Jump to Content Jump to Main Navigation
Signed in as:

12 Article 9: Admissibility and Assessment of Evidence

Roman Khodykin, Carol Mulcahy, Nicholas Fletcher

From: A Guide to the IBA Rules on the Taking of Evidence in International Arbitration

Roman Khodykin, Carol Mulcahy
Edited By: Nicholas Fletcher

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

(p. 407) 12  Article 9: Admissibility and Assessment of Evidence

Article 9  Admissibility and Assessment of Evidence

  1. 1.  The Arbitral Tribunal shall determine the admissibility, relevance, materiality and weight of evidence.

  2. (p. 408) 2.  The Arbitral Tribunal shall, at the request of a Party or on its own motion, exclude from evidence or production any Document, statement, oral testimony or inspection for any of the following reasons:

    1. (a)  lack of sufficient relevance to the case or materiality to its outcome;

    2. (b)  legal impediment or privilege under the legal or ethical rules determined by the Arbitral Tribunal to be applicable;

    3. (c)  unreasonable burden to produce the requested evidence;

    4. (d)  loss or destruction of the Document that has been shown with reasonable likelihood to have occurred;

    5. (e)  grounds of commercial or technical confidentiality that the Arbitral Tribunal determines to be compelling;

    6. (f)  grounds of special political or institutional sensitivity (including evidence that has been classified as secret by a government or a public international institution) that the Arbitral Tribunal determines to be compelling; or

    7. (g)  considerations of procedural economy, proportionality, fairness or equality of the Parties that the Arbitral Tribunal determines to be compelling.

  3. 3.  In considering issues of legal impediment or privilege under Article 9.2(b), and insofar as permitted by any mandatory legal or ethical rules that are determined by it to be applicable, the Arbitral Tribunal may take into account:

    1. (a)  any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of providing or obtaining legal advice;

    2. (b)  any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of settlement negotiations;

    3. (c)  the expectations of the Parties and their advisors at the time the legal impediment or privilege is said to have arisen;

    4. (d)  any possible waiver of any applicable legal impediment or privilege by virtue of consent, earlier disclosure, affirmative use of the Document, statement, oral communication or advice contained therein, or otherwise; and

    5. (e)  the need to maintain fairness and equality as between the Parties, particularly if they are subject to different legal or ethical rules.

  4. 4.  The Arbitral Tribunal may, where appropriate, make necessary arrangements to permit evidence to be presented or considered subject to suitable confidentiality protection.

  5. 5.  If a Party fails without satisfactory explanation to produce any Document requested in a Request to Produce to which it has not objected in due time or fails to produce any Document ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal may infer that such document would be adverse to the interests of that Party.

  6. 6.  If a Party fails without satisfactory explanation to make available any other relevant evidence, including testimony, sought by one Party to which the Party to whom the request was addressed has not objected in due time or fails to make (p. 409) available any evidence, including testimony, ordered by the Arbitral Tribunal to be produced, the Arbitral Tribunal may infer that such evidence would be adverse to the interests of that Party.

  7. 7.  If the Arbitral Tribunal determines that a Party has failed to conduct itself in good faith in the taking of evidence, the Arbitral Tribunal may, in addition to any other measures available under these Rules, take such failure into account in its assignment of the costs of the arbitration, including costs arising out of or in connection with the taking of evidence.

A.  Introduction

12.1  Article 9 is a key provision of the IBA Rules. It deals with assessment and admissibility of evidence, contains the benchmarks by reference to which evidence may be excluded, and provides certain mechanisms by which the tribunal may address bad-faith conduct by a party to the arbitration.

12.2  The results of an IBA survey show that Article 9 is the second most referenced provision of the IBA Rules (approximately 13 per cent of all references), second only to Article 3.1

12.3  The equivalent provision in the 1999 IBA Rules2 was similar in scope to the present provision. However, material changes have been introduced into Article 9 of the current IBA Rules. Two key amendments are:

  1. (i)  A new set of provisions with respect to privilege and legal impediment has been incorporated into what is now Article 9.3; and

  2. (ii)  The addition of Article 9.7—this allows tribunals to impose costs sanctions on a party that fails to conduct itself in good faith in the taking of evidence.

12.4  The provisions of Article 9—in particular, Article 9.2 which sets out the grounds upon which documents, statements, oral testimony, or inspection may be excluded from evidence or production—operate in tandem with a number of other provisions of the IBA Rules. Accordingly, Article 9 is expressly referenced elsewhere in the IBA Rules. For example, in Article 3 (Documents), Article 6 (Tribunal-Appointed Experts), Article 7 (Inspection), and Article 8 (Evidentiary Hearing).3 The provisions contained in Article 9 play an important role in the successful operation of the IBA Rules.

(p. 410) B.  Assessment of Evidence

9.1. The Arbitral Tribunal shall determine the admissibility, relevance, materiality and weight of evidence.

1.  Introduction

12.5  Article 9.1 states the general principle that the tribunal shall determine the admissibility, relevance, materiality, and weight of evidence. The exercise of the tribunal’s discretion in determining these matters is central to its role in arbitration proceedings.

12.6  The terms of Article 9.1 reflect accepted practice in international arbitration and provision in similar terms may be found in a number of institutional rules and national arbitration laws. For this reason, practical application of Article 9.1 operates in a similar manner to practice and procedure adopted in arbitrations not conducted under the IBA Rules, and it has relatively few distinguishing features.

12.7  An important consequence of the principle expressed in Article 9.1 is that (subject to any mandatory provisions of law applicable at the seat of arbitration)4 the tribunal is not obliged to follow strict rules of evidence that might apply in a national court, either at the seat of arbitration or one of the home jurisdictions of the parties to the dispute. Nonetheless, a tribunal may, in practice, take account of or be sensitive to the law of the seat of arbitration, the national legal backgrounds (and expectations) of the parties and their advisers, any agreements made between the parties, and any applicable institutional rules or guidelines.

2.  Article 9.1: An Accepted Principle in International Arbitration

12.8  As mentioned, the principle stated in Article 9.1 can be found in nearly all institutional and other arbitration rules.5

12.9  The same principle is also found in many national arbitration laws. For example, the German Code of Civil Procedure states that: ‘The arbitral tribunal is empowered to determine the admissibility of taking evidence, take evidence and assess freely such (p. 411) evidence.’6 Similar provision may be found in the Belgian Judicial Code7 and the Netherlands Code of Civil Procedure.8 The United States Courts have uniformly held that arbitrators possess broad powers to determine arbitral procedures, including the assessment of evidence,9 and national courts consistently affirm a tribunal’s inherently broad discretion over evidentiary issues.10 Section 34 of the English Arbitration Act contains a statement of the same principle.11

12.10  Thus, there is wide recognition of a tribunal’s discretion to admit evidence, to determine its relevance and probative value, as well as to reject evidence that it regards as being of little or no assistance.12 To that extent, the wide powers granted to a tribunal under the IBA Rules are broadly consistent with the position likely to exist under any applicable arbitration rules, and as a matter of accepted practice in international arbitration.

12.11  However, a tribunal’s discretion around evidentiary matters is not entirely without constraints, as it must take care to observe due process and respect the right of each party to have a fair opportunity to present its case as required by the IBA Rules,13 and in applicable institutional rules, or mandatory national laws or procedural norms at the seat of arbitration.14 In particular, during the course of the proceedings each party should be given an opportunity to respond to and comment on the relevance, materiality, admissibility, or probative value of the evidence that has been presented.15

12.12  What distinguishes the IBA Rules from the majority of other arbitration rules is that they contain clear benchmarks to determine what evidence has value in the proceedings, and the categories of evidence that may be excluded from consideration by the tribunal.16

(p. 412) 12.13  The next sections address matters covered by Article 9.1—determination of the relevance and materiality of evidence, the admissibility of evidence, and the weight to be attached to individual pieces of evidence.

3.  Relevance and Materiality

12.14  Article 9.1 refers expressly to the power of the tribunal to determine relevance and materiality of evidence. As mentioned, these benchmarks have a special significance within the IBA Rules.

12.15  The concepts of relevance and materiality are expressed in the IBA Rules by reference to two yardsticks—‘relevant to the case’ and ‘material to its outcome’. These benchmarks permeate the whole of the infrastructure of the IBA Rules and are the standards by which the introduction, use, and value of evidence is managed.

12.16  For example, as noted elsewhere, a request to produce under Article 3.3 must include a statement explaining why the documents requested are relevant to the case and material to its outcome.17 Under Article 3.5, a party may object to a request to produce on the basis that the documents requested lack ‘sufficient relevance to the case or materiality to its outcome’.18 Under Article 3.7, the tribunal may make an order for production only if it determines that ‘the issues that the requesting party wishes to prove are relevant to the case and material to its outcome’. At the evidentiary hearing, pursuant to its powers under Article 8.2, the tribunal may exclude evidence it considers to be ‘irrelevant’ or ‘immaterial’ or if it lacks ‘sufficient relevance to the case or materiality to its outcome’. Under Article 8.5, the tribunal may ask any person to give evidence on any issue that the tribunal considers to be ‘relevant to the case or material to its outcome’.

12.17  Thus, the tribunal has the power to both exclude evidence that is not sufficiently relevant and material and to actively seek evidence that is. The combined effect of Article 9.1 and the other provisions mentioned is that the tribunal is the final arbiter of whether or not evidence presented to it for use in the arbitration is relevant and material. If it is the view of the tribunal that evidence is relevant and material, then that evidence has a place in the proceedings.

12.18  The meaning of relevance and materiality as used in the IBA Rules, and Chapter 6 paras 6.76–6.146 discuss related factors that may influence a determination of relevance and materiality by the tribunal. In practice, the way in which these two tests are applied will depend on the context in which the particular piece of evidence is being considered.

(p. 413) 4.  Admissibility

12.19  Article 9.1 makes clear that the tribunal is to determine questions of admissibility of evidence.

a.  General approach

12.20  Article 9.2 sets out express limitations on admissible evidence. However, it is for the tribunal to decide if a piece of evidence falls outside or inside those parameters.

12.21  Admissibility is a topic on which most national courts will have a body of practice and rules. These will lay down what evidence is inadmissible in that particular forum and may vary between jurisdictions. For example, in England, the ‘parole evidence rule’ bars the introduction of pre-contract communications as an aid to contractual interpretation, whereas in many civil law countries pre-contractual documents are taken into account in determining the terms of a contractual relationship.19

12.22  In international arbitration, where tribunals will nearly always have an express power to determine issues of admissibility, the rules of national courts will not generally apply. In consequence, where an issue of admissibility arises, tribunals will have a much wider discretion as to whether to admit or exclude the evidence in question and, in practice, the tendency of many arbitrators will be to permit the introduction of evidence, rather than to exclude it. This position has been confirmed by one experienced arbitrator in the following terms:

[T]echnical rules of evidence are usually not observed in arbitration, and the tribunal will err substantially on the side of permitting presentation of the facts that a party desires. Consistent with this, international arbitrators have repeatedly declared that they are not bound by national evidentiary rules or formalities [ . . . ] On questions of admissibility, arbitrators ordinarily err in the direction of permitting introduction of irrelevant or duplicative materials [even though permitted under Article 9.2 of the IBA Rules] to exclude evidence on a number of grounds . . .20

12.23  Under Article 9.1 of the IBA Rules, the question of what evidence may be admitted into the proceedings is left entirely to the discretion of the tribunal. However, the tribunal (p. 414) is assisted by other provisions of the IBA Rules—in particular, by the theme prevalent throughout the rules that the evidence that merits admission is that which is relevant to the case and material to its outcome, subject to the exceptions to that principle stated in Article 9.2. Those exceptions are relatively limited and this reflects the view that a tribunal, like a judge (but unlike a jury),21 is considered sufficiently skilled to evaluate evidence without the need to be ‘protected’ from questionable evidence that might otherwise distort its findings.22

12.24  This liberal approach to admissibility of evidence is facilitated to a significant extent by the ability of a tribunal operating under the IBA Rules to evaluate the evidence presented to it. Article 9.1 makes express provision for the power of a tribunal to determine the ‘weight’ of evidence.23 Adopting a pragmatic approach, rather than having to decide if the evidence should be admitted or excluded, the tribunal may deal with any shortcomings in the character of evidence that is admitted by means of the weight that the tribunal attributes to it. This approach is illustrated by a statement made by one ICC tribunal in its final award:

The Arbitral Tribunal also points out that, pursuant to § 22 of Procedural Order No. 2 and Article 9 § 1 of the IBA Rules (2010) which the Tribunal may take into consideration, it is within its discretion to assess the weight to be given to each piece of evidence submitted in the present case. For this reason, the Tribunal has not deemed it appropriate to discard any specific testimony or document on the basis of one Party’s criticisms thereof.24

12.25  Another reason justifying a liberal approach to admissibility of evidence in international arbitration is that tribunals may wish to avoid any suggestion that due process has not been followed—in particular, that a party has been prevented from presenting its case by the exclusion of evidence on which it wishes to rely.25

12.26  Tribunals will generally deal with issues of admissibility as and when they arise. The wide discretion afforded to them under Article 9.1 is a valuable resource in tailoring decisions to the individual circumstances of the case and dealing pragmatically with issues of admissibility that might otherwise distract resources from more important aspects of the case.

b.  ‘Stolen’ evidence

12.27  There does not appear to be any accepted prevailing practice with respect to admission into evidence of illegally obtained documents, or documents that have been leaked (p. 415) into the public domain by a third party. Much may depend on the facts of an individual case and the attitude of the tribunal. In one ICSID case, the respondent raised an objection to the introduction into evidence by the claimant of an audio recording of a conversation in which a bribe was allegedly sought by the respondent from the claimant. The tribunal rejected the claimant’s application to introduce the evidence (in part) on the grounds that (a) given the ease with which technology permitted manipulation of audio recordings, proven authenticity was an essential condition for the admissibility of this type of evidence (the claimant being unable to discharge that burden in the face of objection from the respondent); and (b) because the recording had been made without the knowledge of the respondent’s representative (and was therefore illegal under the applicable national law) to admit the evidence would be contrary to the principles of good faith and fair dealing required in international arbitration.26 In contrast, in another reported case, the tribunal chose to admit an unlawfully obtained video recording.27

12.28  There are many ways of looking at such situations. Once documents are in the public domain—for example, where they have been ‘hacked’ by a third party—there may be strong arguments for saying that they should be permitted on to the record if one party wishes to introduce them. On the other hand, issues of fairness may arise in relation to unlawfully obtained documents, particularly if one of the other parties to the arbitration is responsible for the ‘theft’. As one author explains, there may be nothing in principle to prevent such evidence being introduced on to the record, but the tribunal may decline to admit it on the basis that it would be unfair to the party from whom the documents have been stolen:

[N]othing prevents a tribunal from admitting into evidence documents that may have been stolen or otherwise unlawfully obtained. However, tribunals will most likely refuse to admit such documents on the grounds of procedural fairness and equality of parties. As regards documents obtained from a public source such as Wikileaks, tribunals are guarded in their approach with respect to documents covered by attorney–client privilege, but as regards any other documents available in the public domain, a tribunal may be willing to admit such documents since ignoring them would lead to an unreasonable conclusion, which could make the award subject to challenge.28

(p. 416) 12.29  Another commentator has proposed that the question of who benefits from the wrongdoing is a factor to be taken into account in relation to their admissibility, but that documents subject to certain types of privilege, such as attorney–client privilege, should always be inadmissible.29 A further relevant factor may be whether the documents fall within a category of documents that had previously been requested by an opponent party, but which, in breach of an order for production, had not been produced.

12.30  International arbitration tribunals have sometimes admitted into evidence documents leaked online. For example, in a recent case involving the Kazakhstan government,30 the claimant applied to admit into evidence leaked emails published on a WikiLeaks-type website. The tribunal acknowledged the need to protect against computer and cybercrime and the potential unfairness of allowing confidential evidence obtained through hacking to be admitted against the legitimate expectations of the parties. However, it also recognized that there was a need for the tribunal to have access to information that is in the public domain, accessible to all, and allegedly relevant and material to the dispute—there was an interest in upholding a party’s right to prove its case. Importantly, however, although the tribunal admitted the leaked material into evidence, it excluded from admission documents that were privileged.31

5.  The Weight of Evidence

12.31  Article 9.1 of the IBA Rules provides that the tribunal is to determine the weight of the evidence presented to it. In other words, the tribunal is to decide what reliance it places upon each individual piece of evidence.

12.32  Determination of the weight of evidence is an evaluative exercise, separate to that of deciding whether evidence is admissible. A piece of evidence may be admissible but given little or no weight by the tribunal when it comes to evaluating the body of evidence that has been presented.

12.33  In theory, in an arbitration conducted under the IBA Rules, a large part of the evidence admitted to the record should be given some weight when the tribunal comes to carry out its evaluation. In addition to fact and documentary evidence that the parties volunteer in support of matters relied on in written submissions, and expert evidence directed at specific issues germane to the dispute, any other evidence obtained by document production under those rules should be demonstrated to be relevant and material (p. 417) to the outcome of the case.32 However, experienced practitioners of international arbitration will know that this is not always the case. Much documentary evidence that finds its way into the record is never looked at again, either by the parties or by the tribunal; either the parties are not sufficiently discriminating in what they choose to introduce, or the requirements of relevance and materiality are not strictly applied by participants in the arbitration. Even in the face of arguments around the admissibility of a peripheral piece of evidence, the tribunal may take a relaxed approach and permit its introduction. However, whatever the attitude of a tribunal to issues of admissibility, a tribunal is likely to be much more discriminating when it comes to weighing the evidence.

12.34  The question of what weight should be given to a particular piece of evidence is an obscure and imprecise exercise, whether carried out in a court room or by a tribunal. In general terms, a tribunal will consider the evidence it has and decide, on an essentially subjective basis, what it believes are the correct facts or conclusions. The weight of the evidence is the persuasive effect of the evidence on the arbitrator’s mind. There are no detailed rules—nor should there be—about how that exercise is to be carried out. That said, there are a number of common factors taken into account when a tribunal is considering how far it should rely on the evidence submitted.

a.  Reliability

12.35  An important factor for the tribunal will be the reliability of the evidence, ie if it constitutes genuine and reliable proof of what it is offered to prove. Case-specific factors are likely to determine the view the tribunal ultimately takes on this question, but a number of general considerations are also likely to be taken into account.

i.  Witness evidence

12.36  For example, in relation to witness evidence:

  • •  was the witness tendered for/did the witness decline to attend for cross- examination;

  • •  is the tribunal being asked to rely only on a witness statement prepared with the assistance of counsel;

  • •  how credible is the witness under cross-examination;

  • •  is the witness evidence contradicted by another credible witness;

  • •  whether the witness had a direct or only an indirect role in the events to which the evidence relates;

  • •  the period of time that has elapsed since the events described by the witness took place;

  • •  whether the witness is a former employee of the ‘other’ party and may hold a grudge that may taint the evidence given against that party;

  • (p. 418) •  whether the witness is an employee who is supporting without questioning the argument of his or her employer;

  • •  whether a witness is independent of the parties at the time the witness offers evidence; or

  • •  whether the answer given by a witness was in reality suggested by counsel asking the question.

In relation to expert evidence, a tribunal may temper the reliance it places on written evidence in a number of different circumstances. For example, the assumed facts on which the expert evidence is based may not be proven or shown to be justified on the fact evidence, or during cross-examination of the expert it may become apparent that his or her real expertise relates to a different, albeit related, body of knowledge. When opposing experts have very different opinions, the tribunal may lean in favour of the evidence given by the expert who performs better under cross-examination or in questioning during ‘hot-tubbing’33 of the experts.

