Arbitration in a Multicultural Environment: Structural and Procedural Aspects
Chapter 6
Arbitration in a Multicultural Environment:
Structural and Procedural Aspects
General Issues
Resolution of international commercial disputes raises particular challenges due to the fact that the conflicted parties frequently come not only from different legal systems, but also from diverse legal traditions. Their legal relationship may prove difficult to be evaluated without a bias towards one of the possible, competing interpretive approaches (bringing an additional layer of consideration to the issue of determining proper substantive law). Moreover, as already discussed, the arbitral tribunal is also usually granted wide discretionary authority in determining relevant standards of procedure. Choice of such standards, typical to one legal tradition rather than to the other, is not just a purely technical matter. Arbitral decision-making in a multicultural environment turns out to be a particularly sensitive issue when considered from the perspective of achieving neutrality and impartiality of both an arbitrator and the proceedings.
In describing the ideal of a fair and neutral arbitration forum, the concept of ‘ideal speech conditions’ developed by Jürgen Habermas1 is frequently invoked as a theoretical basis for the moves towards involvement of practices of democratic discourse into dispute resolution. As Carrie Menkel-Meadow observes, the theory of extrajudicial dispute resolution has fruitfully employed the thought of Habermas and his successors, who developed the ideas of deliberative democracy2 and democratic discourse,3 as well as suggested a call for a greater participation of individuals and for mitigating the impact of policy issues on the resolution of private controversies.
Recognition of the practical importance of an unbiased and responsive attitude of an arbitrator towards the parties representing different legal backgrounds has led William K. Slate II, President and CEO of the American Arbitration Association, to the formulation of a credo for multicultural arbitration:
A ‘legal culture’ is the product of the fundamental values of society as reflected in its history, language and views about social justice. We in the international arbitration community should undertake the responsibility for understanding these values and how they could affect the quality of the process from the viewpoint of the parties. We need to recognize cultural prejudices and be sensitive to cultural traditions lest we unintentionally offend our real and would-be friends. At the same time, we need to pay attention to culturally induced personal behaviors of our own that could be perceived in an unflattering light.4
One of the currently widely discussed problems is the suggested transnational universality of arbitral mechanisms. It is visible not only in the field of procedural regulations, but also in the sphere of substantive norms, affecting arbitral decision-making. It can be seen, for example, in the practice of arbitral application of the new lex mercatoria, classically defined by Berthold Goldman as an ‘arrière-plan’ – an underlying set of principles of every award in international commercial arbitration.5 This view, assuming a uniform character of transnational commercial customs, has also met with opposition as reducing the New Law Merchant to the rules and ideas characteristic to the Western legal traditions.6 An introduction of the concepts of ‘macro’ and ‘micro’ lex mercatoria has been forwarded so as to address these controversies. Analogically, as Abul F.M. Maniruzzaman observes, traditional international law can also be described as fundamentally Europocentric.7 He invokes a classic John Westlake’s remark that for the statement of existence of customary law ‘it is enough to show that the general consensus of opinion within the limits of European civilization is in favour of the rule’.8 This concept of the Westernized Law Merchant has been subsequently challenged by the efforts of international community to achieve universal (although not necessarily uniform) rules, acceptable as a ‘common core’ of different legal systems or the sets of minimal standards, satisfactory for parties coming from various legal traditions.
The vast popularity of international commercial arbitration in recent decades has been accompanied by a phenomenon described by Slate as ‘the growing impact of international norms on arbitration practices’.9 The norms include not only ‘hard’ international law instruments (such as the Vienna Convention) but also usages and customs of the international trade, recognized as the new lex mercatoria. Moreover, even in the lack of explicit choice by the parties of a particular lex mercatoria codification (such as the UNIDROIT Principles of International Commercial Contracts), international trade customs and practices are nevertheless regarded as guided by the standard procedural provisions of arbitral institutions, requiring arbitrators to take into account relevant trade usages. Their significance can be thus characterized as at least supplementary and modifying the adopted interpretation of the substantive domestic law governing the case.
The relation between ICA and the new lex mercatoria is reciprocal and arbitration has largely contributed to consolidation of the body of the New Law Merchant, not long ago criticized for its nebulous and elusive character.10 It has played a major role in what Klaus Peter Berger describes as a creeping codification of transnational commercial law.11 A standard recourse to usages of the international trade in processes of arbitral interpretation, combined with a frequent, extensive use of comparative inquiry, has led some authors12 so far as to identify lex mercatoria itself as a characteristically arbitral method of adjudication.13
According to this theory, while the autonomous character of the New Law Merchant would have still been accepted, it would not be treated as a substantive legal system, but as a procedural creation. These differences in conceptualizing the new lex mercatoria as either a set of substantive transnational rules or rather as a specific method of arbitral adjudication notwithstanding, the link between the New Law Merchant and arbitration remains substantial, as further discussed in Chapter 8.
