Материал: Amy C Kläsener

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Conflicts between Expert Determination Clauses and Arbitration Clauses

interest arise easily, a critical review of the expert’s finding will be difficult. Finally, where the expert exercised judgement or discretion in reaching a decision, it will be difficult to challenge, because the exercise of discretion will usually allow for several legitimate answers.

The binding effect of an expert’s decision

An expert’s decision does not have res judicata effect in the sense of a judgment. Rather, it binds the parties as a matter of contract.59 Where an arbitral tribunal is confronted with a prior decision by an expert in a matter between the same parties, it is suggested that the correct approach is for the arbitral tribunal to treat the decision as binding on the parties according to the terms of their contract and the applicable law.This does not preclude a review of the decision but the conditions for any review, as indicated above, may be very limited, for example excess of mandate, blatant error or fraud.

Conclusions

Expert determination and arbitration use different means to serve different ends.An understanding of those differences is key to drafting workable agreements and navigating overlapping proceedings. In order to avoid difficulties parties need a realistic understanding of those procedures. It would be unwise to try to expand an expert determination to a full-scale arbitration, as if experts could match a seasoned arbitrator’s legal knowledge or understanding of due process, or expect an arbitrator and lawyer to display the expertise of a valuation specialist without relying heavily on expert evidence.

59W Peter,‘Arbitration of Mergers and Acquisitions: Purchase Price Adjustment Disputes’, in Arbitration International,Vol. 19, No. 4, 2003, 502.

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The Taking of Evidence

Andrea Gritsch, Stefan Riegler and Alexander Zollner1

Introduction

The chances of success for a party in most legal disputes significantly depend on whether the party can present and prove the facts justifying its case.This is no different in arbitrations related to M&A transactions.2 Yet, it is the taking of evidence in international arbitration that is – like no other stage of the proceedings – a contentious topic depending on the different legal and cultural backgrounds of the parties, counsel, arbitrators, witnesses and experts. This is due to various reasons. In particular, different legal jurisdictions may qualify certain issues as substantive issues while others consider them to be procedural. Also, nowhere can the divide between common law and civil law be better illustrated than in the conduct of proceedings by arbitrators (adversarial versus inquisitorial approach), the weighing of different kinds of evidence (witness testimony versus documentary evidence) and the volume of rules regulating the evidentiary procedure.

In particular, common law jurisdictions tend to have a more open approach when it comes to the disclosure of evidence by the opponent (even at the pre-litigation stage); civil law jurisdictions usually only provide for rather limited possibilities to do so. For example, when it comes to document production3 the difference between the common law and civil law system becomes especially evident.4 In arbitral proceedings, which often involve

1 Andrea Gritsch and Stefan Riegler are partners, and Alexander Zollner is a senior associate, at Wolf Theiss.

2Broichmann/Schumacher,‘Evidence and Quantification of Damages in M&A Contracts’, FYB Financial Yearbook 2014, p. 65 et seq.

3For a definition of document production and its distinction to other terms used in this respect, see Marghitola,

Document Production in International Arbitration (2015), Chapter 2.

4Drymer/Gobeil,‘Document Production in International Arbitration: Communication Between Ships in the Night’, in van den Berg (ed.), Legitimacy: Myths, Realities, Challenges, ICCA Congress SeriesVolume 18 (2015), p. 207 et seq.

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The Taking of Evidence

parties from different jurisdictions and legal cultures, those two concepts may easily clash.5 However, it is an essential feature of international arbitration that different legal approaches and cultural backgrounds may be reconciled in the same forum.

To balance those two approaches in international arbitrations and to shape an international standard against which the various players may measure their expectations, the arbitration community developed several sets of rules,6 of which arguably the IBA Rules on the Taking of Evidence in International Arbitration7 (the IBA Rules) – containing rules on evidence by documents, witnesses, experts and inspection and on the evidentiary hearing and issues of admissibility and assessment of evidence – are the most widespread and successful initiative.8,9 Their aim is described in the Preamble as follows:‘These IBA Rules . . .