•  ii. Documents

12.37  In relation to documents, the tribunal may consider:

  • •  When and in what circumstances the document was prepared;

  • •  Whether the document is signed and whether any handwriting or signature present is consistent with that available elsewhere;

  • •  Whether there are documents later in time that contradict its content;

  • •  Whether there is a compelling body of evidence that contradicts what the document appears to say;

  • •  Whether the author of the document was sufficiently well informed about the relevant events to justify reliance being placed on the document;

  • •  Whether the purpose for which the document was created may have affected the manner in which it was drafted, including omissions and emphasis; and

  • •  Whether the document or correspondence was written in the period leading up to a formal dispute when the parties were merely trying to position themselves for an impending arbitration with a self-serving document trail.

As mentioned, another factor is the authenticity of a document relied on. Logically, it is difficult to see how a document that is not authentic can have any useful part to play in the proceedings.34 If there are issues around the authenticity of a document or other evidence, it is likely that these will have been raised when the evidence is first introduced. (p. 419) It will be a matter for the tribunal to decide whether or not to admit the document, and the decision made will depend very much on the individual circumstances.35 However, even if the evidence is admitted, the tribunal may nonetheless attribute less (or no) weight to it as a result of the allegations of forgery or lack of authenticity.

iii.  Indirect evidence

12.38  Parties to international arbitration are typically permitted to present indirect evidence (for example, hearsay evidence from a witness who has heard second-hand what has been said on a relevant matter)36 but the tribunal may consider as more reliable (and place greater weight on) direct evidence. For example, a tribunal may place more reliance on the content of a relevant document than it will on oral testimony about what the document says. However, if a party can demonstrate that there are reasons for non-production of direct evidence, this may have a mitigating effect on the tribunal’s assessment (ie it may place more weight on the indirect evidence than might otherwise be the case), eg where a party can provide credible evidence about the prior destruction of a document.37

b.  Difference in approach to issues of admissibility and weight

12.39  Rules and practice on the admissibility of evidence—whether framed by the legal tradition of the tribunal and/or counsel, or by reference to guidelines on exclusion of evidence as set out in the IBA Rules or other applicable rules—are sufficiently tangible that the parties will be able to actively engage with them.

12.40  The position in relation to the weighing of evidence by a tribunal is very different. As mentioned, the weighing of evidence is a nebulous and essentially subjective task. Where the majority of the evidence favours one of the parties it is probable that different tribunals would arrive at the same outcome. In less clear-cut cases, different tribunals might arrive at different conclusions on the same evidence. This is because there is no obviously right or wrong answer in relation to such assessment—the individual tribunal must be persuaded on the evidence that the facts support the case being advanced.38

12.41  The consequence of these different considerations is that it will be far easier to advance an argument that a tribunal has improperly excluded evidence than it will be to argue that the tribunal has not properly evaluated the evidence once admitted. For example, if a tribunal makes a decision to exclude evidence on grounds other than those set out in Article 9.2 of the IBA Rules, a party whose evidence has been excluded may argue (p. 420) that this was unfair by reference to the terms of that provision. It is far more difficult to analyse and attack the subjective approach a tribunal has taken to assessment of the evidence.

12.42  The distinction that exists is reflected in the approach taken by national courts when dealing with challenges to awards brought on the basis that a tribunal has not weighed the evidence correctly. For example, the English Court has made clear that, while a failure to give proper consideration to a piece of key evidence could be grounds for challenging an award, such circumstances should not include a situation where the tribunal had evaluated the evidence but simply reached a conclusion that the challenging party does not like. In Arduina Holdings BV v Celtic Resources Holding plc, the Court said that:

The assertion in the claim form that the decision was contrary to the weight of the evidence does not begin to meet the requirements of section 68 [of the English Arbitration Act 1996].

[ . . . ]

The assertion that the arbitrator failed to take any or proper consider[ation] of the evidence could, in an exceptional case, give rise to a challenge under section 68, based on the general duty of an arbitrator under section 33 if, for example, an arbitrator genuinely overlooked evidence that really mattered, or got the wrong end of the stick in misunderstanding it. But there is all the difference in the world between such cases and an arbitrator evaluating evidence but reaching factual conclusions on it (as will happen in most arbitrations) which one party does not like. That cannot be the basis of a complaint under section 68.39

This perspective should provide comfort to a tribunal when exercising the broad discretion to determine the weight of evidence afforded to it under Article 9.1.

6.  Other Considerations

12.43  When evaluating evidence, the tribunal will need to consider related matters, such as the burden and standard of proof, as well as any inferences or presumptions that the tribunal may feel able to make. The IBA Rules do not contain any provisions relating to burden of proof and only limited provision in relation to the drawing of inferences.40 The following general principles will nonetheless apply in connection with the evaluation of evidence under Article 9.1.

(p. 421) a.  Burden of proof

12.44  It is widely accepted that a party to arbitration has the burden of proving the facts relied on to support its claim/counterclaim, defence, or right of set-off.41

12.45  A number of institutional rules contain an express statement that each party bears the burden of proving the facts necessary to its claims and defences (see, for example, Article 41.1 of the CIETAC Rules,42 Article 29 of the CAM Rules,43 Article 27.1 of the PCA Rules,44 and Article 27.1 of the PRIME Finance Arbitration Rules).45

12.46  The IBA Rules contain no such provision. However, the position described is consistent with commentary on the issue and accepted practice.46

12.47  However, it is worth bearing in mind that there is a divergent approach between and among civil and common law legal systems with respect to classification of the burden of proof.47 If a question does arise about how a burden of proof should be allocated, the answer may have an impact on how evidence is to be produced and evaluated.48 Associated conflict of laws questions may arise. For example, should a tribunal apply the law of the seat (on the basis that the burden of proof is a procedural matter), the law (p. 422) governing the underlying substantive issue, or some international standard?49 A pragmatic solution to such questions is that advocated by Born, who suggests that the strict distribution of the burden of proof applied by national courts does not arise in international arbitration and that the tribunal should adopt a more flexible approach designed to meet the needs of the particular issues in the case:

[T]he tribunal need not apply the burden of proof rules of any specific jurisdiction, but can instead fashion specialized rules in light of the particular substantive issues and procedures at issue in a specific instance.50

12.48  We agree that a pragmatic approach to burden of proof is desirable and a strict analysis of where it rests may not always be helpful or wanted. An obvious case is where a claim and counterclaim relate to the same factual issue. One cited example of this is the case of a construction dispute where a builder delivers an account to the owner to receive payment. The owner seeks a declaration that the money is not owed. The builder counterclaims for the money due. From a technical perspective each has a burden of proof in relation to its contention but, from a practical perspective, the tribunal will simply consider all of the evidence and decide which position is to be preferred.51

12.49  As arbitration proceedings progress, evidence will be presented by different parties at different times. It is therefore very common for the ‘balance’ of evidence to change backwards and forward between the parties. A claimant with the burden of proof may present a prima facie case that satisfies the standard of proof required at that stage, only to find that the respondent subsequently presents a preponderant body of evidence leading to a decision in favour of the respondent.

12.50  In common law legal systems the party with the burden of proof may be required to initially establish a prima facie case (ie one that should succeed in the absence of rebuttal by its opponent), failing which the responding party has the right to seek a determination that there is no case to answer before being called on to present any of its own evidence. The process of ‘no case to answer’ does not have a significant role to play in international arbitration. Tribunals tend to defer decisions on whether the burden of proof has been discharged to the end of the proceedings and respondents tend to present evidence even if they believe that the respondent has no case to answer.52 That said, in recent years there appears to have been some limited erosion of that position. (p. 423) For example, Article 39 of the SCC Rules (Summary Procedure) makes some provision for a party to request early determination of an issue of fact, including on grounds that an allegation of fact is ‘manifestly unsustainable’. Similar summary procedures for early dismissal of claims have been introduced under other arbitration rules, but on the basis of the language used, these appear to be limited to an assessment of the legal merits of the claim53 and on the assumption that the supporting facts are as stated. There is some suggestion that an exception to this may arise where the factual allegations underlying the legal arguments are regarded by the tribunal as being (manifestly) incredible, frivolous, vexatious, inaccurate or made in bad faith.54 Of course, if the claimant cannot even present a prima facie case, the claim will not succeed in any event.

b.  Standard of proof

12.51  The burden of proof deals with the question of which party has responsibility for presenting evidence on a particular issue. It does not indicate the level of proof required.

12.52  In relation to the sufficiency of evidence needed to discharge the burden of proof, it is widely accepted that the standard in international arbitration is the ‘balance of probabilities’ or a ‘more likely than not’ standard.55 It is often pointed out that this is the standard formulated in common law systems and that civil law systems speak of ‘the satisfaction of, or the inner conviction of the adjudicator’.56 However, when it comes to practical application, there does not appear to be any difference of substance between the two formulations.

c.  Inferences and presumptions

12.53  In arriving at conclusions on the facts in issue in the proceedings, arbitral tribunals are permitted to rely on presumptions or inferences regarding evidence.

i.  Positive and negative inferences

12.54  An example of a positive inference would be that contemporaneous documentation is more likely to be reliable than documents prepared for the purpose of the (p. 424) arbitration. Absent a statement to the contrary in the first procedural order, an arbitral tribunal may also presume that documents introduced on to the record are authentic unless an allegation is made to the contrary.57 Of course, such presumptions may not be appropriate in all cases. For example, there may be few contemporaneous documents and those that exist may be contradictory, or the volume of documents may be so great that, in the absence of positive collaborative assistance from the parties in finding those that are material, primary reliance by the tribunal on those documents may be difficult.58

12.55  Examples of adverse inferences include negative inferences drawn from a party’s failure to produce material documents or witnesses in its control, or the failure of a witness to answer certain questions put to them.59 Absent a valid excuse, it is natural (if not logical) to assume that the withheld information is adverse to the interests of the party controlling it and the tribunal may wish to form a view on the kind of information or evidence that is being withheld.60 A tribunal may also draw inferences from circumstantial evidence.61 As with other indirect evidence a tribunal may place more or less weight on such evidence depending on what direct evidence is available.

ii.  The use of adverse inferences under Articles 9.5 and 9.6 of the IBA Rules

12.56  The IBA Rules make express provision for the drawing of adverse inferences by reason of a party’s failure to produce witness or other evidence. Articles 9.5 and 9.6 provide for the right of the tribunal to infer that the withheld evidence would be adverse to the interests of the party that has failed to produce it. These provisions are addressed at 12.357-12.386. The possible use of adverse inferences in relation to bad-faith conduct by a party to arbitration in breach of Preamble 3 of the IBA Rules is also considered briefly in Chapter 2.62

C.  Exclusion of Evidence

9.2. The Arbitral Tribunal shall, at the request of a Party or on its own motion, exclude from evidence or production any Document, statement, oral testimony or inspection for any of the following reasons.

(p. 425) 1.  Introduction

12.57  Article 9.2 sets boundaries for the evidence (oral or written) that a party may be asked to provide or produce under the IBA Rules, and the evidence that a tribunal may exclude. It is an extremely important provision and the grounds of objection set out in Article 9.2 are adopted by reference into various other provisions of the IBA Rules.63

12.58  The provision states that the tribunal ‘shall’ (either upon request by a party or on its own motion) exclude from evidence or production, a document, statement, oral testimony, or inspection, if that evidence falls within one of the limitations listed in Article 9.2(a)–(g). Thus, if a tribunal is satisfied that one or more of those grounds is established, the evidence should be excluded. However, it is for the tribunal to determine whether an objection under Article 9.2 (a)–(g) has been made out, thereby retaining control of the decision to exclude evidence.64 The Commentary on the IBA Rules explains that the limitations contained in Article 9.2 are important because they ‘preserve the lines of distinction between the rights of the parties and the authority of the arbitral tribunal’.

12.59  The grounds for exclusion of evidence set out in Article 9.2 constitute important protections for the parties and, in relation to document production, they provide a necessary counterbalance to the right of a party to request production of documents from its opponent.65

2.  Grounds for Exclusion

12.60  Article 9.2 lists the grounds on which (a) the production of documents or (b) the admission of evidence, can be resisted.

12.61  A disputed request for document production is one of the most common situations in which the provisions of Article 9.2 (a)–(g) will come into play. Under Article 3.5 of the IBA Rules, those provisions contain the grounds upon which a party may raise an objection to production, and under Article 3.7(ii), those which the tribunal must consider when it has to decide whether an order for production should be made.

12.62  While Article 9.2 appears to provide an exhaustive list of limitations, it has been suggested that the provision omits reference to one other ground that is available to a party (p. 426) to raise in connection with a disputed document production request—that the document that has been requested does not exist:

One important substantive objection is not included in the catalogue of Article 9, section 2: the non-existing document; that is, a document which has never existed and leads only a virtual life in the mind of the requesting party. A non-existing document does not come within the scope of Article 9, section 2(d), which is only concerned with the loss or destruction of documents.66

12.63  The point is made elsewhere67 that, although Article 3.3 does not expressly require a party to state in a request to produce the grounds on which it believes the requested documents to exist, it should be read as containing an implied requirement in those terms. In any event, it would be prudent for the requesting party to mention the grounds for such belief, particularly where this is not obvious from the nature of the documents requested. The absence of an express requirement for a statement in these terms may explain why there is no corresponding right of objection under Article 9.2. Clearly, if documents do not exist, they cannot be produced, although an allegation of their non-existence will not prevent an order for production being made if the tribunal is persuaded that the documents do, in fact, exist.

12.64  Each of the grounds for exclusion of evidence expressed in Article 9.2 is addressed in the sections that follow.

D.  Relevance and Materiality

9.2(a) lack of sufficient relevance to the case or materiality to its outcome

1.  Introduction

12.65  The power to exclude evidence on the basis of relevance and materiality extends to all types of evidence—whether a document, oral or written fact evidence, or expert evidence—and may be exercised at any stage of the proceedings.

12.66  The tribunal is to exclude evidence that it determines does not have ‘sufficient relevance to the case or materiality to its outcome’.68

12.67  The requirement of ‘sufficient’ relevance suggests that there are gradations of relevance and a tipping point (sufficiency) where the test is met. On this basis, it is suggested (p. 427) that the sufficiency requirement at Article 9.2(a) bites only on the relevance limb of the benchmark, presumably on the basis that a piece of evidence either is or is not material to the outcome.69 We agree with that view.

12.68  In relation to document production, it should be remembered that the requirement of relevance and materiality at Article 9.2(a) is expressly restated at Article 3.3(b) as a requirement of a request to produce documents.

12.69  A failure to include in the request an explanation of how the documents requested are relevant and material is a standalone basis for rejection or dismissal of the request. These matters are discussed further in Chapter 6 paras 6.76–6.146.

2.  Exclusion of Documentary Evidence

12.70  In general terms, there are two situations where a tribunal’s assessment of a document as not being relevant and material will result in that document being blocked from appearance on the record. The first is where the tribunal declines to order production of a requested document under Article 3.7.70 The second is where it excludes a document already on the record.

12.71  The factors described71 as being relevant to an assessment of relevance and materiality for the purposes of a document production request or order have similar application to the exercise of the tribunal’s more general discretion to exclude documentary evidence under Article 9.2(a) for ‘lack of sufficient relevance to the case or materiality to its outcome’.

12.72  Situations not related to document production requests where a tribunal may, in theory, decide to exercise its power under Article 9.2(a) will be case specific. For example, a party may have introduced a document with its written submissions that the other party contends should be removed from the record for lack of relevance and materiality,72 or a party may, late in the day—after written submissions and voluntary production have been completed—indicate that it wishes to introduce a document on to the record against the wishes of the other party.

12.73  Although relatively rare in our experience, also possible is a situation where, of its own initiative, the tribunal decides that a document is not sufficiently relevant and material to justify its retention or inclusion on the record. For example, when an issue between the parties has been conceded by one side, a tribunal may decide pursuant to Article 9.2(a) (p. 428) that no further evidence should be permitted because it will serve no purpose. In Abaclat, a tribunal excluded from the record legal opinions that had been filed in prior arbitration proceedings by expert witnesses providing testimony in the matter before them. The respondent wanted to introduce the opinions in order to embarrass the claimant’s experts by reference to allegedly inconsistent testimony contained in the opinions. In deciding to exclude the opinions, the tribunal considered the assistance that the opinions would provide on the issues in the case. It took the view that ‘these [opinions] would be used in the first place for impeachment purposes’ and ‘not to shed more light on the legal issues at stake’. The tribunal went on to say that that there was sufficient material available upon which the experts’ evidence could be challenged so as to render admission of the opinions ‘excessive’.73

3.  Exclusion of Witness Evidence

12.74  The factors described74 as being relevant to an assessment of relevance and materiality for the purposes of document production will also have application in relation to an assessment by the tribunal of the relevance and materiality of witness evidence.

12.75  If exclusion of witness evidence is being considered at the time of the evidentiary hearing, a tribunal is much more likely to be fully up to speed on the issues in the case and may find a determination of what is relevant and material (and what is not) much easier than at an earlier stage of the proceedings, when contested document production requests are being ruled on, or the intended scope of witness evidence is being discussed.75

12.76  One example cited elsewhere of tribunal intervention at an evidentiary hearing is that of an ICC arbitration conducted in Paris presided over by a sole arbitrator. During the hearing a witness had been called to give evidence concerning a licence to produce pharmaceutical products. In the course of oral testimony, after cross-examination had continued for a reasonable period, the question turned to matters that the arbitrator understood as relating to the witness’ own liability. As the witness was not a party (or an employee of a party), the tribunal ruled that further questioning would be inadmissible.76 In practice, many tribunals will permit counsel to have a degree of latitude in relation to questions put to witnesses during cross-examination. However, if there is a tight timetable and it is clear that counsel is wasting time on unimportant points, it may well step in to move matters along.77

(p. 429) E.  Legal Impediment and Privilege

  1. 9.2(b)  legal impediment or privilege under the legal or ethical rules determined by the Arbitral Tribunal to be applicable.

[ . . . ]

  1. 9.3  In considering issues of legal impediment or privilege under Article 9.2(b), and insofar as permitted by any mandatory legal or ethical rules that are determined by it to be applicable, the Arbitral Tribunal may take into account:

    1. (a)  any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of providing or obtaining legal advice;

    2. (b)  any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of settlement negotiations;

    3. (c)  the expectations of the Parties and their advisors at the time the legal impediment or privilege is said to have arisen;

    4. (d)  any possible waiver of any applicable legal impediment or privilege by virtue of consent, earlier disclosure, affirmative use of the Document, statement, oral communication or advice contained therein, or otherwise; and

    5. (e)  the need to maintain fairness and equality as between the Parties, particularly if they are subject to different legal or ethical rules.

1.  Introduction

12.77  Article 9.2(b) and Article 9.3 address the important subject of legal impediment and privilege as a bar to the use of evidence.

12.78  As the Commentary to the IBA Rules makes clear, those responsible for drafting Article 9.2(b) felt it important that certain privileges that may apply under the appropriate applicable law should be recognized in international arbitration.78 The Commentary on the IBA Rules refers to three examples of such privileges—attorney–client privilege, professional secrecy, and without prejudice privilege. There is potential for misunderstanding in relation to the use of such terms, as different national jurisdictions may have different labels for the same category of privilege, and the nature and scope of particular privileges may not be the same across jurisdictions. However, there are two broad categories of privilege that are widely used in international arbitration.

12.79  The first category is privilege protecting certain types of communications between a party and its lawyer (and sometimes extending to communications with third parties) (p. 430) relating to legal advice and/or litigation. In England, this category of privilege is broken down into ‘legal advice’ privilege and ‘litigation’ privilege, while in the United States, the equivalent privileges are (in broad terms) ‘attorney–client’ privilege and ‘attorney–work product’ privilege. In a number of civil law jurisdictions, such protections as exist in respect of these matters are often covered by a single privilege known as professional secrecy.

12.80  The second category of widely used privilege is a protection that attaches to communications between disputing parties relating to efforts to settle their dispute—often referred to in England as ‘without prejudice’ privilege. These and other privileges are discussed in more detail at 12.88 – 12.101.

