Articles

The authors would like to thank Rebecca Warder and Adrien Boyer for their assistance with research.

Introduction

In arbitration, the parties and their counsel are free to shape the procedure of their case in conjunction with the arbitral tribunal. Parties can, if they wish, focus on trying to cut costs and speed up their arbitration, for instance by radically reducing document production, or by asking the tribunal to determine their case on paper only. The tribunal is also able to take the initiative in ordering appropriate cost-saving measures. However, in practice many arbitrations – notwithstanding their civil or common law background – follow a predictable procedural path, with first procedural orders following a uniform format. The first procedural order is often not particularly tailored to the case and commonly the parties, counsel, or maybe even the tribunal itself do not really consider alternatives. Document production, for example, is very often governed by Article 3 of the IBA Rules on the Taking of Evidence in International Arbitration (the ‘IBA Rules’)¹ without close consideration of whether it is really appropriate for the specific dispute. An exchange of expert reports is usually provided for in the procedural order, and party-appointed experts then produce separate detailed reports where the expert evidence may ultimately only turn on one or two relatively narrow issues. Institutional (and many ad hoc) arbitrations usually proceed to an oral hearing without any consideration of whether the arbitration could have been resolved on paper. Arbitration is often accused of lacking the very flexibility that was always said to be one of its advantages.²

A lack of procedural flexibility can impact on costs and cause unnecessary delay. While arbitration remains popular and is also increasingly trusted by users from sectors which traditionally have tended to use litigation rather than arbitration,³ there are calls for improvements to arbitral efficiency.⁴ Most practitioners will have experienced cases where the scale of document production has felt unnecessarily overblown, or where a plethora of largely superfluous witness evidence has added to the costs. It is also common to hear complaints about the length of time taken to get to an award.

In contrast, under the new Prague Rules⁵ the tribunal is asked to take the arbitration under its very close control from the outset, determining the timeline, exploring the factual issues and legal arguments in contention and setting the scope of expert evidence and document production. The tribunal can take part in establishing the facts, introduce for consideration legal issues not pleaded by the parties, appoint its own experts and should seek to limit document production only to those documents on which the parties rely, which will be disclosed along with the parties' submissions. There is a focus throughout on resolving the dispute as quickly as possible, with the tribunal encouraged to give early indications on the disputed issues and the weight and relevance of evidence and also to play a role in encouraging mediation and settlement, where the parties are happy for an arbitrator to do so. Tribunals are encouraged to avoid delay throughout and to proceed to an award quickly.

This article will look at the current dominant procedural framework in international arbitration – the IBA Rules – and will then briefly explore how these are perceived (1). The article will then review the content of the Prague Rules (2) and assess whether these new rules will, in practice, improve efficiency (3).

1.The IBA Rules

While institutional rules are mainly silent on the detail of arbitral procedure, such as the extent of document production, expert evidence and evidence from witnesses of fact, the IBA Rules have partly filled this vacuum. The IBA Rules, which have been described as almost universally welcomed,⁶ quickly became a standard framework for evidence, in recognition of their clarity, practicality and common-sense approach. The Rules are often agreed as the governing procedural code for the arbitration, or referred to for guidance.⁷ The IBA Rules have proved to be a highly successful harmonisation project, particularly in respect of arbitral document production where they have become the most widely adopted regime. The document production section is the most frequently referred to provision of the IBA Rules.⁸

The IBA Rules approach to document production

Under the IBA Rules document production regime, the parties must first produce the documents upon which they rely.⁹ The parties may then submit a Request to Produce, requesting the production of further documents that are relevant to the case and material to its outcome.¹⁰ The IBA Rules neatly circumscribe the parameters of what should be disclosable and avoid the need to disclose adverse documents in categories of document not requested by the other side.

In theory then, document production in arbitration under the IBA Rules should be capable of being relatively lean. However, notwithstanding the admirable clarity of the IBA Rules, a great deal of time is frequently expended in international arbitration proceedings on the process of document production. This is primarily due to the relatively wide scope of documentation that many tribunals consider to fall within the IBA Rules definition. Historically, some tribunals have lacked the willingness to control and limit document production effectively, and the production of certain categories of document is often heavily disputed despite the apparent simplicity of the IBA Rules. The document production regime anticipated by the IBA Rules, and the traditional way in which this is applied in international arbitration, has not always translated well in an electronic age of ever-increasing documentation.