are intended to provide an efficient, economical and fair process for the taking of evidence in international arbitrations, particularly those between Parties from different legal traditions.They are designed to supplement the legal provisions and the institutional, ad hoc or other rules to the conduct of the arbitration.’Although the applicability of the IBA Rules depends on an agreement by the parties or maybe even a tribunal ordering their application, they gained significant importance in arbitrations. In practice, parties usually do not agree upfront on the application of the IBA Rules, nor do tribunals unilaterally determine their application.10 Instead, tribunals usually consult with the parties as to whether the IBA Rules shall apply to the proceedings directly (either wholly or partly) or, increasingly, as mere guidelines.11

In the Sections below, topics frequently arising in M&A arbitrations, such as burden and standard of proof issues, access to documentary evidence (in particular, document production and related issues such as privilege, confidentiality and adverse inference), fact witnesses and expert evidence will be discussed. Of course, this chapter does not and cannot claim to elaborate on those issues in a detailed – let alone exhaustive – manner; also,

5Blackaby/Partasides et al., Redfern and Hunter on International Arbitration (6th ed., 2015), mns 6.93 et seq.; Marghitola, Document Production in International Arbitration (2015), p. 11 et seq.

6e.g., ICC Arbitration Commission Report on Techniques for Controlling Time and Costs in Arbitration; ICC

2006 Special Supplement on Document Production; ICC Arbitration Commission Report on Techniques for Managing Electronic Document Production; ICDR Guidelines for Arbitrators on Exchange of Information; CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration; Chartered Institute of Arbitrators’ Protocol for E-Disclosure in International Arbitration; Rules on the Efficient Conduct of Proceedings in International Arbitration (Prague Rules), which are sometimes viewed as a civil law counterpart to the IBA Rules.

7IBA Rules on the Taking of Evidence in International Arbitration 2010.

8Drymer/Gobeil,‘Document Production in International Arbitration: Communication Between Ships in the Night’, in van den Berg (ed.), Legitimacy: Myths, Realities, Challenges, ICCA Congress SeriesVolume 18 (2015), p. 209.

9As to the recently launched Rules on the Efficient Conduct of Proceedings in International Arbitration (Prague Rules), which may arguably be understood as a certain civil law counterpart to the IBA Rules, it remains to be seen whether they will reach an importance comparable to other sets of rules regarding the taking of evidence, in particular the IBA Rules.

10As to the question of whether tribunals have the power to adopt the IBA Rules and direct that the parties proceed in accordance with them, see Born, International Commercial Arbitration (2nd ed., 2014), p. 2211.

11The ‘2012 International Arbitration Survey: Current and Preferred Practices in the Arbitral Process’ by Queen Mary, University of London, found that the IBA Rules are used as guidelines in 53 per cent and as binding rules in 7 per cent of surveyed cases.

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The Taking of Evidence

it cannot present the one and only ‘correct’ answer to the various open questions. This chapter should, however, give the reader a comprehensive overview on frequent topics and – through references to other literature – further guidance on the taking of evidence in M&A arbitrations.

The burden of proof

When it comes to questions on the burden and standard of proof, a tribunal must first determine which law applies, including whether these issues are considered to be part of the applicable substantive law or the procedural rules. In civil law jurisdictions, questions on the burden of proof are traditionally viewed as substantive issues, while common law jurisdictions tend to adopt the procedural approach. By way of example – and leaving aside whether this provision may be directly applicable in international arbitration – Article 18(1) of the Rome I Regulation12 recognises that the law governing a contractual obligation ‘shall apply to the extent that, in matters of contractual obligations, it contains rules which raise presumptions of law or determine the burden of proof’. However, even according to the civil law approach, other issues regarding the taking of evidence, such as the choice of means of evidence or the admissibility of evidence might be governed by procedural rules.13 Finally, even among civil law jurisdictions and among common law jurisdictions the question of standard of proof might be treated differently.