12.81  Evidentiary privileges play a significant role in legal proceedings across the world. However, legal privileges and other legal impediments to production or introduction of evidence generally arise out of a provision of law or practice within a national jurisdiction and, while there may be common themes across jurisdictions, complex issues of conflicts of laws can arise in relation to the application of such privileges in an international forum.

12.82  Article 9.2 provides that the tribunal may exclude from evidence or production evidence to which legal privilege or legal impediment attaches. Article 9.3 describes a number of factors that a tribunal may take into account when considering issues of privilege and/or legal impediment—in substance, the need to protect a document or oral statement made for the purpose of obtaining/providing legal advice; in connection with settlement negotiation; the parties’ expectations when the legal privilege or impediment is said to have arisen; any waiver of the privilege/impediment; and the need to maintain fairness between the parties, particularly where those parties may be subject to different rules.

12.83  It is convenient to consider Article 9.2(b) and Article 9.3 together. In doing so it is important to note that, under those provisions:

  1. (a)  The basis of exclusion from production or evidence is the existence of a legal impediment or privilege under the legal or ethical rules that are determined by the tribunal to be applicable;79 and

  2. (b)  In considering issues of legal impediment/privilege, and to the extent permitted by any mandatory legal or ethical rules that the tribunal determines to be applicable, the tribunal may take into account the factors described in Article 9.3.80

12.84  Although the 1999 IBA Rules contained a provision in identical terms to Article 9.2(b), there was no guidance on the application of its terms. When preparing the 2010 IBA Rules, those responsible for drafting the rules felt it appropriate to provide the additional (p. 431) non-binding guidance that is now found at Article 9.3. The approach taken by the IBA Committee when formulating these guidelines has been described in these terms:

In tackling the issue of privileges, the IBA Working Group had to strike a delicate balance. The new rules had to be specific enough to provide international arbitrators with more practical and workable guidance as to how to handle privilege issues in international arbitration than the 1999 edition of the Rules. At the same time, however, the new provision had to be generic enough to avoid the impression of over-emphasising the issue of privilege and any interference with the complex conflict of laws problems related to privileges as well as any conflict with mandatory, public-policy nature of domestic privilege rules. Such a conflict would have been inconsistent with the soft-law nature of the IBA Rules, which constitute a restatement of best practice standards but cannot and do not intend to override applicable domestic law of a mandatory nature.81

12.85  Despite these objectives, the provisions that appear in the IBA Rules have nonetheless been criticised for being too general and not providing more precision around how potentially applicable privilege rules are to be sorted and applied. One commentator puts it this way:

[A]rt. 9.2(b) refrains from providing a specific conflict rule for the application of privileges in international arbitration. At the same time, the rule is not specific enough to provide international arbitrators with concrete guidance as to the practical handling of privilege issues.82

12.86  However, the view has also been expressed that the discretion afforded to a tribunal by application of the relatively ‘high level’ guidance given in the IBA Rules is a good thing:

There may be competing privilege claims, and the decision as to which privilege rule or rules to apply falls into the general category of procedural matters left to the arbitrators’ discretion.83

12.87  Our view is that the combination of Article 9.2(b) and Article 9.3 provides useful practical guidance for a tribunal asked to rule on issues of legal impediment or privilege. While avoiding expression of a fixed rule that might trespass on mandatory provisions of applicable law (and thereby create more problems than would be solved), the rules provide a decision-making framework that provides assistance to the tribunal as it navigates its way through these complex issues. Express provision on this topic in institutional rules is scarce.84 National laws vary considerably in the substance of legal (p. 432) and ethical rules that may apply. The IBA Rules rightly grant the tribunal considerable discretion and, while tending to suggest that the laws of the home jurisdictions of the parties are the appropriate ones to take into account on issues of privilege (and thereby downplaying the potential relevance of other possibilities),85 the additional considerations expressed in Article 9.3 allow the tribunal take into account factors relevant to the broader conduct of the arbitration.

2.  Different Types of Legal Impediment or Privilege

12.88  In international arbitration, the term ‘privilege’ is very often used to refer to what in English practice is known as legal advice privilege, litigation privilege, or ‘without prejudice’ privilege. However, Articles 9.2(b) and 9.3 are not confined to these categories of privilege. In addition, those provisions make express reference to a ‘legal impediment’. In consequence, tribunals may have to consider a wide range of privileges and legal obstacles to production asserted by the parties. The next few sections describe some categories of privilege or legal impediment that may arise.

a.  Professional privileges

12.89  Professional privileges are those that attach to documents, knowledge, or information that comes into existence or that are shared between parties in the context of a professional relationship. An individual may obtain access to such privileged information by reason of belonging to a particular profession and may be bound by legal or ethical rules to keep that information secret from other parties. Professional privileges often exist within industries where one party may wish or need to reveal sensitive or confidential information to a member of that profession and public policy dictates that such communications should be protected. Examples of professional privileges include the following:86

  • •  Legal advice privilege (widely recognized in many common law jurisdictions and referred to in some as attorney–client privilege or professional secrecy)—designed to protect the confidentiality of communications between a client and a lawyer in connection with the taking and providing of legal advice. This type of privilege is dealt with in more detail at 12.139-12.196.

  • •  Litigation Privilege (again, widely recognised across a number of jurisdictions and having broad equivalents (for example, ‘attorney work product’) in others)—protects communications with third parties where the dominant purpose of the communication is to further litigation which is pending, reasonably (p. 433) contemplated or existing. This type of privilege is dealt with in more detail at 12.149-12.151 and 12.169.

  • •  Medical privilege—this prevents doctors and medical staff from revealing information about the health of their patient without the patient’s consent.87

  • •  Accountant-client privilege—some US states treat certain types of communication between an accountant and a client as privileged (either on the basis of an extension to the accountant of litigation and legal advice privilege or as a standalone privilege). In Europe, the position is rather different and accountants cannot normally claim legal advice privilege although, in some instances, they can rely on litigation privilege.

b.  Other privileges

  • •  Other privileges not connected to a particular profession also exist. As with professional privileges, many of these have their provenance in considerations of public policy. One of the most important of such privileges is that which attaches to settlement discussions (also known as ‘without prejudice privilege’). This type of privilege is dealt with in more detail at 12.174-12.186. Other examples include business secrets privilege (historically an American concept, the privilege may apply to a secret formula, patent, device, or compilation if it is used in the owner’s business and enables the owner to obtain a competitive business advantage), and other privileges such as those attaching to bank records, political votes, tax returns, etc.88

12.90  A further important privilege is that of privilege attaching to government information or matters of national interest. In some cases, this privilege exists as a general principle of law and in others it is embodied in legislation. For example, in Nigeria, Section 243(1) of the Evidence Act 2011 provides that: ‘A Minister, or in respect of matters to which the executive authority of a State extends, the Governor or any person nominated by him, may in any proceedings object to the production or request the exclusion of oral evidence, when, after consideration, he is satisfied that the production of such document or the giving of such oral evidence is against public interest’.89 ‘Cabinet privilege’ exists under Section 38 of the Canada Evidence Act 1985.90 According to this provision, the production of documents prepared for or used by Ministers of the Crown in executive policy-making deliberations is to be refused.91 In England ‘public interest immunity’ has replaced ‘Crown Privilege’ and is similar in scope to that found in the Nigerian provision mentioned above. Halsbury’s Laws describe it thus:

(p. 434)

It is a general rule of law founded on public policy and recognised by Parliament that any documentary evidence may be withheld or an answer to any question may be refused on the ground that the disclosure of the document or the answering of the question would be injurious to the public interest. The rule is a rule of substantive law and may be described as a principle of constitutional law; it is not a mere matter of practice or procedure.92

12.91  A similar type of privilege known as ‘executive privilege’ exists in the United States. This allows the President and other state officials to withhold certain communications within the executive department from the courts and from Congress. In addition, some US states courts recognize a privilege protecting the deliberative process of government.93

12.92  In some jurisdictions, certain of these protections may be classified as legal impediments rather than privileges.

12.93  It should be noted that, even if appropriate to raise under Article 9.2(b), some of these privileges may also give rise to a ground for exclusion under one of the other provisions of Article 9.2. For example, rather than relying on a privilege that protects government information, reference might also be had to Article 9.2(f): ‘grounds of special political or institutional sensitivity (including evidence that has been classified as secret by a government . . . )’.

c.  Legal impediment

12.94  As with evidentiary privileges, a ‘legal impediment’ may take many forms. As mentioned, what is classified as an evidentiary privilege in some jurisdictions may have a different status in others and perhaps fall more readily under the description ‘legal impediment’. In addition, there may be particular types of ‘legal impediment’ that are peculiar to an individual jurisdiction or region. Such impediments may cover a broad range of subject matter and it is therefore much more difficult to provide an illustrative list. However, what follows are some examples of provisions that have been relied upon/considered as legal impediments.

i.  Risk of prosecution/blocking statutes

12.95  National courts have in some cases found that a threat of foreign prosecution is a reasonable excuse for non-production of evidence.94 In essence, the argument is that if the relevant party were to comply with an order for discovery of documents, such conduct would breach the laws of another state and render that party liable to sanctions. The laws of the foreign state constitute the legal impediment.

(p. 435) 12.96  However, there have also been cases—in England and in the United States—where national courts have refused to bar disclosure of documents by reason of foreign ‘blocking statutes’ existing in some civil law jurisdictions. The latter jurisdictions—generally with a tradition of very limited document production—have sometimes viewed pre-trial discovery requests made to one of its nationals in proceedings before a foreign court as interference with the sovereignty, customs, and national interests of that jurisdiction. In order to prevent the discovery procedures from being executed in their territories, those jurisdictions have therefore enacted what are known as ‘blocking statutes’, under which a party complying with the discovery order of a foreign court becomes liable to a penalty.95

ii.  Banking secrecy

12.97  Another commonly raised legal impediment to production of evidence, particularly in disputes involving banks, is the banking secrecy regime. National legislation may provide that a bank cannot disclose information and documents about bank accounts held by clients of the bank. This may put the bank at a genuine risk of sanctions if it were to breach that legislation. Breach of a banking secrecy regime may, in some jurisdictions, even trigger a criminal prosecution and conviction. For example, under the Criminal Code of the Russian Federation, unauthorized receiving, disclosure, or usage of information covered by commercial, tax, or bank secrecy, made without the permission of its owner, by a person to whom it was entrusted or who has obtained the information in the course of business, constitutes a crime.96 The information may, in certain circumstances, be provided to certain third parties (for example, state officials), but the list does not include arbitral tribunals.97 As a result, if a bank employee were to disclose to a tribunal any document or information that is subject to bank secrecy without first obtaining the permission of the bank’s client, the employee may face criminal prosecution in Russia. In addition, the client whose rights have been violated by the disclosure can seek damages from the bank.98

12.98  A balancing of interests approach has been adopted by American courts when considering an application for production of documents from a bank subject to application of (p. 436) foreign law prohibiting production. In one case concerning enforcement of an Internal Revenue Service summons directed to the First National Bank of Chicago seeking disclosure of certain records in First Chicago’s branch bank in Athens, Greece, the Court found that:

First Chicago has adequately demonstrated that compliance will subject its employees to the risk of substantial criminal penalties under Greek law, and that a balancing of relevant competing interests weighs against compelling disclosure at this time. We therefore reverse the judgment of the district court, but remand for consideration of an order requiring First Chicago to make a good faith effort to secure permission to make the information available.99

iii.  Data protection/privacy laws

12.99  Production of evidence may also be resisted by reference to data protection or privacy laws. A number of jurisdictions have in place legislation that prevents the holding, use, or disclosure of personal information.100

12.100  Under the rules of the Swedish Code of Judicial Procedure, purely personal notes are not subject to disclosure unless there are exceptional circumstances justifying this.101 Russia and the Ukraine also have a high level of protection in relation to personal correspondence and communications. For example, under Article 23.2 of the Constitution of the Russian Federation, ‘Everyone has the right to privacy of correspondence, or telephone conversations and of postal, telegraph and other messages. Limitation of this right shall be allowed only on the basis of a court decision’.102

12.101  Under Article 138 of the Russian Federation Criminal Code, violation of the secrecy of correspondence, telephone calls, and postal, telegraph, and other communications of individuals is a criminal offence punishable with a fine, compulsory community (p. 437) service, or, if committed by a person who abused his or her occupational status, by imprisonment of up to four years. Based on this provision, it has been argued in some cases that a corporate respondent cannot produce the business emails of its employees without putting him/herself and company officers in danger of criminal prosecution. Certain Russian data protection laws—for example, Article 88 of the Labour Code of the Russian Federation—do permit employers, in certain circumstances, to disclose personal data of employees, provided they first obtain the written consent of the employee.103

3.  Applicable Law—Legal or Ethical Rules Determined by the Tribunal to Be Applicable

a.  Introduction

12.102  Article 9.2(b) makes provision for evidence to be excluded on the basis of a legal impediment or privilege ‘under the legal or ethical rules determined by the Arbitral Tribunal to be applicable’. This invites the question of how a tribunal should go about determining that applicable law in cases where this is disputed.

12.103  Although objections of legal impediment are likely to be directly linked to application of a national system of law, more complex questions may arise in relation to evidentiary privileges. The parties to international arbitration will very often come from different countries, may sometimes instruct counsel based in a different jurisdiction to their own, and the arbitration in which they are involved may be seated in yet another jurisdiction. When a party claims the protection of a privilege, that party, or its legal counsel, will generally have in mind a specific domestic or internationally recognized protection that it believes should apply. However, where parties are in dispute—and, in particular, where one of them is trying to obtain production of evidence and another is resisting this—disputes may arise as to what standard of protection (if any) should apply. For example, if a party from the United States is in dispute with a French party and the seat of the arbitration is in London, which jurisdiction’s laws should determine the question of legal privilege?

(p. 438) 12.104  The most straightforward solution to this issue would be an express agreement between the parties on the law or rules that should apply to questions of privilege. As in other contexts, the principle of party autonomy means that parties are free to agree the law or rules that are to govern questions of privilege and may even themselves define the scope of privilege that is to apply. Party agreements on such matters will generally be binding on the tribunal.104 In practice, however, such agreements are rare.

12.105  Another pragmatic approach used by some tribunals is to address the issue of privilege at an early case management conference in order to expose any likely complexities or disagreements in relation to issues of privilege, and whether an agreed approach can be found. It may be sensible to include this topic on a list of possible agenda items for discussion under Article 2 of the IBA Rules.

12.106  In the absence of party agreement, the position remains difficult. Institutional rules and national laws seldom make express provision for issues of privilege.105 Most institutional rules,106 and many national arbitration107 laws, simply contain general provisions granting a tribunal wide powers in relation to the conduct of the proceedings, including the admissibility of evidence. Even where privilege is mentioned, it is usually only to make clear that the tribunal has the power to determine the matter.108

12.107  The IBA Rules start from the same standpoint of granting the tribunal wide powers to determine all issues related to evidence, including the question of admissibility.109 The IBA Rules go on to state expressly in Article 9.2(b) that a tribunal may exclude evidence for reason of legal impediment or privilege but, as mentioned, also indicate that the tribunal must first establish the applicable rules to determine if that ground of relief is available.110

b.  Possible tribunal approaches to determination of applicable rules

12.108  It is suggested that, faced with the question of which rules apply to an issue of privilege, there are four approaches a tribunal might take:111

  1. (a)  The application of general principles of law;

  2. (b)  The application of a single national law determined through a choice-of-law approach;

  3. (p. 439) (c)  The cumulative application of two or more potentially relevant national laws or rules; or

  4. (d)  The creation of an autonomous standard defining the scope of the privilege.

12.109  These different approaches are briefly considered below.

i.  Application of general principles

12.110  One possible approach is simply to apply general principles to the question of whether the asserted protection exists. The difficulty with this approach is that it may be difficult to identify a set of such principles in relation to each type of privilege or impediment that may be raised. The position may be easier in relation to some categories of privilege than it is in respect of others. One example of the former category is that of legal advice (attorney–client) privilege.

12.111  However, even if the existence of legal advice privilege can be treated as an internationally accepted norm, it is still the case that the scope and application of such privilege varies considerably between jurisdictions. In addition, while there is no doubt that legal advice privilege is internationally recognized and understood, the same cannot be said for the wide variety of lesser-known privileges that may be available or which operate within national boundaries. Without constant and uniform application, a rule cannot be treated as a general principle of law. Accordingly, as attractive as it sounds, application of ‘general principles’ may be of limited practical assistance in relation to issues of legal impediment/privilege.

ii.  Application of a single system of law

12.112  Where there are competing systems of law potentially applicable to resolution of an issue, application of a single system of law determined by conflict-of-laws principles is the traditional approach to take. In some cases, the discretion afforded to a tribunal may be sufficiently wide to enable it to make a direct choice of an appropriate system of law. Both of these routes will result in application of a single system of law. This introduces simplicity, but comes with a certain level of rigidity. Domestic law on privilege is rarely designed to deal with international disputes.

12.113  In relation to identification of a single applicable law, a number of possibilities are generally available to a tribunal.

Lex arbitri (the law of the seat of arbitration)

12.114  Arguments for application of the lex arbitri are based on the premise that the operation of legal privilege as a restriction on the production or admission of evidence is procedural in nature and should be governed by the law of the seat of arbitration in the same way as other procedural matters not expressly addressed in applicable institutional or arbitration rules. However, this approach is criticized for not upholding the legitimate expectations of the parties who may have assumed the applicability of certain privileges that exist in their home jurisdiction. In addition, given that national laws on arbitration do not generally contain any detailed rules dealing with privilege in arbitration, the tribunal may have no choice (p. 440) but to resort to procedural rules applicable in state courts. This may be said to be inconsistent with the expectations of the parties who have opted to have their disputes settled through arbitration and not by reference to national court rules.112 Members of the tribunal may also come from a jurisdiction different to that of the seat and have no appetite or experience of local procedural rules.113

12.115  The potential advantages of applying the lex arbitri is that it will often be neutral territory for the parties and will put both on an equal footing. A further advantage may be that counsel for the parties are often based at the seat and will therefore be familiar with the applicable rules.

Lex causae

12.116  Another possibility is to apply the lex causae—the law that applies to the substantive relationship between the parties. For example, if the claim is founded on a contract, the proper law of the contract. The lex causae is applied on the premise that evidentiary privileges are substantive in their nature (rather than procedural).114 As mentioned, this premise is not accepted in all jurisdictions and party expectations may be undermined by adoption of this approach.

The law most closely connected

12.117  The ‘closest connection’ approach involves taking account of a number of factors linking the evidence in dispute to the potentially applicable privilege laws. These may include the country where the document/information was created; the country where the document is held/the communication took place; the domicile of the party seeking to rely on the privilege; and where the evidence in question is a communication with a legal adviser, the law of the jurisdiction where the lawyer is registered. Berger suggests that the law of the jurisdiction where the party has its place of business at the moment the relevant communication took place, and where (in the case of legal advice privilege) the lawyer–client contact took place, may also be applied.115

12.118  The ‘most closely connected’ approach has benefits and drawbacks. On the one hand, it may come reasonably close to reflecting the parties’ expectations. On the other hand, the appropriate applicable law is not obvious and can lead to uncertainty as to what law is to be applied.116 At a practical level, in a truly international case with parties and counsel all being located in different countries, it may not be that easy to find a ‘centre of gravity’ or place of the closest connection.117 Perhaps more troubling is the possibility (p. 441) that there may be a number of different documents that have different ‘closest connections’ to different laws. This in turn may lead to different parties being found subject to different national systems of law with the potential for allegations of unfairness or inequality.

