Материал: Amy C Kläsener

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The Taking of Evidence

course of due diligence or contract information or otherwise available in public registers shall be deemed disclosed with the effect that buyers would have to prove the opposite.The tribunal should apply the specific statutory or contractual provisions if and to the extent it determines that they are part of the (substantive or procedural) applicable law.

Since M&A arbitrations are heavily determined by contractual provisions, in particular by the shareor asset purchase agreement and corresponding deal documents, the tribunal should pay particular attention to the wording of those provisions. The parties may have (explicitly or by underlying intention) agreed to shift the burden of proof.Another example where the tribunal might not apply the common rules of burden of proof is when a party needs to establish an omission. For instance, it might be difficult for a purchaser to demonstrate that it has not received certain relevant information on the target company. In such circumstances it will likely fall on the seller to demonstrate that it provided or made available the relevant information.

The standard of proof

As indicated above, the standard of proof may be governed by the substantive law or by the procedural rules.The standard of proof is the level of proof required to convince the tribunal. While civil law jurisdictions often describe it as ‘full conviction’, common law jurisdictions often refer to the ‘balance of probabilities’. It has therefore been argued that the civil law system requires a higher standard of proof; as the common law understanding merely requires that something was ‘more likely than not’.22 However, in international arbitration, the distinction is more theoretical than practical.As a result, it has been argued that the party that can establish a ‘preponderance of the evidence’23 will convince the tribunal.

Commentators have expressed different views as to whether the standard of proof should be heightened or even lowered in particular circumstances, for example if corruption, fraud or other criminal behaviour is alleged.24 Similar questions might arise in M&A disputes. For instance, certain claims for contractual liability are usually excluded or at least limited unless the purchaser can prove that the seller wilfully deceived the purchaser by, for example, withholding crucial information or giving misleading or incorrect information. Although the evidential burden might rest on the purchaser, the task of establishing such facts might be alleviated if the standard of proof is lower than usually required under the substantive law.Another example relates to the quantification of damages. Some commentators are satisfied with a lower standard of proof if the exact amount cannot be ascertained by the tribunal; others might consider this to be a question of the applicable law. There might be specific provisions under the applicable law that allow tribunals to determine an amount in instances where an exact determination would require disproportionate resources.

22See, e.g. Blackaby/Partasides et al., Redfern and Hunter on International Arbitration (6th ed., 2015), mn 6.87.

23Waincymer, Procedure and Evidence in International Arbitration (2012), p. 766 with further references.

24Menaker/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. 82 et seq. with further references.

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The Taking of Evidence

Access to documentary evidence

In M&A arbitrations, documentary evidence (e.g., the various documents contained in data rooms) plays a significant role. Generally, parties are advised to preserve the data room so that they have the information that was provided when signing the SPA and parties might keep information as to how they valued the target company or companies and relevant documents as to the basis of the agreement on the price. Further, and depending on the parties’ relative negotiating power, sellers sometimes contractually ‘secure’ post-closing access to evidence by having the right to meet with the target group companies’ management, employees or inspect the target company’s books and records, etc.Yet, there are frequently situations in which a party cannot rely on such clauses and does not have access to the relevant evidence needed to present and prove the facts justifying its case. For example, this could be the case for documents that are in possession of the opposing party or the target company (e.g., documents useful for the buyer containing information on false statements made by the seller about the target company could be in the seller’s possession).25 In the case of documents in the possession of the opposing party or the target company, the procedural mechanism of document production may be of particular importance.

Before going into the details of document production, a clear distinction should be made: a procedural obligation to produce documents must be distinguished from an obliga­ tion to produce documents under substantive law, which may be derived from statutes, case law or – as described above – contract.26 The contract may enable the entitled party to independently claim for the handing over of the respective documents (or granting of access to the relevant people). In such case, at least for the documents covered by the contractual provisions, one does not necessarily have to resort to document production.27 Further, the role document production plays in a particular arbitration, to some extent, also depends on the rules of the chosen arbitral institution,28 the procedural rules of the place of arbitration29 and the parties’ agreement.30

Although it might be advisable to preserve relevant documents to be prepared for a future dispute, being in possession of these documents might also be disadvantageous as in document production they might have to be handed over to the counterparty.This tension can likely only be resolved case by case.

25Broichmann/Schumacher,‘Evidence and Quantification of Damages in M&A Contracts’, FYB Financial Yearbook 2014, p. 70 et seq.

26Marghitola, Document Production in International Arbitration (2015), p. 7.

27Notably, although a document production phase may also be conducted without reference to the IBA Rules, they will, owing to their importance, also frequently be referred to in the following Sections, which describe how document production phases are usually conducted and which legal questions frequently arise.