A further issue is that some phrases in the IBA Rules are not defined, and this in itself can lead to disputes over what is meant. For example, while a party requesting production of documents in a particular case must state how they are 'material to its outcome', there is no definition of materiality within the Rules. A party requesting documents already in its 'possession, custody or control' does not have to produce those documents itself where it would be 'unduly burdensome', but unfortunately the Rules do not set out how to assess whether production would in fact be 'unduly burdensome'.¹¹ In addition, the IBA Rules provide that privileged documents may be withheld from production and the Rules list factors for the tribunal to take into account when considering issues of privilege. However, the Rules do not set out a detailed test for which rules of privilege should apply. This leaves the applicable rules of privilege as a potentially contentious issue in IBA Rules arbitrations involving parties from different jurisdictions with different approaches to privilege.¹²

Limits of the IBA Rules

The IBA Rules only deal with the taking of evidence and many broader procedural issues are therefore not dealt with at all by the IBA Rules. It is also important to appreciate that the IBA Rules are generally very well accepted, but the IBA's 2016 ‘Report on the reception of the IBA arbitration soft law products’ highlighted the following:

• The IBA Rules on the taking of evidence have always been more accepted in some regions than in others. While 48% of all arbitrations known to the respondents used the IBA Rules, the IBA Rules were only referenced in 30% of Latin American arbitrations and in 25% of African arbitrations. By contrast, there was 57% uptake in Asia Pacific and 52% in Europe. Within individual regions, their use varies significantly between different countries.¹³
• The vast majority of those surveyed on the IBA Rules in 2016 took the view that they should not be changed.¹⁴ However, 10% of the 714 people surveyed wanted them to be amended.¹⁵

Some of these respondents were of the view that the IBA Rules should be altered to move further away from what was perceived as a US-style approach. There was also a minority sentiment that some key words in the IBA Rules needed to be defined, including ‘relevance’, ‘materiality’ and ‘category’.¹⁶ Those who said they favoured change to the document production regime wanted the scope of document production to be limited.¹⁷ Interestingly, there was no clear pattern of greater discontent in civil law jurisdictions with the current wording of the IBA Rules, and the use of the IBA Rules was not consistently lower in civil law countries.¹⁸ Against this background, we have recently seen the promulgation of a new, and much wider, set of procedural rules: the Prague Rules.

2. The Prague Rules: an innovative approach

The Prague Rules were drafted over the course of four years by a Working Group comprising representatives from around 30 countries, most of which were CIS and Eastern European civil law jurisdictions. The Working Group used a survey to obtain views from 30 respondents on arbitration procedure in 29 countries, again mainly in the CIS and Eastern Europe, before launching the final version of the Prague Rules in December 2018.¹⁹

The Prague Rules provide a set of soft law rules that can be adopted in whole or in part to increase the efficiency of arbitral proceedings.²⁰ They can be used in institutional arbitrations as well as in ad hoc arbitration, as most institutional rules do not deal in any detail with the procedural issues covered by the Prague Rules.²¹ In essence, the Prague Rules accord more closely with a broadly civil law, inquisitorial approach to arbitration, with the tribunal using an early case management conference to take close control of the case from the start.

Previous commentators on the Prague Rules have rightly established that the content of the Rules is not entirely new.²² This is clearly true insofar as most of the provisions in the Prague Rules are either in the IBA Rules, could be argued for under the IBA Rules, or can be found in existing institutional rules.

The role of the early case management conference

The Prague Rules aim to streamline proceedings, reducing both costs and delay with the tribunal driving the arbitral process. This is clearly set out in Article 2 of the Prague Rules, which envisage the 'proactive role of the arbitral tribunal' from the very outset of the arbitration. Under the Prague Rules, the tribunal will hold an early case management conference 'without any unjustified delay after receiving the case file'. At the case management conference, the tribunal will clarify with the parties the relief sought, the legal issues and facts which are in dispute, and will also set the timetable for the arbitration.²³ The Prague Rules also rightly recognise that in some arbitrations the parties' cases may not be sufficiently evolved to be able to deal with all of these issues at this early stage, and the Prague Rules say that in such arbitrations the tribunal can deal with these points 'at a later stage of the arbitration'.²⁴ The provisions for the early case conference have similarities with the Terms of Reference process required in ICC Arbitration, which also aims to delineate and narrow the issues in dispute with the aim of enhancing efficiency, and with the case management conference as introduced in the 2012 ICC Arbitration Rules.²⁵

The Prague Rules provide the following:

• The tribunal 'may' use this early case conference to focus the remainder of the proceedings by narrowing the issues in dispute between the parties. The tribunal is invited (but not required) to set out which facts are still disputed and those which are now undisputed. The tribunal can state what evidence is required to prove the parties' positions, and what it understands the key legal arguments to be.²⁶
• The tribunal is guided into an inquisitorial approach and is asked to consider (where appropriate) any 'actions which could be taken' both by the tribunal and the parties to 'ascertain the factual and legal basis' of both the claimant and respondent's cases. The exact scope of this enquiry is not set out in Article 2, but it is likely to include considering, together with the parties, whether it would be appropriate to order at this stage any of the fact-finding steps set out later in the Prague Rules, such as a site inspection, or relevant interim relief required, such as an order preserving evidence.²⁷
• The tribunal can (again only if appropriate) give its 'preliminary views' on applicable burden of proof, the relief the parties are seeking, 'the disputed issues' and ‘the weight and relevance of evidence submitted by the parties’.