The ‘most-favoured-nation’ regime

12.119  This approach involves selecting, from the pool of conflicting laws and principles available, the law of the country which gives the highest level of protection. This approach is one that puts the parties on an equal footing and is popular with a number of arbitrators. It is criticized for (a) the lack of a satisfactory analytical basis—privileges only apply because they are created by national laws and, if they do not exist or operate in relation to a given situation, they should not be applied;118 (b) the fact that routine application of such standards across the board in an arbitration may lead to the creation of a ‘super privilege’, which is undesirable; and (c) because the search for material evidence may be hindered by application of this standard.119

The ‘least-favoured-nation’ regime

12.120  This approach is the mirror image of the most-favoured nation approach described above. In essence it also treats the parties equally in that the same regime is applied across the board. However, it may have draconian consequences. Under this approach a tribunal can order production of a document if it is not considered to be privileged in any one of the potentially relevant jurisdictions. The advantage of this approach is that it permits wider scope for production of documents or other evidence. The disadvantage is that, against party expectations, it may deprive a party of the greater protection provided for in its domestic law.120

iii.  The cumulative approach

12.121  The cumulative approach is one in which a tribunal applies two or more relevant laws simultaneously. For example, the tribunal applies the lex arbitri to all issues of privilege but also takes into account domestic legal or ethical rules that bind individual counsel acting in the case. Cumulative application of laws is not an extraordinary feature in international arbitration.

12.122  However, this approach is criticized on the basis that it really only works when application of all of the chosen legal systems yield the same outcome.121

iv.  Autonomous approach

12.123  Using the autonomous approach a tribunal may approach a difficult privilege issue by applying its own independent standard to the claimed privilege—subject always to the tribunal’s overriding duty to act fairly and treat the parties equally. Adopting this approach, the tribunal does not need to apply the precise rules of any particular national system of law. For example, in Bank for International Settlements the tribunal (p. 442) applied an autonomous international standard for legal advice privilege and waivers and held that a waiver of privilege occurred if the communications are disclosed ‘beyond the circle of those who are authorized to or make or participate in making of the decision’ in respect of which legal advice was sought. Applying this standard, the tribunal ordered the bank to produce a document that had been disclosed at a press conference as a result of which all confidentiality in the document had been lost.122 The same approach has also been used in international commercial arbitration from time to time.123

v.  Conclusion

12.124  While the approaches described above (and others) are available and used by tribunals there is no universally accepted approach to identify the appropriate rules to apply to issues of privilege. Nor is there any universal standard of what constitutes privilege for the purpose of excluding material from evidence or production in international arbitration, or therefore any acknowledged ‘best practice’.124

4.  Identification of Applicable Rules under Article 9.2 and the Relationship between Article 9.2 and Article 9.3

12.125  Article 9.2 provides that the tribunal may exclude material from evidence or production where legal impediment or privilege exists under the legal or ethical rules that the tribunal deems applicable to the issue.

12.126  Use of the phrase ‘legal or ethical rules’ (emphasis added) suggests that the standard to be applied under Article 9.2(b) is derived from a pre-existing set of rules available under a national system rather than a standard laid down by the tribunal125 (although the latter cannot be ruled out). In addition, the Commentary on the IBA Rules (as well as Article 9.3(e); see 12.228-12.241) refers to a situation in which the parties are subject to different legal or ethical rules, which again suggests a national standard is engaged—namely, that of a party’s home jurisdiction.

12.127  However, superimposed on Article 9.2(b) are the guidelines set out in Article 9.3 that a tribunal ‘may’ take into account when ‘considering’ issues of legal impediment or privilege. It may do so subject to any mandatory provisions of the applicable legal or ethical rules.126

(p. 443) 12.128  It has been suggested that this checklist of guideline factors should be a primary and straightforward source of reference for tribunals operating under the IBA Rules when deciding issues of privilege. For example, Berger says that:

Arbitral tribunals that are faced with privilege issues in the future no longer have to enter into a time-consuming review of applicable laws. Instead, they can consult the checklist contained in the new Article 9(3). At the same time, the new provision leaves enough room for a flexible approach and does not interfere with the substance of domestic privilege rules or with complex conflict of laws issues which prevail in the area of privileges.127

12.129  Klamas puts it this way:

[A]lthough the IBA Rules leave the door open for the tribunal to decide which law (or laws) they will apply, they do set out some basic and important principles to guide its decision.128

12.130  However, although Article 9.3 is an innovative and helpful addition to the IBA Rules, the precise status of that provision, and its relationship to Article 9.2(b), is not altogether clear. For example, it is not possible to consider the Article 9.3 guidelines in isolation, as they are made expressly subject to any mandatory provisions of the legal or ethical rules referred to in Article 9.2(b). In addition, it is possible to see that the considerations expressed in several of the Article 9.3 guidelines may be at odds with the substance of potentially applicable laws. For example, a need to protect the confidentiality of a document created for the purpose of providing legal advice may be recognized pursuant to the guideline expressed in Article 9.3(a), but privilege in the relevant document may not be recognized under the applicable law (for example, French law)129 because the document was prepared by in-house, rather than external, counsel. If the applicable law, and its effect, is determined in isolation under Article 9.2(b), the tribunal’s flexibility to have regard in any meaningful way to the considerations in Article 9.3 may be significantly hindered.

12.131  One way of reconciling this tension is to interpret the Article 9.3 factors as matters that the tribunal should take into account when deciding what the applicable standard under Article 9.2(b) should be. For example, if there are two possible sets of rules in contention and one provides appropriate protections contemplated by one or more of (p. 444) the Article 9.3 guidelines, and the other does not, the tribunal could favour the former over the latter. Möckesch describes the secondary nature of the Article 9.3 provisions in the following terms:

They [the Article 9.3 considerations] are mere guidelines regarding the most relevant factors that may influence a tribunal’s decision, which should be tailored on a case-by-case approach.

So, Article 9.3 of the [IBA Rules] does not include a rule on how the applicable standard should be determined. It does not solve the conflict-of-laws problem; rather, it merely reminds arbitrators of certain factors they may keep in mind when determining the applicable standard.130

12.132  An alternative approach would be for the tribunal to take account of the Article 9.3 factors in the exercise of its wider discretion on the admissibility of evidence under Article 9.2. For example, if it is found that the law determined to be applicable to the issue of privilege does not provide adequate (or any) protection to meet the considerations identified in Article 9.3, then the tribunal may nonetheless decide to exclude the evidence to which the privilege is said to attach.

12.133  In practice, a tribunal may be able to avoid this type of analysis by simply choosing the approach to identification of the applicable rules (see 12.108-12.124) that provides the outcome the tribunal considers to be fair in all of the circumstances, taking account of the factors identified in Article 9.3 where relevant.

12.134  While noting the importance of the factors outlined in Article 9.3, the Commentary on the IBA Rules appears to confirm that the standard that is ultimately applied to determine an issue of legal impediment/privilege is a matter for the tribunal’s discretion, whatever route it uses to arrive at that result:

Although the standard to be applied is left to the discretion of the arbitral tribunal, it is desirable that the tribunal take account of the elements set forth in Article 9.3, in particular if the parties are subject to different legal or ethical rules.131

5.  Factors to Be Considered by the Tribunal under Article 9.3

12.135  Article 9.3 of the IBA Rules lists five different factors that the tribunal may wish to consider when resolving issues of legal impediment or privilege. The relationship between these factors and the terms of Article 9.2(b) is discussed at 12.125-12.134.

12.136  The Commentary to the IBA Rules makes clear that the factors listed at Article 9.3 are ‘non-binding guidelines’. This position is reinforced by the fact that the introductory words of Article 9.3 state that the tribunal may, rather than shall, take the listed factors (p. 445) into account. Nonetheless, in all cases, it would be sensible for the tribunal to invite submissions from the parties on the matters covered by Article 9.3.

12.137  The considerations listed at Article 9.3 comprise the following:

  1. (a)  any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of providing or obtaining legal advice;

  2. (b)  any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of settlement negotiations;

  3. (c)  the expectations of the Parties and their advisors at the time the legal impediment or privilege is said to have arisen;

  4. (d)  any possible waiver of any applicable legal impediment or privilege by virtue of consent, earlier disclosure, affirmative use of the document, statement, oral communication, or advice contained therein, or otherwise; and

  5. (e)  the need to maintain fairness and equality as between the Parties, particularly if they are subject to different legal or ethical rules.

12.138  Before considering these factors in more detail it is useful to note a number of general points.

12.139  The first is that factors (a) and (b) are directed at particular types of privilege—namely, the protection that is commonly afforded to communications between a lawyer and client in connection with the taking and giving of legal advice, and the protection afforded to disputing parties in connection with efforts to negotiate a settlement of their differences. The Commentary to the IBA Rules describes (a) as encompassing both the common law understanding of legal advice/attorney–client privilege and the civil law understanding of the duty of professional secrecy. It describes (b) as expressing a generalized understanding of the so-called ‘without prejudice’ or ‘settlement’ privilege that exists in certain jurisdictions. Consideration of factors (a) and (b) will be relevant only in relation to claimed protections falling broadly into these two categories of privilege.

12.140  Factors (c), (d), and (e) are of more general application. As explained in the Commentary on the IBA Rules, factor (c) highlights for the tribunal that it should take into account the expectations of the parties at the time that the legal impediment or privilege—whatever its nature—is said to have arisen. As also explained in the Commentary, factor (e) emphasizes the need for any outcome to maintain fairness and equality between the parties. Factor (d) reflects a widely accepted exception to the operation of an evidentiary privilege—namely, the waiver of that protection.

12.141  The second general point to note is the potential for tension between the different considerations described in Article 9.3. For example, in a dispute between French and English companies, the tribunal could take note of the fact that privilege does not attach (p. 446) to communications between a French in-house lawyer and his employer, whereas similar communications between an English in-house lawyer and his employer will attract privilege. If the tribunal were to treat the two situations as being subject to different rules, this would be consistent with the parties’ expectations as contemplated by paragraph (c), but would arguably result in a lack of equality or fairness between the parties as contemplated by paragraph (e).

12.142  In any case where tension between different considerations arises the tribunal will need to consider how best to balance those competing factors and/or which consideration should have priority. We suggest that the overriding consideration must always be to maintain fairness and equality between the parties. This is an express obligation of the tribunal under many national arbitration laws and the majority of institutional rules, as well as being one of the principles of the IBA rules.132 We suggest that this principle should guide the tribunal in its application of other considerations. For example, in the situation described in12.141, the tribunal could adopt the ‘most-favoured nation’ approach described at 12.119 so that the more favourable English rules would apply to all parties.

a.  The need to protect confidentiality of legal advice

9.3(a) any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of providing or obtaining legal advice.

12.143  Guideline 9.3(a) is concerned with the need to protect the confidentiality of legal advice received by a lay client from a lawyer or professional adviser. In one form or another, such privilege is widely recognized across jurisdictions.133 As mentioned, it is referred to as ‘legal advice privilege’ in the UK, ‘attorney-client privilege’ in the United States and falls within the protection of ‘professional secrecy’ in many civil law jurisdictions. Article 9.3(a) does not give the privilege a label, but rather describes it by reference to the nature of the communication. This makes sense. National labels carry specific meanings based on domestic law and practice. A generic description of the material to be protected creates a more even playing field devoid of the ‘baggage’ that comes with localized terms.

12.144  As with most other privileges, the burden of proof is on the party claiming the privilege.134

(p. 447) i.  The policy behind legal advice privilege

12.145  As a matter of principle, legal advice privilege is designed to protect open and frank communications between lawyer and client by providing a protection against any obligation or instruction to disclose such communications to a third party.135 If the rule did not exist, lay clients might be reluctant to disclose relevant facts to their lawyers and the lawyers, in turn, would not then be able to give the advice that the lay client may need. This would have negative consequences for the administration of justice and settlement of disputes. In common law countries, legal advice privilege exists for the benefit of the client and can be waived by the client if s/he chooses.

12.146  In one report in which reference was made to a number of decisions made by the English House of Lords (now the Supreme Court), the foundations of legal advice privilege in that jurisdiction were very efficiently summarized:

Legal professional privilege is a substantive right founded on public policy, and not merely a rule of evidence determining which documents are admissible or inadmissible in court proceedings. The courts have regarded the client’s right to communicate confidentially with his or her legal adviser under the seal of legal professional privilege, as a necessary corollary of the fundamental right of access to legal advice.136

12.147  As mentioned, a number of civil law countries regard communications between lawyer and client as a ‘professional secret’, a concept that provides a broad umbrella of protection. The concept of ‘professional secrecy’ has developed in order to protect information and communications passing between a lawyer and a client, but the precise nature of the professional secrecy, and the ways in which it may be waived or lifted, varies.137 Some civil law jurisdictions impose penal sanctions on counsel who violate the duty to safeguard privileged information.138

12.148  Generally speaking, professional secrecy attaches to all information the lawyer gains in the exercise of his or her professional practice. This includes information the attorney receives from third parties, as long as this occurs in the exercise of his or her professional work. As a result, the rules regarding professional secrecy do not contain the distinctions between legal advice privilege and ‘litigation privilege’ that exist in some common law jurisdictions.

(p. 448) 12.149  In common law jurisdictions, legal advice privilege does not generally extend to communications with third parties or other professionals. However, where a communication relates to arbitration or court proceedings it may nonetheless be protected by a separate head of ‘litigation privilege’.139 In broad terms, litigation privilege arises from the principle that a litigant or potential litigant should be free to seek evidence without being obliged to disclose the result of their enquiries to their opponent. For example, in England, the protected communication may be between a lawyer (acting in a professional capacity) and the client, or between either of them and a third party (or be a document created by or on behalf of the client or the client’s lawyer). The communication must be for the dominant purpose of litigation, and the litigation (or arbitration) must be existing or reasonably contemplated.

12.150  Litigation privilege is therefore generally wider than legal advice privilege in that it extends to communications with non-lawyers. It is narrower in that it attaches only to documents and communications made for the purpose of litigation or arbitration. If there is no litigation or arbitration in existence or in contemplation, the right to assert litigation privilege may not arise.

12.151  A further but related head of privilege existing in some common law jurisdictions is ‘common interest privilege’. Two or more parties (for example, two respondents to an arbitration claim) may have a common interest in the subject matter of the proceedings and a common interest in keeping confidential communications between them on those matters. In those circumstances, common interest privilege may apply to protect the communications.140

ii.  The general scope of legal advice privilege

12.152  When considering Article 9.3(a) it is useful to bear in mind a number of different factors that may operate at a national level to determine whether a particular communication falls within the scope of any protection afforded to the taking and giving of legal advice. Such factors generally relate to issues around such matters as:

  1. (a)  Who the parties are receiving and giving the legal advice in question; and

  2. (b)  The nature of the communication.

The person giving the advice

12.153  A factor that can be relevant to the existence and nature of legal advice privilege is the status of the person giving the advice.

(p. 449) Lawyers

12.154  Legal advice is generally thought of as being given by a ‘lawyer’ or ‘attorney’, but what does this actually mean? In broad terms, the requirement is generally satisfied if the advice is given by a lawyer admitted to a local bar/roll of solicitors or another legal professional regulatory body. However, the position is less clear with respect to other types of professionals who are not so admitted. In such a case, a factual enquiry to assess the true position may be necessary.141

12.155  The question may be more acute in relation to professionals from jurisdictions where the giving of legal advice is not restricted to a lawyer admitted to the bar or other professional body. For example, in Russia the legal profession is only partially regulated.142 In particular, it is only in criminal cases that a lawyer appearing in court must be an ‘advocate’, ie a person admitted to the local bar. There is no similar requirement with respect to civil proceedings. As a result, there are a substantial number of ‘lawyers’ who are practising law without being formally admitted to the bar.143 The scope of legal advice privilege afforded to those distinct categories of professional is also different. Advocates in Russia enjoy the protection of ‘Advocate’s secrecy’, which is similar to the concept of professional secrecy in France. Advocates cannot be interrogated about facts they learned from their clients, their premises cannot be searched, and the law is clear that any related documents obtained during any searches or seizures are inadmissible in court.144 In contrast, the privilege applicable to legal representatives who are not members of the Russian bar permits those representatives to refuse to testify about matters they have learned from their clients when representing them in legal proceedings underway or contemplated,145 but there are no express provisions providing for the inadmissibility of lawyer/client correspondence or any prohibition on search and seizure of files.146 If a tribunal is faced with an assertion of privilege in relation to correspondence between a client and a Russian lawyer, it may be necessary to establish whether the lawyer in question is a member of the bar and what is the regime of legal advice privilege applicable to that particular counsel.

12.156  In England, privilege may exist in relation to communications with legal executives and licensed conveyancers who are employed to give advice on English law by a licensed body. Section 190 of the Legal Services Act 2007 provides that communications and documents relating to services provided by a person who is an ‘authorised person’ in relation to rights of audience, the conduct of litigation, or conveyancing or probate services are privileged from disclosure as if the provider had been a solicitor. An authorized (p. 450) person is one who is authorized to carry on the relevant activity by an approved regulator. Approved regulators include the Chartered Institute of Legal Executives (CILEX) and the Council of Licensed Conveyancers.

In-house lawyers

12.157  Another important factor is the distinction that is sometimes drawn between in-house counsel and external counsel. The relevance of this distinction can vary significantly between jurisdictions.

12.158  In England, as well as in the majority of the common law countries, both in-house and external legal advice is covered by privilege. This is also the case in some civil law countries, eg in Portugal, subject to the requirement that counsel is a member of the Portuguese Bar Association.147

12.159  In Germany, legal privilege does not apply to in-house counsel who are regarded as ordinary employees of a company.148 A similar position prevails in France.149 Decisions of the Court of Justice of the European Union have also given rise to debate. In Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission,150 the CJEU held that in European competition investigations communications with in-house counsel are not privileged. The rationale for this decision was a finding by the court that in-house counsel do not enjoy the same degree of independence from their employer as external counsel.151

Other professionals

12.160  There are a number of non-legal professionals who provide legal or quasi-legal advice—for example, tax advisors, customs clearance specialists, accountants, etc. To take the example of a tax adviser—although the purpose of the advice given by the tax advisor may be to find the jurisdiction with the lowest, yet legal, tax rate, the tax advisor will sometimes find themselves in the domain of legal advice because that is an inextricable part of the strategy on which s/he is advising. The question then arises as to whether protection should attach only to legal advice given by a qualified lawyer admitted to practise law, or should it also attach to advice given by a professional from another discipline, provided that they are permitted under the relevant domestic law to give such advice and where the advice given concerns matters of law?

(p. 451) 12.161  This issue has generated much debate and the position varies widely across jurisdictions. One of the arguments for extending legal advice privilege to other professionals is that, irrespective of the status of the person who is giving legal advice, there exists a special relationship between the client and the professional adviser in which the client should feel secure disclosing confidential information. If the privilege did not attach to such communications this would hinder frank and open discussions between client and adviser. However, there is also a considerable body of opinion in favour of limiting privilege to advice that is given by lawyers who are members of a regulated profession and bound by professional rules and standards. It is said that it is only by the observance of such rules and standards that the proper administration of justice be achieved.152


12.162  In summary, the question of whether advice given by in-house lawyers, by non-legal professionals or by quasi-lawyers will attract legal advice privilege may be treated differently in different jurisdictions and by different tribunals. A tribunal operating under the IBA Rules will have to consider whether, as a matter of the applicable law referred to in Article 9.3(a), legal advice privilege is engaged, as well as the factors described in Article 9.3.

The person receiving the advice

12.163  There is generally no requirement concerning the attributes of the party receiving the legal advice. Access to legal advice is a universal fundamental right.

