Discovery of evidence in international commercial arbitration

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РАСКРЫТИЕ ДОКАЗАТЕЛЬСТВ В МЕЖДУНАРОДНОМ КОММЕРЧЕСКОМ АРБИТРАЖЕ

Бакуменко В.В.

ORCID: 0000-0002-0153-101X, Бакалавр юридических наук, Национальный исследовательский университет Высшая школа экономики

Аннотация

evidence jurisdiction legal institution

В статье рассмотрены - концепции института раскрытия доказательств, существующие в различных правовых юрисдикциях, произведен их теоретико-правовой анализ для дальнейшего определения возможности и рациональности использования данного института в рамках международного коммерческого арбитража и его основополагающих принципов.

Ключевые слова: институт раскрытия доказательств, раскрытие доказательств, доказательства, международный коммерческий арбитраж.

Bakumenko V.V.

ORCID: 0000-0002-0153-101X, Bachelor of Legal Sciences, National Research University Higher School of Economics

DISCOVERY OF EVIDENCE IN INTERNATIONAL COMMERCIAL ARBITRATION

Abstract

The article considers the different concepts of discovery of evidence, which exist under different legal jurisdictions, with their theoretical analysis to determine the feasibility and rationality of the application of the discovery mechanisms in the frameworks of international commercial arbitration and its fundamental principles.

Keywords: discovery, disclosure, evidence, international commercial arbitration.

The fundamental significance of the arbitration, as, indeed, for any other law enforcement process, is the rules of evidence. This conclusion can be confirmed not only by the very practical objectives, as evidentiary rules constitute the basis for the successful presentation of claims before the arbitral tribunals, but also by the latest scientific papers in this regard. International commercial arbitration, as a fusion of elements from different legal orders, is able to combine a variety of approaches to the proof: of collecting and presenting evidence as well as of their research and evaluation. Traditionally, it is believed that in most cases of international arbitration the proof remains under the influence of civil law model. However, the increasing influence of the approaches to the proof used in the system of common law countries, on the international commercial arbitration is also should be noted, which, respectively, predetermines to study more complex approach on the issue.

The term “discovery” is most commonly used in the context of common law litigation, which provides with a broad notion of disclosure of documents [1]. Discovery of evidence linked to the procedural obligations of the parties in the UK and US jurisdictions, which allows them to familiarize themselves with the process of evidence relating to the case, and also provides with a chance to prepare for the hearing in advance. Discovery generally concerns a party's request to provide all evidence (sometimes, this may include documents or information in electronic form), which is at exclusive disposal of another one and may be related to the possible claims or objections on its behalf [2].

Although some authors believe that the discovery is part of each legal family, drawing an analogy with the institutions of production of evidence, the concept of discovery is traditionally considered in the practice of the English courts (also known in the English legal tradition as “disclosure”) [3, 4]. English legislation, namely Article 32.1 of the Civil Procedure Rules, defines disclosure of documents as the request for document production on behalf of a party, which knows or believes that the document in question exists and may be relevant to the outcome of the proceedings. Requested party is obliged to disclose all evidence which is in its possession, custody or control, including such evidence that may adversely affect its arguments and position in the hearing.

Common law is also familiar with the US-styled discovery [5, 6]. Under American litigation doctrine, discovery includes the variety of methods available (document production, premises inspection, medical examination, interrogatories, depositions, requests for binding admissions, etc.), which permit a tremendous level of intrusion to the opponent's internal processes including the obligation to disclose every document merely relates to the case, even being arguably relevant to the merits [7]. The “relevant” connection more often is interpreted “very broadly to mean matter that is relevant to anything that is or may become an issue in the litigation.” [8] Some authors in this respect even adhere to a broad interpretation, which allows production of confidential or commercially sensitive documents on condition they guarantee the due level of transparency between parties to the dispute [9]. It should be noted that these conclusions are not unfounded. For instance, in several cases the US Supreme Court confirmed the pro-discovery character of federal litigation with increasingly expansive definitions of documents subjected to discovery. Thus, in Burger King Corp. v. Rudzewicz the court rendered discoverable the whole structure of the business activities to determine whether the corporation was subject to personal jurisdiction [10]. The similar approach was used in another case, when the court awarded the discovery for the analytic and business framework of a foreign corporation to assert personal jurisdiction over it [11].

The US-styled discovery has received a fairly wide criticism from experts and practitioners for such a broad and unlimited possibilities. First of all, this criticism is related to the probable abuse of the fair trial principle, which is most evident in delaying trial procedures, increasing legal costs, and consequent depriving the opponent to participate in the proceedings. In addition, as it was noted, the American discovery procedure allows parties to query a large enough amount of information. Despite a few exceptions to the scope of disclosure of possible evidence that, as a rule, deal with the evidentiary privileges (e.g. attorney secrets, etc.), the discovery request may be filed against entire categories of documents with no limitations. Accordingly, there is a high risk that the discovery may reveal the information which is principally irrelevant to the dispute, but falls under the intentions and interests of unscrupulous parties (i.e. information and content of contracts in competitive fields of economic activity, etc.).