Civil Law and Common Law Procedural Approaches – Addressing the Differences
The problem of procedural differences between continental and common law systems, potentially leading to serious misconstructions as to the conduct of arbitral proceedings, has been frequently considered.14 While legal systems based on the common law tradition prevail in majority of the English-speaking countries, the civil law systems prevalent in continental Europe have been adopted in all of Latin America, as well as most of Asia and Africa.15
The existence of significant differences between those legal traditions as to the commencement of proceedings and their conduct in resolution of private disputes can hardly be seen as controversial. The practical importance of these dissimilarities in arbitration is, however, a matter of discussion. It is frequently emphasized that, in a highly professionalized field of international commercial arbitration, it is an ordinary and legitimized requirement to expect from legal counsel to the parties a relevant openness to different procedural solutions, even when they differ from the counsel’s domestic standards. In administered arbitration the rules of arbitral institutions are also known in advance to the parties and to their advocates.
The evolution of the rules of procedure of major arbitral institutions mirrors, as Elena V. Helmer observes, harmonization processes taking place in ICA.16 This phenomenon is also described as homogenization of the civil law and common law procedural standards, or, as Hans Smit puts it, as a hybrid that is drawn from both systems by the efforts of arbitral tribunals. As a result, a counsel cannot expect the procedure to directly replicate the patterns known from either of these legal traditions.17 Eric Bergsten perceives this evolution as a change of the traditional European ‘Grand Old Men’s’ model of arbitration, based on document discovery, under the influence of American participants within the last fifty years; he uses a metaphor of immigrants, who adapt to the new country, but whose new country is also changing under their influence.18
It would be a far-reaching oversimplification, though, to assume that the nationally gained professional training will always necessarily determine a preference of a party’s counsel for the standards of procedure he or she was primarily trained in (presumably, his or her own legal system). As Lew and Shore remark, it is rather a matter of a pragmatic calculation in regard to a particular dispute:
[t]he approach of most experienced advocates and arbitrators is rather more case-driven than ideological. Depending on the strength of a case or of a particular witness or of a single document, common law lawyers may well be comfortable in seeking limited cross-examination, no discovery, and lengthy witness statements. Depending on the nature of a particular case, civil law lawyers may seek a procedure in which oral submissions are extensive.
As long as pragmatism prevails, and the ‘Western canon’ of literature is a staple of a lawyer’s education, the harmonization of cultural differences in international arbitral practice should proceed with relative ease.19
Whereas a wide discretional power as to the detailed organization of the proceedings is usually granted to the arbitral tribunal, it is also an already well-established practice that a compromising modus operandi can be proposed to the parties coming from a common law legal system (especially from the US) on one side and from a continental one on the other. Siegfried H. Elsing and John M. Townsend observe that it is an increasingly popular habit of international arbitrators to promote compromising procedural solutions instead of choosing standards characteristic to one or the other party’s legal systems.20
This practice of procedural convergence is present at virtually all stages of the arbitral process. As Elsing and Townsend demonstrate, it affects even the issues traditionally described as bones of contention between conflicting parties coming from the common law and civil law legal traditions. Under such circumstances, the required formulation of the claim, as seen for example in the ICC arbitral practice, is set up somewhere between American standards of laconism and continental expectations to have the details of the claim fully developed already at this initial stage of the proceedings. One of the possible, practical tests for qualification of the statement of claim as sufficient is that it would provide an arbitrator in an ICC arbitration with the information and attached documentation adequate for a preparation of the ‘terms of reference’21 for the case.
Consequently, if formal demands regarding the claim statement exceed those expressed in American litigation, the standards of admissible document discovery shall also be set up accordingly. Between the opposite poles of American liberal discovery and civil law canons of limited elicitation of documents, a consensus can be achieved, as
[m]ost civil lawyers and arbitrators now accept that it is reasonable to permit a party to obtain some documents from its adversary, as long as the process is not called ‘discovery’ (a term which, to most civil lawyers, resonates with all of the positive associations of bubonic plague) and does not permit an adversary to ‘fish’ for documents that it does not have some reason to believe to exist.22
Article 3
…
3. A Request to Produce shall contain:
(a) (i) a description of each requested Document sufficient to identify it, or
(ii) a description in sufficient detail (including subject matter) of a narrow and specific requested category of Documents that are reasonably believed to exist; in the case of Documents maintained in electronic form, the requesting Party may, or the Arbitral Tribunal may order that it shall be required to, identify specific files, search terms, individuals or other means of searching for such Documents in an efficient and economical manner;
(b) a statement as to how the Documents requested are relevant to the case and material to its outcome; and
(c) (i) a statement that the Documents requested are not in the possession, custody or control of the requesting Party or a statement of the reasons why it would be unreasonably burdensome for the requesting Party to produce such Documents, and
(ii) a statement of the reasons why the requesting Party assumes the Documents requested are in the possession, custody or control of another Party.23
Another of the most commonly emphasized differences between the Anglo-American and the continental types of civil procedure is the role of a judge. In the common law-based adversarial model, the activity of a judge is mostly limited to a general supervision of the course of proceedings, as well as the fact- and law-finding, while it is the contesting parties and their counsel who are directly involved in the unfolding of the controversy before the court.