12.164  However, issues may arise where the party seeking advice is not an individual, but a corporate entity or other organization or collective. Communications may take place between the lawyer and several individuals at the relevant entity, and those individuals may perform different functions and be based in different parts of the organization. Does privilege attach to all of the communications? The definition of ‘client’ in this context may vary across jurisdictions. For example, the English courts have laid down a restrictive definition of client. In Three Rivers District Council and Others, the Court of Appeal held that privilege would attach only to communications between the bank’s lawyers and a small group of the bank’s employees actually charged with instructing those lawyers.153 In contrast, the United States Supreme Court has adopted a broader approach and has recognized the privilege existing in relation to all employees of the corporation, provided that the communications concern matters within the scope of the employees’ corporate duties.154

The content of the advice

12.165  As mentioned, the rationale underlying legal advice privilege is the need to protect communications between a client and a professional adviser in (p. 452) relation to the seeking and giving of legal advice. To attract privilege, the substance of the communication should therefore concern the matters to which the required legal advice relates. Where this is not the case, the communication may not be privileged, even though it takes place between lawyer and client.

12.166  This is an issue that most commonly arises in respect of communications between in-house counsel and their internal client. In-house counsel sometimes perform several functions, not all of which will necessarily be concerned with the giving of legal advice. As alluded to in an English House of Lords case:

It does sometimes happen that such a legal advisor does work for his employer in another capacity, perhaps of an executive nature. Their communications in that capacity would not be the subject of legal professional privilege. So the legal advisor must be scrupulous to make that distinction.155

12.167  Examples of written materials that may attract legal advice privilege include correspondence relating to the advice given, meeting notes (taken by client or lawyer) recording oral discussions between them on the same subject, and notes of advice on possible legal strategies. Letters sent by the client for the purposes of receiving legal advice will generally have the same status. The way the client has formulated the questions, and the background facts provided by the client, can give away the position of that party in any pending or contemplated proceedings.

iii.  Exceptions to the normal application of available privileges

12.168  When considering what are the applicable rules for the privilege being asserted, a tribunal may also have to consider possible exceptions to the general rule that are said to apply.

12.169  For example, if English law were to apply, both legal advice privilege and litigation privilege are lost if it can be shown that the communication or document in question came into being for the purpose of furthering a criminal or fraudulent purpose.156 In the United States there exists the fiduciary exception. For example, in derivative shareholder litigation, courts have been reluctant to allow the management of a company to assert attorney–client information as a basis for a refusal to disclose information to the company’s shareholders. The justification for the exception is that the management owes fiduciary duties to both the company and its shareholders.157

iv.  Scope of application of Article 9.3(a)

12.170  Article 9.3(a) refers to a need to protect the confidentiality of a document or statement or oral communication made for the purpose of providing or obtaining legal advice. (p. 453) Given the distinctions between types of legal privilege that exist in some common law jurisdictions, the terms of Article 9.3(a) might be seen as aligning more closely with (say) English legal advice privilege than litigation privilege (see 12.145-12.151). However, Article 9.3(a) is concerned with communications ‘in connection with’ as well as ‘for the purpose of providing or obtaining’ legal advice. In our view, the consideration described in Article 9.3(a) should be interpreted broadly and we see no reason why it should not be taken into account in relation to claims of privilege that are broader than a direct communication between lawyer and client containing legal advice—thus including, for example, English litigation privilege or appropriate categories of professional secrecy.

12.171  Similarly, the text of Article 9.3(a) does not mention in-house lawyers or quasi-lawyers. It draws no distinction between advice given by different types of lawyers. It simply says that the tribunal should take into account the need to protect confidentiality of communications ‘made in connection with and for the purpose of providing or obtaining legal advice’. It is in the discretion of the tribunal to interpret that provision as it thinks appropriate.

12.172  Article 9.3(a) confirms that the need for confidentiality in the context of privilege claims may arise in relation to a wide range of potential evidence. It refers to a

Document created or statement or oral communication made in connection with and for the purpose of providing or obtaining legal advice.158

Taking into account the wide Definition of ‘Document’ contained in the IBA Rules,159 this encompasses all types of evidence likely to be submitted or sought under the IBA Rules and is consistent with the wide scope of material capable of attracting legal privilege.

12.173  In the case of legal advice privilege, and some communications covered by professional secrecy, the confidential nature of the material may be plain. In relation to litigation privilege, or some other communications covered by professional secrecy, the position may be less clear, particularly where the communication takes place with a third party such as a potential witness. It will be for the parties to make submissions on these matters. In any case, and subject to consideration of the applicable rules determined under Article 9.2(b), the tribunal is likely to pay heed to the broad policy considerations underpinning the particular privilege and the confidential information that it is designed to protect. Obviously, if the confidentiality has never existed,160 or has been lost for reasons of waiver (as discussed at 12.202-12.227), the need to take such matters into account may not arise.

(p. 454) b.  The need to protect the confidentiality of settlement discussions

9.3(b) any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of settlement negotiations.

12.174  As is explained in the Commentary to the IBA Rules, Article 9.3(b) expresses a generalized understanding of what is known in England as the ‘without prejudice privilege’ and in the United States as the ‘settlement privilege’. Both concepts protect from disclosure communications and documents generated in connection with and for the purposes of settlement negotiations. Historically, such communications were regarded as being created by the parties pursuant to an implied agreement of confidentiality and in recognition of a public interest in protecting that confidentiality as an aid to dispute resolution.161

i.  Background to the ‘without prejudice’ rule

12.175  ‘Without prejudice’ privilege is an important tool in the conduct of disputes. In an effort to reach an amicable resolution of a dispute the parties may, during negotiations, make admissions or statements adverse to their ‘open’ position, or offer a compromise or terms of settlement that may carry an implicit acknowledgment that they are not wholly confident in all parts of their case. If such admissions or settlement proposals were admitted onto the record in the dispute, they might be exploited by the opponent party, or influence the tribunal’s view of the strength of a claim or defence and/or the appropriate measure of damages.

12.176  Communications between parties directed at a settlement of a dispute are frequently labelled ‘without prejudice’, but provided the necessary characteristics of a without prejudice communication are met, the omission of this express tag will not necessarily be fatal to a claim of privilege.162

12.177  Not all civil law jurisdictions recognize without prejudice privilege. For example, as a matter of Russian law, the substance of settlement negotiations may be admitted as evidence.

(p. 455) ii.  Recognition of the ‘without prejudice’ rule in international arbitration

12.178  The notion that communications aimed at reaching a settlement should not be admitted into evidence has now been generally recognized in international arbitration. As Berger explains with reference to Article 9.3(b):

That provision acknowledges that there is a transnational privilege principle with respect to written or oral statements made in good faith by the parties to an arbitration during previous settlement negotiations between them.163

12.179  Furthermore, the without prejudice rule is not always applied by reference to what might be considered to be the applicable law of the privilege. For example, in ICC Case No. 13176, a tribunal seated in Paris considered the issue of ‘without prejudice’ privilege by reference to the ‘case law and practice of international commercial arbitration and the Iran–US Tribunal’ and the UNCITRAL Model Law.164 Berger articulated this in the following terms:

There is a unanimous view today in international ADR and arbitration practice that a general mediation privilege exists which renders all evidence, whether written or oral, stemming from mediation, conciliation and similar ADR processes between the parties, inadmissible as evidence in subsequent arbitration proceedings. [ . . . ] The underlying rationale of the mediation privilege is derived from the special nature and character of these negotiations conducted in good faith between the parties. Such policy considerations apply irrespective of whether one is dealing with formalised ADR proceedings, or with private, informal settlement negotiations conducted between the parties without the presence of a third, neutral party. [ . . . ] This view has been confirmed repeatedly in the case law of the Iran–United States claims tribunal.165

iii.  Application of Article 9.3(b)

12.180  A claim of without prejudice privilege may be asserted by reference to domestic law principles, or in reliance on accepted practice in international arbitration. In either case, pursuant to Article 9.2(b) the tribunal may have to consider if any particular rules are applicable to the circumstances relied on. However, the terms of Article 9.3(b) appear to acknowledge the desirability of preserving the confidentiality of information generated for the purposes of reaching the settlement of a dispute. In our view, the absence of privilege attaching to settlement discussions under the appropriate applicable law should not be a bar to the tribunal’s determination that protection of the confidentiality of those settlement discussions is desirable.

12.181  In considering the need to protect the confidentiality of material over which settlement privilege is claimed, the tribunal may find it helpful to consider some of the (p. 456) matters taken into account in those jurisdictions where the concept of this protection is well-developed.

12.182  First, it should be clear that the parties are seeking to protect communications or documents created in good faith with a genuine desire to explore possible ways of resolving the dispute. A party cannot invoke the settlement privilege if the document or communication was generated under a ‘without prejudice’ tag solely for the purpose of being able to hide this information from the tribunal.166 Indiscriminate labelling of correspondence as ‘without prejudice’ in an attempt to take advantage of the privilege should not be accepted.

12.183  Second, it is the character of the discussions, not the character of the participants, that should lead to application of the settlement privilege. For example, from the tribunal’s perspective, it should be irrelevant whether the parties are conducting negotiations either through or with the advice of lawyers, or by use of a mediator, etc. It is not uncommon for the without prejudice rule to be recognized as covering third-party communications commissioned to facilitate a settlement.167

12.184  Third, the tribunal should take into account the parties’ expectations pursuant to Article 9.3(c) as discussed at 12.87-12.201. In particular, if a document or communication is in good faith marked ‘without prejudice’ this may be a strong signal for the tribunal that the parties, or at least the sender, regarded the communication as privileged. It is very common for conduct of the dispute and without prejudice communications to take place in tandem. Clear marking of the two associated streams of correspondence as ‘open’ or ‘without prejudice correspondence’ may create a similar presumption. If settlement negotiations took place orally, a relevant consideration in deciding whether evidence on those discussions is to be admitted may be whether one or both of the parties expressly stated that they wanted to speak on a without prejudice basis. However, application of the without prejudice rule should be a question of substance not form and its application should not be dependent on use of the phrase ‘without prejudice’.168

12.185  Fourth, settlement offers may have some significance when it comes to cost assessment. For example, a party may wish to argue that its opponent should not have all of its costs, even though it was successful in the arbitration, because the winning party recovered less that it had been offered by its opponent as part of a settlement proposal. In order to preserve its right to make such an argument, a party may mark a settlement proposal ‘without prejudice save as to costs’ so as to preserve its right to show the offer to the tribunal after its determination on the merits but prior to a decision on allocation of costs. The use of this device has wide acceptance in the practice of arbitration and supports (p. 457) the policy behind the use of without prejudice communications as a means of encouraging settlement.169

12.186  As is the case with legal advice privilege,170 without prejudice privilege may be lost if the information in question is no longer confidential in nature, eg if it has been waived by the parties or has come into the public domain.

c.  The expectations of the parties and their advisors

9.3(c) the expectations of the Parties and their advisors at the time the legal impediment or privilege is said to have arisen.

12.187  Article 9.3(c) invites the tribunal to take into account ‘the expectations of the parties and their advisors’ when resolving issues related to claims of legal impediment or privilege. The Commentary to the IBA rules reiterates that ‘Article 9.3(c) expresses the guiding principle that expectations of the parties and their advisers at the time the legal impediment or privilege is said to have arisen should be taken into consideration’.

12.188  There is a serious timing consideration—Article 9.3(c) states expressly that the expectations to be considered are those existing at the time the legal impediment or privilege is said to have arisen. If taken literally, the tribunal may disregard any expectations that have arisen after the relevant document/communication was made.

12.189  The importance of the expectations of the parties vis-à-vis the legal advice privilege have been explained as follows. Although this statement refers to legal advice privilege it is equally applicable to other privileges:

[A]ttorney–client privilege will encourage communications between attorney and client only if both parties know at the time of the communications whether the privilege will apply. If they are uncertain, their communications will be chilled, and the purpose of the privilege will be entirely defeated.171

i.  Defining ‘expectations’

12.190  Expectations very often play an important part in a decision by a party to do or refrain from doing something, and the manner in which it is done. However, not every expectation merits legal protection. This is why legal documents sometimes contain reference to party expectations qualified by such words as ‘justified’, ‘legitimate’, or ‘reasonable’.

12.191  In English law, the doctrine of ‘legitimate expectation’ was first developed as a basis for judicial review in administrative law to protect a procedural or substantive interest (p. 458) when a public authority seeks to withdraw from a representation made to another party.172 The United States Restatement (Second) of Conflict of Laws makes express reference to ‘the protection of justified expectations’ as a relevant consideration in relation to choice of applicable law.173 The commentary to that provision explains that protection of justified expectations is an important value in all fields of law, including in choice of law situations where a party may be adversely affected by the application of a law that is unfamiliar to him.174

ii.  Party expectations regarding home jurisdiction protections

12.192  Consistent with these considerations, there exists a body of opinion that the expectations of individual parties in relation to available legal protections should be assessed by reference to their ‘home’ jurisdiction (the place of incorporation or domicile) and that they should expect no more and no less than the protection that is available to them under the relevant domestic law.175

12.193  Of course, in international arbitration, difficulties arise when parties from different jurisdictions—particularly those without prior experience of international arbitration—have different expectations as to the procedural and evidentiary protections that will be afforded to them.176 One of the raisons d’etre for the IBA Rules was to create a set of rules on evidence that would meet, or at least accommodate, the expectations of parties from different sides of the common/civil law divide.

12.194  In the context of legal impediment or privilege, differences in expectation are illustrated by the example given at 12.141 of a dispute between a French company and an English company. What are the expectations of the parties with respect to communications with in-house lawyers? Under French law, such communications do not attract legal advice privilege, while under the laws of England, they do. Ignoring the considerations expressed in Article 9.3(e), and looking at these circumstances exclusively from the perspective of the parties’ expectation, it might be said that the French party expects to have to produce communications with its in-house lawyer, while the English party does not.

iii.  Expectations regarding the law of the seat of arbitration

12.195  Although application of the law of the seat of arbitration might be considered to fall within the reasonable expectations of the parties, there is a considerable body of opinion opposed to this idea. For example, it is said that there is often no obvious or conclusive link between the rules of the seat and the communications or documents over which (p. 459) privilege is claimed, and that application of the rules of the seat cannot therefore be consistent with the expectations of the parties.177 Möckesch expresses the position that:

[T]he application of the national privilege rules of the seat of arbitration is presumably inconsistent with the legitimate expectations of the parties. The parties and their counsel most likely do not have the privilege rules of the seat of arbitration in mind when communicating with each other. Moreover, the parties are free to agree on any seat. Therefore, the seat of arbitration may have no connection to the parties, their counsel or the dispute. In fact, the seat of arbitration is regularly chosen due to its neutrality in relation to the parties, convenience, the seat’s mandatory rules, and the provisions for setting aside an award. The parties most likely do not consider the privilege rules of the seat of arbitration when selecting it.178

12.196  Others concur in this view.179 The point has also been made that a party is unlikely in practice to adjust its behaviour in connection with lawyer/client communications based on an expectation that it might at some later date become a party to this or that arbitration or litigation.180

12.197  In our view, it may be possible to draw a distinction between situations where the seat of arbitration is selected by the parties, and circumstances in which the seat is determined by the tribunal or arbitral institution181 or pursuant to a default provision in institutional rules.182 While it may be correct that, in the latter cases, parties could not reasonably expect the law of the seat to apply to issues of privilege (or at least not in relation to communications/documents generated prior to determination of the seat), in the former case we do not see why, as a matter of principle, a party could not have an expectation to that effect when concluding an arbitration agreement with an express choice of seat.

iv.  Weighing considerations of party expectations under Article 9.3(c)

12.198  Other than the temporal restriction mentioned at 12.188, Article 9.3(c) does not qualify the nature of the expectations that a tribunal may take into consideration. However, even without such qualification, it would (in our view) be inappropriate for the tribunal to protect any illegitimate or unreasonable expectation any party may have had. For example, other than on the basis of an agreement or representation, if a corporate party expected that its opponent party would not seek production of internal communications (p. 460) held by that corporate party, it is unlikely that the tribunal would place any weight on that expectation because there was no reasonable basis for the expectation to arise.

12.199  In the context of privilege, there exists a strong case that consideration of a party’s expectations must encompass a recognition of the desirability of ensuring that the protection afforded to ‘privileged’ documents should generally not be a lower level of protection than a party enjoys under its local laws. However, the tribunal will then need to consider the interaction between Article 9.3(c) and the need to maintain fairness and equality as contemplated by Article 9.3(e).

12.200  As mentioned, it has been suggested that application of the ‘most-favoured nation’ approach will ensure that party expectations are met (even if the protection afforded to one party is greater than anticipated), as well as preserving equality between the parties. In the example given earlier concerning French and English parties, if the tribunal were to apply English law to both parties and thus extend the legal advice privilege communications between the French party and its in-house counsel, this would be squarely within the expectations of the English party and would exceed (rather than frustrate) the expectations of the French party. Conversely, if the tribunal were to apply French law and order production of the correspondence between the parties and their respective in-house counsel, that would be inconsistent with the expectations of the English party, as well as with Article 9.3(e).183 However, there is no hard rule requiring a tribunal to grant a party protection beyond that available under the law determined to be applicable to the privilege.

12.201  It may not always be an easy task to balance party expectations. If a party is forced to disclose documents that at the time of their preparation were reasonably considered to be privileged in their home jurisdiction, that party may well feel that it has been treated unfairly. On the other hand, parties whose requests for document production are denied because a generous basis of privilege has been applied may argue that they have been denied access to essential evidence to prove their case.184 In both instances, the parties may try to attack the award on the grounds of serious irregularity or a breach of due process, leading to delay and additional costs even if the claims are ultimately found to have no merit.

d.  Waiver of privilege or legal impediment

9.3(d) any possible waiver of any applicable legal impediment or privilege by virtue of consent, earlier disclosure, affirmative use of the Document, statement, oral communication or advice contained therein, or otherwise.

(p. 461) 12.202  Article 9.3(d) invites the tribunal to consider whether the legal impediment or privilege that is relied on has been waived. The Commentary to the IBA Rules indicates that this express reference to waiver encapsulates an important exception to the existence of privilege common to many jurisdictions.

i.  Introduction

12.203  The precise manner in which a privilege may be lost will vary considerably according to the nature of the privilege and the applicable rules that operate on it. Therefore, it would be difficult to draft a provision including express reference to all of the possibilities.

12.204  For example, the nature of the privilege under its applicable law may affect the basis on which it can be lost—in particular, who may waive the privilege. Under English law, legal advice privilege belongs to the client and may be waived by the client.185 In contrast, in some civil law jurisdictions the protection afforded by the relevant privilege may be both a right and a duty that is not so easily waived. For example, in Germany only the lawyer has an explicit right to refuse to testify or to produce documents, the scope of the privilege being tied to the lawyer’s obligation of professional secrecy and ethical rules.186 As a result, documents in the hands of the client are not expressly protected by the privilege, but the court may take into account the interest of the party in the confidentiality of communications with its lawyer when exercising its discretion in relation to use of the documents.187

12.205  It should also be borne in mind that in some cases, an apparent waiver by one party to the communications may leave unaffected a mandatory prohibition against disclosure supported by penal sanctions in the event of a breach of the prohibition. In some circumstances this may give rise to a separate legal impediment for the purposes of Article 9.2(b). As Klamas expressed it by reference to civil law practice:

As opposed to most common law systems, under civil law privilege is not considered to be an individual right that could be waived by the parties under party autonomy. It is both a right and a duty. Also, one may argue that the penal rules that protect it are mandatory rules based on public order. So, it becomes questionable whether a tribunal would have the power to (or should) order the disclosure of privileged information in disregard of such mandatory rules of protection.188

12.206  No doubt in recognition of the difficulty of identifying and expressing all possibilities, Article 9.3(d) contains a non-exhaustive list of actions which may constitute a waiver—namely, ‘consent’, ‘earlier disclosure’, or ‘affirmative use’ of the privileged material—as (p. 462) well as a catch-all description ‘or otherwise’. It can be seen from these descriptions that some effort has been made to capture the substance of laws and practice relating to waiver of privilege from a number of jurisdictions. As a result, it is not surprising that there may exist some overlap of concepts. For example, in some instances, the voluntary prior disclosure of a privileged document may be treated as carrying the consent of the disclosing party to waive privilege. The important question is whether any one of the described grounds of waiver can be identified.

