Will the Prague Rules on the taking of evidence change anything in International Arbitration?

What are the “Prague Rules”?

Just like the IBA Rules on the Taking of Evidence in International Arbitration, the draft Prague Rules provide guidance on taking evidence in international arbitration. Nevertheless, the assumption of the Prague Rules is to follow a “civil law” approach in the conduct of arbitral proceedings that provides more investigative and inquisitorial powers to arbitral tribunals. The drafters believe that the Prague Rules  will increase efficiency in international arbitration and reduce costs.

The Prague Rules are seen as a potential alternative to IBA Rules which, in the opinion of many practitioners, reflect a more “common law” and adversarial approach to managing arbitration and assume the parties’ autonomy in the proceedings. 

The final version of the Prague Rules is to be approved in December 2018.

Prague Rules vs. IBA Rules. Where is the difference?

The main factors that prevent the reducing of time and costs of arbitral proceedings are - in opinion of the Working Group of the Prague Rules - (i) document production, (ii) too many factual and expert witnesses, and (iii) cross examination at lengthy hearings. 

Document production

The conclusion that expansive document production may delay the resolution of a dispute for months seems to be obvious. Both the IBA and Prague Rules provide some mechanisms for limiting the delay.

Under the IBA Rules^[1], a party may request a specific document or a “narrow and specific requested category of documents”. Based on this provision, parties commonly exchange requests for broadly described categories of documents, as they are not able to indicate the exact document they are looking for. It has also become a quite common practice to request a kind of e-discovery, i.e. to request the other party to produce all the e-mails that match specific search criteria. However, the IBA Rules^[2] give tribunals the right to refuse such broad requests for documents. A tribunal may therefore deny a request if it lacks sufficient relevance to the case or materiality to its outcome, or if it involves an unreasonable burden to produce the requested evidence.

Under the Prague Rules^[3], document production is even more limited. The solution proposed by the Working Group is to give the Arbitral Tribunal the power to avoid extensive production of documents, including any form of e-discovery. A party may request the Arbitral Tribunal to order the other Party to produce only specific documents which (i) are relevant and material to the outcome of the case, (ii) are not in the public domain; and (iii) are in the possession of the other Party.

The difference between the IBA Rules and the Prague Rules in the approach towards document production seems to be relevant from a practical point of view, especially because the request to produce a document is very often used by the parties to discharge their burden of proof, or to counter any potential false statements by the other party. Under the Prague Rules, this possibility would be significantly limited, as the party requesting the document is normally not able to specifically identify documents that are not in its possession.

Limitation of the number of witnesses

The Prague Rules provide Arbitral Tribunals with efficient mechanisms to limit number of witnesses^[4]. Firstly, the Arbitral Tribunal is fully authorized to decide on what witnesses are to be called for examination during the hearing, after hearing the other party. Secondly, the Arbitral Tribunal may suggest which witnesses should testify, as their statements may be helpful in resolving the issues in dispute.

According to the IBA Rules, the number of witnesses to appear at the hearing is more a decision of the parties.^[5] The IBA Rules obviously provide for possibilities for the Arbitral Tribunal to exclude witness testimonies on its own motion, if said testimony is not relevant to the case[6], however, this is not the same solution proposed by the Prague Rules, which grant the Arbitral Tribunal a more proactive role from the very beginning.

Examination of witnesses

Under both sets of rules, the Tribunal has ultimate control over the evidentiary hearing. Both the Prague Rules[7] and the IBA Rules[8] allow the Arbitral Tribunal to limit the number of questions to witnesses and both allow the Arbitral Tribunal to make adverse inferences. They also provide for party-appointed experts and tribunal- appointed experts, although the IBA Rules appear to be much more extensive in this regard.

Nevertheless, one controversial difference appears in article 5.5 of the Prague Rules, according to which if a written witness statement is filed after hearing the Parties, the Arbitral Tribunal may decide not to call a factual witness to testify at the hearing, retaining the authority to give evidential value to a written witness statement, as it deems appropriate. In practice, this simply means that the Arbitral Tribunal can rely on a written testimony, without giving the other party the opportunity to hear the witness.

'Jura Novit Cura'

Another important difference between the IBA and Prague Rules relates  the power of the Arbitral Tribunal to investigate points of law on its own motion introduced by the Prague Rules. According to Article 7.2 of the Prague Rules, the Arbitral Tribunal “can apply legal provisions not pleaded by the Parties if it finds it necessary”. In so doing, the Arbitral Tribunal “shall seek the Parties’ views on the legal provisions it intends to apply”.

Jura novit cura is not regulated by the IBA Rules, which leave to the parties the burden of legally justifying their claims.

Conclusion

The Prague Rules are  an interesting and potentially useful addition to the existing IBA Rules. They should be viewed as complimentary rather than an alternative to the IBA Rules. It is also doubtful whether certain new trends in taking evidence established by the Prague Rules would, in fact, reduce time and the costs of arbitration proceedings. Nevertheless, it is definitely worth observing how the Prague Rules develop and whether they gain popularity amongst civil law practitioners.