Despite the differences among the American, English and continental European systems of discovery, hearing and arbitration, a consensus has developed as to certain core principles regarding international arbitration procedures. These basic principles have become widely accepted standards of practice, mainly because of the constraints imposed by the nature of international arbitration proceedings.
By Steven C. Bennett|October 10, 2002 at 12:00 AM
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The International Chamber of Commerce (ICC), headquartered in Paris, is only one of many organizations that sponsor international arbitration proceedings. Although an arbitration sponsored by a particular organization may be conducted virtually anywhere in the world, it is not unusual for European parties and counsel to favor ICC proceedings (administered from Paris); American parties and counsel to favor American Arbitration Association proceedings (administered from New York); and English parties to favor proceedings sponsored by the London Court of International Arbitration (also a private institution, headquartered in London). International arbitration proceedings, moreover, often involve parties, lawyers and arbitrators with widely varying experiences and views on procedure for litigation and dispute resolution. The American system of litigation, involving free-ranging discovery and often lengthy hearings, is at one extreme. The continental system, involving very limited (if any) discovery and limited in-person hearings is at the other extreme. The English system, involving some document discovery but no pretrial depositions, with often extensive cross-examination at hearings, is somewhere in between. Frequently, arbitration agreements concerning international transactions do not specify whether (and how many) discovery and trial-type procedures will be allowed. The rules of sponsoring organizations, moreover, provide only limited guidance on how proceedings are to be conducted. As a result, the predilections of the arbitrators, and the necessities of the situation, will determine what discovery and trial procedures are followed. American lawyers generally expect to be able to obtain from their adversaries all documents relevant to a dispute, not just those offered in evidence by the opposition, and to receive those documents well before trial. American lawyers are also accustomed to obtaining deposition testimony from witnesses connected with the parties, and even third parties, irrespective of whether such witnesses are willing to testify voluntarily. The breadth of potential discovery is generally quite wide, bounded only by generous limits of relevance and undue burden. Ancillary procedures for written interrogatories, requests for admissions and inspection of relevant places and things are also commonly used. For American lawyers, the point of this broad-ranging discovery is to gather materials both to help make their case at trial and to help prepare for cross-examination of an adversary’s witnesses at trial. The trial is the critical ground for making one’s case, and for exposing weaknesses in the other side’s case. Even in commercial cases involving extensive documentation, witness credibility may be tested through cross-examination, using, among other things, documents and answers to deposition questions. THE ENGLISH APPROACH The English tradition is similar to the American, except that it generally does not permit pretrial interrogation of witnesses and does not permit pretrial discovery of documents from third parties. It does, however, afford ample opportunity for parties to obtain relevant documents from one another in advance of trial. Like the American system, the English system incorporates cross-examination of witnesses, and prizes this practice as a way of exposing and correcting unreliable testimony. Differences between the American and English systems of discovery and trial should not be underestimated, however. English lawyers are accustomed to conducting a painstaking cross-examination of a witness’s statement in front of a judge, while American lawyers are accustomed to preparing a cross-examination that draws from both the witness’s discovery deposition and his oral examination. Moreover, the American lawyer, more than an English counterpart, must appeal to a jury. These differences affect the character of pretrial discovery. Because the English advocate can expect a free-ranging opportunity to conduct cross-examination at trial, and generally will not risk boring a jury by essentially conducting discovery as part of the trial, pretrial discovery expectations are reduced. Although discovery is considered an essential feature of the English adversary system, discovery in England has never followed the wide-ranging approach embodied in the American system. Under the English system, for example, a document requested must be shown to be relevant to the dispute; wide-ranging “fishing” discovery is not permissible. THE CONTINENTAL APPROACH Commercial law cases in continental Europe generally place primary emphasis on documents. The principal method of production of evidence is through the exchange, before hearing, of pleadings and briefs, which typically annex the documents upon which each party’s position is founded. Witnesses, if any, are heard only after exchanges of pleadings and documents. The continental system generally does not permit prehearing deposition of witnesses. Even when hearings