12.207  There are a number of other factors that may need to be considered, but in general, the tribunal will have to establish whether a party asserting privilege or legal impediment has behaved in a way inconsistent with the (normally confidential) nature of the privilege, or whether that privilege remains in place. Subject to mandatory provisions of applicable law, it appears that Article 9.3(d) invites the tribunal to consider events that may give rise to ‘any possible’ waiver of privilege, even if the law otherwise applicable to the privilege does not recognize those events as a waiver, or treats the consequences of them differently.

12.208  We discuss further, by reference to the different labels listed at Article 9.3(d), some instances of how a waiver may occur in practice, and how such events have been treated at a national level in jurisdictions where the waiver of privilege is a recognized and developed concept.

ii.  Waiver by consent

12.209  Consent may manifest itself in various forms but, in the majority of cases, it arises by reason of a voluntary waiver by which the client, or the client’s lawyer, makes a deliberate choice to waive privilege over a document or other evidence.189

12.210  A client may decide to consent to waiver of privilege for various reasons, eg if s/he has obtained independent legal advice and wants this advice to be made known to the other party in order to persuade it to reconsider its position or admit the claim. By disclosing the advice, the client is consenting to the waiver of privilege that might have otherwise attached to it.

12.211  A common issue associated with an express waiver of privilege in relation to materials to be admitted to the record in an arbitration is the question of how far the consent extends. Where privilege is waived voluntarily over a document, it is necessary to bear in mind the ‘collateral waiver’ rule. The effect of this rule is that, when a party waives privilege in a document because it wants to use it in evidence, it may be taken to have waived privilege in relation to the whole of the material relevant to the issue in question. If this were not the case, the court or tribunal might otherwise be presented with a misleading picture of the material.190 As a result, even if the consent was only directed towards (p. 463) disclosing a confidential legal opinion or another privileged document, depending on the rules applied, consent may be deemed to have extended to all collateral materials in relation to that opinion/document. For example, all correspondence with the lawyer for the purposes of obtaining the legal opinion may be found to fall within the waiver by consent.

12.212  In the United States, a failure to object to a request for disclosure may constitute an implied waiver of privilege, even where the right to claim privilege may have existed.191

iii.  Earlier disclosure

12.213  Privilege may be waived by an earlier disclosure of the relevant document or other evidence to the opponent party, whether such disclosure is made by the client or the client’s lawyer (provided the lawyer had the necessary authority to waive the privilege). Once disclosure has been given, the general rule is that it cannot be reclaimed at a later date.

12.214  Issues may arise around inadvertent or involuntary disclosure of privileged material. For example, in the United States, there is no waiver if the confidential communication is involuntarily disclosed—for example, if the opponent party steals a document or breaches reasonable protections put in place in order to eavesdrop on communications with the lawyer.192

12.215  In Germany, in some circumstances, even involuntary disclosure of privileged documents can result in a loss of privilege. Documents that were lost or stolen can still be admitted into the record. Furthermore, if a lawyer consciously or subconsciously breaches the duty of professional secrecy by testifying in relation to protected matters, that testimony is nevertheless considered admissible evidence.193

12.216  Ashford suggests that the following five factors may assist in deciding how to deal with an inadvertent disclosure:

  1. (i)  The reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production;

  2. (ii)  The number of inadvertent disclosures;

  3. (iii)  The extent of the disclosure;

  4. (iv)  Any delay and measures taken to rectify the disclosure; and

  5. (v)  Whether the overriding interests of justice would or would not be served by relieving the party of its error.194

(p. 464) 12.217  Under English law, where a disclosed document has been redacted in order to conceal the parts of the document that are privileged, this will not amount to a waiver of privilege.195 However, if the redactions result in the remaining content of the document that has been disclosed being read in a misleading way, arguments that the ‘collateral waiver’ rule196 applies may be engaged.

12.218  It may also be necessary to consider whether the waiver of privilege can be limited to a particular party to whom a party has given earlier disclosure. This issue is illustrated by the facts of the English case of Gotha City197 where Sotheby’s was in possession of some legal advice that had been given to it by a co-defendant. The lower court had made a disclosure order against its co-defendant, on the grounds that sharing the advice with Sotheby’s had amounted to a waiver of privilege over the legal advice as against the whole world. The English Court of Appeal, however, disagreed, finding that the key issue was whether the advice was disclosed to Sotheby’s in confidence. If it was, then privilege had been waived as against Sotheby’s, but not as against the whole world.198 Thus, in some jurisdictions, and in some circumstances, it may be possible to disclose a privileged document, or an extract or paraphrase of a privileged document, to a third party without waiving privilege as against other parties.199 However, this may not be the case everywhere.

12.219  In each case, a tribunal may have to consider whether a waiver has occurred under the applicable regime, what mandatory requirements of that regime may apply, and the other considerations contained in Article 9.3.

iv.  Affirmative use of the document/statement/oral communication or advice contained therein

12.220  Another possible instance of waiver identified in Article 9.3(d) is ‘affirmative use’ of a privileged document, statement, oral communication, or advice contained in any of those things. Affirmative use is not defined, but it is likely to be interpreted as positive reliance on the evidence, or use of it in such a way that there is no doubt about the intention to rely on it.

(p. 465) 12.221  An obvious example of affirmative use is where a document or other evidence is expressly referenced and relied upon by a party in submissions or witness/expert evidence. Such reliance may be found to be inconsistent with an assertion of privilege. In addition, there may be instances where an act or event of waiver falling under one of the other headings described in Article 9.3(d) may also be regarded as affirmative use, eg a voluntary prior disclosure of a document in connection with the proceedings.

12.222  Some other, less-obvious circumstances that may give rise to an argument of affirmative use include making reference to a privileged communication during discussions with an opponent party. Article 9.3(d) makes explicit reference to a ‘statement’ and ‘oral communication’. In this respect, the English courts draw a sensible distinction between a reference in oral communication to the fact or effect of legal advice received (which is unlikely to result in a waiver of privilege) and a reference to the actual advice tendered, which may do so.200

12.223  Another possible circumstance is where a party makes reference to a privileged document/communication in evidence (for example, during cross-examination). Legal privilege may have been asserted in relation to correspondence between one of the parties and their legal advisers on a matter in issue between the parties. The privilege may have been upheld and the relevant documents excluded from production. However, the party who requested the correspondence may try to trespass on that privilege by asking questions about the correspondence during cross-examination of one of the witnesses and the witness may respond in positive terms. If the reference is to a document, there is a risk that privilege in that document may be irretrievably waived by that responding witness.

v.  Otherwise

12.224  Article 9.3(d) describes three instances in which privilege may have been waived (consent, earlier disclosure, and affirmative use), but the list is not exhaustive. Article 9.3(d) also refers to waiver having occurred ‘otherwise’ than in the instances described. It goes without saying that ‘otherwise’ is very broad and will encompass all instances where a waiver can be established. In each case, the tribunal will have to consider the arguments and evidence put forward on the point.

12.225  The circumstances that may fall under the ‘otherwise’ umbrella are likely to be varied and case specific. For example, in Germany a client may impliedly waive privilege by nominating his lawyer as a witness.201 If the lawyer reveals the content of legal advice, it may be said that the waiver is lost because of the affirmative use of the advice. However, it appears that a mere nomination of the lawyer, even in the absence of the affirmative use, may amount to a waiver.

(p. 466) 12.226  The ‘otherwise’ category may also capture circumstances in which the material covered by privilege has ceased to be confidential.202 For example, this may happen if a party has made reference to privileged legal advice in a non-confidential application to a public authority, or where documents have come into the public domain through carelessness on the part of the party to whom the privilege attaches. If the loss of confidentiality has been involuntary, it cannot be regarded as consent. The documents were not introduced as evidence by way of affirmative use and the ‘earlier disclosure’ ground might not be applicable to inadvertent release of the documents into the public domain. The loss of confidentiality has nonetheless occurred as a result of conduct by the party who might otherwise have been able to claim privilege.

12.227  More complex questions may arise where loss of confidentiality is not the result of action by the party to whom the privilege attaches. Privileged documents may have been hacked or stolen and then released into the public domain. There will have been a loss of confidentiality, but the cause of this will not be conduct or ‘waiver’ on the part of the party holding the privilege.203

e.  Need to maintain fairness and equality between the parties

9.3(e) the need to maintain fairness and equality as between the Parties, particularly if they are subject to different legal or ethical rules.

12.228  Article 9.3(e) is the last (but nonetheless very important) factor that the tribunal is invited to consider in relation to issues of legal impediment and privilege. It refers expressly to the need to treat the parties with fairness and equality. As highlighted elsewhere, tribunals are in nearly all cases bound to observe these principles, whether pursuant to provisions of applicable national arbitration law, institutional rules, and/or Preamble 1 of the IBA Rules.204

i.  Introduction

12.229  The Commentary to the IBA Rules explains that the need to safeguard fairness and equality between the parties may arise when the approach to privilege existing in the disputing parties’ home jurisdictions differ. This issue has already been discussed at 12.187-12.201 in relation to considerations of party expectations under Article 9.3(c), and the differences in approach to privilege that exist between jurisdictions has also been illustrated in discussion of the other considerations listed in Article 9.3.205

12.230  As explained in the Commentary on the IBA Rules, applying different rules to individual parties to arbitration could create unfairness by shielding the documents of one (p. 467) party from production but not those of another party. For example, in the example given at 12.141 of a dispute between French and English companies, ordering production of correspondence between the French party and its in-house counsel, but not ordering production of the equivalent correspondence from the English party, is likely to lead to an inequality of access to evidence.

12.231  Tribunals are generally reluctant to subject the parties to different treatment. It may create an inequality in access to evidence and for that reason be unfair to the party subject to the less restrictive privilege regime.

ii.  Fair and equal treatment

12.232  One obvious approach to avoiding such a situation is to apply the same set of rules to all parties. The chosen rules could be the least favourable rules applicable to any of the parties, or the most favourable, or another set of rules altogether. The ‘most-favoured nation’, ‘least-favoured nation’, and the ‘autonomous’ approaches are discussed at 12.102-12.124.

12.233  Application of the ‘most-favoured’ approach meets the parties’ expectations and provides the necessary level of parity between them. There is evidence of support for this approach in tribunal practice. For example, in one unpublished ICC decision, the tribunal indicated that international arbitration practice was to apply to all parties only the privilege law that awards the broadest protection to privileged information so as to maintain fairness and equality between the parties.206

12.234  Of course, if one party has already produced documents not subject to privilege in its home jurisdiction, but which are privileged under the laws of the adverse party, then it might be thought fair to order the other party to produce the same category of documents in order to offset the imbalance that would otherwise arise.207

12.235  Another factor to be borne in mind is that application of the law giving the highest level of privilege protection will not always mean application of a single national law. For example, the national law of one party may provide greater protection in relation to a certain category of material (eg correspondence with in-house counsel), but the national law of the other party may offer broader protections with respect to other matters (eg waiver). If the most-favoured nation approach were to be applied uniformly, the applicable national rule might vary depending on the issue at stake.208 While this may be correct as a matter of principle, in our view, it will necessarily add an additional layer of complexity. If circumstances warrant this approach, it would be sensible for the various rules decided upon to be noted for the record in case of future issues of privilege arising in the case.

(p. 468) f.  Assessment of whether privilege exists

12.236  Assessment of whether privilege attaches to any type of evidence is, in the first instance, a matter for counsel representing the producing party. Counsel will also generally draft the objections to a request for documents in which a claim to privilege is asserted.

12.237  A party relying on legal impediment or privilege by way of response to a document production request delivered under Article 3.2 of the IBA Rules will have to explain the nature of the privilege relied on and why it attaches to the particular documents requested. If the requesting party has doubts about the veracity or reliability of the statements made then it should be permitted to raise them.209

12.238  Tribunals will sometimes order parties to produce what is called a ‘privilege log’—a document containing sufficient details of each and every document the parties are withholding on grounds of privilege so that the opponent party and the tribunal are able to understand why privilege is said to apply. For example, the log may record the date of a communication, the sender, and recipient, and the reason for asserting privilege (eg ‘contains legal advice’).

12.239  Although the level of detail contained in a privilege log is not always sufficient to enable the other party to reach a firm conclusion on whether or not the relevant documents contain privileged material, in some cases it may do so. For example, the date of the document may show that it came into existence at a time when the dispute was not in contemplation and that the claim of litigation privilege may be incorrect, or an email may be shown as having been circulated to a third party, thereby potentially waiving the privilege.

12.240  However, the use of privilege logs is not without problems, nor are they universally employed by tribunals. For example, there is some evidence to suggest that the use of privilege logs in ICC arbitration has, in the past, generally only occurred where a party has requested it.210 A disadvantage of the privilege log is that it can be very time-consuming and costly to prepare. In addition, to be of value to the receiving party in relation to its assessment of the claim to privilege, the withholding party may have to disclose so much detail that the confidential information sought to be protected is revealed to a greater or lesser extent. For example, even the names of the lawyers with whom correspondence has taken place may provide information as to a particular course of action or area of expertise in which advice has been sought.

(p. 469) 12.241  It is clearly not appropriate for a copy of the document over which privilege is claimed to be provided to the other party in advance of a dispute as to its privileged status being resolved. If the tribunal believes that it needs to review the document before making a decision on a disputed claim of privilege, then it may do so.211 However, as the Commentary on the IBA Rules makes clear,212 such review is generally undesirable because the document may contain information that, once seen by the tribunal, cannot be unseen, and which may taint the tribunal’s view of the case.213 It may also constitute an improper delegation of the tribunal’s powers.

F.  Unreasonable Burden to Produce

9.2 (c) unreasonable burden to produce the requested evidence

12.242  Article 9.2(c) permits the exclusion from evidence or production of material that it would be an unreasonable burden to produce. The 1999 IBA Rules contained an identical provision.

1.  Introduction

12.243  The concept of unreasonable burden is mentioned three times in the IBA Rules. The first is in Article 3.3(c)(i), which allows a requesting party to seek production of a document that it already has in its possession, custody, or control where it would be ‘unreasonably burdensome’ for the requesting party to produce it.214 The second is Article 8.2, which gives the tribunal power to limit or exclude any question to, or answer or appearance by, a witness at an evidentiary hearing where such question, answer, or appearance is unreasonably burdensome.215 The third reference appears in Article 9.2(c), and is discussed below.

12.244  Article 9.2 allows the tribunal to exclude material from evidence or production. However, Article 9.2(c) refers expressly to an ‘unreasonable burden to produce’.216 This raises the question of whether this ground of objection is intended to be available only by way of response to a request for production made by another party under Article 3.2 of the IBA Rules, and is not to be relied upon in support of a request to/decision by the tribunal to exclude documents or other evidence from the record.

(p. 470) 12.245  It is certainly the case that the examples for application of Article 9.2(c) described in the Commentary to the IBA Rules refer only to situations involving document production.217

12.246  However, the Commentary also states that ‘Article 9.2(c) permits the arbitral tribunal to exclude from production or from evidence any documents or evidence which would be an unreasonable burden to produce’,218 thereby indicating that the provision has a wider application than document production. This makes sense. Many of the considerations discussed below have the potential to apply equally to documents and other evidence introduced pursuant to other provisions of the rules as they do to production of documents pursuant to the provisions of Articles 3.2–3.8 of the IBA Rules.219

12.247  For example, under Article 4.10 of the IBA Rules, a tribunal is permitted to ask a party to make arrangements for the appearance of a witness identified by the tribunal. In some cases, it may be extremely burdensome for the party to have to approach the witness and make those arrangements. The circumstances in which such a situation may arise will be fact specific. However, for example, in a dispute relating to the performance of a power plant, the project manager responsible for managing the site on behalf of the employer may have left the employer company and moved on to another project in a remote location. If the project manager’s evidence on a particular point becomes relevant in a dispute between the employer and a third party responsible for commissioning the plant, the employer may have to first trace the former employee, then persuade him to testify, negotiate an appropriate leave of absence from his present employer, and support applications for a visa and travel, etc. Much may depend on the perceived relative value of the evidence sought, but a tribunal might be persuaded that these steps are unreasonably burdensome.

12.248  Such examples aside, it is undoubtedly true that an objection of ‘unreasonable burden’ comes most into play in the management of document production in international arbitration. If a tribunal is satisfied that it would be unreasonably burdensome for a party to produce a particular document or (more likely) one or more categories of document, the tribunal will be entitled to dismiss a document production request for those documents. Given the volume of electronic documents potentially in play in most arbitrations it is right that some consideration of the burden of production, whether in time or costs (or both), should be taken into account.

12.249  Where relied upon in other circumstances, the claim of unreasonable burden is most likely to be engaged in advance of the evidence in question being introduced (p. 471) on to the record. If the evidence is already available, the burden of maintaining that evidence on the record is likely to be negligible or non-existent. That said, there may be some circumstances where, in cases of disagreement between the parties, the operation of this provision may be useful. For example, if one party is insisting that a large volume of documents, introduced into evidence, but which has later become redundant because of changes in case, be included in the hearing bundles at considerable cost, the other party might wish to rely on Article 9.2 to have the material excluded.220

12.250  No guidance is given as to how a tribunal should decide whether the action necessary to provide the evidence is reasonable action to be expected of a party, or if it presents an unreasonable burden. This gives the tribunal considerable flexibility as to how to interpret the provision, and whether the relevant standard has been met on the facts of a particular case. This flexibility is intentional. As stated in the Commentary on the IBA Rules: ‘This unreasonable burden can take many forms, and the nature of the burden is purposely left to the discretion of the arbitral tribunal’.

12.251  To make out an objection of ‘unreasonable burden’, we suggest that something additional to the ordinary burden of conducting proceedings that is specific to the facts of the case should generally be established. This may include objections based on serious practical difficulties in providing a witness, or making available for inspection a site or other property or materials. A party wishing to raise an objection should explain as fully as possible why provision of the document or other evidence is unreasonably burdensome to them and, if possible, why that burden is out of the ordinary.

12.252  Document production is inevitably a time-consuming and costly exercise. In large commercial disputes, it may involve interrogation of thousands, sometimes hundreds of thousands, of electronic documents. Even with the assistance of data review software, the burden of undertaking this exercise can be considerable. The Commentary on the IBA Rules notes that even where a request for documents properly identifies why the requested documents are relevant and material this may not be sufficient to warrant an order for production where ‘their sheer quantity creates an unreasonable burden on the receiving party to produce’. Of course, the sheer volume of the documents and/or the costs involved, cannot be decisive factors or there would be very limited production given in a large number of cases. In this vein, it has been reported that one ICC tribunal pointed out to the parties involved that the costs incurred by a party in complying with a request for the production of documents is a reimbursable arbitration cost and that it is open to the parties to claim such costs with supporting evidence at the end of the proceedings.221

(p. 472) 12.253  In assessing whether a particular proposed step is unreasonably burdensome, a tribunal may consider the proportionality of the request. This is a separate ground of objection under Article 9.2(g) and is discussed in more detail at 12.308-12.316. However, it is suggested that an assessment of whether a particular step is unreasonably burdensome must involve considerations of proportionality. Thus, in addition to assessing arguments on the time, cost, or other difficulty associated with provision of the particular documents or other evidence under discussion, the tribunal may wish to consider whether the alleged burden is (or is not) disproportionate to the likely evidential value of the requested evidence and/or the value of the dispute.

2.  Practical Examples

12.254  This section provides examples of decisions by tribunals following an argument raised by one of the parties that production would be unreasonably burdensome.

