules are silent, by any rules which the parties or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.
2
In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.”
Article 20(1) provides that “the Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means.” Article 20(5)
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provides that “At any time during the proceedings, the Arbitral Tribunal may summon any party to provide additional evidence.”
(b) LCIA Rules
Article 14:
“14.1 The parties may agree on the conduct of their arbitral proceedings and they are encouraged to do so, consistent with the Arbitral Tribunal’s general duties at all times:
(i) to act fairly and impartially as between all parties, giving each a reasonable opportunity of putting its case and dealing with that of its opponent; and
(ii) to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay or expense, so as to provide a fair and efficient means for the final resolution of the parties’ dispute.
…
14.2 Unless otherwise agreed by the parties under Article 14.1, the Arbitral Tribunal shall have the widest discretion to discharge its duties allowed under such law(s) or rules of law as the Arbitral Tribunal may determine to be applicable; and at all times the parties shall do everything necessary for the fair, efficient and expeditious conduct of the arbitration.”
Article 15.6 provides that those documents which are “essential documents on which the party concerned relies and which have not previously been submitted by any party” are to accompany in copy statements of case (although they can be listed if particularly voluminous). This of course does not relate to the provision of further, non-reliance, documentation.
Article 22.1(e) then provides the tribunal with the additional power to order any party to “produce to the Arbitral Tribunal, and to the other parties for inspection, and to supply copies of, any documents or classes of documents in their possession, custody or power which the Arbitral Tribunal determines to be relevant.”
(c) UNCITRAL Rules
Article 15(1): “Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at any stage of the proceedings each party is given a full opportunity of presenting his case.”
Article 18 contains permissive provisions regarding the provision of reliance documents with statements of case. This of course does not relate to the provision of further, non-reliance, documentation.
Article 24(3): “At any time during the arbitral proceedings the arbitral tribunal may require the parties to produce documents, exhibits or other evidence within such a period of time as the tribunal shall determine.”
(d) Arbitration Act 1996
Section 1 describes the object of arbitration as “the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense” and provides that “the parties should be free to agree on how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.”
Section 33 defines the tribunal’s general duty as follows:
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“(1) The tribunal shall
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent; and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.”
Under section 40 a separate duty is imposed on the parties to “do all things necessary for the proper and expeditious conduct of the arbitral proceedings.”
Under section 34, it is for the parties to agree, failing which the tribunal to determine, “all procedural and evidential matters”, including (section 34(2)(d)) “whether and if so which documents or classes of documents should be disclosed between and produced by the parties and at what stage”.
Section 68 then specifies that one of the grounds on which an award may be challenged for serious irregularity is where (section 68(2)(a)) the tribunal fails to comply with its general duty under section 33.
2.2 Each dispute and each arbitration is different, and international commercial arbitration is designed to adapt to the different situations it encounters. The un-prescriptive and flexible legal framework adopted in the major rules is entirely laudable. However, it necessarily exposes international arbitration to the various cultural and legal approaches, wishes, tactical pursuits, sensitivities and abuses which might be at play in any given case. For any arbitration to be handled effectively it will be imperative, therefore, for the parties and the tribunal to address their minds to what more detailed rules and guidance are required when it comes to document disclosure. Unlike in litigation, relying on the rules is not sufficient, and can lead to, at best, uncertainty and, at worst, differences of approach, misunderstandings and potentially serious injustice.
2.3 Thus at the one extreme one can encounter cases which involve no documentary disclosure whatever beyond what each party chooses to provide in support of its case. England is often seen as a jurisdiction in which disclosure will inevitably occur and will be extensive and expensive. As is apparent from the extracts cited above, this need not be the case. The Arbitration Act itself empowers the tribunal to determine firstly whether, and then if so which, documents are to be disclosed. To the extent that there are tribunals or practitioners conducting arbitration on the assumption that its procedures are typically to resemble those in litigation, this is down to those practitioners and tribunals, and not to the law.
2.4 Realistically, it will be extremely rare for an entire substantive dispute to be resolved absent any document production process whatsoever. However, many cases will of course present preliminary issues, which may well be issues of law rather than fact, which may be determinative of all or part of the case and which may be well suited to being disposed of without any, or with very limited, document production. Bifurcation, dealing with liability ahead of quantum, can similarly avoid unnecessary production of documents relating to quantum.
