Report from the Prague Rules inaugural conference

24 Декабря 2018 Report from the Prague Rules inaugural conference

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The new  set of rules for taking evidence in international arbitration was officially signed 14th of December 2018 in Prague after 4 years of its drafting.

The opening ceremony organized by Russian Arbitration Association (RAA),Global Arbitration Review (GAR) and The Law Offices of Prof. Dr. Alexander Bělohlávekwas held in a privately owned historical location Martinický palác (Martinic Palace) in the Prague’s old city.

Prof. Dr. Alexander Bělohlávek, The Law Offices of Prof. Dr. Alexander Bělohlávek, Prague, welcomed the guests.He underlined that the development of the Prague Rules took nearly 10 years of hard work, the idea being first proposed at the meeting of arbitration practitioners in 2011 and being a collective contribution of a multitude of professionals. I do not believe there is a competition between the rules to be applied in arbitration, noted the lawyer. No one questions the importance of IBA Rules. However, Prague rules are not a rival to the IBA Rules, he added. The Prague Rules are here to help and give a viable alternative where applicable. Dr. Belohlavek also added that without the RAA the Prague Rules would never come to light.  

Vladimir Khvalei, Chairman of the Board, RAA, Moscow, outlined the drafting history of the Prague Rules, which began with a meeting of the ICC arbitration academy. After that the working group was formed, and now consists of 15 members. The Prague Rules had undergone 6 drafts, and are now published in 4 languages. The Rules were discussed at arbitration events in 15 countries, from US to China. More than 20 arbitral institutions and arbitral associations are supporting the Prague Rules today. Initially, the Prague Rules were called European rules of taking evidence, but this name was eventually changed due to the presence of England, common law country, in the EU, told the arbitrator. Сompanies from civil law countries would prefer arbitration rules based on civil law, noted Vladimir Khvalei, comparing the Prague Rules to the IBA Rules. Besides, as international trade is decreasing, more and more cases are presented by in-house lawyers, and simpler arbitration rules are in demand. The Prague Rules fit these cases perfectly, he noted. The scope of the rules is broader, than taking evidence – they are about the role of the tribunal in arbitration, he underlined. Khvalei named the key features of the Prague Rules, the most important of them being the active role of the arbitrators. He gave the example of a sale of goods dispute in which the arbitrators could guide the parties on what specific documents should be presented as evidence to make the proceedings faster and more efficient. Finally, Vladimir Khavlei presented the Signing Book of the Prague Rules and asked the guests to leave the signature in it at the end of the evening. 

Beata Gessel-Kalinowska vel Kalisz, Senior Partner at GESSEL, Warsaw, started the first  session “Showing a poker face. Limits of the tribunal’s role in the management of arbitration proceedings”. She touched upon the legal backgrounds of the speakers and underlined the power of the judge in a civil and common law systems. She compared the judicial reforms in the UK and in France in the 1990s and their influence on understanding of arbitration in these jurisdictions and how parties understand fairness in different proceedings. She described the result of a legal experiment which determined that as “fair” are perceived proceedings that are adversarial in nature, however, there should be some inquisitorial approach practiced by the judge. She gave an example of a relevant case from her practice in France.

Prague rules add an additional tool in the armoury of the parties, said Hilary Heilbron QC, Barrister, Brick Court Chambers, London. The avoidance of extensive disclosure and other tools cannot be underestimated, she said. Witnesses which are not key to the final decision should be able to participate by means of video in the process, and the Prague Rules allow for that, said Heilborn. She discussed the sanctions available to the tribunal under the Rules. Further, she discussed the expression of the preliminary views with regard to the burden of proof at the case management conference and the problems arising, especially in connection with the due process arguments. 

In response, Klaus Peter Berger, Director, Centre for Transnational Law (CENTRAL), Cologne, discussed the parties consent to give the preliminary view according to the Prague Rules and the DIS Rules. In theory, giving a party a preliminary view should be more cost effective than rendering the final award only in the end of deliberations without informing the parties, he said. To contrast this argument, he described failed attempts of arbitrators to impose the preliminary view on the parties in Germany. «I have never seen a case where I would be able to give a preliminary view at the case management conference»,  said Peter Berger. Then addressed the problem of deficit of settlement in arbitration. The judge or the arbitrator should play an active role in reconciliation of the parties, and this is reflected in the Rules, he noted. The tribunal needs to have the consent of the parties at every specific stage and in every case now, added the speaker.

