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Arbitral ‘Culture’, procedural flexibility and the Prague rules

A Guest Post by Letizia Busso

Letizia is a Master’s graduate from the University of Turin and the University of Amsterdam. During her studies, she took part in the 25th edition of the Willem C. Vis International Commercial Arbitration Moot Court and she obtained a Certificate in Transnational Legal Studies from the Georgetown Center for Transnational Legal Studies. She is currently in the process of qualifying as a Lawyer.

1.    Introduction: the ‘culture’ of international arbitration

Procedural flexibility is clearly one of the promises of international arbitration, and has proved to be one of the key factors for the widespread use of this dispute-settlement mechanism.[1]

Nevertheless, decades of arbitral practice have created what could be defined as a ‘culture’ of international arbitration; a set of widespread behaviours that keep being repeated despite a lack of codification and without apparent benefit for arbitration’s increasingly international users. In other words, there may be a divergence between practitioners’ experiences and preferences owing to the ‘culture’ of arbitration (see here). This discrepancy is particularly evident due to the so-called “common law-civil law divide”[2] in international arbitration.

The current fixed set of unwritten rules in arbitration risks creating a glass ceiling for procedural flexibility, limiting the possibility for a large number of arbitration users to tailor their case according to their preferences. This is not what arbitration needs. Given the increasing numbers of international actors involved in arbitration, as well as the recent challenges related to the COVID-19 pandemic, arbitration should instead seek to increase its flexibility in order to truly meet the needs and preferences of all its users.

This article will focus on a recent effort of the arbitral community: the 2018 Rules on the Efficient Conduct of Proceedings in International Arbitration (hereinafter Prague Rules). The aim is to analyse how the Prague Rules inject a good dose of procedural flexibility in arbitral proceedings, creating room for reshaping the existing ‘culture’ of arbitration.

2.    The Prague Rules and procedural flexibility

The Prague Rules were signed in December 2018. Their core aim is to respond to general dissatisfaction as to the time and cost of arbitration through increasing efficiency in arbitral proceedings (Preamble). This efficiency is essentially achieved through a more proactive role for the tribunal in managing the proceedings.

The Prague Rules’ Working Group was in large part formed of representatives of civil law jurisdictions. In this sense, the Rules introduce a civil law approach on the conduct of arbitral proceedings, clearing the way for behaviours that deviate from the established arbitral ‘culture’.

The following subparagraphs will analyse aspects of the Prague Rules’ that appear to bring greater room for increased procedural flexibility in arbitral proceedings.

2.1   The Case Management Conference (hereinafter CMC)

Art. 2.1 of the Prague Rules provides that “the arbitral tribunal shall hold a case management conference without any unjustified delay after receiving the case file”. Performing such conferences at an early stage of the arbitration is not unique to the Prague Rules, and is commonplace in most arbitral proceedings. For instance, art. 24 of the 2017 ICC Arbitration Rules provides that the arbitral tribunal shall convene a CMC to consult the parties on potential procedural measures and to set a procedural timetable; in a similar vein, art. 2 of the 2010 IBA Rules on the Taking of Evidence in International Arbitration (hereinafter IBA Rules) provides for early-stage consultations aimed at agreeing “an efficient, economical and fair process for the taking of evidence”.

In this framework, the Prague Rules go one step further. Art. 2.4 of the Prague Rules provides that “the arbitral tribunal may at the case management conference or at any later stage of the arbitration, indicate to the parties […] its preliminary views on […] the disputed issues”. Thus, the potential subject matter of the CMC under the Prague Rules is broader than the traditional scope of such conferences, as it is not limited to procedural and administrative issues, rather it expands to the merits of the case.[3] This innovative aspect of the Prague Rules fosters procedural flexibility in three ways.

First, as stated in the headline of art. 2 of the Prague Rules, this provision gives the arbitral tribunal a more proactive role to shape the proceedings at an early stage, promoting a more civil-law-inspired fact-finding approach to the conduct of arbitral proceedings.

Second, the tribunals’ choice to express their preliminary view on the disputed issues is purely optional – Art. 2.4 of the Prague Rules states that the tribunal may provide the parties with such indications, as long as it deems it appropriate. This possibility to expand the reach of the CMC’s subject matter depending on the specific case demonstrates flexibility.

