The conference included keynote addresses by Guy Canivet (former President of the French Cour de Cassation and member of the Constitutional Council in France) on day one, and by Lord Keen of Elie QC (Advocate General for Scotland and Lords Minister for the Ministry of Justice in England and Wales) on day two, each engagingly contributing their respective civil and common law perspectives on the practice of international arbitration.

The conference was organised in eight panel discussions and one open forum spread over two days and addressed topics from the elaboration of arbitration laws to the enforcement or annulment of arbitral awards by judges, as well as contemporary concerns relating to technology advancements and Brexit.

Legislative framework and arbitration

In the first panel on ‘The Role of Legislation in Developing and Sustaining an Arbitration Friendly Seat’, chaired by Lord Dyson (39 Essex Chambers and former Master of the Rolls and Head of Civil Justice – the second most senior judge in England and Wales), several speakers addressed the 2015 CIArb London Principles, 1 which enumerate ten principles conducive to the creation of an arbitration-friendly seat. In discussing the importance of these principles, the role of national legislation was generally understood to be vital; inasmuch as it provides the foundation upon which all other elements are established.

The role of in-house counsel and arbitral institutions in creating a synergy between civil and common law traditions

In the second panel ‘Strategic Choices in Drafting Arbitration Agreements’, chaired by Jason Fry (Partner, Clifford Chance, Paris) and third panel ‘Perspective from Arbitral Institutions on Building the Synergy between Civil Law and Common Law’, chaired by Alexis Mourre (President of the ICC International Court of Arbitration), in-house counsel and representatives from arbitral institutions brought complementary views on approaches to drafting arbitration clauses and on arbitral institutions’ elaboration and application of arbitration rules.

Both panels discussed how party feedback and client expectations play a key role in moulding the development of civil and common law practices. It was noted that clients’ desire for an effective and flexible dispute resolution process has contributed to the acknowledgement – and inclusion – of internationally recognised best practices in arbitration, leading to an increasing amalgamation of common and civil law procedures.

Organising and managing the arbitration

Several panels, chaired by Ann Ryan Robertson (International Partner, Locke Lord, Texas), Axel Reeg (Partner, Reeg Rechtsanwälte, Germany), Teresa Cheng SC (Senior Counsel and Chair, Asian Academy of International Law) Carole Malinvaud (Partner, Gide Loyrette Nouel, Paris) and Philip Capper (Partner, White & Case, London), discussed the similarities and divergences in common and civil law procedural styles.

On the one hand, a number of panellists have underlined the main procedural differences between the common and civil law approaches to arbitration. They notably explained the difference between the common law adversarial system, in which courts rely on the parties for the presentation of evidence, and the civil law inquisitorial system, in which courts are actively involved in the discovery of facts. The panellists also referred to the considerable weight given to oral evidence and cross-examination in common law, as opposed to civil law where written evidence generally prevails over oral evidence.

On the other hand, the role played by counsel, the techniques employed, the length and nature of hearings, the acceptance and consideration of written submissions and evidence, and the reliance on cross-examination, were all said to exemplify the manner in which both the civil and common legal traditions have been incorporated and merged into current practice.

In addition to engaging in detailed analysis of such practices and procedures, panellists contemplated how arbitral practice could be further developed to harmonise the two legal systems and ensure that the best of both worlds are integrated. One interesting idea put forward was that encouraging the interaction of different legal traditions within arbitral tribunals is an excellent way to promote dialogue between professionals engaged in the application and development of arbitration principles.

The perspective of judges from civil and common law backgrounds

A panel chaired by Sir Vivian Ramsay (Judge of the Singapore High Court and former Judge of the High Court of England and Wales) was dedicated to approaches taken by courts in civil (France, Switzerland, Germany) and common law jurisdictions (the United Kingdom and United States) towards arbitration. Judges were unanimous in concluding that the judiciary in their respective countries maintained a position of support in encouraging the practice and growth of arbitration, and that arbitration should be seen as complementary to the national courts’ system.

The panellists made clear that their support of arbitration was reflected in their approaches to judicial appointments and challenges of arbitrators, as well as in their reluctance to intervene in the arbitral proceedings or to interfere with an arbitrator’s final decision when dealing with a request for enforcement or for annulment of an arbitral award.

The new global order and the future of arbitration in Europe and the Americas

The conference also included discussions on the future of arbitration in light of technological advancements and innovation, and geopolitical developments.

