The value of witness statements in commercial arbitrations

The introduction of the Rules on the Efficient Conduct of Proceedings in International Arbitration (also known as the ’Prague Rules’) in December 2018 provides a timely reminder of the differences between civil law and common law jurisdictions and the comparative approaches to fact finding and factual evidence prevalent in those systems. This is particularly important in international arbitrations, where the parties and their counsel, as well as the member(s) of the tribunal, will often come from very different jurisdictions with different systems of law and legal cultures.

One of the most costly and time-consuming aspects of international arbitrations is the production of factual evidence by the parties, which (in addition to the production of documents) includes witness evidence of fact. It is well known that the approach to the production of documents (known as ’disclosure’ or ’discovery’ to English or US lawyers familiar with litigating in the courts) can vary considerably between different jurisdictions and systems of law, but the same is also true of witness evidence.

The approaches taken by the parties and their lawyers to the preparation of witness statements in international arbitrations, the approach taken by tribunals to such evidence being adduced and tested, and ultimately the weight that is attached it, can vary considerably depending on the system of law that exists in their home jurisdiction and, importantly, the seat of the arbitration.

For example, it is normal in many civil law jurisdictions for the tribunal (whether a court or arbitrator(s)) to adopt an inquisitorial approach to the dispute before them and to place emphasis on its own ‘fact-finding’, rather than relying exclusively on the factual evidence adduced by the parties in order to prove (or disprove) disputed facts. This is reflected in Article 3 of the Prague Rules, which states (in Article 3.1) that the tribunal is positively ’entitled and encouraged to take a proactive role in establishing the facts of the case which it considers relevant for the resolution of the dispute’. Such a proactive and even interventionist approach is less familiar to lawyers from common law jurisdictions, in which the Court or tribunal, notwithstanding that it is the ultimate arbiter of both questions of fact and law, tends to rely upon the documentary and witness evidence adduced by the parties in support of their respective cases in order to discern and establish the facts. In line with the ’adversarial’ approach to dispute resolution in common-law jurisdictions, disputed facts are established following oral cross-examination of witnesses of fact.

The desire to minimise, so far as possible, the scope for witnesses of fact to be undermined during oral cross examination has in recent years created a situation whereby heavily lawyered witness statements of fact have become increasingly prevalent. Such statements are prepared with the heavy involvement of the parties’ counsel and tend, given the adversarial nature of the proceedings (or the mindset of the parties and their counsel), to be defensive, in order to protect the witness from attack under cross-examination. There may in some cases even be an attempt indirectly to seek to bolster the party’s case and tailor the factual evidence given by the witness to the version of events espoused by the party for whom they are giving evidence. Moreover, the desire to protect the witness from attack can lead to them being asked to provide very long witness statements, so as to avoid giving the opponent the opportunity to argue that a witness has deliberately not addressed certain facts or issues that, on a proper analysis, may have little or nothing to do with the legal issues or the facts that are genuinely in dispute. It has also become increasingly common for the role of witnesses to be used tactically, with individuals who have relevant evidence to give having their roles downplayed or minimised or, in some cases, not being asked to give evidence at all. The overall result can be a far cry from the raw, untainted and (hopefully) unbiased factual evidence that the tribunal is seeking in order to determine the facts in issue in the proceedings.

The Prague Rules seek to address some of these issues, and to reduce the time and cost associated with arbitrations - specifically in relation to factual witnesses. As the introductory ’Note from the Working Group’ to the Prague Rules says, ’users of arbitration’ are often ’dissatisfied with the time and costs involved in the arbitral proceedings’ such that the aim of the Prague Rules ’is to encourage tribunals to take a more active role in managing the proceedings (as is traditionally done in many civil law countries)’. Of particular interest is Article 5.3, which provides that ’The arbitration tribunal may decide that a certain witness should not be called for examination during the hearing, either before or after a witness statement has been submitted, in particular if it consider the testimony of such a witness to be irrelevant, immaterial, unreasonably burdensome, duplicative or for any other reasons not necessary for the resolution of the dispute’. To an English lawyer, used to seeing (unfortunately, all too often) challenges to awards brought under section 68 of the Arbitration Act 1996 (alleging procedural unfairness in the conduct of the arbitration), this looks alarmingly like an open invitation to the party whose witness is not ’called for examination during the hearing’ to seek to mount a subsequent challenge if the outcome of the arbitration is not to their liking, and it will be interesting to see whether tribunals who adopt the Prague Rules will take advantage of the powers conferred by Article 5.3. It also raises interesting questions as to who should pay the costs of producing witness statements for witnesses who are not called for examination, since the party that is ultimately unsuccessful in the proceedings and is ordered to pay the successful party’s costs may nevertheless argue that it should not have to bear the costs of that the tribunal ultimately thought ’irrelevant, immaterial, unreasonably burdensome, duplicative or for any other reasons not necessary for the resolution of the dispute’.

It remains to be seen the extent to which arbitral tribunals (or parties) will adopt the Prague Rules and, if they are adopted, how they will be applied. Ultimately, the value of factual witnesses is that the tribunal can assess each witness’ credibility when they are cross-examined by the opposing party’s counsel, and so written witness statements (setting out the witnesses’ evidence in chief) will remain an important feature in international arbitrations. It would be a brave party (or a brave counsel) who decided from the outset to not to serve witness statements or to call particular witnesses to give evidence purely to save costs.

Daniel Burbeary, partner at Cooke, Young & Keidan