Rules of Evidence in International Arbitration

Nathan D; O'Malley; LLM

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CHAPTER 1 The rules of evidence and their application

1.01 The phrase “rules of evidence” poses two conceptual challenges when applied to international arbitration. The first is one of perception. Some who have a passive knowledge of international arbitration may believe that it is, for all intents and purpose, a process free of rules. In this sense, arbitration has been variously called “litigation lite”, “binding mediation” and other names, some which are arguably accurate and others that are clearly not. Nonetheless, these terms are intended to convey the concept that it is a process that has few, if any, procedural rules. If arbitration is, therefore, the antithesis of rules-based dispute resolution, how then can one speak of “rules of evidence” in international arbitration? 1.02 The second challenge is one of definition. What are the rules of evidence in international arbitration? An astute observer of the various institutional and ad hoc arbitration rules will note that in most instances only cursory guidance is given on how evidence is to be taken and admitted. Those articles which do speak to evidence affirm the wide discretion arbitrators have to decide these matters without setting forth detailed rules.1 As the experienced arbitration professional knows, however, the paucity of direct references to binding rules of evidence does not mean that international arbitration is free of disputes over evidentiary procedure. Quite the opposite, where procedural disputes do arise it is often over questions of proof. Be that as it may, the question still remains that if there are so few written rules of evidence, how can one refer to, or much less write a book about, the “rules of evidence” in international arbitration? 1.03 The above two questions may be answered sufficiently, as will be further explained below, by establishing that arbitration does lend itself to rules of evidentiary procedure, and that such rules are more than merely the ad hoc solutions adopted at the whim of various arbitrators. In fact, what becomes evident from a study of this issue is that many of the principles invoked today are rooted in the jurisprudence of international tribunals stretching back for more than a hundred years.2 In modern practice, these principles are utilised by arbitrators with a wide variety of legal backgrounds, with the somewhat surprising yet satisfying result that they are applied with general consistency.

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1.04 It is the intention of this book to catalogue the rules of evidence in international arbitration and to examine their common application. Thus, one will notice that this text draws heavily from the published and unpublished case law of international tribunals as its primary source material. As a result, the commentary herein is intended to account for the views of the many experienced tribunals who have considered and interpreted these rules in their respective decisions. 1.05 The chapters following this initial introduction are organised around common statements of the rules of evidence as found in various sources. The 2010 IBA Rules on the Taking of Evidence in International Arbitration (2010) is the greatest source of such rules, and thus this book contains a wide consideration of that body of rules save for articles 1 and 2, which are discussed only as they relate to the more substantive portions of the IBA Rules found in articles 3–9. Another source is the UNCITRAL Arbitration Rules (2010) and to some extent also the UNCITRAL Model Law (2006) where appropriate, with further reference made in some instances to the ALI/UNIDROIT Principles of Transnational Civil Procedure and institutional rules.

Are there rules of evidence in international arbitration?

1.06 In recent times, it has become widely known that claims worth hundreds of millions and billions of euros and US dollars are decided by international arbitrators on a regular basis. This fact alone should put paid to the notion that the practice of international arbitration is devoid of any rules of evidence. Who would reasonably subject a claim of such magnitude to a process that does not have any rules concerning proof? 1.07 Beyond the circumstantial evidence for the existence of the rules of evidence, there is direct proof of their presence. Beginning with the jurisprudence of international tribunals, such as mixed claims commissions and early state-to-state tribunals, in the late nineteenth and early twentieth centuries, one finds regular references to principles and rules of evidentiary procedure.3 The rules are in some cases referred to as “normal” or “fundamental” rules of procedure by various tribunals, indicating their inherent applicability irrespective of their absence in a constitutive document setting forth the tribunal’s mandate.4 Many of these tribunals operated, like arbitrators today, under skeletal procedural outlines which made little to no reference to rules of evidentiary procedure. Yet these arbitrators determined to draw inferences, assigned the burden of proof and conducted hearings in accordance with rules of procedure with the confidence that the principles being applied were both correct and should have been anticipated by the parties. 1.08 From where did their confidence come? In this respect Bin Cheng notes that in some instances it was common sense.5 Indeed, arbitrators must preside over a procedure