28For an assessment of the tribunal’s powers as to document production based on arbitration rules, see Marghitola, Document Production in International Arbitration (2015), p. 25 et seq.

29For an assessment of the tribunal’s powers as to document production based on legislation, see Marghitola,

Document Production in International Arbitration (2015), p. 22 et seq.

30Ehle,‘Arbitration as a Dispute Resolution Mechanism in Mergers and Acquisitions’, in Campbell (ed.),

The Comparative LawYearbook of International Business (2005), p. 307; for model clauses regulating document production, see Marghitola, Document Production in International Arbitration (2015), Chapter 8.

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The Taking of Evidence

The timing of document production

It is crucial to find the right time to schedule document production. Scheduled too early, the parties might be unable to fully assess which documents are needed to present or defend their case (as there might also be the need for documents to respond to certain allegations made by the counterparty); also, the tribunal might not sufficiently understand the case at this stage. Scheduled too late, a party might use a document production request to significantly delay the proceedings. The ‘best’ timing of a document production phase depends on the particular case and there is therefore no one-size-fits-all solution.As a rule of thumb, it is often argued that document production should be scheduled once the parties have submitted their main submissions, so that the tribunal is in a position to assess whether the documents requested by the parties are indeed relevant and material.31

The usual course of a document production phase

Usually, tribunals at an early stage of the proceedings discuss with the parties whether there is a need for a document production phase and how it should be structured (e.g., form of a document production request, timing of the request, the need for protective orders).32 Frequently, the rules on document production agreed by the tribunal and the parties are then included in a procedural order or specific procedural rules. As mentioned, the IBA Rules are not usually agreed to be directly applicable, but are frequently referred to as guiding principles.

In terms of format, the Redfern Schedule has developed into a commonly accepted tool for organising and presenting the process of document requests, objections and decisions.33 It usually has (at least) four columns34 and guides the tribunal and the parties through the usual course of a document production phase:

The first and second column (Step I) is filled out by the requesting party.While the first column is reserved for setting out a description of specific requested documents sufficient to identify them or a description in sufficient detail of a narrow and specific requested cat­ egory of documents (to prevent an impermissible ‘fishing expedition’), the second column should contain (1) a statement as to how the documents requested are relevant to the case and material to its outcome and (2) a statement that the documents requested are not in the possession, custody or control of the requesting party and a statement of the reasons why the requesting party assumes the documents are in the possession, custody or control of another party.

In this respect, it is debatable whether a party may only request documents material to issues for which it bears the burden of proof.While, according to some authors, a tribunal must determine ‘whether the requesting party actually needs the documents to discharge

31Article 3.3 (b) IBA Rules. SeeWaincymer, Procedure and Evidence in International Arbitration (2012), p. 842 et seq.; see also ICC 2006 Special Supplement on Document Production, p. 88.

32See ICC Arbitration Commission Report on Techniques for Managing Electronic Document Production, para. 5.5 (b); Marghitola, Document Production in International Arbitration (2015), p. 117 et seq.

33Blackaby/Partasides et al., Redfern and Hunter on International Arbitration (6th ed., 2015), mn 1.238 and Figure 1.1.

34Blackaby/Partasides et al., Redfern and Hunter on International Arbitration (6th ed., 2015), mn 6.104.

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The Taking of Evidence

the burden of proof. If not, the request should be denied,’35 other authors oppose this view.36 Yet another view is, that the rule that a party may only request production of documents material to an issue for which it bears the burden of proof should not be adopted ‘as a blanket rule’.37

Particularly in M&A arbitrations, the concept of control may be debatable, for example when documents are located at the target company. Indeed, it will depend on the particular case whether the ‘group concept’, under which a tribunal may order the production of documents that are not in the direct possession of the requested party, but are in the possession of a company that is also a member of the group to which the party belongs, can be applied.38 While this concept might be justified in cases where the requested party controls the entity in possession of the document, the justification is less clear when the requested party is a subsidiary.39 Alternatively, reference could be made to Article 9.3 of the IBA Rules, which provides for a basis for production of documents by third parties under certain circumstances.40

In the third column (Step II), the requested party states the extent to which it is prepared to accede to the request (leading to a voluntary production), or if it objects, the grounds on which it does so (in essence triggering the need for a decision by the tribunal). Objections may be based on formal or substantive arguments.With respect to formal objections, a party may, for example, argue that the request for document production is too broad or that requested documents are not in its possession, custody or control. As to substantive objections, a party must make an assessment of the case and could for instance argue that the documents are not relevant to the case or material to its outcome.