For instance, during an open forum entitled ‘The Telecommunications and New Technologies Case Study’ and chaired by Elie Kleiman (Partner, Freshfields Bruckhaus Deringer, Paris), the audience highlighted the increasing importance of algorithms, which could act in the place of arbitrators, and the now ‘not-so-far-fetched’ possibility of artificial intelligence-based arbitration. The audience also addressed the development of innovative tools and the increasing accessibility of online platforms providing arbitration services, which intend to save time and costs in arbitration.

Geopolitical developments were similarly discussed as having the potential to impact the arbitral landscape. One such issue that has left uncertainty in the air was Brexit; while the United Kingdom’s exit from the Brussels regime may impact the legal framework for litigation, it was underlined that the New York Convention, to which the United Kingdom is a party, will continue to provide a clear framework leaving the practice of arbitration in the United Kingdom largely unaffected.

Concluding remarks

Professors from both common law and civil law jurisdictions summarised the discussions that took place throughout the conference and shared their views on the dichotomy and synergy between both systems in arbitration. George A. Bermann (Colombia Law School) reflected that while the conference had predominantly focused on the procedural aspects of arbitration, issues of substantive law also stood within the conference’s reach. He referred to three key areas, at the ‘outskirts’ of substantive law, on which the civil/common law dichotomy have great influence: the choice of applicable law, the interpretation of such law, and a third category consisting of issues that are neither merit- not procedural-based, such as res judicata, limitation periods or anti-suit injunctions. Professor Bermann submitted that, to some extent, each of the aforementioned areas are influenced or approached differently based on one’s civil or common law background. According to Professor Bermann, the convergence or divergence in these areas cannot be measured, but the extent to which the gap between the two systems is ‘bridgeable’ is reflected by international standards developed by international associations such as IBA (International Bar Association) or ILA (International Law Association).

According to Pierre Tercier (Emeritus Professor, University of Fribourg), harmonisation between the civil and common law approaches does not mean unification or fusion of traditions. On the contrary, the preservation and embodiment of differences facilitates the flexibility and neutrality that makes arbitration so effective. On the future of arbitration, Professor Tercier concluded that globalised education had allowed the next generation of arbitration practitioners to engage in international studies and gain experience in both common and civil law jurisdictions. Such greater understanding of both legal systems will inevitably create more opportunities for dialogue between practitioners of different legal traditions.

Some Observations on the Civil - Common Law Dichotomy: the Approach to Factual and Legal Issues

Reza Mohtashami, partner at Freshfields Bruckhaus Deringer in London and editorial board member of the ICC Bulletin, shares his remarks presented at the CIArb conference, where he raised two examples of the Civil - Common Law dichotomy that, in his experience, continues to persist notwithstanding the inexorable trend towards harmonisation of international arbitration procedure over the past two decades. The first point concerns matters of procedure; the second relates to a substantive difference between the civil and common law systems of law.

International arbitration brings together parties, counsel and arbitrators from diverse legal backgrounds and practices. Over the past two decades, arbitration practice has successfully combined features from different legal traditions and has, as a result, forged a form of transnational or international arbitration best practice.

Sequencing the pre-hearing submissions

The procedural rules that are commonly adopted today have taken elements from both the Civil Law and Common Law traditions. For example, on the one hand, proceedings usually involve the exchange of substantial written submissions which lay out the parties’ legal and factual arguments; on the other hand, the hearing forms a significant part of an arbitral proceeding, both for examination of witnesses, but also the oral presentation of the parties’ case. Another example of the blend of different procedural traditions concerns the use of document disclosure, which in most arbitrations today are regulated by the IBA Rules on the Taking of Evidence in International Arbitration, which set forth a middle ground between the Common Law and Civil Law traditions.

But there is one area of procedural dichotomy that remains and it concerns a question that is raised at the very outset of proceedings after the tribunal’s constitution; namely whether the parties should adopt a ‘memorial style’ of procedure or the so-called ‘London style’, based on the traditional English common law approach, in respect to the pre-hearing submissions:

  • The memorial style procedure, which is commonly adopted in international arbitration practice, involves two rounds of consecutive written submissions, each submission setting out the parties’ case in comprehensive detail, accompanied by the relevant documentary evidence, as well as any supporting witness statements and expert reports.
  • The London style entails an initial exchange of statements of case or pleadings; each of which can be quite terse and lack the narrative structure adopted in memorials, and where the claimant has the last word; the pleadings are then followed by a simultaneous exchange of witness statements and expert reports, and then, shortly before the hearing, there are so-called ‘skeletons’ or written opening submissions that bring together – for the first time – all of the factual and legal issues.