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that will allow them to fulfil their mandate successfully. An example of “common sense” comes from the Italy-Venezuela Claims Commission of 1903. Here the tribunal was constituted under procedural rules that required the arbitrators to receive “all” evidence that was submitted.6 Applying its mandate, the umpire of the tribunal noted in reaction to a question over evidence submitted belatedly, that the tribunal had no ability to impose any restriction on the parties as to when they would submit their evidence, because of its duty to receive “all” evidence. Nevertheless, recognising that time limits of some nature were warranted as a means of maintaining order, the tribunal found that it had the ability to set limits on the time frame for submitting claims which permitted it to close the record to new evidence. Common sense prevailed here as the umpire found that “all things must come to an end”. 1.09 Further, early tribunals often recognised that common sense was in effect tantamount to applying many of the basic notions of procedure found in domestic law. Consider, for instance, the following observations of the Mexico-US General Claims Commission: “With respect to matters of evidence they [arbitral tribunals] must give effect to common sense principles underlying rules of evidence in domestic law.”7 Bin Cheng further identifies that the rules of evidence often recognised in arbitration are a “large number of general principles of law recognised by States in foro domestic”.8 However, that a tribunal would apply procedural principles found in domestic law should not be understood as an acceptance of the applicability of domestic court practices to international arbitration. Common sense in this context meant an acceptance of general principles of evidentiary procedure underlying domestic practice, which often were modified for particular application to international arbitration.9

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1.10 Moving forward to present arbitral practice, in international commercial arbitration, investor-state arbitration and state-to-state arbitration, there is continued proof in the case law of these tribunals of the existence of rules of evidentiary procedure.10 Further, academic writings and compilations of views of leading arbitrators show that there is an identifiable consensus on what the rules of evidence are and, moreover, how they should be generally applied. These sources of jurisprudence and commentary provide sufficient proof of the continued existence of rules of evidence in international arbitration.

What are the rules of evidence in international arbitration?

1.11 As noted above, the leading institutional and ad hoc arbitration rules often give little more than cursory guidance concerning evidentiary procedure. That being said, there exists in international arbitration evidentiary rules that are commonly understood and applied despite the paucity of direct references to them in institutional and ad hoc arbitration rules. 1.12 Starting with the fundamentals, it may be said that the very basic rules of evidence are those principles providing the definition of due process generally in international arbitration, which include a party’s right to equal treatment and an opportunity to be heard. These principles are applied to most cases by virtue of the lex arbitri,11 and have been recognised by various ad hoc annulment committees in the ICSID system as fundamental principles of international procedure generally.12 They also feature in the law governing the enforcement of awards such as the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.13 These rules have a direct connection to the administration of evidence. It is axiomatic that a party who is not afforded a fair opportunity to present its evidence will not have been afforded due process. 1.13 The application of due process principles to evidentiary procedure presents several challenges. First, the principles of the right to be heard and to equal treatment have to be applied in the context of various evidentiary issues. As an example, fairness must be observed in organising an evidentiary hearing, appointing a tribunal expert or ruling on

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the admissibility of evidence. Second, when considering equality and fairness, a tribunal must also balance the consideration of other legal principles, such as, for example, the observance of attorney-client privilege. A third challenge to the application of fairness and equality to evidentiary procedure is to find modes of application accepted beyond the boundaries of one legal system. Clearly, as international arbitration calls upon the service of arbitrators and counsel from a wide variety of legal systems, and involves parties of similarly wide backgrounds, what is considered a “fair opportunity” to present evidence must appeal to those of multiple jurisdictions.14 1.14 It follows from the above text the core rules of evidentiary procedure, fairness and equality, require more particular standards. It is, in the interests of the participants to be afforded some idea of what constitutes procedural fairness.15 It further follows that the codification of such standards will contain both principles that are cast as recommendations and those that are immutable due process norms. For example, in any set of rules regarding document production, one may find a recommendation that the tribunal set a time for hearing such applications, but, at the same time, an inherent rule that the tribunal afford both parties the same opportunity to make them. 1.15 Beginning in 1983, at the initiative of the International Bar Association, an attempt was made at refining those principles into a body of rules which may be thought of as restatements of the law of evidentiary procedure in international arbitration. After another revision in 1999, the IBA Rules of Evidence were revised again in 2010.16 Through this process the Rules have become widely accepted as an authoritative body of standards restating the accepted rules of evidence for international arbitration. As noted by one ICSID tribunal:

The IBA Rules are used widely by international arbitral tribunals as a guide even when not binding upon them. Precedents and informal documents, such as the IBA Rules, reflect the experience of recognized professionals in the field and draw their strength from the intrinsic merit and persuasive value rather than from their binding character.17

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