Duarte Henriques, Partner, BCH Lawyers, Lisbon, added that there are no clear cuts between the arbitrator communicating with the parties and the preliminary view. He addressed the problem of regulation. Today we witness so many guidelines, and we are nearly on the edge of creating civil procedure for international arbitration said Henriques. Nowadays «less is more», and the Prague Rules reflect this approach. Regarding the fact finding, in the end, it depends, from what role is expected from the arbitrators. He referred to an English court setting aside an ICC award.  Henriques thanked the organisers of the conference and thanked the representatives of CIETAC for coming from China. The overarching effect of the Prague Rules is that the chinese community is favouring civil law and may find the civil law-bases rules of arbitration very relevant, so the Rules may bridge the eastern and western litigation cultures.

Roman Zykov, Secretary General, RAA, Moscow, opened the second session «Let’s not decide on anything until we decide everything? In-house expectations on the outcome of arbitration and the tribunal’s role in facilitation of settlement”,underlining the discussion will be led by in-house council an dedicated to their view on the Prague Rules.

Susanne Gropp-Stadler, Lead Counsel Litigation, Siemens AG, Munich, noted that Siemens has a huge variety of disputes in complexity of the issue. The company is as well present in more than 150 countries, adding variety of jurisdictions. She asked the panellists about the risk if different principles of arbitration being applied, that may lead to the arbitration award being unenforceable. Addressing the issue of document production in arbitration proceedings, she noted that limited document production can incur problems with appealing against the tribunal’s award. Of course, a too broad document production is not feasible, stated the speaker. She asked the audience to speak on the categories of documents, and discussed whether a tribunal has the competence to ask for a very specific document.

Dr. Clemens-August Heusch, Head of European Litigation, Nokia, Munich, told the audience about technical disputes in Nokia, specially those connected with licensing issues. Those involve a lot of uncertainty and time, and engineers cannot be always engaged on the projects to assist the lawyers. He touched upon dispute settlement in Germany. The German Civil procedure code provides for state judges to call for settlement extensively. But in arbitrations the parties should request the settlement procedure.

Michael McIlwrath, Senior Counsel, General Electric Company, Florence, noted that that the preliminary views often cause trouble to the process, as one party considers itself to be a winner and the other has to fight against a specific view of the tribunal nearly from the very beginning of deliberations. He pointed out how differently the Prague Rules are perceived by legal practitioners even in the civil law countries. He noted that if the Prague Rules were addressed to costs of document production, that would be very beneficial both for the litigators and the developers of the rules. The «cultural differences» between the viewpoint of arbitrators and the parties on the predictability of the dispute often lead to discontent with arbitration procedure. Identical rules can be applied very differently by judges in different countries, especially when it comes to appointing and experts. McIlwrath also described the process of selecting the arbitrator.

Moderating Session 3 “Is the sky the only limit? The scope of discoveryand e-discovery in arbitration” Andrey Panov, Senior Associate, Norton Rose Fulbright (Moscow) asked the speakers about the cultural differences in document production between common law and civil law jurisdictions. He asked the speakers about the rules of privilege in different legal traditions and then asked them to elaborate on e-discovery in international arbitration. Together with the panelists, Andrey Panov discussed whether discovery in arbitration was or ought to be different in comparison to litigation, the tribunal’s role in document disclosure and the approaches form different jurisdiction.

Dorothy Murray, Partner, King & Wood Mallesons, London, told the  participants about peculiarities of disclosure in China and compared this with the common law system and cases when disclosure was definitely necessary. She described two disclosure cases from her practice. The speaker addressed the problem of gaps in document disclosure, which could be helpful to the opposing party.

Francisco C Prol, Partner, Prol & Associates, Madrid, mentioned that disclosure can threaten certain documents that are crucial to the life of a company (talking in particular about sensitive financial and corporate documents). However, banking and financial contracts can be very complex and demand disclosure, he added. A delicate balance has to be identified individually in each case so that disclosure leads to a reasonable decision.