2.5 At the other extreme of course, one encounters cases where an approach akin to full blown English or, worse still, American litigation style disclosure/discovery is undertaken across the board in relation to all issues in the case. These cases are thankfully rarer these days than they used to be and, to many, are somewhat incongruous in an international arbitration context.
2.6 The prevailing approach in international cases these days is a combination of reliance and request disclosure (with preliminary issues and/or bifurcation where appropriate). That is to say that each party will be required to provide those documents on which it chooses to rely to establish its case, as well as those which are validly requested by the opponent.
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2.7 The remainder of this paper looks at some of the issues, and makes some suggestions as to best practice, in relation to the approaches which can be taken to making and responding to requests for the production of documents.
3 Time and costs, enforceability
3.1 The speedy and cost efficient handling of any arbitration is typically paramount in the minds of parties when agreeing to arbitrate and, so the parties would hope, in the minds of institutions and arbitrators. It is very much at the forefront of the various rules and laws cited above, subject to some minor variations in approach. For instance, the ICC Rules contain no equivalent to Articles 14.1 and 14.2 of the LCIA Rules; even if time and cost efficiency are implicitly central to ICC arbitration (and certainly at the forefront of practice following the Commission’s Report on Techniques for Controlling Time and Costs in Arbitration), the express wording of the ICC Rules promotes the delivery of an enforceable decision over the swift and cost-effective determination of the case.
3.2 This hints at what is perhaps a wider tension between (i) avoiding expense and delay where possible; and (ii) allowing the parties the maximum opportunity to receive and examine relevant documents to pursue their own case and attack that of the opponent.
3.3 Tribunals have to tread this line. It is all very well for parties to become disappointed when tribunals grant requests for documents which might be of at best tangible relevance to the real issues; but for many tribunals this will be the lesser evil compared to the risk of prejudicing the enforceability of the award having suppressed important materials. The key points are:
(a) Tribunals need to be alive to this sensitivity and engage in the debate rather than simply erring on the side of permitting document requests on the basis that a later adverse costs order will save the day if the request transpires to have been invalid/unnecessary.
(b) Parties need to be alive to techniques designed to obtain the best quality decisions from tribunals on these issues, bearing in mind that in a typical procedure the tribunal will have only limited appreciation of the substantive issues in the case at the time of determining whether to grant disclosure requests.
3.4 From an English perspective, the key provisions of the Arbitration Act relevant to this tension are sections 33 and 68, cited above. An example of how the tribunal’s handling of disclosure can arise under section 68 is the case of BTC Bulk Transport Corporation v Glencore International AG [2006] EWHC 1957 (Comm). Here, the tribunal issued an award upholding the respondent’s counterclaim in circumstances where the claimant had produced evidence only on the question of whether the counterclaim should be summarily dismissed and had reserved its right to adduce further evidence contesting the underlying substance of the counterclaim. The court found that the tribunal had accordingly prevented the claimant from presenting its substantive case. This was found to fall within section 68(2)(a) and the court remitted the case back to the tribunal to be reconsidered.
3.5 One can easily see how similar arguments could be run if, for instance, the tribunal were to adopt a timetable and procedure which placed a party under extreme time pressure to provide extensive disclosure, resulting in the disclosure being less than thorough and denying the other party the opportunity to obtain relevant documents. To the extent that a party is prevented from adducing its own evidence in support of its own case, this of course harks back to the issues being covered today by Stephen Jagusch.
3.6 Broadly, the English courts are reluctant to interfere in what they rightly regard as the exercise of judgement and discretion by tribunals during the course of arbitrations. It is only in extreme cases that the procedure adopted for document disclosure will prove to be fatal. By way of example of cases where the courts have not sought to interfere with the tribunal’s decisions:
(a) Ranko Group v Antarctic Maritime SA [2002] 2 Lloyd’s 681 - in this case, the court refused to intervene where the claimant alleged that the arbitrator had
failed to order the production of a document which the claimant argued was
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of great significance: Toulson J ruled that, under section 34 Arbitration Act 1996, “questions of that nature are expressly given to the arbitrator” and there was nothing approaching serious irregularity.
