Is Arbitration Heading Toward a Model Procedure (And Is That a Good Thing?)
As International Arbitration is a global phenomenon, its practice is spread out on all continents and flexibility has become one of its key elements. A growing debate in International Arbitration highlights the tensions between the diversity of culture and practice in proceedings, and the need for harmonization. While harmonization would increase predictability in the procedural process, flexibility in proceedings allows for, among other benefits, the possibility of a custom fit, case specific process, designed by the legal team with practical, strategic, and creative considerations in mind.
Arguments supporting a move toward a model procedure
Arbitration has developed as the preferred method of dispute settlement and has led to interactions between people from different legal backgrounds. In the interest of efficiency, these interactions have triggered a general move toward harmonization of procedure through treaties and soft law.
Parties are free to apply the institutional rules they think most appropriate to their particular dispute. Despite the suitability of party autonomy and the great number of procedural alternatives available, it is a fact that parties often end up doing things in the same way and choosing a set of rules they believe to be more efficient (or that is simply more popular).
Counsel’s and arbitrator’s influence and guidance also contribute to harmonization. Lawyers will often suggest rules that they are familiar with and that seem preferable to them. Arbitrators regularly suggest the same or similar procedures across cases for reasons of comfort and ease.
International instruments set a general framework, represent a political desire to move toward harmonization and create a model ground for procedural rules. The Geneva treaties of 1923 and 1927 were the first steps toward the recognition of arbitral clauses and awards (later to be crystallized in the New York Convention of 1958).
The underlying purpose of UNCITRAL was to provide for general harmonization and set up a minimal standard to cope with the flaws that disparities can create. The UNCITRAL Model Law has been used by many countries as a basis to adopt their own domestic law and become more arbitration friendly. Its purpose was to achieve uniformity of procedural law throughout the world. While it is true that choosing a place / seat of arbitration will bring in a specific set of rules, the fact that these national rules are converging thanks to the Model Law pleads for a harmonization of the procedure.
The availability of the jurisprudence and its global use has also influenced and contributed to harmonization. The ICSID Convention has played a key role in this matter.
Many clients add an arbitration clause in their contract mainly because they do not wish to go to court, not because they know what going to arbitration entails. For this reason, it is crucial that the arbitration community provides them with a strong degree of guidance. The epistemic community shares the same expertise and is moved by similar objectives, and undoubtedly has interest in promoting the arbitration practice in a similar way.
While it is understandable that States have great political interests in adopting similar laws, one may wonder why they are almost always doing the same things in the same way considering the large degree of flexibility provided. That they want to attract business to their own countries (and do so by adopting an arbitration friendly framework with greater predictability) is one thing, but don’t they also have a strong interest in distinguishing themselves? Arbitration is a business in itself and the very existence of Paris Place de l’Arbitrage shows the will of countries to compete against each other in terms of reputation and best practices.
Arbitration institutions have historically been very influential in this process. When the ICC changes its arbitration rules, it is likely that other institutions will consider those changes and use the guidance provided by the leading institution to modify their own rules. More and more arbitrations are institutional and rules now tend to converge rather than differ.
Professional associations such as the IBA provide guidance through their notes and rules. While civil and common lawyers often disagree on what to do with the evidence, the IBA Rules set a common yet flexible basis on how to deal with this matter, and are now used in 60% of arbitrations. It can be argued that soft law relating to the law of evidence provides for a degree of convergence of the two legal traditions and for a common ground that lawyers often need.
The 2012 International Arbitration Survey conducted by the University of Queen Mary and sponsored by White & Case dealt with current and preferred practices in the arbitral process. It led to the conclusion that there is indeed a general common practice on how proceedings are conducted and how evidence is managed. For example, there is a quasi-consensus on the effectiveness of cross-examination, expert witness evidence, and that fact witness evidence should be offered by exchange of witness statements. This has become a general global framework.
Arguments opposing a move toward a model procedure
While it is true that factors do converge toward best practices in International Arbitration procedure, a number of factors prevent harmonization. First, while we cannot doubt the existence of an arbitration community whose goals and expectations about procedure may support convergence, one cannot argue that the practice of arbitration is limited to the arbitration community. The majority of arbitration cases involve lawyers whose practices are not arbitration. These lawyers may not see many arbitration cases in their careers and their individual litigation backgrounds will guide their conduct, thus leading to different procedural aims amongst practitioners. Said differently, the global arbitration community composed of arbitration experts will not share the same opinions as the local counsels involved in arbitration a few times in their lives.