The Prague Rules do not set out how these preliminary views should be given, i.e. in a formal written format or orally in a more informal indicative style at the case management conference. At least theoretically, preliminary indicative views on the key issues in dispute could help reduce costs, as this would allow parties to consider dropping elements of their case where they are told they are unlikely to make headway, and indeed may prompt the parties to consider settling those issues (and more broadly). Whilst it is common for tribunals to give decisions on preliminary issues, these are issued in the form of binding dispositive awards, following written and usually also oral submissions from both parties on the limited issues concerned. A widespread adoption of an informal indicative approach on the likelihood of success on key issues at the initial procedural conference would represent a fairly radical departure from the common practice in most arbitrations.²⁸

When setting the timetable for the arbitration, the tribunal is encouraged to consider (after the parties have made their submissions) whether any particular points of law and fact should be heard as preliminary issues, restrictions on the number of submissions that may be made by the parties, and the maximum length of the submissions. It is also suggested that the tribunal may wish to impose 'strict time limits' for submissions.²⁹

The Tribunal's inquisitorial mission

The Prague Rules encourage the tribunal to take a 'proactive role' in establishing the factual matrix of the case, with the Rules setting out a non-exclusive list of 'fact finding' measures that tribunals can take at any stage. These include site inspections, asking the parties to provide relevant documentary evidence or to produce a particular witness to give oral evidence at the hearing. The tribunal can appoint its own experts, including on legal issues.³⁰ There is also a broad-ranging provision giving the tribunal the power to 'take any other actions which it deems appropriate' for fact-finding purposes.³¹ The Prague Rules also ask the tribunal to tightly control the fact-finding phase of the arbitration by considering imposing a time limit after which no new evidence will be accepted, unless there are 'exceptional circumstances'.³²

Document production

The Prague Rules suggest a radical (and seductively simple) approach to document production as they provide that tribunals and parties should 'avoid any form of document production, including e-discovery'.³³

At this stage the tribunal can also set the timetable and form of document production 'if any', though the Prague Rules direct the tribunal to try to dispense entirely with document production where possible. Again, this 'zero document production' approach would be a marked departure from the norm in most international arbitrations. The parties must make any requests for document production at the first case management conference, and later requests will only be allowed in 'exceptional circumstances'.³⁴

The parties are required to submit the documents that they rely on at the earliest possible stage and if any requests for the production of further documents are made (which is styled as the exception, rather than the rule) then this must usually be done at the first case management conference. Any later requests for documents can only be made in 'exceptional circumstances' and 'should' only be granted if the arbitral tribunal considers that the request could not have been made at the first case management conference.³⁵ Documents can only be requested from the other side where they are 'relevant and material to the outcome of the case', not in the public domain and are either in a party's possession, power or control.³⁶

This creates a clearly different set of rules from the IBA Rules document production regime currently widely used both by the civil law and common law arbitration community. While many international arbitrations under the IBA Rules involve the production of a significant volume of documents, in a Prague Rules arbitration the scope of document production could be dramatically reduced. Timing is also a key difference. In arbitrations under the IBA Rules, there will usually be a document production phase after the parties have completed their submissions, but in Prague Rules arbitrations all requests for document production would usually be made much earlier, at the first case management conference.

Fact witnesses

The default position under the Prague Rules is that parties must detail their fact witness evidence at the same time that they submit their claim or defence submissions, though this can also happen at a different stage if the tribunal considers that more appropriate. At this point, parties must identify each witness they intend to rely on, the factual issues the witness will address, and the relevance and materiality of that evidence to the outcome of the case. The parties can submit witness statements, and the tribunal can also request written witness statements from key witnesses. The tribunal is encouraged to take a strict approach to witness evidence. Under the Prague Rules, the tribunal can decide that a witness will not give evidence at the final hearing even before any witness statement is submitted, if the tribunal considers the evidence will be 'irrelevant, immaterial, unreasonably burdensome, duplicative' or for any other reason not necessary in order to resolve the dispute. However, the Prague Rules do provide that if a party insists on calling a witness whose witness statement has been provided by the other side, then the arbitral tribunal should generally allow this ‘unless there are good reasons not to do so’.