(b) Tame Shipping Ltd v Easy Navigation Ltd [2004] 2 Lloyd’s Rep 626 - in this case, allegations that the arbitrator had taken into account an issue not
argued and had disregarded an important document were rejected, Moore-
Brick J noting that it was wrong to dissect every comment of the arbitrator
put forward by him as “peripheral explanation”.
3.7 Internationally, similar factors are at play. Under Article V New York Convention, one of the grounds for refusing to enforce an award is where the party against whom the award is invoked was “not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case” (emphasis added).
3.8 As we all know, Article V of the Convention is subject to widely differing interpretations from jurisdiction to jurisdiction. One can easily conceive of the case in which the party against whom enforcement is sought suggesting that, but for the aggressive timetable to which the tribunal subjected him, he would have been able to adduce documentation which would have altered the result of the case. Not all courts will take the non-interventional approach of the English courts. This adds a further and dificult dynamic to any arbitration in which the likely country of enforcement is not supportive of arbitration and/or whose courts might seek to interfere at the enforcement stage.
3.9 Objections can also arise as a result of the rejection of document requests. For instance, in Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [2003] 380 HKCU I, the respondent argued that it had not been given a fair hearing by reason of the tribunal’s refusal to grant an application for disclosure of documents. The Hong Kong court dismissed this argument, on the basis that there had been no denial of natural justice.
3.10 These factors relating to time and cost efficiency on the one hand and enforceability on the other will underlie all decisions made in relation to document production.
4 Factors affecting document production
4.1 In the absence of agreement between the parties, the scope of document production to be ordered will depend on a number of factors including:
(a) the background of the arbitrators, the parties and their legal counsel, in particular, whether they come from a civil or common law tradition (this particular aspect is elaborated upon further below), how experienced they are in international arbitration, and how familiar they are with the concepts associated with document production;
(b) the nature of the case. If the dispute is fact based, the scope of document discovery may be broader than if the dispute is purely of a legal nature. For example, if the key issue to be decided is the construction of a particular contract clause, the tribunal may decide that it needs no or limited extrinsic evidence. If the arbitration is largely fact related (such as many construction disputes), the tribunal is more likely to allow for document production. In such cases, it may be that one party has the bulk of the documentation, which can lead to a host of practical and tactical issues of itself;
(c) the amount in dispute and the desire/need for proportionality.
4.2 It is worth elaborating on the distinction between a civil law and common law background. It is not unlikely that in an international arbitration, the parties will come from different legal backgrounds, one from a civil law background and the other from a common law background. The factors at play include:
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(a) In common law jurisdictions, proceedings are usually adversarial. A party presents evidence to prove its case. The decision maker applies rules of evidence to examine the relevance and admissibility of the evidence presented. The decision maker does not identify additional evidence and makes a decision based on the material presented.
(b) In civil law jurisdictions, proceedings are inquisitorial. The parties present the facts that support the relief sought and witness statements are unusual. Instead, the witness appears at the hearing to give direct original testimony. Decision makers independently identify additional evidence and take an active part in obtaining evidence by questioning witnesses. Documentary evidence is considered more reliable than oral evidence.
(c) General disclosure of documents after the case has commenced is often required in common law systems whereas in civil law systems, disclosure is usually limited to specific documents relevant to the facts alleged.
(d) Documents presented are often considered by a civil lawyer to be self-standing, whereas a common law lawyer would expect documents to be authenticated, deployed and explained by the testimony of a witness and/or expert.
(e) The common law places great emphasis on cross examination.
4.3 Yves Derains has summed things up neatly as follows: “For the Continental lawyer, it is essential that the legal problem in dispute be clearly defined so that the judge can solve it. Facts are relevant and have to be proved beyond any doubt only insofar as they help to define the legal problem. The common lawyer generally takes the opposite approach, the chief concern being that all parties have equal and full knowledge of the facts.”1
4.4 It is not therefore surprising that conflicts or confusion can arise in arbitrations where tribunal members, parties or their lawyers are from different cultures and approaches.