are permitted, testimony is often restricted. Continental lawyers generally do not see much point in witness examination that adds nothing to information already in documents before the court. Further, the continental system finds cross-examination in the English and American styles tedious, burdensome and often unfair to the witness. The point of cross-examination, in the continental system, is more to adduce facts that are not otherwise available from the documents, to aid the court in understanding the documents and to help determine which of the documents may be more reliable than the others. Often, continental judges will take it upon themselves, in inquisitorial fashion, to ask these kinds of questions of the witnesses directly. When prehearing discovery is taken in the continental system, a judge’s intervention is required. Discovery does not automatically follow from the request from one party for information from the other. Some form of showing that a document exists, and that it is relevant to the proceeding, must be made. A continental jurist, moreover, generally considers it his duty to inquire into the case, and thus may, on his own motion, call for the production of documents, order an expert opinion or conduct an inspection or site visit. The procedural laws and related practices in the continental European countries are not all identical. There are often as many differences as similarities among these various systems. Yet it may be fairly said that continental lawyers and judges abhor the kind of wasteful, costly and potentially abusive discovery practices they associate with the American system. The rules of most major arbitration-sponsoring organizations do not generally seek to establish a comprehensive regime of arbitral procedures. The procedures for prehearing discovery, in particular, are frequently outlined only in very general terms. Despite the vagueness of the rules, the major sponsoring organizations reflect, at least to some degree, the legal systems from which they have grown. COMPARISON OF DISCOVERY RULES The rules of the ICC provide that an arbitral tribunal shall “proceed within as short a time as possible to establish the facts of the case by all appropriate means.” The ICC rules contemplate construction of “terms of reference,” in which the parties agree (among other things) upon the “particulars of the applicable procedural rules” for the case. Typically, at or before the conference where the terms of reference are finalized, the parties will agree on issues pertaining to the mode of discovery in the case. Despite these flexible directives, the ICC system of arbitration generally follows a continental approach to procedure. The parties generally define the issues in the case by exchanging pleadings, together with the contract(s) at issue and other relevant documents. The arbitral tribunal may decide to hear witnesses, appoint experts or call for the production of specific documents necessary to decide the case, but may also (in the absence of a request for a hearing) decide the case solely on the documents submitted by the parties. Similarly, the rules of the London Court of International Arbitration (LCIA) provide that arbitral tribunals have the “widest discretion” to discharge their duties as necessary for the “fair, efficient and expeditious conduct” of an arbitration proceeding. Parties are also encouraged to agree upon the method by which their individual arbitration proceedings will be conducted, and arbitrators are generally directed to “adopt procedures suitable to the circumstances of the arbitration.” As in the ICC rules, the LCIA rules contemplate an exchange of pleadings, coupled with copies of “essential documents.” The LCIA rules, however, are much more explicit in providing that an arbitral tribunal may order a party to produce-to the tribunal and other parties-”any documents or classes of documents in their possession, custody or power which the arbitral tribunal determines to be relevant.” The rules also contemplate the possibility of appointment of experts, who report to the tribunal. Parties may be required to provide relevant documents and other information to such experts. The LCIA rules, however, do not provide for any prehearing deposition of witnesses. The international arbitration rules of the American Arbitration Association (AAA) provide that a tribunal may, within the bounds of fairness and equality of treatment, “conduct the arbitration in whatever manner it considers appropriate.” Unlike the ICC and LCIA rules, the AAA rules do not expressly contemplate the exchange of documents along with the pleadings in the case. Instead, the AAA rules generally provide that a tribunal may order a party to identify the documents and other evidence on which it relies in support of its claims, and may order parties to produce “other documents, exhibits or other evidence it deems necessary or appropriate.” The AAA rules also permit appointment of experts who report to the tribunal, and who may require a party to produce any relevant documents that the experts may require. Under the Federal Arbitration Act and parallel state statutes, moreover, AAA arbitration proceedings conducted in the United States may also involve production of evidence from third parties. Despite this broader authority, the AAA rules do not generally contemplate prehearing deposition of parties or other witnesses. A SYNTHESIS OF PROCEDURES Despite the wide theoretical gaps among the