If the case proceeds to a merits hearing then the tribunal takes the lead in examining each witness, in the inquisitorial style. The tribunal may elect to use witness conferencing if appropriate, may decide the witness running order, time limits for each witness, the type of questions allowed and it has the final say on what questions are put to witnesses. The tribunal can reject those questions it considers to be 'irrelevant, redundant' or not material to the outcome of the case, or for 'other reasons'.³⁷

Again, this inquisitorial style presents a markedly different approach to the current norm in international arbitration. Tribunals can take the lead in questioning witnesses in IBA Rules arbitration and the IBA's own Commentary on the IBA Rules confirms that an arbitral tribunal can hear witnesses using 'the traditional method in certain civil law countries where witnesses are initially questioned by the arbitral tribunal'. However, the adversarial approach to witnesses, with examination conducted by the parties' representatives, is more often seen in IBA Rules arbitrations.³⁸

Experts

The Prague Rules are also innovative when it comes to the use of expert evidence. The arbitral tribunal is encouraged to use a tribunal-appointed expert (or more than one if necessary) to prepare a report on the relevant disputed issues,³⁹ and is given control over the characteristics of this expert, the expert's identity and the scope of his or her remit. The tribunal is invited to decide and communicate to the parties the requirements for the expert witness in terms of their qualifications, availability and cost. This aims to ensure that the arbitration will not be unduly delayed by the limited availability of an expert, and that the expert's fees are proportionate.

The tribunal is then encouraged to consult with the parties on who should be appointed, but under the Prague Rules the final decision lies with the tribunal, which 'shall not be bound by the candidates proposed by either party' and can appoint its own preferred individual. The tribunal can also create a 'joint expert commission' made up of experts proposed by the parties, or ask an external organisation such as a relevant professional body to propose a candidate.⁴⁰ The expert's instructions will be controlled by the tribunal, as the terms of reference for the expert will be determined by the arbitral tribunal, albeit after receiving submissions from the parties.⁴¹ Adopting an inquisitorial approach, the tribunal will 'monitor the expert's work' and can order the parties to provide the expert with all relevant information and documents to enable the expert report to be prepared.⁴²

Despite the strong steer in the Prague Rules towards a tribunal-appointed expert, the parties may nevertheless appoint their own experts and submit these expert reports. If the case proceeds to a hearing, the party-appointed experts can also give evidence.⁴³ Where there is more than one expert, the tribunal is invited to instruct the tribunal and/or party-appointed experts to prepare a joint list of questions that should be reviewed. The tribunal can also call on the experts to meet and issue a joint report on the issues on which the experts agree and disagree and, on the areas of disagreement, the reasons why this is the case.⁴⁴

Iura Novit Curia

Entirely logically, given that the Prague Rules invite the tribunal to take on an inquisitorial role, the dispute may be resolved by applying points of law and legal authorities not pleaded by, or referred to, by the parties. The Rules sensibly include the due process safeguard that the tribunal must seek the parties' views on the new points and/or authorities before proceeding to apply them.⁴⁵ Nevertheless, parties and counsel steeped in the common law tradition may be unpleasantly surprised to find the tribunal 'improving' upon the case argued by their adversary at the tribunal's initiative.

Assisted settlement

One of the most bold and controversial sections of the Prague Rules is the provision for the assisted settlement of disputes, which allows the arbitral tribunal (if both parties are willing) to assist the parties to settle at any stage of the arbitration.⁴⁶ With the agreement of the parties in writing, one of the arbitrators can act as a mediator and attempt to help the parties to resolve the dispute by mediation.⁴⁷ It is currently the case that such a proposal is often made to the parties where the arbitral tribunal is chaired by a Swiss or German national.⁴⁸ Given the costs involved in pursuing an arbitration through to a final merits hearing, this has the potential to significantly reduce parties' legal costs and to allow a speedier resolution of disputes. Concerns have, however, been expressed about this provision, because any arbitrator involved in settlement negotiations or a formal mediation is highly likely to become part of confidential discussions about the commercial realities of the dispute and weaknesses in the parties' cases. In most cases, either one or both parties are likely to have concerns about arbitrator impartiality in such a scenario and to be very reluctant to continue with the arbitrator concerned in place.