In civil law jurisdictions, the inquisitorial (investigative) model of procedure requires the active participation of a judge, who has to determine the details of the case and applicable law, while personally participating in questioning the witnesses and the experts. A party or a counsel who wants a witness to be asked a particular question must present this question to the court, which will ask it. Live direct examination of a witness is thus relatively restricted.24
As often emphasized, the practice of arbitration, borrowing from this approach, may turn out to be particularly demanding for the counsel trained in the Anglo-American legal tradition of extensive cross-examination. He or she may not be (at least initially) fully prepared for participation in proceedings based largely on documentary findings, and for oral hearings to be provided only to a limited extent. Analogically, the self-authenticating status of written evidence, characteristic to the civil law procedural regulations, may turn out to be surprising for a person coming from a common law jurisdiction.
There is indeed an established tradition of common law counsel promoting cross-examination in multicultural arbitral proceedings, as documented for example in the practice of the Iran–US Claims Tribunal. Still, in the controversies involving civil law adversaries, the limits of admissibility of witness testimony are rather strict. It is frequently required of a party to submit in advance the testimony of its witnesses in writing to the arbitral tribunal. Whereas model instruments, as well as rules of arbitral institutions and agencies, generally leave the decision on organizing a hearing to the discretion of the tribunal, the traces of civil law or common law influences can be found in what is suggested as the default options for the arbitrators.
In the UNCITRAL Model Law, the standard of respecting the will of the parties regarding a hearing has been adopted. According to Art. 24(1), unless the parties have agreed otherwise, the arbitral tribunal shall decide whether to hold oral hearings or whether the proceedings shall be conducted on the basis of documents and other materials. The tribunal shall also hold hearings upon a request by a party, unless both parties have previously decided that there shall be no hearings. A similar formulation can be found in Art. 15.2 of the UNCITRAL Rules: unless any party has requested oral hearings at any stage of the proceedings, the arbitral tribunal is free to decide whether they will be held.
Analogically, according to Art. 20.6 of the ICC Rules, the arbitral tribunal may decide the case solely on the basis of documents submitted by the parties unless any of the parties requests a hearing. The HKIAC Administered Arbitration Rules provide (Art. 14.2) for holding hearings if the arbitral tribunal so determines or if either party so requests. Art. 27(1) of the Stockholm Rules stipulates that a hearing will be held if requested by a party, or deemed appropriate by the Arbitral Tribunal. Also, pursuant to Art. 20.3 of the Vienna Rules, oral hearings shall take place at the request of one party or if the sole arbitrator or arbitral tribunal considers it necessary. Correspondingly, Art 19.1 of the LCIA Rules stipulates that any party has the right to effectively demand an oral hearing on the merits of the dispute, unless the parties have explicitly agreed in writing on documents-only arbitration.
On the other hand, the CIETAC Arbitration Rules offer in this regard a solution with hearings as a default option:
Art. 33.2
The arbitral tribunal shall hold oral hearings when examining the case. However, the arbitral tribunal may examine the case on the basis of documents only if the parties so agree and the arbitral tribunal consents or the arbitral tribunal deems that oral hearings are unnecessary and the parties so agree.
Not surprisingly, the ‘pro-hearings’ approach has also been expressed in the IBA Rules of Evidence, where a submission of a written witness statement is supposed to be followed by an oral testimony of this witness at an evidentiary hearing, unless the parties explicitly agree otherwise. Also, the consequences of the witness’s absence at a hearing are more far-reaching than in the more ‘continentally fashioned’ regulations:
Art. 4.8
If a witness who has submitted a Witness Statement does not appear without a valid reason for testimony at an Evidentiary Hearing, except by agreement of the Parties, the Arbitral Tribunal shall disregard that Witness Statement unless, in exceptional circumstances, the Arbitral Tribunal determines otherwise.
Furthermore, in the AAA International Rules a distinctively common law-based model of procedure has been implemented. Orality of proceedings is stipulated here as a self-evident form of conducting arbitration (see Art. 20). Also, it is left to the discretion of the tribunal whether any written statements will be required from the parties besides the initial statements of claims and counterclaims and statements of defence (although the submission of witnesses’ evidence in the form of signed, written statements is also admitted (Art. 20.5).
In the regulations discussed above, influenced by the continental legal tradition, the self-authenticating status of documentary evidence is – on the contrary – generally acknowledged and the submission of a witness’s testimony in writing may be considered sufficient. It is also interesting to observe that the Rules of the London Court of International Arbitration leave the evaluation of the pre-submitted written witness statement in a case when the witness failed to attend the oral hearing without good cause to the discretion of the arbitral tribunal (see Art. 20.4 of the LCIA Rules).