5 Balancing civil and common law approaches: toward s a general approach; IBA Rules
5.1 While it is unlikely that common law and civil law approaches will fuse (or indeed necessarily should fuse) into a single set of procedures for international arbitration, a consensus on the range of procedural options available to the tribunal is emerging. There is an increasing acceptance of a set of procedures that are unlikely to be challenged as inherently unacceptable or unfair by parties from either common or civil law traditions. This approach is reflected in the IBA Rules on the Taking of Evidence in International Arbitration (the “IBA Rules ”).
5.2 The IBA Rules were adopted by the International Bar Association on 1 June 1999. A consensus appears to have emerged that the IBA Rules provide a good starting point for parties and tribunals alike to formulate their own specific rules regarding disclosure in arbitral proceedings. The IBA Rules support reliance and request disclosure and have no doubt played their part in such becoming the preponderant approach. In so doing, the Rules have steered something of a middle course between common and civil law traditions. On the one hand, the Rules sought to avoid extensive English or American style disclosure, but on the other hand recognised that even for most civil lawyers some kind of document disclosure process is required. What became enshrined in the Rules was what was arrived at by the Working Group as a workable compromise, for which purposes Articles 3 and 9 of the Rules have to be read alongside one another. Whilst it is entirely possible to conduct reliance and request disclosure with no regard to the IBA Rules, this paper looks at the Rules and their benefits. Certain of those benefits will follow in any case where reliance and request procedures are followed, even if the IBA Rules are not formally adopted in the case.
1 “Towards greater efficiency in document production before arbitral tribunals - a continental viewpoint” - Document Production in International Arbitration - ICC International Court of Arbitration Bulletin, 2006 Special Supplement
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5.3 The IBA Rules provide mechanisms for (i) discovery of documents; (ii) presentation of witnesses of fact as well as expert witnesses; (iii) on-site inspection; (iv) evidentiary hearings; and (v) admissibility and assessment of evidence.
5.4 The provisions of the IBA Rules are binding only if the parties or the tribunal expressly adopt them. Even if they are not expressly adopted they may still be relevant to the proceedings to the extent that they are deemed to represent persuasive authority reflective of prevailing trends in international arbitration. Parties may rely on the IBA Rules in support of their arguments. Similarly the tribunal itself may rely on the IBA Rules for guidance - it is often suggested that the IBA Rules are to be used as ‘yardsticks’ even if there has been no formal adoption of them in the arbitration. Self-evidently, however, if the parties or the tribunal wish for the IBA Rules to apply in a given case, this should be reflected as appropriate in the tribunal’s procedural orders, at the earliest possible stage of the reference.
5.5 In the context of document discovery, it is important to have a definition of ‘document’. Article 1 of the IBA Rules defines ‘document’ as ‘a writing of any kind, whether recorded or on paper, electronic means, audio or visual recordings or any other mechanical or electrical means of storing or recording information.’ Obviously, this definition attempts to cover all forms of documentation, whether on paper or modern forms such as electronic or visual.
5.6 As regards reliance documents (beyond the scope of this note), each party is required, pursuant to Article 3(1) to “submit within the time ordered by the Arbitral Tribunal, all documents available to it on which it relies”. This of course leave ample room for different approaches as to timing and style of production, not discussed here.
5.7 As regards non-voluntary disclosure, Article 3(2) provides a party with the option of submitting a ‘Request to Produce’ documents. No specific types of documents are excluded from document production. The IBA Rules provide for disclosure of individual documents and disclosure of categories of documents.
5.8 The IBA Rules set forth detailed requirements for a Request to Produce. Each request is to:
(a) be sufficiently detailed;
(b) be narrow and specific;
(c) include an explanation of how the documents requested are relevant and material to the outcome of the case;
(d) include a statement that the documents requested are not in the possession, custody or control of the requesting party; and
(e) include an explanation as to why the requesting party believes the documents requested to be “in the possession, custody or control of the other party.”