As for the civil law tradition, there is neither the extensive production of documents, nor the concept of discovery. As it is fairly pointed out by some scholars, for “a civil law opponent… the idea of liberal discovery would be to allow one party to obtain from the other a signed copy of a document of which the requesting party has only an unsigned copy [12].” In other words, in civil law jurisdictions a party can obtain a specifically described document in the possession of the adverse party only if the document is relevant with regard to the fact alleged.

Currently, some authors presume the existence of so-called transnational approach to discovery, which is reflected in Article 16.1 of the UNIDROIT Principles of Transnational Civil Procedure, according to which a party to the proceedings may make a request for the disclosure of evidence, if the principles of relevancy and proportionality are met. Thus, in contrast to the common law approach, a transnational mechanism of discovery establishes a limited powers (so-called “limited discovery”), which prohibit the “fishing expeditions”. The court may also make an order for the protection of confidential information at the request of one of the parties, however, the effectiveness of this institution is rather low, especially in situations when the contents of the requested information for the contractor is more valuable than the possibility of its disclosure to third parties. Moreover, the concept of “limited discovery” is more reminiscent with the earlier mentioned legal institute of production of evidence, based on the same principles and aims.

Analysis of international arbitration rules shows that they establish rather simplified arrangements for the collection and discovery of evidence than the applicable national law (i.e. ICC Rules, Art. 20(5); DIS Rules, Art. 27.1; UNCITRAL Rules, Art. 27(3)). However, none of the institutional arbitration regulations define the terms and scope of evidence production. Traditionally, regulations using voluntary disclosure institution differ only in their wording. Accordingly, when the parties do not specify in the arbitration clause or subsequently failed to agree on the form of discovery, the arbitrators have to be guided by the personal views and preferences.

The degree of discretion and competence of the arbitral tribunal with respect to discovery of evidence is mainly determined by the arbitration agreement and the rules established by the parties. The most striking manifestation of the arbitration is the freedom of the parties to agree on or exclude the non-discovery clause in the arbitration agreement, which exercises their right to establish the procedure they find appropriate for the dispute in question. This principle is widely recognized under most institutional arbitration rules, as well as under legal doctrine [13]. Otherwise, in the violation of the obligation to conduct the arbitration in accordance with the procedure agreed upon (i.e. due process), the arbitral award may be set aside [14]. At the same time, both the applicable law and the place of arbitration may play a key role in determining the model of evidence discovery, as well as the applicability of this mechanism in principle. Even in the presence of claims that the process in international arbitration is aiming at unification, the difference in the approaches of gathering and disclosure of evidence remains relevant, as it will be shown below.

Commonly, international arbitration does not deal with any kind of discovery, following the civil law tradition. This approach has been identified as a fundamental way of treating parties from different legal traditions equally since parties from civil law countries might perceive the use of discovery as unfair because they are not used to the disclosure of commercially sensitive documents (i.e. pricing policies, distribution lists, and lists on counteragents or suppliers are routinely found to be protected business secrets exempt from document production [15]). As a general rule, voluntary or pursuant to tribunal orders production of documents is under the protection of confidentiality principles. As it was fairly stated in case law, all documents produced by each party to the arbitration under the process of production are covered by the obligation of confidentiality [16]. Nevertheless, in some national judgments it can be found that there is no implied duty of confidentiality in private arbitrations [17]. For instance, in common law jurisdictions some courts upheld position that confidentiality unlike privacy is not an essential attribute of commercial arbitration and, therefore, the non-party was entitled to discovery of arbitration documents and information [18].

We presume that broad interpretation of discovery concept contradicts the neutral nature of international arbitration, as very rules on evidence do not favor one side over another. The standard practice in international commercial arbitration is to automatically exclude the US-style discovery [19]. Indeed, as it was fairly stated in one of the ICC awards, the US-styled discovery is significantly different from the production of documents ordered by the arbitral tribunal in context of ordinary international arbitration proceedings [20].

As a standard, the rules governing the collection, evaluation and provision of evidence in the literature referred to the IBA Rules on the Taking of Evidence, which in recent decades has gained enough popularity under international arbitration practice. The IBA Rules, providing an efficient and fair process for the taking of evidence, have found widespread acceptance within the arbitration community. Arbitral tribunals fairly often recognize them as guidelines as they reflect the experience of highly qualified professionals and experts [21].

