Principles of American Procedural Law “Creeping In” to International Arbitration

Dr. Manfred Heider

Introduction

We lawyers have often invoked „cultural differences“ to mean a clash of legal processes such as the different procedures used in civil and common-law countries. More recently „cultural differences“ have been invoked by both civil and common-law practitioners to criticize – with some justification – the use by U.S. attorneys of litigation-style procedures in the arbitration forum that expand time and costs of the arbitration process … But another cultural development that has the pendulum swinging in the other direction seems to have gone virtually unnoticed. That is the growing impact of international norms on arbitration practices …

William K. Slate II, President and CEO of the American Arbitration Association, ICCA Congress 2004, Beijing, China

Dr. Manfred Heider

Different Legal Systems

Legal Culture – Legal Traditions

Legal Culture: develops from religious, political, economic and cultural elements

Legal Traditions and Systems: build on traditional legal sources and their application (e.g., Roman Law, Canon Law, Ancient Germanic Law)

Dr. Manfred Heider

Different Legal Systems

Common Law

Predominant to varying degrees in:

The United States, Great Britain, anglophone Africa, India and Pakistan

Civil Law

Predominant to varying degrees in:

Continental Europe, francophone Africa , Latin America, Japan, China, Indonesia

Dr. Manfred Heider

Different Legal Systems

Common / Civil Law Hybrids:

Scotland, Quebec, Louisiana, Sri Lanka, South Africa;

Israel (also influenced by Talmudic tradition)

Dr. Manfred Heider

Different Legal Systems

A couple of basic differences:

Common LawPrinciple of Party Representation - Inductive Reasoning - Case Law - “Ultimate Truth” (complete truth)Civil LawInquisitorial Principle - Deductive Reasoning - Statutory Law - “Judicial Truth” (high probability)

Therefore: Different understanding of the roles of judges and party representatives

Dr. Manfred Heider

How did the “creeping in” come about?

• Globalization of trade

• Increasing importance of arbitration in dispute resolution

• Arbitration is frequently the lowest common denominator for partners from differing legal systems

• Arbitrators must be flexible and find a compromise solution to questions of procedure

Dr. Manfred Heider

In which stages of the proceeding are US-principles creeping in?

• The commencement of the proceedings

• The taking of evidence

• The hearings

• The legal evaluation

• The award (costs)

Dr. Manfred Heider

Commencement of the Proceedings

Common Law

Cursory “Notice Pleading”, No document submissions

Civil Law

Submission of complete legal and factual arguments, Document submissions

Prevailing Practice

Depends on the arbitrator – predominantly Civil Law Approach

Dr. Manfred Heider

Taking of Evidence

Preliminary note: What is Discovery?

United States:

Discovery is defined as pre-trial devices that can be used by one party to obtain facts and information about the case from the other party in order to assist the party‘s preparation for trial. (Black‘s Law Dictionary 466, 6th ed. 1990)

United Kingdom:

Discovery is the disclosure and production of contemporary documents for inspection by the other party. (David St.J. Sutton, Discovery and Production of Evidence in Arbitral Proceedings, ICC, 1989)

Dr. Manfred Heider

Taking of Evidence

Common Law (US)

Discovery (Rules 26-37 Fed.R.Civ.P.):

Production and inspection of documents, Written interrogatories, Witness depositions, Requests for admission

Civil Law

Discovery light ? (e.g., öZPO §§ 303 et seq., dZPO §§ 422 et seq.)

Prevailing Practice

Discovery is limited by IBA Rules on Taking of Evidence in International Commercial Arbitration Art. 9 (2) and “Redfern Schedule.” Non-compliance is subject to the free consideration of evidence.

Dr. Manfred Heider

Taking of Evidence

“Redfern Schedule” (Prof. Alan Redfern)

Parties are to fill out a four-columned table:

1.Documents (or document types), whose production is demanded by the opponent;

2.Reasoning for the demand;

3.Objections to the demand;

4.Reasoned decision by the tribunal

Dr. Manfred Heider

Aside: Discovery Orders by United States

Federal Courts for foreign arbitrations?

28 USC § 1782 (United States Code):

Assistance will be offered when the proceedings for which the information is sought are adjudicative in nature

Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) : U.S. Supreme Court broadens the scope of§ 1728.

First instance of assistance to an international tribunal was in 2006:

Oxus Gold PLC (ad-hoc UNCITRAL, BIT U.K./Kirgizstan)

Roz Trading Ltd. (VIAC)

Dr. Manfred Heider

Taking of Evidence

Common Law

Experts are appointed by the parties and subject to cross-examination

Civil Law

Experts are appointed by the court and submit a written report; Possible examination during the hearing.

Prevailing Practice

At the discretion of the tribunal, usually both types of experts are appointed.

Dr. Manfred Heider

Hearings

Common Law

Witness evidence preferred (generally under oath); Probative value of documentary evidence less than oral statements under oath

Civil Law

Documentary evidence preferred, Mistrust of witness evidence, Administration of oath to witnesses is the exception.

Prevailing Practice

Depends on the tribunal, usually a combination

Dr. Manfred Heider

Hearings

Common Law

Parties may serve as witnesses; cross-examination

Civil Law

Parties are not witnesses, no American-style cross-examination

Prevailing Practice

Submission of written witness statements, short examination, Parties make statements, cross-examination “light” as per IBA Rules Art. 8(4) (comp. öZPO), “Witness Conferencing” (simultaneous examination of multiple witnesses)

Dr. Manfred Heider

Hearings

Common Law

Generally a single hearing without adjournments; Judges not permitted to attempt settlement discussions; U.S. Court Room set up

Civil Law

Hearing over several dates; Judges encourage settlement discussions; U-shaped judge’s table

Prevailing Practice

Inconsistent. Arbitrators to be restrained regarding settlement discussions

Dr. Manfred Heider

Legal Evaluation

Common Law

Emphasis on case law, written analysis of the legal arguments with extensive citations from previous decisions, the most important points are pled orally

Civil Law

Emphasis on statutory law and legal commentaries; Pleadings regarding the legal arguments submitted in writing.

Prevailing Practice

Depends on the applicable law on the merits and the origins of the arbitrator. Overly extensive legal submissions become undesirable if they impede the speedy progress of the proceedings.

Dr. Manfred Heider

Legal Evaluation

Common Law

Evidence regarding legal issues under foreign law is usually presented by way of expert opinions, Exposition of favorable and unfavorable case law with an explanation as to why the favorable side wins.

Civil Law

Direct studies of the sources of law and legal materials

Prevailing Practice

Depends on the arbitrators

Dr. Manfred Heider

Costs

Common Law (US)

Generally no compensation for costs; Exception: when the defeated party acted unfairly or fraudulently or when governed by special legal norms

Civil Law

Costs follow the event

Prevailing Practice

Discretion of the tribunal (e.g., Vienna Rules Art. 31, § 609 ZPO), Moderated costs follow the event: Art. 28(4) LCIA-Rules

Dr. Manfred Heider

Conclusion

The great divide in international commercial arbitration is, in my view, not so much between the civil law and the common law traditions; it is between jurisdictions that favor and support arbitration and jurisdictions that are distrustful of arbitration. Sadly, the latter jurisdictions are often also jurisdictions where the rule of law is generally shaky. To work well, international commercial arbitration really needs the rule of law.

Pierre A. Karrer (Dispute Resolution Journal Feb-Apr 2008)

Dr. Manfred Heider