5.9 These requirements may appear onerous at first sight, particularly if the other party is minded to accede to certain requests in any event. However, they play a vital role in forcing the requesting party to bear the onus to justify its document requests, rather than leaving the other party to justify a refusal to produce the documents. Any lack of clarity from the requesting party in this respect will accordingly undermine the disclosure request. Neither does the party responding to the request necessarily need to feel defensive about refusing a request since there are objective criteria which the requesting must satisfy for the request to be upheld. This is all important in seeking to discourage “fishing expeditions” and unduly wide disclosure requests, and in the author’s opinion is undoubtedly the correct approach notwithstanding the burden placed on the requesting party.
5.10 Partly due to their level of specificity, however, these same requirements leave ample room for interpretation. On the one hand, they offer the kind of flexibility that is required in international arbitration as they can be adapted to the specific circumstances of the case. On the other, there
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is also room for uncertainty, potentially leading to disputes among the parties as to the meaning of those requirements.
5.11 Perhaps the two most common areas for argument are whether a request is sufficiently narrow and specific, and whether the documents in question satisfy the dual requirement of relevance and materiality (mere relevance to an issue being insufficient).
Narrow and specific
5.12 Disputes on this aspect are more likely where a party has requested a category of documents, as the IBA Rules merely provide that the description of a category of documents must include the ‘subject matter’. Perhaps inevitably, the IBA Rules provide no objective standard as to what constitutes a narrow and specific request. This has to be approached on a case by case basis.
5.13 Should the volume of documents influence whether a request is ‘narrow and specific’? This is a consideration that often arises in practice. It is sometimes argued that a request which generates a substantial volume of documents is, per se, not narrow and specific. However, there are surely cases where this is not true. There are also cases where the requesting party and quite possibly the responding party will not know the likely volume of documents at the time of the request being made.
5.14 The interpretation of ‘narrow and specific’ will depend upon the parties involved in the arbitration. If both parties are from a common law background and accustomed to expansive discovery, their Requests to Produce are likely to be wide ranging. If both parties are from a civil law background, they may submit very restrictive requests e.g. specifically identify the documents by date, author and content, rather than requesting by ‘category’ of documents. The difficulty arises where there is a discrepancy between the parties. Here the requesting party will be required to establish its own standard as to what constitutes narrow and specific. There is an obvious danger of disparity of approach between the parties.
5.15 In any event, the interpretation of ‘narrow and specific’ is likely to be a function of the arbitrators themselves. If the dispute is legal, they are more likely to adopt a more restrictive definition than if the dispute is factual.
5.16 The amount in dispute may also play a role in establishing what constitutes a narrow and specific request to produce. The higher the amount at stake, the more likely the tribunal is to allow generous discovery for obvious reasons of proportionality and the high stakes in terms of enforcement difficulties should relevant material be suppressed.
Relevance and materiality
5.17 This dual requirement is another key benefit of the IBA Rules. Since mere relevance to some issue in the case is insufficient to justify a request for disclosure, the Rules do an important job in discouraging parties from making, and tribunals from granting, disclosure requests which seek quantity rather than quality of documents. For instance, we will all have encountered situations where a requesting party seeks to place the other party under costs pressure by requesting all manner of documents which, whilst “relevant” in the widest sense are in reality never going to be dispositive of the case or any material issue in it. Provided the Rules are used properly, such tactics ought to be exposed for what they are.
5.18 In practice, one of the key needs is to identify the “issues” in the case so that document requests can be adjudged against them. Without knowing the issues, it is somewhat difficult to form a definitive view as to whether a document or category of documents might be relevant and material to an issue.
5.19 It is preferable for this reason that the Request to Produce procedure appear later in the procedural timetable than the exchange of relatively detailed statements of case. This will of course not always be possible or desirable, but to the extent possible if Requests to Produce can be justified and adjudged by reference to submissions already served and issues defined therein, then uncertainty will have been reduced. Conversely, if document requests are made in advance
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of a party’s case being formulated in detail, the danger of fishing expeditions is increased for obvious reasons.
5.20 Further, in an ICC arbitration the Terms of Reference can be of considerable assistance in this process. The Terms of Reference are of course a defining feature of ICC arbitration. Under Article 18 of the ICC Rules they are to be drawn up, signed and submitted to the ICC Court within two months of the file being transmitted to the tribunal. Article 18(1)(d) requires that the Terms of Reference include (unless the tribunal considers it inappropriate) a “list of issues to be determined”. Whilst Terms of Reference are mandatory in ICC arbitration, there is of course nothing to stop parties and tribunals adopting them in other forms of arbitration.