Finally, such potential expansion to the merits of the dispute combines with the general preference of the Prague Rules towards amicable settlement at any stage of the arbitration – as provided in art. 9. In this framework, the possibility for the tribunal to express its views on the disputed issues during the CMC could prompt the parties to seek amicable settlement at a very early stage. This implies procedural flexibility, and helps the parties to satisfy their ultimate interest: a fast and efficient resolution of their dispute, rather than a hard-fought arbitration. Especially in the days of COVID-19, where liquidity has become a near-universal issue for many businesses, there will inevitably be a desire to reduce litigation costs, and parties may eschew lengthy and costly arbitration proceedings in favour of more economically efficient outcomes (see here).

2.2   Document Production

Requests for document production are extremely common in international arbitration, and form part of the core arbitral ‘culture’. However, the possibility to file such requests is one of the most debated topics within the arbitral community, which gives rise to clashing views between common and civil lawyers (see here). Indeed, requests for document production occur much more frequently in the common law world than in the civil law one.

In this regard, art. 4 of the Prague Rules heavily limits the possibility to request document production. On the one hand, paragraph 4.1 generally encourages the parties to avoid “any form of document production, including e-discovery”.  On the other hand, paragraph 4.3 constrains the timeframe for issuing such requests, providing that, should the parties need to request documents from the other parties, this shall be done during the CMC. Requests at a later stage can only be issued in exceptional circumstances, insofar as the parties could not have made them at the CMC.

This provision clearly diverts from art. 3 of the IBA Rules, which broadly allows requests for document production “within the time ordered by the arbitral tribunal”.

The Prague Rules’ stricter approach paves the way to a more civil-law-oriented point of view on the topic of document production in arbitration, i.e. generalised doubts as to the relevance of document production for the outcome of the case. Quoting a Note of the Prague Rules’ Working Group “it is very rare, if ever, that document production brings a smoking gun to light” (see here).

In this framework, the Prague Rules constitute an alternative to the established ‘culture’, which (civil law) practitioners can use to tailor their arbitral proceedings in a way that better meets their preferences and their clients’ needs. This is the core of procedural flexibility.

2.3   Expert Witnesses

The use of expert witnesses is widespread in international arbitration. Although the arbitration rules of several highly reputed arbitration institutions (see here, here, here, here and here) as well as the IBA Rules (art. 6), contain provisions allowing tribunal-appointed expert witnesses as well, party-appointed experts are definitely more common and engrained arbitral ‘culture’.

In this regard, the Prague Rules swim against the tide, and in art. 6 on experts they promote greater procedural flexibility in two different ways.

First, they set tribunal-appointed expert witnesses as a default rule. This provision undoubtedly accommodates civil lawyers’ scepticisms as to party-appointed experts, which they often perceive as less effective and more prone to partisanship towards their appointing party than those that are appointed by the tribunal (see here).

Second, default tribunal appointment of experts “does not preclude a party from submitting an expert report by any expert appointed by that party”, nor the examination of party-appointed experts at the hearing (art. 6.5 of the Prague Rules).  Once again, the Prague Rules clear the way for a broader use of tribunal-appointed experts, but still keep a door open for a more traditional approach. It will be up to the users to decide which option better matches their preferences.

2.4   Hearing

Under art. 8 of the Prague Rules “the arbitral tribunal and the parties should seek to resolve the dispute on a document-only basis”. Document-only arbitrations are not a novel concept: several rules of arbitral institutions envisage this possibility, although in most cases requiring parties’ consent thereto (see here, here and here). The Prague Rules invert this approach, strongly endorsing document-only arbitration as the default rule, as long as appropriate for a particular case.

Art. 8.2 of the Prague Rules, however, leaves the door open for hearings, should one of the parties request it or the tribunal find it appropriate in the specific case. With a caveat: hearings shall in any event be conducted “in the most efficient manner possible” through “video, electronic or telephone communication” (art. 8.2 of the Prague Rules).

In this respect, the Prague Rules’ arbitral proceedings significantly differ from tradition, where in-person hearings are an “obvious ritual”.[4] The Prague-envisaged document-only default and remote hearings only if necessary is extremely forward-looking, as it reflects the changes arbitration is undergoing due to the COVID-19 pandemic. The existence of rules that explicitly redesign arbitral proceedings in a way that better matches the needs of its users cannot but help increase procedural flexibility in these unprecedented times.