The fourth column is left blank for the tribunal’s decision (Step III). In this decision, the tribunal may also decide on protective measures (e.g., in cases of sensitive or confidential information). Depending on the outcome of the request, documents must be produced within a deadline set by the tribunal (Step IV).The produced documents are usually not automatically on the record,41 but have to be introduced by the respective parties with their submissions under the regular rules of the case.

Occasionally, the requesting party may reply to the objections of the requested party so that the Redfern Schedule has five columns (the fourth column reserved for the reply and the fifth column for the tribunal’s decision). Although one could argue that a reply is not necessary and might be problematic with regard to the requested party’s right to be heard,42

35Derains,‘Towards Greater Efficiency in Document Production Before Arbitral Tribunals – A Continental Viewpoint’, in ICC, Document Production in International Arbitration, p. 87; see also Zuberbühler/ Hofmann/Oetiker/Rohner, IBA Rules of Evidence (2012),Article 3 mn 138 et seq.

36Born, International Commercial Arbitration (2nd ed., 2014), p. 2364.

37Waincymer, Procedure and Evidence in International Arbitration (2012), p. 860.

38Zuberbühler/Hofmann/Oetiker/Rohner, IBA Rules of Evidence (2012),Article 3 mn 150 with further references.

39Waincymer, Procedure and Evidence in International Arbitration (2012), p. 864.

40Zuberbühler/Hofmann/Oetiker/Rohner, IBA Rules of Evidence (2012),Article 3 mns 206 et seq.; Waincymer, Procedure and Evidence in International Arbitration (2012), p. 854 et seq.

41IBA Rules,Art 3.4 and 3.7; See Waincymer, Procedure and Evidence in International Arbitration (2012), p. 842.

42As the requesting party could have the first and last word on its own request.

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The Taking of Evidence

there may be occasions in which this is justified. Such reply may be limited to objections that the requesting party did not have to, and did not, address when presenting the reasons underlying its request.43

Requesting electronic files (e-document production)

The vast majority of documents used in today’s business transactions are stored electronically (one must only think of the general use of electronic data rooms in M&A transactions and the fact that communication between counsel, advisors and transaction parties is basically done by email).44 The IBA Rules take a neutral approach45 as to the nature of documents and define a document to be ‘a writing, communication, picture, drawing, program or data of any kind, whether recorded or maintained on paper or by electronic, audio, visual or any other means’.Therefore, electronic evidence (including metadata46) is generally considered to be covered by the IBA Rules.The IBA Rules, however, do not prescribe the production of electronic documents as such in a particular case, but rather they provide a framework in case the parties agree to, or the tribunal orders, the production of electronic documents.47 In any case, certain differences with regard to the production of hard-copy documents should be kept in mind.

Firstly, tribunals (at an early stage) might wish to consult with the parties whether e-document production would be possible and, if so, how it should be conducted.48 The outcome of such discussion or the decision of the tribunal will usually be addressed in procedural orders covering the document production phase.49 In this respect, there is also a variety of further guidelines and checklists.50

Secondly, the phrasing of the document production request raises particularities, as it should be sufficiently narrow and specific.In this respect,the IBA Rules in Article 3(3)(a)(ii) suggest that the requesting party may, or the tribunal may require it to, additionally identify specific files, search terms, individuals or other means of searching for such documents efficiently and economically.

43Habegger, Chapter 13, PartV:‘Saving Time and Costs in Arbitration’, in Manuel Arroyo (ed.), Arbitration in Switzerland:The Practitioner’s Guide, p. 1403.

44Blackaby/Partasides et al., Redfern and Hunter on International Arbitration (6th ed., 2015), mns 6.104 with further references.

451999 IBA Working Party & 2010 IBA Rules of Evidence Subcommittee,‘Commentary on the revised text of the 2010 IBA Rules on the Taking of Evidence in International Arbitration’ (2010), p. 9; Zuberbühler/ Hofmann/Oetiker/Rohner, IBA Rules of Evidence (2012),Article 3 mn 122.

46Zuberbühler/Hofmann/Oetiker/Rohner, IBA Rules of Evidence (2012),Article 3 mns 12 and 123.

47Zuberbühler/Hofmann/Oetiker/Rohner, IBA Rules of Evidence (2012),,Article 3 mns 56 and 122.

48Born, International Commercial Arbitration (2nd ed., 2014), p. 2373.

49See ICC Arbitration Commission Report on Techniques for Managing Electronic Document Production, para. 5.5 (a).

50Chartered Institute of Arbitrators’ Protocol for E-Disclosure in International Arbitration; ICC Arbitration Commission Report on Techniques for Managing Electronic Document Production;The Sedona Conference Working Group on Electronic Document Retention & Production,The Sedona Principles: Best Practices Recommendations and Principles for Addressing Electronic Document Production.

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