This distinction is relevant because in most circumstances, the designation of the substantive law to be applied by the tribunal is relatively clear: either the parties have chosen the law or the applicable lex arbitri or have chosen arbitration rules containing a (conflict) rule as to how the applicable lex causae should be determined by a tribunal. If the tribunal considers questions on the burden of proof to be part of the substantive law, it will follow the substantive provisions (once it has determined the applicable lex causae). By contrast, if the question of burden of proof is qualified as a procedural issue, the tribunal will usually enjoy wider discretion in determining the evidentiary procedure and its rules.While the procedural rules applicable in court litigation at the place of arbitration will usually not be relevant, the lex arbitri will rarely contain strict rules as to how the tribunal should proceed. For instance, Article 19(2) of the UNCITRAL Model Law14 provides that ‘The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.’ Similarly, Article 27(4) of the UNCITRAL Arbitration Rules (2013)15 states, ‘The arbitral tribunal shall determine the admissibility, relevance, materiality and weight of the evidence offered.’ Consequently, if the tribunal treats the burden of proof as a procedural question, it will usually enjoy considerable discretion in the absence of any agreement by the parties to the contrary. Owing to the relevance of determining this issue, it is unsurprising that in international arbitration tribunals are encouraged to look into both the rules of the applicable substantive law and

12Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations.

13Poudret/Besson, Comparative Law of International Arbitration (2nd ed., 2007), mn 643.

14UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006.

15UNCITRAL Arbitration Rules (with new Article 1, paragraph 4, as adopted in 2013).

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The Taking of Evidence

the procedural rules.16 However, it is advisable that the tribunal lay out this framework at an early stage of the proceedings so the parties can present the facts and produce the evidence according to these expectations.

The issue whether evidentiary rules qualify as substantive or procedural leads to the question to what extent an arbitral award and the related proceedings are subject to court review. While arbitration laws may contain different grounds for set-aside, the New York Convention17 is almost universally applicable.The disregard of rules on the burden of proof can have different sanctions depending on how the tribunal made such qualification.While a ‘simple’ erroneous application of the substantive law will usually not constitute a ground for refusal as long as the public policy of the enforcing state is not violated,18 enforcement of the award may be refused if the arbitral procedure was not in accordance with the agreement of the parties.19 This might occur if, for instance, the application of the IBA Rules or another set of procedural rules was not merely adopted as ‘guiding principles’ by the tribunal, but explicitly agreed by the parties and the tribunal has disregarded them.20

The purpose of taking evidence (on facts) is to adduce the evidence to support one’s case and convince the tribunal to uphold it. The question as to which party shall prove what fact is often generally referred to as ‘the’ burden of proof. However, it is important to distinguish between two different burdens of proof: the legal burden of proof, also referred to as ‘onus of proof’, specifies which party must prove a particular issue; that party consequently bears the risk whether the tribunal considers certain facts to be true or not.The legal burden of proof is based on the principle onus probandi incumbit actori: the party that asserts certain facts must establish their existence. In other words, the claimant must prove all elements of its claims, and the respondent must prove all elements of its defence.This principle is, for instance, explicitly laid down in Article 27 of the UNCITRAL Arbitration Rules (2013):‘Each party shall have the burden of proving the facts relied on to support its claim or defence.’ By contrast, the evidential burden of proof determines which party must produce evidence on a particular issue (onus proponendi).The evidential burden may shift in some circumstances.21 Specific statutory or contractual provisions might govern issues, such as presumptions, shifting the (evidential) burden of proof and prima facie evidence. For instance, with regard to warranty issues, statutory or contractual provisions might provide that if a defect is revealed within a certain time after delivery, the defect is presumed and the seller or contractor must prove that the defect was not existent at the time of delivery. Such statutory rights are typically excluded in sale and purchase agreements. Rather, in an M&A context sellers often try to establish that certain information provided by them in the

16Born, International Commercial Arbitration (2nd ed., 2014), p. 2315.

17Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NewYork, 1958).

18ArticleV(2)(b) NewYork Convention.

19ArticleV(1)(d) NewYork Convention.

20Poudret/Besson, Comparative Law of International Arbitration (2nd ed., 2007), mn 647.

21Born,‘On Burden and Standard of Proof’, in Kinnear, Fischer, Mínguez Almeida, et al. (eds.), Building International Investment Law:The First 50Years of ICSID (2015), p. 46; Menaker/Greenwald,‘Proving Corruption in International Arbitration’, in Baizeau, Kreindler (eds.), Addressing Issues of Corruption in Commercial and Investment Arbitration, Dossiers of the ICC Institute of World Business Law (2015), p. 81 with further references to investment tribunals; Sharpe,‘Drawing Adverse Inferences from the Non-production of Evidence’, Arbitration International,Volume 22, No. 4, p. 552.

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