Moreover, the existence of a model procedure assumes that all players have reached a consensus on the practice. Such uniformity is not the reality of arbitration and there are many grounds for debate. For example, some lawyers appoint an arbitrator that they wish to be assisted by an administrative assistant. The debate relates to his duties, should he be drafting the award? Opinions diverge on this point.
There are many new local markets becoming places of arbitrations. The emergence of these new players leads to an increasing number of arbitrations being handled locally, where practice may differ greatly from other places. New emerging players may not agree that best practices for others also constitute best practices for themselves and would, for example, consider the IBA Guidelines on Party Representation very differently.
Often one of the biggest influences on the procedure is the arbitrator himself. Arbitrators’ preferences for procedure remain fairly consistent across their caseloads and vary greatly when compared to other arbitrators. Some may not want post-hearing briefs whereas others do away with direct examination. Yet, the arbitrator who favors post-hearing briefs can be expected to apply this procedure to many of his cases.
Along the same lines, parties may be hesitant to propose changes to an arbitrator’s procedural expectations for practical reasons. One wants the arbitrator to like him and like his case; if the arbitrator suggests something in the procedural order, one must really wonder if proposing an amendment to the procedure is really a good idea.
Moving toward a model procedure is a good thing
A model procedure in International Arbitration would ensure stability and security in the preparation of the case. It could reduce costs by promoting predictability and allowing parties to organize their cases quicker and with ease. Already today, there are certain reliable procedural aspects which practitioners can expect to encounter in every arbitration.
They will agree that the ability to rely on the following features is indeed a good thing:
- First, the statement of claim is expected to be detailed and supported by evidence. This is not the case in all legal traditions as common law attorneys are often expected to provide a skeletal statement of claim to be supplemented through discovery.
- Second, limited discovery is available. Parties can request documents from the other side if such documents are helpful to building their case.
- Third, the parties have a right to a hearing. Hearings are automatic in common law jurisdictions whereas they are not in civil law jurisdictions. International Arbitration practitioners can rely on the fact that they always have a right to a hearing but may also decide to waive this right.
- Fourth, it is not necessary to introduce or authenticate evidence at the hearing. The introduction and authentication of evidence is a burdensome practice present in common law jurisdictions.
- Fifth, the parties and the arbitral tribunal decide procedure together. Whether or not parties decide to exercise their right to participate in determining the procedural process is another consideration.
- Sixth, witnesses are examined by both arbitrators and counsel. Counsel examines witnesses in common law jurisdictions while the judge examines witnesses in civil law jurisdictions.
- Seventh, counsel will be limited in his ability to conduct direct examination. The witness statement usually serves as the direct examination and one will have an opportunity to supplement this statement only if something new comes up afterwards.
- Eighth, both parties and tribunal can appoint experts. Parties should always anticipate the appointment of experts and plan accordingly.
- Ninth, counsel can prepare and pay witnesses and experts. The IBA Guidelines on Party Representation confirmed that parties may pay witnesses and experts for expenses reasonably incurred in the preparation of the hearing, loss of time, and expert reasonable fees.
- Finally, counsel may, not knowingly, make false submissions of facts to the tribunal. This is analogous to the rule in the United States whereas French law does not address the issue. If parties do make false submissions of facts, the tribunal may make adverse inferences or modify parties’ allocation of legal costs and tribunal fees.
A model procedure would be evil
The International Arbitration procedure is characterized by its flexibility. Parties can tailor the procedure to their individual needs and choose from a wide range of procedural options. Many arbitration proceedings look similar but, as there will never be identical cases, there should never be identical procedures.
The solution toward a model procedure would necessarily impair this flexibility. As one practitioner mused, “Why buy IKEA when you can have custom-made furniture?”
The 2012 International Arbitration Survey conducted by the University of Queen Mary showed that practitioners were concerned that the process had become too regulated.
The practice of International Arbitration needs to take into account cultural aspects and local differences, and respect the expectations of the parties. This is what arbitration should be about. For example, there are many issues to be considered when trying to enforce an award in the Middle East and that will be typical to the local culture (in Dubai the oath of the witnesses can be problematic if the proper administrative form was not use, and the Qatari Court of cassation set aside an award because it was not rendered in the name of the emir of Qatar).
Clients may eventually feel cheated by the use of a model procedure as they chose arbitration as a means to settle their disputes at least in part for its procedural flexibility. Clients may also view a harmonized procedure as taking less of their individual expectations into account.
Arguments presented during a Young Arbitrator’s Forum Panel Presentation by speakers:
- Eleonore Caroit (Castaldi, Mourre, & Partners)
- Lorraine de Germiny (King & Spalding)
- Matthew Secomb – Moderator (White & Case)
- Thomas Granier (ICC)
- Florian Grisel (Dechert)
– Olivier Marquais