It bears emphasis that the Prague Rules require prior consent before any arbitrator can mediate (an ‘opt-in’ mechanism), and if an objection is voiced to arbitrator involvement in settlement discussions (an ‘opt-out’ option), then such an involvement cannot proceed.⁴⁹ These are safeguards which should go some way towards allaying users' concerns about the mediation and settlement provisions. There is also the further protection that an arbitrator who has acted as mediator can continue to act as an arbitrator only if both parties agree in writing, failing which the arbitrator must withdraw from the tribunal.⁵⁰

Some difficulties do remain, not least that if an arbitrator must withdraw after a failed mediation there will necessarily be additional costs entailed in the appointment of a new arbitrator. The appointment of the new arbitrator will also cause delay because a suitable candidate will have to be chosen, and unless their diary availability matches that of the existing arbitrators, the scheduled hearing date and other agreed procedural milestones may be compromised. However, given the high rates of successful settlement at mediations, this problem is probably not likely to impact on most proceedings under the Prague Rules.⁵¹ There is no provision in the Prague Rules for the removal of an arbitrator who has attempted (and failed) to broker a commercial deal, but who has not become a formal mediator. This is a somewhat surprising omission and may make the settlement provisions less useful. Parties may be reluctant to allow an arbitrator to try to bring about a negotiated settlement, knowing that the Rules do not provide for the removal of an arbitrator who has undertaken this role.

Sanctions

The Prague Rules empower the tribunal to sanction parties who do not comply with the tribunal's orders or instructions:

• The tribunal is entitled to draw adverse inferences from any non-justifiable non-compliance with the tribunal's order or instruction in relation to the relevant issue or the party's case.⁵²
• The tribunal can take into account the degree to which parties assist with the goal of conducting the arbitration in a ‘cost-efficient and expeditious manner’. It is made clear that any ‘lack’ of co-operation can be penalised in costs.⁵³

Awards

The tribunal is required to use its ‘best efforts’ to ensure that the award is issued ‘as soon as possible’ after the arbitration has ended.⁵⁴ This is reinforced with provisions requiring deliberations even before a hearing (if one is scheduled), and then as soon as possible after any hearing. Although there is a clear and strong encouragement that the tribunal move ahead with the award expeditiously, given the ‘best efforts’ requirement, the requirement to produce the award ‘as soon as possible’, may call for flexible interpretation according to the circumstances.

It is interesting that the drafters did not take the approach of setting a maximum length of time (for example, the three months deadline set by the latest HKIAC Rules,⁵⁵ or six-month time limit set by the ICC Rules⁵⁶) by which the award must usually be issued. There is, of course, an argument that setting a maximum particular length of time risks encouraging tribunals to see that time period as the norm, whether or not the complexity of the case justifies it. Given the overall framework and stated intention of the Prague Rules, it is to be hoped that tribunals following the Prague Rules will aim to produce an award especially promptly. It will be interesting to see how quickly Prague Rules awards are in fact issued.

3. The Prague Rules: challenges

If a tribunal adopts and applies the Prague Rules closely, then it remains true that the arbitration procedure will be much more streamlined and very different from the prevailing procedural norms in international arbitration. The Prague Rules encourage the tribunal to adopt a much more active inquisitorial role than is commonly encountered in international arbitration. The emphasis on the inquisitorial approach has the potential not only to reduce costs overall, but also to alter the way in which costs are typically incurred in arbitration.

The tribunal's full involvement from the start is likely to cause an element of front-loading of costs as the tribunal will need to be familiar with the parties' case and actively run the arbitration from the earliest stage. Where cases settle early there is undeniably the possibility that more costs may have been incurred in a Prague Rules dispute than would be the case in an arbitration run along a more extended procedural timetable.

Whilst this inquisitorial approach will be familiar and welcome to users of arbitration from civil law jurisdictions, it may come as somewhat of a culture shock to some common law practitioners who have trained and practiced in jurisdictions where courts rely on the parties to investigate the facts and present their positions. The extent of these 'cultural differences' should not be overstated, however: international arbitration has always operated as a hybrid between civil law and common law practice, where international arbitration practitioners expect that the procedure will not reflect solely their own jurisdictional experience.

In practice, costs management by the parties might well be less predictable in Prague Rules arbitrations, where the tribunal can take a very active and innovative role. While the parties will know the outline of the arbitration once the tribunal gives its first procedural order, there is the possibility of the tribunal appointing a further expert or introducing new legal concepts later, all of which would have the potential to alter initial costs estimates. While this is on one view less important than the potential costs savings that the Rules may generate, there are also other potential issues that early adopters of the Prague Rules will need to bear in mind.