12.255  In one case, the documents requested by the claimant had already been collated and analysed by the respondent when preparing its own evidence. In these circumstances the tribunal was not persuaded by the respondent’s argument that the burden of producing them was too great.222

12.256  In another case, the arbitral tribunal considered as unduly burdensome a request for documents that should already have been in the requesting party’s possession. There was therefore no reason to compel the other party to engage in a broad search of its files for those documents.223

12.257  In an unreported LCIA case, a sole arbitrator expressed the view that it would be unreasonably burdensome to require the claimant to search email inboxes of all of its employees. In that case, the claimant was a large bank with over 30 offices in different jurisdictions and having around 30,000 employees.

G.  Loss or Destruction of the Documents

9.2(d) loss or destruction of the Document that has been shown with reasonable likelihood to have occurred.

12.258  Article 9.2(d) permits the exclusion of a document from evidence or production on the grounds that it has been lost or destroyed. The 1999 IBA Rules contained an identical provision. ‘Document’ is widely defined in the IBA Rules.

(p. 473) 1.  Introduction

12.259  Unlike other provisions of Article 9.2, Article 9.2(d) refers expressly to a ‘Document’, thus limiting the application of this provision to that category of evidence. The reference to ‘Document’ makes sense as it has a physical existence and may be lost or destroyed in a way that eg witness evidence yet to be given cannot be.

12.260  The 1999 IBA Rules provided that loss or destruction should be ‘reasonably shown to have occurred’. The current IBA Rules mention loss or destruction that has been shown ‘with reasonable likelihood to have occurred’. It appears to have been recognized that the provision was imprecisely phrased and that a more specific wording of the 1999 IBA Rules was desirable.

12.261  Article 9.2(d) appears to be relatively straightforward. In practice, there may be a number of considerations that require attention.

2.  Reasonable Likelihood of Loss/Destruction

12.262  Article 9.2(d) does not require incontestable evidence that a document has been lost or destroyed. Rather, it sets a benchmark. A party is required to show that it is ‘reasonably likely’ that the document is no longer available.

12.263  For example, if a party demonstrates that a document was sent three months ago to a company specializing in paper shredding and document destruction, and that such company normally destroys the documents received within one or two weeks, this may satisfy the benchmark in Article 9.2(d). In fact, the document may still await its fate at the storage premises of the shredding company, but the tribunal might well conclude that it is inappropriate to order that the party should try to find that document.

12.264  A frequent starting point for the raising of an objection under Article 9.2(d) is the document retention policy of a relevant party. If a party has a document retention policy that requires it to destroy a particular type of document after, say, three years, and that period expired before the commencement of arbitration, the tribunal may accept that it can reasonably be inferred that the document is likely to have been destroyed.

12.265  The position is rarely as clear cut with regard to documents that are said to have been lost. A tribunal is unlikely to accept a bare assertion that a document has disappeared. The party seeking to rely on this ground may want to produce evidence confirming that a reasonable search has been undertaken in the files/locations where the document is likely to have been stored or archived, but that the document cannot be found. If the party knows how the document has been lost—for example, because it was taken by an employee who has moved to a foreign jurisdiction with no forwarding address—then an explanation of those events should be included.

(p. 474) 12.266  In some cases, the requesting party may demand an affidavit or witness statement confirming that proper searches have been carried out to find the document. If the tribunal has concerns about what it is being told it may be prepared to order this.

3.  Loss or Destruction of Documents during the Arbitration

12.267  Additional considerations may arise when the document is said to have been lost or destroyed after the arbitration was commenced.

12.268  Many jurisdictions impose an obligation on locally qualified lawyers to advise their client, on commencement of a litigation or arbitration, that they should preserve potentially relevant and disclosable documents.224 Although not universal, this practice has been incorporated into the IBA Guidelines on Party Representation in International Arbitration:

When the arbitral proceedings involve or are likely to involve Document production, a Party Representative should inform the client of the need to preserve, so far as reasonably possible, Documents, including electronic Documents that would otherwise be deleted in accordance with a Document retention policy or in the ordinary course of business, which are potentially relevant to the arbitration.225

12.269  Upon receipt of such advice a party is expected to take steps to ensure that potentially relevant documents are identified and ring-fenced in such a way that they are not destroyed and that any routine document destruction policies are suspended. Deliberate destruction of evidence is sometimes referred to as spoliation of evidence.

12.270  If it is demonstrated that a party has destroyed potentially relevant documents after the arbitration has commenced, a tribunal may be asked to draw adverse inferences as to the reasons for the destruction, ie it may be asked to conclude that the content of the documents was adverse to the interests of the destroying party in relation to the subject matter that it addressed.226 It is debatable as to whether a document that no longer exists could fall within the provisions of Article 9.5 of the IBA Rules227 but, even if it does not, a tribunal may feel it is justified in drawing an adverse inference pursuant to its general powers in relation to the assessment of evidence. If satisfied that the (p. 475) document was destroyed deliberately in order to prevent it having to be produced, the tribunal might also impose a cost sanction under Article 9.7 on the basis that the party responsible for destroying the document has failed to conduct itself in good faith in the taking of evidence, as required by Preamble 3 to the IBA Rules.228 Before taking such a step, the tribunal may wish to be satisfied that the appropriate warning about preservation of evidence was given to the party.

4.  Destruction of Electronic Records

12.271  The loss of electronic files can occur through various events. One possibility is the destruction of data by computer viruses or other malware. Another possibility is a loss of hardware containing relevant files. In the latter case, the loss should only be relied upon if there are no other available copies of the documents on other hardware.

12.272  Destruction of electronic files is another phenomenon. In recent years, the volume of electronic documents has grown exponentially. In an organization with thousands of employees, the number of documents held may grow by hundreds of thousands every week. As a result, large organizations often require off-site storage for archived material. However, even with this facility, an organization may need to have destruction policies in place to enable data and cost management. Many organizations have introduced email retention policies that provide for the mandatory deletion of all emails after a certain period of time. Shorter email retention policies are cheaper to implement, but in some instances local laws require certain types of information to be retained for a longer minimum period of time. To comply with these requirements businesses may be required to keep the data on backup tapes.

12.273  An issue that sometimes arises in relation to document production is whether a document that has been deleted but is still retrievable from a backup tape should be considered as ‘destroyed’. Although backup tapes contain information, they are not normally easily searchable. Objection to production of such documents may be better made under Article 9.2(c) although it has been suggested that backup tapes, as well as electronic data that has been ‘fragmented’ or ‘damaged’, may fall within Article 9.2(d).229

12.274  Clearly, there may be cases where, even taking account of issues of proportionality, a fair determination of the case requires that a party be asked to go through backup tapes to find a document or category of document. However, we suggest that such approach should be limited to cases in which the evidential value of the document sought is likely to be significant.

(p. 476) H.  Commercial or Technical Confidentiality

9.2(e) grounds of commercial or technical confidentiality that the Arbitral Tribunal determines to be compelling.

12.275  Under Article 9.2(e), the tribunal may exclude evidence, including by the rejection of a document production application, on compelling grounds of commercial or technical confidentiality. The attaching of protections to confidential information is dealt with at Article 9.4. It is up to the party invoking confidentiality as a ground for exclusion to prove its existence.230

1.  Introduction

12.276  As a general rule, it is customary within international arbitration for consideration to be given to any legitimate need to keep sensitive business or technical information secret. Article 9.2(e) expressly reserves the right to object to production or introduction of evidence on this basis. A request for production of ‘confidential’ material should not be permitted to be used by one party to gain unwarranted insight into the business secrets of the other party.

12.277  The evidence requiring confidentiality can take many forms, but it is most likely to apply to confidential business records or models, technical formulae, know-how, trade secrets, and other forms of proprietary information or commercial know-how.

12.278  Determining what may be considered a compelling commercial or technical reason for denying or excluding evidence under Article 9.2(e) is largely a question of fact in each case.231 The word ‘compelling’ is not defined in the IBA Rules, but it appears clear that circumstances justifying the complete exclusion of evidence will be the exception, rather than the rule.

12.279  There may be cases where the information requested is not relevant to the case or material to its outcome. In these cases, it should be possible for the requested party to resist production under Article 9.2(a), but it may additionally wish to rely on Article 9.2(e).

12.280  In considering an objection under Article 9.2(e) to deny a request for production or to exclude a piece of evidence from the record, a tribunal will have to consider whether the document or other evidence requires special consideration. This is what one commentator describes as ‘[t]he threshold question’. It is said that an Article 9.2(e) objection is a form of objection applicable to ‘evidence which a party would (p. 477) normally go to great lengths to keep from disclosure to business contacts or the public more generally’. One ICC tribunal denied a request for production on this basis because it regarded the relevant request as constituting an ‘unacceptable invasion of [business] privacy’.232 We agree that adoption of such a threshold test is a useful starting point.

12.281  The complete exclusion of evidence may be justified if the confidential information has a high economic value and its production is likely to cause significant damage to the party holding the document. However, much will depend on the attitude of the tribunal and the facts of the case. Examples given elsewhere of where evidence has been excluded include:233

  • •  A company specializing in credit card security in dispute with a credit card company regarding the quality of its services cannot be expected to disclose its highly secret security mechanisms, even to its client.

  • •  A chocolate manufacturer in a dispute with a distributer regarding the quality of the chocolate cannot be expected to disclose a secret recipe.

  • •  A pharmaceutical company in a dispute with a supplier will not be required to disclose know-how about the development of a drug not yet protected by a patent.

12.282  None of the respondents to a recent survey on use of the IBA Rules234 was aware of any national court decisions laying down a test for commercial or technical confidentiality under Article 9.2(e), although respondents from China reported that the Intermediate People’s Court has held that technical confidentiality can be defined as ‘technical information with a commercial value that can generate wealth for its owner’.235

12.283  Each argument for special treatment preventing or restricting introduction of the evidence will need to be considered against the particular facts of the case and the precise issues to be determined. The tribunal must balance the interests of one party in maintaining confidentiality against the interests of other parties in being able to obtain access to the evidence. By way of illustration, in one case, a tribunal made up of continental European lawyers considered that the claimant’s right to prove its case or advance arguments outweighed the respondent’s obligation towards a third party to keep a document confidential.236

(p. 478) 2.  Third-Party Confidentiality

12.284  The confidentiality sought to be protected will, in most cases, attach to one of the parties to the arbitration and will often concern a document created by that party for internal circulation only, but this will not always be the case. One example known to the authors concerned a request by one party for proprietary information relating to the software by which the other party’s expert had produced models relating to a technical issue in the case.

12.285  There may be good commercial reasons why third-party confidentiality rights have been put in place and a relevant factor for the tribunal to consider when asked to impose restrictions is whether a confidentiality agreement with a third party will be breached if the evidence is disclosed. Generally speaking, a tribunal will be reluctant to require a party to the arbitration to breach its agreement with a third party if this can be avoided.237 In Dongwoo, the tribunal accepted the existence of confidentiality arrangements in place between Mann+Hummel and a third party as justification for the non-production of documents.238

12.286  A related factor may be the potential consequences that could follow from the breach—for example, whether a breach of the contractual provision constitutes a ground for the third party to terminate a contract or not to conclude a new contract.239 In some cases, the party ordered to produce the document may feel more comfortable if it does so under compulsion pursuant to an order of the tribunal.

12.287  On the other hand, a party should not be permitted to obstruct production of a document by contriving in bad faith to make it subject to a confidentiality undertaking with a third party.240 Where a tribunal finds that a confidentiality undertaking to a third party has been entered into for purposes other than legitimate business needs (eg in order to avoid the production of documents), the tribunal may consider the restriction as posing no real obstacle to the production of the requested evidence.241 In such circumstances there is no genuine commercial sensitivity or relationship of confidentiality to be protected.

(p. 479) 3.  General Considerations

12.288  Irrespective of the exact nature of the evidence over which confidentiality is claimed, where a party wishes to rely on Article 9.2(e), a clear statement of the nature of the confidentiality relied on together with an explanation of the potential adverse consequences for anyone who may be affected by disclosure or production must be the proper starting point for submissions to the tribunal. The tribunal’s decision as to whether the grounds relied on are ‘compelling’ as required by Article 9.2(e) will always depend on the facts and circumstances of each case. A tribunal is unlikely to place much weight upon an objection that relies on a general claim to ‘business secrecy’ unsupported by evidence as to why this is so.242

12.289  Where the party seeking confidentiality protection is simply concerned about the use to which its opponent might put the information, it may be possible for the other party and the tribunal to review a hard copy of the evidence and for arguments to be made on exclusion of the evidence in the same way as happens with any other form of contested application. Where the ‘protecting’ party does not wish its opponent to see the evidence, the position becomes more difficult. In such circumstances it may be thought appropriate for access to the document to be restricted to the tribunal so that it can consider the need for confidentiality. However, this may pose a problem if either party contends that the tribunal would be unable to treat the parties fairly and in an even-handed way after viewing the evidence, even if it were to uphold the objection under Article 9.2(e).243

12.290  As mentioned, an alternative approach to tribunal review of documentary evidence is the appointment by the tribunal of a ‘confidentiality expert’ under Article 3.8 of the IBA Rules who will be tasked with reviewing the document/s and reporting to the tribunal who will then decide whether to accept or reject the objection.244

12.291  In circumstances where a tribunal determines that a ‘compelling’ reason of commercial or technical confidentiality has not been made out, it may nonetheless feel that the evidence in question should be made subject to some form of confidentiality protection under Article 9.4 of the IBA Rules.245 For example, it may be clear that the evidence in (p. 480) question is commercially sensitive, but because it also has significant probative value, the tribunal may determine that the reasons to refuse production or exclude the evidence from the record are not compelling on the facts of the particular case.

4.  Practical Examples

12.292  In a survey of use of the IBA Rules,246 several respondents had direct experience of evidence being excluded for reasons of commercial or technical confidentiality.247 Respondents in France gave examples of several cases where a decision to exclude was made: in one case, the excluded evidence was a report which included specific know-how on uranium; in another, it was accounting documentation containing the calculation of margin in maritime transport documents (the margin being the main element for price setting). Spanish respondents reported that, in a dispute concerning a claim to damages for a failure to deliver goods under a commodity contract, the tribunal denied a request for production of a contract of resale between the claimant and a third party on grounds of commercial confidentiality. This last case is interesting because the terms of the contract of resale might in some cases be relevant to the measure of damages for non-delivery. In another case, the tribunal denied a request to produce a document issued by a third party that contained the third party’s know-how on running and operation of an energy installation.

I.  Political or Institutional Sensitivity

9.2(f) grounds of special political or institutional sensitivity (including evidence that has been classified as secret by a government or a public international institution) that the Arbitral Tribunal determines to be compelling.

12.293  Article 9.2(f) allows tribunals to exclude from the evidentiary record, or from production, evidence that has political or institutional sensitivity. The tribunal must find the reasons advanced in support of reliance on Article 9.2(e) to be compelling.

1.  Introduction

12.294  In some jurisdictions, political sensitivity is treated as a type of privilege. However, even in those countries where it is not regarded as an evidentiary privilege, there are often specific national laws or regulations governing the treatment of state, diplomatic or military secrets. Article 9.2(f) allows the tribunal to exclude documents or evidence on (p. 481) grounds of political or institutional sensitivity, even if that type of confidentiality is not considered to be an evidentiary privilege for which protection might be available under Article 9.2(b).

12.295  The Commentary on the IBA Rules explains that Article 9.2(f) was added because certain international political organizations pointed out that ‘commercial and technical confidentiality’ as covered by Article 9.2(e) might not include confidentiality within such organizations. Article 9.2(f) was added to put such political or institutional sensitivity on an equal footing with commercial or technical confidentiality.

12.296  Article 9.2(f) gives only one example of a situation falling within the category of political or institutional sensitivity—namely, ‘evidence that has been classified as secret by a government or a public international institution’. However, this example is preceded by the work ‘including’ thereby making clear that Article 9.2(f) can also embrace other confidential communications meeting the description set out in that provision.

2.  Political Sensitivity

12.297  In some jurisdictions, local law may provide a benchmark for the kinds of evidence that are not disclosable in any court or arbitration proceedings because of their political nature. A party may rely on these rules as evidence of the political sensitivity of the material for the purposes of Article 9.2(f) in addition to raising a claim of legal impediment or privilege under Article 9.2(b). In Merill & Ring Forestry LP,248 the tribunal found that Cabinet privilege, as defined by s. 9(3) of the British Columbia Crown Proceedings Act, can fall within the definition of ‘special political or institutional sensitivity’ and therefore could be a valid ground for exclusion of evidence on that basis.249

12.298  Examples of public interest or national security privileges available under national systems of law may be found at 12.90-12.93. Any of those matters might be relied upon under Article 9.2(f).

12.299  It has been suggested that national security privileges (also referred to as ‘public interest immunity’) are widely acknowledged by international arbitration tribunals.250 The argument has also been advanced that public interest immunity is, in fact, a general principle of law or an identified tenet of public international law. However, that argument has not been universally accepted. For example, it was raised but rejected in Biwater Gauff (Tanzania) Ltd.251

(p. 482) 12.300  Waincymer252 cites the following two examples of circumstances connected to security considerations where political sensitivity was regarded by the ICJ as being a bar to production of evidence. The first concerned acceptance by the ICJ of an assertion of naval secrecy as a reason for refusing to produce naval orders in Corfu Channel.253 In the former Yugoslavia Genocide case, the ICJ declined to make an order in relation to redacted material on the (claimed) basis of military secrets.254

12.301  Political sensitivity may arise in many different situations and in relation to varied subject matter. For example, the document may relate to development of a new governmental policy on immigration, or contain information about suspected terrorist activities or set out details of a military strategy to be employed in respect of a hostile state. The possibilities are numerous. However, Article 9.2(f) has obvious application in cases where there are national security considerations in play.

12.302  Under Article 9.2(f), even in situations where the local law does not explicitly say that the politically sensitive documents are protected from document production, the tribunal is entitled to exclude them from production if the tribunal is satisfied that there are compelling reasons for doing so.

3.  Institutional Sensitivity

12.303  Article 9.2(f) expressly mentions ‘institutional sensitivity’. Some international organizations—for example, the United Nations, the International Monetary Fund (IMF)—may not be political organizations, but may nonetheless be working in the interests of the public or communities at large. The reference to ‘institutional sensitivity’ provides an umbrella for sensitive documents generated by such organizations.

12.304  It is not clear whether ‘institutional’ or ‘political’ sensitivity can be extended to companies that are involved with projects of national importance. For example, can a large bank that funds military enterprises, or holds their accounts, claim exclusion of evidence by reference to these matters? As far as state secrets are concerned, the United States courts have taken the view that the protection afforded to that type of information belongs to the government and cannot be waived by a private party.255

(p. 483) 4.  Tribunal’s Approach to Claims of Political or Institutional Sensitivity

12.305  Although tribunals are bound to consider an objection raised under Article 9.2(f) very seriously, a mere reliance on Article 9.2(f) is not enough. The provision clearly states that the reasons advanced in support of reliance on Article 9.2(e) must be determined by the tribunal to be ‘compelling’. As the Commentary on the IBA Rules makes clear, the tribunal retains the final discretion to determine whether the considerations of sensitivity are sufficient to warrant the exclusion from evidence or production of the relevant documents or other evidence.

12.306  The fact that private tribunals, comprising arbitrators from various jurisdictions, may be deciding on matters of state importance has triggered some concerns. For example, in response to a recent survey by the IBA on the use of soft law products, it was suggested that those responsible for drafting the IBA Rules should consider whether these tribunals are best placed to decide disputes about the production of documents relating to political or institutional matters.256

12.307  Practical difficulties can arise in relation to discussions about the content of the document in question or, in exceptional cases, the need for a review of the document by the tribunal in order to make a determination on the objection. If the document contains highly sensitive information for which special security clearance is required, the tribunal may have to take on trust submissions made by counsel about the generic content of the document. In some cases, tribunals have ordered that a log of politically sensitive documents be produced in the same fashion as privilege logs are sometimes produced.257 However, such logs have similar shortcomings as privilege logs.258

J.  Economy, Proportionality, and Fairness

9.2(g) considerations of procedural economy, proportionality, fairness or equality of the Parties that the Arbitral Tribunal determines to be compelling.