5.21 Whilst the Terms of Reference are not without their detractors, in the author’s view well drafted Terms of Reference can have all or some of the following benefits relevant directly or indirectly to document disclosure.
(a) Assuming the tribunal takes a proactive role in drafting the terms of Reference (as in the author’s opinion is desirable), then the tribunal is from an early stage engaged in the case, able to test the parties’ positions and decide on an informed basis on the most appropriate procedure and timetable.
(b) Assuming as is common there is a procedural meeting at the time of the Terms of Reference being signed, the parties and the arbitrator(s) meet face to face and see the whites of each others’ eyes at an early stage. On an intangible basis, this can have the effect that a party who is perhaps involved in the process anything less than whole-heartedly realises the scope of the commitment it has made in coming to arbitration. It can also allow an early opportunity to see whether a party appears to be well prepared and to have a genuine conviction in its position. It brings the parties physically together (assuming principals attend) thus potentially providing an opportunity for dialogue outside of formal correspondence and hearings.
(c) The process of agreeing a summary of each other’s claims/defences and defining the issues to be determined forces the parties to understand their own and the other side’s position in detail early in the process. Thus arguments and issues which absent the Terms of Reference might not be addressed until an unduly late stage in the procedure ought to be identified early and addressed properly.
(d) It allows the parties henceforth to focus on the true issues in the case and not to be sidetracked into addressing irrelevant or trivial points.
(e) It can point to any evident pitfalls in a party’s case.
(f) If the list of issues is detailed and continues to reflect the true issues in the case as matters progress, it of course provides an invaluable guide to the parties in terms of knowing what to address in written and oral submissions and to the tribunal in drafting the award; consequently the Terms of Reference are potentially informative as to which categories of documents are central to the case.
5.22 Whilst it is relatively standard for the list of issues to be preceded by introductory wording making it clear that other issues will be admissible as and when they arise, nonetheless unless the case mutates considerably after the Terms of Reference are signed, the parties and tribunal can be assisted in dealing with Requests to Produce by seeking to understand whether and how Requests to Produce relate to the issues defined in the Terms of Reference. Those issues will of course have been defined on an agreed basis, albeit in many cases after lengthy and heated exchanges between the parties on how the issues are to be formulated.
5.23 To some extent there is a likely difficulty with the timing of the Terms of Reference, coming as they do at a relatively early stage of the proceedings and often before the parties have filed detailed statements of case. Whether the timing of the Terms of Reference and/or the list of issues envisaged by Article 18(1)(d) should be deferred is not within the scope of this note, although has been discussed at recent ICC events discussing potential revisions to the ICC
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Rules. However, for present purposes a well drafted list of issues which is not subject to extensive change or revision can be of considerable benefit in determining whether documents or classes of document are disclosable following a request for their production. This will be all the more so where the Terms of Reference themselves were preceded by detailed statements of case from the parties, which again will not always be the case.
5.24 The above suggestions as to best practice of course do not preclude parties from couching their submissions deliberately so as to support subsequent document requests they intend to make, or conversely so as to deny document requests which they anticipate being made against them. To the extent that such sharp practice is inherent in counsel representing clients effectively then it is probable that no amount of rule making will defeat it. To a degree, it is in any event advantageous if it serves to delineate the true issues early on and, in particular, to encourage parties to make admissions where appropriate (failing which to face the costs and inconvenience of producing documents which would otherwise be irrelevant).
5.25 Most commentators would agree that document production should first and foremost bring to the tribunal’s attention evidence without which a party would not be able to discharge the burden of proof lying upon it, and it is the burden of proof which lies behind a document’s materiality. It may be prudent for the tribunal to set out expressly in its directions what is in any event the case, i.e. that it will rule on the prima facie relevance of the requested documents having regard to the factual allegations made by the parties in the submissions filed to date. A prima facie ruling of relevance or materiality does not then bind the tribunal to rely on or refer to those documents in its award having heard the merits of the case. Some tribunals will equally make clear when refusing a document request that they may nonetheless reverse the decision should the case develop in a way which indicates that the request ought to have been granted.