Potential issues with using the Prague Rules

The Prague Rules do not constitute a full, fixed procedural code but instead recommend a series of potential options. This conciseness is undoubtedly the hallmark of civil law which favours the freedom of the parties to tailor their arbitration proceedings. Some of the drafters have emphasised that the Rules were deliberately designed in this way to encourage a thoughtful approach to what is best to maximise efficiency in each given case.⁵⁷ It makes sense that what is procedurally efficient in one case will not map across readily to other cases with different facts and legal issues at stake, so the Rules could not have achieved their aims by setting procedural requirements 'in stone'. This is, of course, precisely why detailed procedural arrangements of this kind have not historically been addressed in institutional rules.

However, this does necessarily leave the Rules in some ways functioning more as a statement of intent than as a clear pathway for what will happen in any particular case, as there are few mandatory provisions in the Rules. Where parties agree to adopt the Rules they will be handing over power to the tribunal on the basis that some of the suggested options may be selected, perhaps upon the submission of the parties and at the initiative of the tribunal, and that the arbitration will proceed in a more cost-effective way as a result. As a minimum, parties will be sure that an early case management conference will be held, a cut-off date for the submission of evidence will be considered, production requests will only be allowed after the first case management conference in exceptional circumstances and that the tribunal is required to use 'best efforts' to deliver the award. The tribunal has the power, but is not required, to put in place the other features of the Rules including rejecting all document production, appointing an expert itself, offering to assist with settlement and proposing documents-only resolution of the dispute, as these are all drafted as powers rather than requirements.

Because the Prague Rules are really a menu of options designed to encourage a focus on efficiency from the start of the case, they do not have the level of detail that could be expected in a more prescriptive document. On the one hand, this brevity may be welcomed, since it is consistent with the degree of flexibility that can reasonably be expected in international arbitration. This approach is not surprising given that the Prague Rules are based on a civil law tradition where language is generally shorter and simpler, giving rise to more freedom in its implementation. On the other hand, this conciseness may also be perceived as a lack of necessary detail, which could generate more disagreement between the parties.

• For example (and as already discussed), it is unclear how the 'preliminary views' of the tribunal on the parties' cases would be given, and this may be significant.⁵⁸
• There is no explanation of how the joint expert commission envisaged by Article 6.2(ii) of the Rules would work.⁵⁹ It is not clear what any expert on 'legal issues' will do, and what the scope of their role would be, as no detail is given other than that such an expert 'may' be appointed.⁶⁰ The Prague Rules have more or less replicated the IBA Rules document production test, but not provided any further accompanying detail on how the test should be applied. At first sight this may be surprising, as some of the criticism of the IBA Rules document production regime has centered on the need for further detail on the scope of the test. Arguably, however, further detail would in fact be redundant, given that the Prague Rules’ default approach to excessive document production is entirely clear. The Prague Rules strongly suggest that in most arbitrations, no document production is necessary and that the parties should be content to have sight only of the documents the other side relies on and which are provided with the submissions.

In general, there may be some risk that the lack of detail may produce negative results, potentially leading to more wasted costs as the parties dispute the meaning of particular provisions of the Prague Rules, but it is important to set this against the advantage of giving the tribunal a free hand to decide the most procedurally efficient approach in the context of the particular arbitration concerned.

There are also some surprising omissions from the Prague Rules, which have been kept short and straightforward. While a small number of potential (particularly efficient) options are suggested in relation to a range of procedural areas, the Prague Rules have not attempted to be comprehensive and to cover the widest range of potential cost-saving procedural approaches currently in use. One surprising omission, for example, is the possibility of expert hot tubbing, where the issues in expert evidence are dealt with in the hearing by the party-appointed experts appearing together, so that they present their views and are questioned in parallel. Another innovation that is surprisingly missing from the Rules altogether is the use of tribunal secretaries, which can potentially lead to substantial costs savings for the parties. There is nothing in the Rules to prohibit this - but they are not expressly encouraged.

However, such omissions perhaps merely reflect the overall purpose and nature of the Prague Rules, which increase the role and power of the arbitral tribunal. The lack of reference to certain specific procedures leaves some room to apply them or not depending on the nature of the case.

It is also unclear what impact the use of the Prague Rules will have on the entirely proper quest for increased diversity in arbitration. The Prague Rules require much of tribunals, and it is important that adopting the Prague Rules does not lead to an increased temptation to appoint only the 'usual suspects' who are perceived as a safe pair of hands. "Professional" arbitrators would arguably be more likely to use the Prague Rules, as they have the time to get fully involved in the dispute from its outset, together with the experience to take the initiative on procedural matters without being burdened by an overly-cautious deference to due process concerns. However, it is at least arguable that new arbitrators who have not yet settled into a well-established groove of standard procedural practice may be particularly well placed to take an innovative approach to arbitral procedure and will, as far as availability is concerned, have fewer hearings in their diaries.