American, English and continental systems of discovery and hearing, and despite the disparities in rules for the major sponsoring organizations, over the past 30 or more years a consensus has developed as to certain core principles regarding procedures in international arbitration. These basic principles are not rules, per se, but rather standards of practice that have come to be widely accepted, largely because of real constraints imposed by the nature of international arbitration proceedings. Arbitrators may feel free to depart from these principles, in appropriate circumstances, but there must be some articulated reason why the basic principles should not be applied. First, the primary source of information for resolution of international commercial arbitration disputes is the documentary evidence submitted by the parties. Typically, such documents are produced by the parties as part of the process of pleading and briefing their cases, before any oral hearing is conducted. This principle follows, in part, from the nature of international commercial disputes. Given the distances that parties, witnesses, lawyers and arbitrators often must travel to participate in oral hearings, and the cost and burden associated with such hearings, oral hearings must be as abbreviated as possible. Thus, when relevant documents can be examined well before such hearings, and their meaning largely explicated without testimony, arbitrators expect parties in international arbitration to identify and produce relevant documents (to the extent that they support a party’s case) voluntarily, and well in advance of any hearing. Parties have an incentive to produce such documents voluntarily, moreover, as a consequence of the rule, generally applied in international arbitration, that “he who asserts a fact must prove it.” Second, it is virtually unheard of for arbitrators in international arbitration disputes to order prehearing depositions. This principle follows from the primary emphasis on documents, and from the expectation that any oral hearings will be abbreviated, such that prehearing depositions, intended to provide fodder for cross-examination at the hearing, are not appropriate. Although some prehearing discovery of an adversary’s documents may be permitted, the proponent of the discovery request must make some showing that the documents exist, that they are in the possession of the adversary and that they are necessary to a fair decision in the case. This principle recognizes that arbitration proceedings should be as efficient and swift as possible, and that involvement of arbitrators in discovery disputes will detract from those purposes. Further, this principle coincides neatly with the preferred sanction for failure to produce an essential document: an “adverse inference,” i.e., the possibility that the tribunal will conclude that a relevant document, if produced, would have been detrimental to the intransigent party. As may be seen, these basic principles are generally rather favorable to the continental practitioner. Even with limited discovery, however, a skillful English or American practitioner may, in the limited time provided for oral hearing, make effective use of cross-examination and testimony from his own witnesses and experts. The essential imperative for such practitioners is to find a way to be focused and brief, both in asking for any discovery and in conducting any oral hearing. There are certain inherent barriers that probably foreclose, at least for the foreseeable future, development of a comprehensive set of rules for international commercial arbitration-including rules of discovery-that are truly not of any nation in particular, but rather a synthesis. First, each arbitral tribunal tends to be a law unto itself. The rules adopted and applied for the occasion are to a large degree determined by the cultural background of the members of the tribunal. Most international arbitrators are lawyers or jurists, who prefer to apply procedures with which they are familiar. Second, there are few external constraints on the operation of international arbitral tribunals. Although a disappointed party may attempt to challenge an award based on the assertion that denial of discovery, or an opportunity to put particular questions by cross-examination, made him unable to present his case, in practice failure to follow a specific requested practice can almost never be the basis for a successful challenge to an award. Further, to the extent that review of awards involves discovery and hearing-procedure issues, that review is conducted in courts around the globe, with judges applying their own views of what constitutes fundamental fairness. Finally, to some extent, diversity in procedures for international commercial arbitration is desirable. In some international arbitrations it may be obvious, from the nationality of the parties, the law of the contract, the place of the arbitration or other factors that problems of discovery and proof should be resolved using a continental, English or American system. Thus, a strict one-size-fits all standard is neither necessary nor desirable. Steven C. Bennett is a partner and general commercial litigator in the New York office of Jones, Day, Reavis & Pogue (www.jonesday.com). He teaches commercial arbitration at Brooklyn Law School. This article is adapted from “Arbitration: Essential Concepts” (2002), an American Lawyer Media publication.
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