6 When will a Request to Produce be denied?
6.1 Article 9 of the IBA Rules sets out the grounds on which a Request to Produce can be denied. Specifically the IBA Rules provide that a request can be refused on the following grounds, some but not all of which are commented upon in this note (many of them being sizeable topics in their own right):
(a) insufficient relevance or materiality (see above);
(b) legal impediments or privilege;
(c) unreasonable burden to produce the requested evidence;
(d) loss or destruction of the evidence;
(e) commercial or technical confidentiality;
(f) special political or institutional sensitivity;
(g) compelling considerations of fairness or equality.
6.2 Further, a request to produce can be objected to on the grounds that it does not comply with the requirements set out in Article 3(3) of the IBA Rules. All in all there are a number of objections that can be made to a document request, all of which are likely to result in a delay to the arbitral process but which in theory should result in only those requests which are meritorious needing to be complied with.
6.3 In most jurisdictions the tribunal does not have the power to order the production of documents that are in the possession of a person other than a party to the arbitration. If a document is requested from a party then the requesting party must show that the document is likely to be in the possession, power, custody or control of that party. If a party does not have a document or is unable to locate it, the request will usually be denied. Of course, if it appears that the party resisting disclosure has brought such circumstances about specifically to avoid disclosure, then adverse inferences may be drawn.
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6.4 It will be important to factor into the procedural timetable sufficient time for the filing of requests and objections, the arbitral tribunal’s response and for the production of documents.
6.5 Even if the IBA Rules are not adopted wholesale in an arbitration, it is the author’s experience that it can save considerable amounts of time and money for procedural orders to be drafted so as to be clear that in assessing the validity of any request for disclosure, the tribunal will be guided by Article 9. That is to say that even if there is no requirement on the requesting party to file a Request to Produce complying with the detailed requirements of Article 3, Article 9 will nonetheless be the code by which the validity of a request is to be adjudged. This is all the more beneficial where the parties may be from differing backgrounds and otherwise have differing understandings of what will amount to a valid reason for refusing a document request. For many, this approach will be more attractive than adopting the IBA Rules wholesale as a binding document, since it avoids suggestions that any minor transgression from the detailed provisions in the Rules will then breach the tribunal’s procedural order and prejudice enforcement.
6.6 Parties are often concerned, understandably, that the tribunal will become tainted if it is to review a highly prejudicial document in order to rule on its admissibility only to find that it is not disclosable. An often overlooked procedure is that whereby the tribunal may appoint a third party to review such documents. This “fourth arbitrator” approach is indeed included in the IBA Rules at Article 3(7), which makes reference to an independent and impartial expert. The resulting order is still made by the tribunal, but following the expert having reviewed the document(s) in question, subject to a duty of confidentiality.
7 Redfern schedules
7.1 A Redfern schedule can be invaluable in assisting the parties and tribunal to deal with document requests, whether or not the IBA Rules Request to Produce system is being followed.
7.2 A Redfern schedule consists of four columns:
(a) the first sets out each document or category of documents requested;
(b) the second contains brief reasons justifying the request (according to the criteria set forth in the IBA Rules if being used); the
(c) the third summarises the objections raised by the non-requesting party (by reference to Article 9 of the IBA Rules if being used for guidance);
(d) the fourth is left blank for the tribunal’s comment/order.
7.3 The intention is that the first three columns of the schedule stand as a sufficient resource for the tribunal to make its rulings. Thus, the tribunal does not need to be sent or copied any additional correspondence in which the parties may have been arguing the point. The schedule also provides the tribunal with the opportunity to show its reasoning for each request. Assuming the schedule is sufficiently sophisticated and the parties have completed their columns in a way which does justice to their arguments, this should assist in the context of the potential tensions relating to enforcement discussed earlier in this note. Assuming the schedule is clearly worded, it will be difficult to argue that the tribunal did not take account of the key arguments or was unaware of the importance of a category of documents. The trail is transparent and contained in one, albeit potentially lengthy, document.