Most scholars agree that these rules represent the unification of civil law and common law approaches and set compromise regulations in respect of discovery [22]. However, the effectiveness of the IBA Rules still remains controversial, as they are not directly binding upon the tribunal in the absence of the parties' consent, as well as they provide just recommendations for their express incorporation. Therefore, it is hardly to recognize them as a solution to the existing problems of the different approaches to the discovery of evidence, especially if the parties to the dispute are representative of the different legal traditions. Of course, the IBA Rules in some way contribute to the elimination of differences in approaches to discovery of evidence. Nevertheless, there are a number of arguments that still to be discussed since the IBA Rules 2010 edition was elaborated with some uncertainties, which have received absolutely different interpretations in practice and legal doctrine.

In this regard, analysis of the previous rule's edition gave a clear conclusion that they tended to the civil law system. For instance, in accordance with Article 4.4 of the 1983 IBA Rules, requesting party was to specify a particular document, which was requested into evidence from the opposing. By the way, it should be mentioned that nowadays the same approach is developed in the Russian state courts, as well as in arbitration practice under the ICAC Rules [23]. Unlike narrow civil law approach, the provisions of the 2010 IBA Rules permitting to request for the category of documents that are reasonably believed to exist, which may be fairly interpreted as the development of the common law model of discovery. Of course, the IBA Rules' provisions establish the principles of reasonableness and relevancy as they appear under civil law jurisdictions. For instance, in order to meet the well-established relevance requirement the evidence requested shall be indispensable to support party's factual allegations and substantive submissions [24]. It follows from this that the requesting party must show, substantially, why in her opinion the issues it wants to prove with the help of the requested documents are relevant and material to the outcome of the case. Still, these concepts remain quite amorphous, allowing to be interpreted broadly. Therefore, the principle of reasonableness may contain only the presumed author or recipient of the documents, the date or presumed time period within which the documents were established and the presumed content of the document. Likewise, the principle of relevancy is commonly considered on case-by-case basis, and arbitral tribunals take into account the link between the requests of documents and factual allegations in the submissions made by requesting party. In other words, the requesting party should make clear with reasonable particularity what facts or allegations each document or category of documents sought is intended to establish, however, reasonableness is not a strict concept also, which sometimes may be interpreted quite broadly [25]. All this suggests that the 2010 IBA Rules predominantly reflects common law approach to discovery.

At the same time, it is well understood that the standard for the production of documents in international commercial arbitration is much narrower than the “all relevant information” standard as usually found in the US litigation. This may be also confirmed by the preparation works on the 2010 IBA Rules [26], which indicates that they have not been developed on the basis of common law tradition [27]. Consequently, we presume that a broad approach to the interpretation of the latest IBA Rule is invalid since, in accordance with the formal reading of the rule, even categories of documents under request must also be specified.

Nonetheless, some trends in international practice cast doubts on the narrow interpretation of the discovery. Thus, provisions of English Arbitration Act, as well as the London Court of International Arbitration Rules (Art. 22.1(e)), contradict to the approach taken in IBA Rules, since they allow the arbitrators to request any evidence that are in the possession or control of a party. Such discrepancies may appear to be a serious problem at the stage of the enforcement. For example, despite the fact that the discovery procedure is mandatory only within the US jurisdiction, it is quite often when American parties to international arbitration use such grounds to appeal awards, arguing a violation of procedural rights, interests, and the principle of fair trial proceedings [28, 29].

In order to eliminate approaches to the IBA Rules, the International Centre for Dispute Resolution and the American Arbitration Association published guidance on the exchange of information, which was aimed at establishing the rules “on a limited, controlled suspension and arbitrators discovery of evidence.” The Guidelines are basically based on the obligation of the parties to provide evidence to substantiate their claims and objections prior to the hearing. If a lack of information appears, the tribunal may invoke discovery procedures under its own control with strict prohibition of the US-styled mechanisms (e.g. depositions, interrogatories, request for confirmation) [30].

Undoubtedly, this manual constitutes a positive step towards the unification of rules on the discovery of evidence, creating a compromise between two different legal systems. However, it seems to be true that they do not eliminate the possibility of abuse, for example, in situations when one party has an access to assistance of the American or British vessels by evidence discovery institution, while the appropriate tools are generally not available in civil law countries. Accordingly, when applying alternative methods of settling disputes, in particular, through international arbitration, the parties to the arbitration agreement must take into account the possibility of such risks.

Considering all above mentioned difficulties and uncertainties, we believe that the discovery in international arbitration may result in rather negative than positive tendencies. In particular, the duty upon the parties to provide all the documents at their control is able to destroy the very idea of fast and efficient proceedings, as well as it opens up a great discretion for the unfair conduct of the parties, which expressed in the tightening the process, the increase in costs, the disclosure of confidential information, etc. Therefore, we presume that in the case of bad faith refusal to produce evidence the international commercial tribunals should use already developed methods of proceedings, namely adverse inferences, shifting of the burden of proof or the balance of probabilities, which generally are quite flexible and not followed with large risks of violation of rights of the parties.

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