2.5   Assistance in Amicable Settlement

Art. 9 of the Prague Rules encourages arbitral tribunals to assist the parties in reaching an amicable settlement of the dispute at any stage of the arbitration, unless any of the parties object. Moreover, upon prior written consent of all the parties, any of the arbitrators may act as a mediator to assist in the amicable settlement. Should a settlement not be achieved, the arbitrator-mediator can continue to act as an arbitrator in the proceedings, subject to written consent of all parties.

Common lawyers may not be as familiar with this ‘fluid’ role of arbitrators, nevertheless the IBA Guidelines on Conflict of Interests in International Arbitration (hereinafter IBA Guidelines) contain a similar provision. According to General Principle 4(d) “an arbitrator may assist the parties in reaching a settlement of the dispute, through conciliation, mediation or otherwise, at any stage of the proceedings”. Prior to this, however, there must be an “express agreement by the parties that acting in such a manner shall not disqualify the arbitrator from continuing to serve as arbitrator”. Through this express agreement, the parties waive any potential conflict of interests arising from the arbitrator acting as a conciliator or mediator before any conciliation or mediation takes place.

The Prague Rules offer a different approach, choosing to reverse this existing default option of ‘fluid’ arbitrators upon prior consent. Art. 9 fully normalises a ‘fluid’ role of arbitrators, allowing them to facilitate an amicable settlement at any stage of the proceedings without requiring any prior express consent by the parties, and relegating such consent to a later moment. In this sense, Art. 9 of the Prague Rules pioneers a ‘depolarisation’ of roles and functions of arbitrators[5], granting them more flexibility in view of the ultimate goal of arbitration: solving the dispute in the most satisfactory way possible.

3.    Conclusion: the Prague Rules and arbitral ‘culture’

In light of the foregoing, the Prague Rules enhance procedural flexibility in arbitration, and they do so in two main ways: their content and their structure. First, the Prague Rules contain innovative provisions that significantly deviate from well-established patterns of performance in arbitral proceedings, giving voice to the needs of a great chunk of arbitration users and creating a different and more civil-law-oriented version of arbitration. Second, the Prague Rules also implement procedural flexibility through the way their provisions are structured. Indeed, they create options fostering procedural flexibility, although always keeping a door open for more traditional ‘culture-based’ approaches to procedural issues, thus handing strategic choices back to the preferences of arbitration users.

Despite the innovative content of their provisions, a common point of criticism of the Prague Rules is that there are overall superfluous, as they do not add anything to what the IBA Rules already envisage.  However, the truly innovative nature of the Prague Rules, as compared to the IBA Rules, does not lay in the creation of unprecedented provisions, rather in the fact that they reverse the status quo, transforming options that are well possible but merely exceptional under the IBA Rules into the new default setting. In doing so, the Rules officially champion the views and preferences of ‘the other side’ of arbitral practitioners and help to legitimise procedural choices that deviate from pre-packaged behaviours.

Procedural flexibility introduced through the Prague Rules may contribute to break the glass ceiling and reshape the ‘culture’ of arbitration. A repeated use of these Rules, especially in view of the complementarity of some provisions with the arbitral community’s needs during the COVID-19 pandemic, may slowly harden their soft law nature, to the point that new behaviours will crystallise in a more all-encompassing ‘culture’ of arbitration. 

[1] See: Alan Redfern and Martin Hunter, ‘Law and Practice of International Commercial Arbitration’ (Sweet & Maxwell 1991), para. 1-42, 1-43, 1-44, and 1-53.

[2] See: Siegfried H. Elsing and John M. Townsend, ‘Bridging the Common Law-Civil Law Divide in Arbitration’ (2002) 18(1) Arbitration International, pp. 1-7.

[3] See: Roberto Oliva, ‘The Prague Rules: Minimal notes from an Italian Perspective’ (2019) 2 Revista Romana de Arbitraj, p. 67.

[4] Emmanuel Gaillard, ‘Sociology of international arbitration’ (2015) 31 Arbitration International, p. 11.

[5] Ibid., p. 13.