7.4 The advantages of this approach are largely self-evident. Aside from the obvious, such schedules can serve as a useful way of engaging an otherwise reluctant tribunal in the detail of what is disclosable (avoiding inundating them with a series of separate applications or large volumes of sometimes impenetrable correspondence).
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8 Failure to comply with a Request to Produce/order as to document production
8.1 An important issue that arises in the arbitration context is what sanctions are available if a party fails to comply with a request to produce. Generally, tribunals’ procedural orders are less effective than those of the courts in this respect, procedural orders not being enforceable as awards under the New York Convention.
8.2 Of course, in many situations it may be possible to apply to the national courts under the arbitration law for an order to produce evidence. Whilst this may better enable the documents to be produced, it will often bring with it substantial delay and costs in making the application and awaiting a decision. In the eyes of a requesting party whose request has already been upheld by the tribunal, this is something of a repetitious process.
8.3 Article 9(4) of the IBA Rules specifically addresses non-compliance with requests to produce. If a party fails to produce documents requested in a Request to Produce to which it has not objected in due time, or which the tribunal ordered to be produced, then the tribunal may infer that such documents would be adverse to the interests of that party. While this allows the tribunal to sanction the defaulting party without recourse to any national courts, care has to be taken in relation to drawing inferences.
8.4 First, it is often difficult for the tribunal to know what adverse inferences to draw if documents are not produced, since in many cases it is the content of the absent documents themselves which would reveal the appropriate adverse finding.
8.5 Secondly, an adverse inference may be too vague to influence the course or result of the proceedings.
8.6 Thirdly, many tribunals are wary of drawing such inferences at all, preferring perhaps understandably to base the award on the evidence heard rather than on potentially vague and untested inferences.
8.7 The IBA Rules do not specify whether the tribunal is required to inform the parties of any adverse inference it may intend to draw. If the tribunal fails to provide the party against whom the adverse inference is drawn with the opportunity of rebutting it, this may raise an issue of due process and prejudice enforceability.
8.8 In practice, these difficulties are largely overcome by the parties making detailed submissions to the tribunal as to what inferences may appropriately be drawn. Whilst, however, Article 9(4) is an important remedy, in the author’s experience it is rarely invoked save in extreme cases of non-disclosure.
8.9 On a related point, one sometimes sees cases where a party will deliberately over-disclose where it will be costly for it to conduct a detailed review to establish precisely which documents are responsive to a request for documents. Similarly, one encounters cases where documents are produced in a deliberately illogical or confusing sequence in order to put the receiving party to additional expense and difficulty in assessing their effect. To some extent these situations can be avoided by detailed discussions and directions as to the format in which documents are to be produced; otherwise it is likely that such practices will result in no sanction other than an adverse costs order.
9 Conclusions and best practice
9.1 There is no one size fits all approach to arbitration. It is thus inappropriate to seek to promote one approach above others for all purposes. The main arbitral rules and laws leave these matters open and promote party autonomy for good reason. There may be cases which, whilst being determined by international arbitration, nonetheless lend themselves for good reason to something approaching English or even American litigation style processes (although in the author’s opinion such cases will be extremely rare), and equally those which require no document
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production at all beyond that which each party volunteers by way of evidence upon which it chooses to rely.
9.2 That said, the reliance and request procedure as is now commonly adopted and which finds a detailed procedure in the IBA Rules is now the preponderant approach and, in the author’s opinion, one which commends itself to a great many cases. If it is combined with early and detailed statements of case, Redfern schedules and (in ICC proceedings at least) well drafted Terms of Reference, all the better.
9.3 Cases in which parties and tribunals blindly follow court-like procedures having failed to engage properly in a consideration of the procedure appropriate to the case are, thankfully, few and far between these days. May they become even less so. Provided parties, counsel and tribunal members are willing to consider the document production process in detail and early in the procedure, much can be done as a matter of normal case management to ensure so far as possible that the twin goals of time and cost efficiency and enforceability are achieved. To the extent that a relatively standardised system of “best practice” might be emerging which will accommodate the majority of cases and parties from differing backgrounds, this is to be welcomed.