More widely and perhaps most importantly, it is unclear whether the Prague Rules have identified the right solution to arbitration practitioners' concerns about efficiency in international arbitration. The preamble to the penultimate draft of the Prague Rules highlighted the role of standard arbitration processes in relation to document production, party-appointed experts and fact witnesses in increasing costs and inefficiency.⁶¹ The foreword also identified concerns in relation to tribunals' case management of disputes. The Prague Rules aim to solve these problems by giving the tribunal more power and a very wide discretion in relation to procedural matters. It remains to be seen whether, in practice, tribunals will use their powers and exercise their discretion in the way that the drafters of the Prague Rules would hope. Given that many arbitrators have very busy schedules and a natural inclination to avoid procedural surprise or controversy, there may be some practical stumbling blocks to the achievement of pro-active tribunal case management and the speediest resolution of disputes as contemplated by the Prague Rules.

Potential procedural challenges

The Prague Rules are relatively new, and there is therefore no consensus within the arbitration community on how they should be used or interpreted, nor any clarity on how they will be viewed by local courts. Conversely, there is broadly a settled arbitration community practice in relation to the IBA Rules, which are also less ambitious in their scope. Initially, therefore, there is a risk that where the Prague Rules are adopted there will be wrangling between the parties about the meaning of some provisions, perhaps exacerbated by their relative lack of detail. This may also lead to due process challenges, and there are a series of provisions which appear particularly likely to lead to applications to local courts.

Art. 4.2 of the Prague Rules: If tribunals impose the suggested regime of no document production in the face of requests from a party for specific documents to be produced, this may well mean that the party concerned will launch a challenge on the basis that they have not been given a proper and full opportunity to present their case. However, given the inherent flexibility of the Prague Rules, it is to be hoped that a skilled and experienced tribunal will be capable of navigating these potentially risky waters and will operate a ‘no document production’ model only in suitable cases where challenges are less likely to occur and, if brought, less likely to succeed. In this regard, it ought to be noted that the arbitral tribunal is only 'encouraged to avoid any form of document production’.⁶²

Article 2.4(e) of the Prague Rules: Challenges can also be anticipated in relation to the powers for tribunals to give their preliminary views including on burden of proof, the issues in dispute and the evidence, either at the early case management conference stage or later.⁶³ Unsuccessful parties may seek to suggest that there has been an early formation of a particular view by the tribunal, perhaps particularly where this occurs before the expert reports and witness statements have been considered by the tribunal and before any hearing has been held, along the lines that the tribunal did not take an impartial approach for the remainder of the conduct of the arbitration. Although the Prague Rules attempt to reduce the risk of challenges by stating in Article 2 that 'expressing such preliminary views shall not by itself be considered as evidence of the arbitral tribunal's lack of independence or impartiality, and cannot constitute grounds for disqualification',⁶⁴ this provision will not be effective in all jurisdictions due to the operation of relevant mandatory law.⁶⁵

Article 3 of the Prague Rules: The provision for the tribunal to operate in an inquisitorial manner in relation to fact-finding is another potential flashpoint.⁶⁶ In common law jurisdictions, it is currently unusual for tribunals to forge their own fact-finding path, and in the English courts a recent (and pre-Prague Rules) case of a sole arbitrator conducting investigations at his own initiative led to his award being challenged for serious irregularity and remitted back to him.⁶⁷ The arbitrator in that case made contact with a third party to find out whether a particular provision had in fact been incorporated into its regulations, and carried out independent research including checking the website of the organisation concerned. The English court decided that this conduct ran contrary to the requirement that a tribunal must act fairly and, as part of this, must give the parties an opportunity to deal with any issues on which the tribunal may base its findings. The tribunal was required to bring the issue to the attention of the parties so that they could make submissions on it. The court said that the arbitrator should have copied the parties into his message to the third party and given the parties sight of the replies, and should also have given the parties the opportunity to comment.⁶⁸

An inquisitorial Prague Rules tribunal is permitted by the Rules 'after having heard the parties' to take 'for the purposes of fact finding … any other actions which it deems appropriate'. However, in practice, the position may be very different in a London-seated arbitration. As noted above, if arbitrators are minded to conduct their own independent enquiries, they cannot simply gather information entirely independently and make use of it without referring back to the parties. The parties should be copied in to all written enquiries, and given the information received. They must then be given the opportunity to respond to it.⁶⁹ This would be the same under French law.⁷⁰ Arguably, this approach is in any event simple good practice that is easy for tribunals to adopt and should minimise the risk of challenges based on the use of powers in Article 3.