The so-called London style is often adopted in arbitrations in the Middle East, especially in cases involving English practitioners as counsel and arbitrator; and of course, it is adopted in many London-centric cases. Indeed, the London approach is adopted in Article 15 of the LCIA Rules dealing with the procedure for written statements, and applies unless the parties have agreed otherwise or the Tribunal decides differently.

These two procedural approaches are very different, such that there may be tactical considerations at play that make one procedure more favourable than the other. Indeed, I have found myself making both sides of the argument. Having done so, I am convinced that a tribunal’s decision as to which procedure to adopt turns, not so much on the particular nuances of the case at hand, but on the arbitrators’ legal tradition and familiarity with the approach that they know best. This is why, to my mind, this issue remains an area of Civil - Common Law dichotomy.

Adjusting the parties’ agreement on liquidated damages

My second example concerns the treatment of liquidated damages (clause pénale in French law) which are a common feature of many contracts that give rise to arbitration disputes. Under both Civil and Common Law systems, parties to a contract are free to determine the damages payable in the event of a specific contractual breach before the breach has arisen.

Under English law, the liquidated damages should represent a genuine pre-estimate of loss; but there is no requirement for the innocent party to prove that it has actually suffered a loss. The amounts stipulated should be commercially justified and not intended as a deterrent; otherwise the clause risks being qualified as an unenforceable penalty. This is why many agreements contain a stipulation to the effect that the liquidated damages provisions represent a genuine pre-estimate of loss and do not constitute a penalty. There is no such hesitation under French law in relation to the clause pénale having the character of a punishment or fine for non-performance.

There is a real chance that a liquidated damages clause will provide for a sum in damages that does not correspond to the losses of the aggrieved party. It is for this reason that, under French law, and indeed many civil law systems in the Middle East, the arbitrator has discretion to increase or reduce the amount stipulated under a liquidated damages clause if it is deemed to be manifestly excessive or derisory. Pursuant to the Article 1231-5 of the French Civil Code:

Where an agreement provides that he who fails to perform will pay a certain sum as damages, the other party may not be awarded a greater or lesser sum.

Nevertheless, the judge may even of his own motion moderate or increase the agreed penalty, where it is obviously excessive or ridiculously low.2

There are some subtle variations across different Civil Codes as to when the discretion of judges or arbitrators is triggered, but typically it is when either there is no damage suffered or if the amount of liquidated damages is unreasonably higher or lower than the actual loss suffered.

Notwithstanding the discretion granted to arbitrators to modify the amount of liquidated damages under many Civil Law systems, there appears to be great reluctance shown by arbitrators – especially those from the Common Law tradition – to exercise such discretion even where the amount stipulated in the contract is clearly excessive or inadequate. This reluctance was demonstrated clearly in a recent ICC case arising out of a contract governed by Bahraini law. The relevant provision of the Bahrain Civil Code (Article 226) provides as follows:

Damages fixed by agreement are not due if the debtor establishes that the creditor has not suffered any loss. The court may reduce the amount of these damages, if the debtor establishes that the amount fixed was grossly exaggerated or that the principal obligation has been partially performed. Any agreement to the contrary is void.

In that case, liquidated damages were being claimed by the claimant, whereas the respondent argued that no loss had in fact been suffered by the claiming party, and therefore the tribunal should exercise its discretion and not award liquidated damages under the contract. An experienced ICC tribunal rejected such argument and held as follows:

Even if gross exaggeration had been established such as to afford the Tribunal a discretion, it would decline to exercise that discretion bearing in mind in the Claimant’s favour the fact that the agreement represents a finely balanced commercial transaction for a long-term major infrastructure project negotiated by sophisticated commercial parties.

Finding such a clear statement of principle in an award that eschews a tribunal’s available discretion under the applicable law is uncommon. Although arbitrators are generally reluctant to interfere with what they perceive to be the parties’ commercial bargain, it is doubtful that an all Civil Law tribunal would have shown the same reluctance to consider the discretion available to it in reviewing a claim for liquidated damages. This is perhaps another example of where, despite the great strides made towards harmonisation, there remains a Civil - Common Law dichotomy.

Néanmoins, le juge peut, même d'office, modérer ou augmenter la peine qui avait été convenue, si elle est manifestement excessive ou dérisoire.’



1
‘CIArb London Centenary Principles, 2015’, available at http://www.ciarb.org/docs/default-source/ciarbdocuments/london/the-principles.pdf?sfvrsn=4


2
Free translation from original text: ‘Lorsque le contrat stipule que celui qui manquera de l'exécuter paiera une certaine somme à titre de dommages et intérêts, il ne peut être alloué à l'autre partie une somme plus forte ni moindre.