Artem Doudko, Partner, Osborne Clarke, London,said that disclosure helps to «find the truth», but can be a very expensive and lenghty excercise. He emphasised that finding the right balance was dependant on having a strong tribunal who could control the parties and provisions of instruments like the Prague Rules could provide the necessary support to tribunals to feel empowered to be stronger and more pro-active. He went on to say that E-disclosure will continue to develop and become ever more efficient and inexpensive over time. If a request for disclosure was too wide, the tribunal could narrow down the request. However, where requests were obviously contrary to applicable rules, the tribunal could refuse them outright. He described various scenarios of document disclosure and corresponding costs.

Opening the 4th session “Lie to me. Fact witnesses vs. documentary evidence: can documents lie” José Rosell, Arbitrator, introduced the guests. He spoke on the topic of the credibility test, which has been done by council, but with the Prague Rules this competence is being transferred to the tribunal.

Olena Perepelynska, Partner, INTEGRITES, Kyiv, said that the of witness and documentary evidence was connected with psychology as well. Olena gave an overview of witness statements in history of litigation. The attitude is striking – the civil law trusts documentary evidence, the document prevails. In many civil law jurisdictions the use of witness statements in commercial litigation was very unusual – in Ukrainian commercial litigation they didn’t exist at all until the recent law system reform. The national civil code even prohibits the use of witness testimony in certain circumstances. Among dozens of cases in her practice only two included an oral witness statement. Memory of witnesses is a very unreliable instrument, she concluded, and the modern methods of witness testimony in arbitration are to be reviewed.

Oral witness evidence has a strong tradition in common law countries, and hearings can run for months, said Christopher Newmark, Partner, Spenser Underhill Newmark, London. An advocate can introduce the document by a witness statement, he continued. He described the phenomenon of exposure of witnesses to post-event information that may influence their memory. The form of the questions can be a means of such influence as well, along with a draft of a witness statement written by somebody else and not the witness him- or herself.

A robust cross-examination is the most effective way of producing evidence, added Homayoon Arfazadeh, Member of the Arbitration Court of the SCAI Swiss Chambers’ Arbitration Institution, Geneva.The arbitrator shared his experience of a construction dispute between a German and an Italian party, where the witness statement ended the proceedings and helped to render the final award. Witness statements are very useful in complex cases. He elaborated on tribunals role on appointing the witnesses, speaking on behalf of SCAI. The «one fits all» tradition of running the proceedings is no longer valid, he said. Arbitration is not of common or civil law traditions, but is a culture of its own, borrowing from different legal systems. The procedure can be tailored to parties expectations, including the presence of witnesses. In an ideal world arbitration can have many «codes of civil procedure». 

Alexandre Khrapoutski, Partner, SBH Law Office, Minsk, moderating the Session “How much do hired guns contribute to the truth? Party appointed vs. tribunal appointed experts”discussed the role of tribunal-appointed experts in civil law countries. Alexandre asked how to maximize the usefulness of experts in arbitration proceedings.

Peter Rees QC, Barrister, 39 Essex Chambers, London, mentioned that it is crucial that the experts agree on the terms, and the request of the experts have to be kept reasonable, so that the process does not become expert-driven.  He named 4 instruments to find out the truth – witnesses of fact, documents, submission and expert’s statement. He also mentioned that often the expert’s bill matches the bill of an arbitrator.

Anthony Charlton, Partner, Deloitte, Paris, named the qualities of an expert.He noted that the expert has to be competent, be impartial, finally have the capacity to do the work. An early participation of the tribunal in improving expert instructions is of course beneficial.

Steven Law, Partner, BDO, London, spoke about the details of appointing an expert in arbitral proceedings. Answering the questions from the floor, he spoke about the duties of an expert.

Laurence Kiffer, President of UIA International Arbitration Commission & Teynier Pic, Paris, underlined the importance of instructions given to the expert. One of the techniques for making the proceedings more efficient is that we should focus the parties and experts on the technical issues interesting to the tribunal.

Valery Knyazev, Partner, Haberman Ilett, London, underlined that timing is crucial for proper preparation of the expert, as well as having expert meeting before producing the first expert report. Specific topics given by the tribunal make the participation of the expert beforehand more efficient, he added.

The conference was followed by the official signing ceremony of the Prague Rules signatory book, which will be deposited in Prague.


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