The inquisitorial model is undeniably more usual in civil law countries. However, the combination of the proactive role of the arbitral tribunal with the cost-efficiency objective that is embodied in the Prague Rules could raise issues related to arbitrators' liability in some jurisdictions. It is admitted in France that a contractual relationship arises between parties and arbitrators when they decide to engage in an arbitration process.⁷¹ Yet, considering the special mission of the arbitrator, judges have progressively forged a dual regime of liability. Accordingly, on the one hand, arbitrators benefit from jurisdictional immunity regarding the content of the award rendered. In other words, arbitrators' liability cannot be sought for what has been decided.⁷² Nevertheless, on the other hand, arbitrators can be contractually liable for any breach of the arbitrator contract. One of the duties stemming from this arbitrator contract is imposed by Article 1464 of the French Civil Procedure Code pursuant to which arbitrators must 'act diligently and in good faith in the conduct of the proceedings’.⁷³ Considering that the decision to use the Prague Rules may be based upon a desire to limit costs and time, it is possible to imagine new grounds upon which to found arbitrators' liability. In other words, parties could seek to establish arbitrators' liability when they believe that arbitrators did not organise the hearing 'in the most cost-efficient manner possible' or even when arbitrators resolved the dispute by calling witnesses unnecessarily in the exercise of their inquisitorial power, when it was not necessary to do so.⁷⁴

In light of these considerations, the Prague Rules could be seen as imposing new duties that constitute new grounds to found arbitrators' liability, which may prove problematic in France and other (civil law) seats with a similar approach to arbitrator liability. However, some arbitral institutions have excluded arbitrator liability⁷⁵ and this is less likely to be an issue in common law countries where arbitrators are rarely liable for how they perform their role.⁷⁶

When will the Prague Rules be used?

The Prague Rules have already started to be adopted in practice, and it will be interesting to see how widely they are used in the next few years. The Rules will provide a particularly valuable option for cases where both parties are from civil law jurisdictions and wish to have their disputes resolved in a manner more closely aligned to the prevailing approach in their own jurisdiction. If there is widespread adoption of the Prague Rules then it is at least possible that international arbitration may start to diverge and develop along two distinct paths, with one being Prague Rules civil-law flavoured arbitration and the other IBA Rules-style arbitration. This has the potential to alter the current hybrid nature of international arbitration proceedings. Whether that becomes the reality or not, civil law parties will very likely welcome the ability to dispense with some of the common features of international arbitration that have frustrated some civil law practitioners, such as the inefficiency of excessive document production.

The Prague Rules will also be a particularly useful option for lower value cases which do not justify the usual procedural approaches. In such cases, it will often be entirely appropriate to pare back document production and avoid a merits hearing. Similarly, cases which turn primarily upon disputed legal issues, where extensive fact witness evidence and documentary document production will not be central, will also be very suitable. The Prague Rules are less likely to be a good choice for complex cases that turn on very detailed factual issues, where extensive disclosure is likely to be vital to resolving the dispute fairly and giving both sides the opportunity to make their case. In higher value disputes, the parties will continue to prioritise the fullest opportunity to make their case and so are perhaps less likely to favour the use of the Prague Rules. The IBA Rules will likely remain popular for these cases and also more generally, as the majority of practitioners are both broadly satisfied and very familiar with the IBA Rules. A collateral benefit of the emergence of the Prague Rules is that it may perhaps prompt the IBA to take a fresh look at the IBA Rules to see whether changes should be made to clarify the document production regime, in the interests of improving efficiency.

Conclusion

While we should not be complacent about what needs to change, arbitration has a flourishing culture of procedural innovation aimed at increasing efficiency. We are in an era of an unprecedented degree of revision to the institutional rules, with important changes having been made to improve arbitration procedure. The ICC Rules were revised in 2017, the HKIAC Rules and the CCJA Rules⁷⁷ have also been revised in 2018, a revision of the LCIA Rules is again expected later this year,⁷⁸ and changes to the SIAC Rules are also anticipated in the course of 2019 or 2020. There is also an increase in 'soft law' aiming to improve the efficiency of arbitral proceedings. The emergence of the inventive Prague Rules is part of this trend and is therefore primarily a sign of what is right with arbitration, rather than what is wrong with it.

The Prague Rules may well help optimise efficiency in suitable disputes, though it is currently uncertain how popular the Prague Rules will be, and how often Prague Rules tribunals will be prepared to issue some of the more radical orders envisaged by the Rules. It is also not yet certain whether major costs savings will materialise. However, what is undoubtedly clear is that the arbitration community must work together to rise to the challenge of maximising efficiency, and that the Prague Rules have the potential to be a significant part of it.

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