12.308  Article 9.2(g) of the IBA Rules states expressly that the Tribunal may exclude evidence from the record or production for reasons of ‘procedural economy, proportionality, fairness or equality of the Parties’ that the tribunal determines to be ‘compelling’.

12.309  Achieving an ‘efficient, economical and fair’ process is one of the principles underpinning the IBA Rules and is expressly stated in Preamble 1 to the IBA Rules.259 Consistent (p. 484) with this, Article 9.2(g) provides express grounds for excluding evidence from the record or production on this basis, as well as for considerations of proportionality. It is described in the Commentary on the IBA Rules as a ‘catch-all provision’ intended to assure procedural economy, proportionality, fairness, and equality in the case. Although reflected in the principle stated in Preamble 1, the provision at Article 9.2(g) adds teeth by making these considerations an express basis for the exclusion of evidence from the record or production. The same principle is emphasized again at Article 9.3(e) in relation to considerations of privilege.

1.  Economy and Proportionality

12.310  Procedural economy and proportionality are, in reality, two sides of the same coin. Both of these considerations are directed at ensuring an efficient and economic arbitration, taking into account both the financial or commercial value of the matters in dispute and its complexity.260 The value of a piece of evidence—in terms of its relevance and materiality to outcome—may be weighed by a tribunal against the cost, delay, and burden associated with its provision or production.261

12.311  The amount at stake is normally a good starting point to assess the proportionality of costs likely to be incurred. If the tribunal is dealing with a claim for $1 million, it may well be disproportionate to order substantial production of documents if the costs of production would be a significant percentage of the claimed amount. However, although the amount in question is a good starting point, it is not always conclusive. For example, it may be a ‘bet the company case’, in which the entire business of one of the parties rests on the outcome of the dispute, or there may be a series of similar contracts between the same parties and the outcome of the arbitration will be regarded as a precedent by reference to which the parties may be able to address the same issue on those other contracts. As mentioned, the potential probative value of the evidence sought must also be considered.

12.312  Georg von Segesser, one of the members of the committee responsible for drafting the IBA Rules, notes that different tribunals may have different perspectives on an assessment of proportionality and economy. In relation to issues of document production he states that:

Proportionality and economy will be factors that most likely will be applied differently by arbitrator panels depending on their backgrounds and practice, e.g. a tribunal with arbitrators practising as lawyers in the U.S. may be less restrictive than a Swiss panel, and common law practitioners’ perception of procedural economy in the context of document production may differ from that of practitioners in civil law jurisdictions.262

(p. 485) In our experience this is correct. Depending on the facts, assessment of what is considered to be reasonable and proportionate may vary significantly between tribunals made up of different arbitrators with varying backgrounds and viewpoints.

12.313  The ICC Task Force on E-Discovery contains an express recommendation that proportionality be taken into account in determining the scope of document production,263 the object being to achieve a balance between the benefits of production and the burdens associated with it. The report produced by that Task Force states:

If the arbitrators are satisfied that the document or category of documents sought is sufficiently identified, relevant and material and all other applicable criteria for the production of documents are met (in particular, pursuant to the IBA Rules of Evidence or generally accepted ‘best practices’), they should then consider whether the requested production would be likely to impose an unreasonable burden on the producing party.

This process requires arbitrators to consider the balance between the likely benefits of production to parties and arbitrators and the potential costs, delay and other burdens that the production exercise may entail. It requires consideration of the specific circumstances of the case at hand. Parties and arbitral tribunals therefore require a degree of flexibility in this respect.264

12.314  However, in no case should the objectives of proportionality and procedural economy be used by the tribunal as an excuse not to review a large volume of documents where this is required in order to make a proper determination on the dispute.265 Thus, in deciding whether to exclude a body of evidence from the arbitration—whether part of requested document production or otherwise—the tribunal must consider the issues to which the documents relate, weigh the arguments on production, and balance the competing considerations as best it can.

2.  Fairness and Due Process

12.315  Considerations of fairness and equality are concerned with issues of due process. In addition to the principle of fairness stated at Preamble 1 of the IBA Rules, a tribunal will be required by the majority of national arbitration laws and institutional rules to ensure that the arbitration process is fair to both parties. This topic is discussed further in Chapter 2 paras 2.7–2.24.

12.316  The Commentary on the IBA Rules makes clear that considerations of fairness under Article 9.2(g) (or indeed any of the other matters mentioned in that provision) may (p. 486) have direct application to objections arising under any of the grounds listed at Article 9.2(a)–(f).266 Article 9.3 is addressed in tandem with Article 9.2 (b) at paras 12.125–12.241.

K.  Confidentiality Protection

9.4. The Arbitral Tribunal may, where appropriate, make necessary arrangements to permit evidence to be presented or considered subject to suitable confidentiality protection.

1.  Introduction

12.317  Article 9.4 allows a tribunal to arrange matters so that evidence of a confidential nature may be introduced into the arbitration subject to protections designed to prevent unnecessary disclosure or dissemination. The discretion granted to the tribunal is a wide one. The tribunal may make such arrangements where it considers it ‘appropriate’ to do so. The nature of the arrangements contemplated by this provision is also unrestricted—the only requirements being that they be ‘necessary’ to permit the evidence to be used.

12.318  Article 9.4 should be considered in conjunction with Article 3.13 of the IBA Rules, which states a general principle providing for the confidentiality of documents introduced into the arbitration. The parties may also wish to consider any general obligation of confidentiality that may exist in the underlying arbitration agreement or in applicable institutional rules267 or national arbitration laws.268

(p. 487) 12.319  Article 3.13 states that:

Any Document submitted or produced by a Party or non-Party in the arbitration and not otherwise in the public domain shall be kept confidential by the Arbitral Tribunal and the other Parties, and shall be used only in connection with the arbitration. This requirement shall apply except and to the extent that disclosure may be required of a Party to fulfil a legal duty, protect or pursue a legal right, or enforce or challenge an award in bona fide legal proceedings before a state court or other judicial authority . . .269

12.320  It goes on to provide that ‘The Arbitral Tribunal may issue orders to set forth the terms of this confidentiality’. Thus, for example, a tribunal may issue an order—perhaps included in its first procedural order— setting out a protocol by which any confidential materials are to be identified or processed. If the subject matter of the dispute or the industry sector in which the parties operate is one where sensitive or highly valuable commercial information is likely to be generated, there may be good reason to anticipate issues of confidentiality. If the tribunal does make such an order, application of Article 9.4 must be considered in tandem with whatever arrangements have already been agreed or ordered. Article 3.13 is dealt with in greater detail in Chapter 6 paras 6.386–6.394.

12.321  Whatever general provisions may apply to an arbitration, where extremely confidential or sensitive evidence is in issue, parties will very often wish to secure additional targeted safeguards to reduce the risk of that evidence being disclosed outside of the arbitration proceedings. All of the major institutional rules confer a wide discretion on the tribunal in relation to the conduct of the proceedings which would cover the imposition of confidentiality protections on evidence presented were the tribunal to consider such protections to be necessary.270 The ICC Rules include an express provision to this effect, as do (unsurprisingly) the World Intellectual Property Organization (WIPO) Arbitration Rules.271

(p. 488) 2.  When Will an Arbitral Tribunal Make a Confidentiality Order under Article 9.4 of the IBA Rules?

12.322  The circumstances in which a confidentiality order may be made under Article 9.4 is a matter for the discretion of the tribunal. The tribunal can make such an order whenever it considers it ‘appropriate’ to do so.272

12.323  Parties to an arbitration tend to face confidentiality issues in one of two situations. The first is when they are requested to produce documents by their opponent. The second is in connection with evidence they wish to submit in support of their case (whether documentary, witness, or expert evidence).

12.324  Under Article 3.5 and Article 9.2(e) of the IBA Rules, a party may object to a request for production on grounds of commercial or technical confidentiality. Where it finds that there are compelling grounds to do so—a question of fact in each case—the tribunal is permitted under Article 9.2 to exclude that evidence or production altogether. Where the tribunal is not satisfied that the necessary threshold to justify exclusion has been met, it may nonetheless feel, or be sympathetic to an application by the relevant party, that measures should be implemented to protect the confidentiality of the relevant evidence.273

12.325  However, the power given to the tribunal under Article 9.4 is not limited to situations where confidentiality concerns have been raised as part of document production under Article 9.2. The tribunal may propose or agree to confidentiality safeguards whenever it considers it appropriate to do so. The material attracting such safeguards can include documents produced by one of the parties, written and/or oral witness evidence, proprietary materials used or relied on by experts in preparing their evidence, or premises and technology inspected during the course of the proceedings.

12.326  The nature of the content that may attract protection will include commercial confidences, confidential business records or models, samples, recipes, technical formulas, other forms of know-how, price calculations, sources of supply, distribution channels, agreements with suppliers and customers, trade secrets or proprietary information, and all forms of intellectual property.274 The nature of the relationships may also be (p. 489) relevant. For example, if parties to the arbitration are competitors or one supplies goods or services to the other, such factors may heighten the need to protect confidential information if there is a risk of market advantage being undermined by the disclosure of confidential information. Examples of evidence potentially justifying confidentiality protection extend to politically sensitive material or confidential information of institutions such as the World Bank or the IMF.275 Specific examples that have been reported to us include (in a dispute between competitors in the insurance business) contracts between one of the parties and its customers276 and business models or drawings or software customized to handle the trading and logistics of commodities.277

3.  The Nature of the Measures

12.327  The tribunal is empowered to make ‘necessary’ arrangements to permit evidence to be used with the benefit of ‘suitable’ confidentiality protection. At the heart of this provision is the wide discretion granted to the tribunal to tailor measures to the facts of an individual case: what is necessary—no more and no less.

a.  General approach

12.328  Each situation will be different. However, in each case, the tribunal must find the right balance between ensuring due process—in particular, that the restrictions around the evidence do not hamper the ability of the parties to prepare and present their cases, and to test the evidence of their opponent—and the need to accommodate legitimate confidentiality concerns. The point has been made elsewhere that, because claims to protection based on confidentiality alone will not engage application of a legal principle (for example, legal privilege), a tribunal has considerable flexibility as to the manner in which the issue can be resolved. As a result, the spectrum of measures adopted to deal with confidentiality is very broad and generally restricted only by the facts of the case.

12.329  For this reason, a tribunal will be very keen to establish as much consensus as possible when considering and formulating appropriate protection measures. The more that can be done with agreement of the parties—or even better, by encouraging direct agreement between the parties—the smaller will be the risk of a challenge based on the arrangements ordered to be made.

12.330  The power to attach safeguards is directed at permitting evidence to be both ‘presented or considered’. A tribunal will wish to consider and encourage measures facilitating party review or assessment of the evidence, and the presentation of that evidence at any evidential hearing that may take place.

(p. 490) 12.331  The arrangements that a tribunal will consider necessary to protect confidentiality will vary depending upon the facts of the case and the attitude of the parties and of the tribunal. Relevant factors will include the nature and form of the evidence; who among the parties, witnesses, experts, and legal teams will need access to the evidence in order to provide all parties with a reasonable opportunity to assess its nature and relevance; and how can the evidence be used or presented so as to best protect its confidential or sensitive character. Basic questions to be considered at the outset are:

  • •  the nature of the concern or risk;

  • •  at what stages in the arbitration the need to assess the evidence will arise;

  • •  what form of protection is most appropriate to address the problem while ensuring due process; and

  • •  how long the measures should remain in place.

12.332  The tribunal may, as a first step, invite or direct the parties to consult to see if agreement can be reached on a mutually acceptable form of confidentiality protection. Where a third party is involved, the tribunal may ask the party holding the evidence (or having the relationship with the third party) to engage in good-faith negotiations to obtain the third party’s consent to the evidence being used. A form of order mentioned elsewhere provides that the respondent should ‘negotiate production of the document with the third party. Should the third party not agree to production, the respondent is ordered to produce a letter from the third party to this effect’.278

12.333  Whether confidentiality concerns are dealt with by way of confidentiality agreements between the parties or protective orders issued by the tribunal, individual confidentiality undertakings are likely to be required from any individual permitted to see the confidential information, whether it be an employee, fact witness, technical expert, or counsel. This in itself may call for some form of negotiation or request by the parties to secure these undertakings.

b.  Possible measures

12.334  Possible confidentiality measures that may be agreed or directed are diverse in nature limited only by the ingenuity of the tribunal and the parties. Even where the same mechanism is chosen in different cases, the drafting of the agreement or order will need to be carefully tailored to the particular circumstances of the dispute.

12.335  Commonly used mechanisms include the following:

  • •  Redaction

  • •  Synopsis

  • •  Single location review

  • (p. 491) •  Confidentiality circles

  • •  Confidentiality adviser

i.  Redaction

12.336  Redaction of documents is a straightforward means of protecting confidential material and its use is commonplace in arbitration. The confidential parts of a document are simply excised from the copy of the document produced. An obvious example is minutes of board meetings containing confidential material on different topics, only one of which is relevant to the arbitration. Redacting material related to the other topics may very often be appropriate.

12.337  As has been noted elsewhere, redaction of truly irrelevant material does not intrude on due process since neither party is being denied access to material that may affect the case. However, where the broad subject matter of a document is known but there is a dispute as to its relevance and materiality, redaction may not be appropriate—to deny a party access to potentially material evidence engages issues around the ability of each party to present its case. Such circumstances may give rise to a need to review proposed redactions against the originals so as to assess whether redaction is an appropriate measure to adopt. This review might be done by the tribunal, and possibly ‘counsel only’ for each party, subject to provision by counsel of confidentiality undertakings. Another option is for the tribunal to delegate the selection of those parts to be redacted to a ‘confidentiality’ expert (see 6.263-6.280).279

ii.  Synopsis

12.338  Provision of a synopsis of key elements of the content of a document is a variation on redaction and can be useful in appropriate circumstances. In one ICC arbitration in which the parties had agreed that the arbitral tribunal could take into account relevant provisions of the IBA Rules, the claimant requested production of contracts that the respondent had concluded directly or indirectly with designated customers. The contracts formed the basis of the claimant’s claim for commission from the respondent. The respondent objected to production on grounds that ‘disclosure as requested . . . would violate confidentiality of Respondent’s contracts with third Parties and legitimate interest of Respondent for “non-disclosure and secrecy” of its commercial and contractual practices’. In order to protect the respondent’s concerns over confidentiality of its commercial interests and practices, the tribunal decided not to compel the respondent to produce a copy of the contracts, but only a list containing the date of the contract, the subject matter of the contract, the original contract price (and any variation), payments received, and payments pending or anticipated.280

(p. 492) iii.  Single location review

12.339  Another possibility is to restrict inspection of documents to a single location with no right to take copies, notes, photographs, or other form of record.281 It is suggested that this solution may be used where the primary goal is to reduce the risk of dissipation of the information. It is often combined with the use of a confidentiality ‘club’. An example mentioned elsewhere concerns a dispute involving the review of industrial designs. The tribunal ordered the setting up of a data room for inspection of the relevant information under the supervision of an expert.282

iv.  Confidentiality club

12.340  Another measure frequently used in arbitration is to restrict access to the confidential material to selected individuals. The narrower the ‘club’, the greater the risk of infringing due process. The wider the club, the weaker the protection afforded in respect of the confidential material.283

12.341  In theory, it would be possible for the confidential material to be disclosed only to the tribunal.284 However, it is difficult to see how such a step would be consistent with due process. Both the tribunal and the producing party would have the opportunity to see the material while the other party would be denied such access. It would be difficult for the other party to challenge or test the evidence effectively.

v.  Counsel- or expert-‘only’ review

12.342  Restricting access to legal counsel and the tribunal may be appropriate depending upon the facts of the case. Under this arrangement, outside counsel will sign a confidentiality agreement by which they agree not to disclose the relevant material to third parties, including their own clients.285

12.343  The potential advantage of this approach is that, despite its confidentiality, the relevant material can still be included in the development of a case strategy. The disadvantage is that, in many cases, without counsel being able to seek instructions on the material, the evidence cannot be usefully challenged.286 For example, the evidence in question may be technical evidence that does not lend itself to proper assessment without input from the client or expert, thereby hampering preparation of the case. Other commentators highlight similar shortcomings in this approach.287

12.344  Another possibility in appropriate circumstances is for the confidential information to be shared only with the experts for each the parties. However, similar difficulties to (p. 493) those identified above in relation to ‘counsel-only’ review may arise when access is limited to the tribunal and the relevant discipline of expert on each side. The experts may have the knowledge to assess technical evidence but the use that can be made of that assessment is hindered if the expert cannot consult with counsel to facilitate challenge to the evidence thereby (arguably) hindering a party’s right to be heard. A possible solution may be to extend access to both counsel and the appropriate discipline of expert. This approach may be appropriate where the disputing parties are competitors who have concerns about providing their rival with access to sensitive commercial material.

12.345  A further possibility, where necessary, is to extend the confidentiality ‘club’ to key party representatives—for example, in-house counsel, an employee with ‘hands on’ knowledge of the facts in issue, or a client technical specialist. Who should be included in the club will depend very heavily on the nature of the dispute.

12.346  With only one exception, all respondents to a recent survey on use of the IBA Rules288 had direct experience of protective measures being used in arbitration. Redaction and the use of confidentiality clubs appear to be widely used regardless of nationality or jurisdiction. Respondents from France reported one example of redaction where the tribunal had given the claimant a week to make proposals about paragraphs to be redacted for reasons of business secrecy and/or proprietary information before ruling on the objection. Spanish respondents reported another case in which the tribunal reviewed the original documents against the proposed redactions and then issued a ruling confirming the appropriateness of certain redactions and requiring the deletion of others.

12.347  Spanish respondents also cited a number of examples of single location examination of confidential documents—one arrangement permitted documents to be inspected by counsel at the arbitration room during a fixed two-hour window; another involved the setting up of a special data room with attached secrecy and access conditions. Respondents from Spain and Argentina reported orders by an arbitral tribunal permitting tribunal-only review of documents.

4.  Confidentiality ‘Expert’

12.348  There may be circumstances where, despite concerns around due process, the tribunal accepts that it would not be appropriate to allow any member of the tribunal or anyone in the parties’ teams (including counsel) to have access to confidential or sensitive information. One possible approach in these circumstances is to appoint a confidentiality ‘expert’.289 Depending on the nature of the issue to be addressed, the expert may be appointed under Article 3.8 or Article 6 of the IBA Rules.290 However, because of the danger of challenge to the process on the basis that the tribunal has improperly (p. 494) delegated its powers, it is important that such arrangements are formulated with care. For obvious reasons, it will become even more desirable for the tribunal to try to obtain agreement from the parties on the precise arrangements to be put in place.

12.349  In one ICC arbitration concerning a technology licence agreement in the defence and security industry, reliance was placed by both parties on extremely sensitive evidence that each party refused to disclose to the other party. The solution proposed by the tribunal, and accepted by the parties, was the appointment of a ‘third-party neutral’ to collect the evidence, review the sensitive information, and answer factual questions from each party, and from the tribunal. As with a tribunal-appointed expert, the parties (and the tribunal) had the opportunity to comment on the third-party neutral’s report, but any questions over access to sensitive information were to be referred to the tribunal for decision.291 Where parties have expressly agreed to such an approach and it is therefore—in essence—a ‘carve-out’ from the matters put before the tribunal for determination, we see no problem (in principle) with such an arrangement.

5.  Ancillary Matters

12.350  Even when a primary protection mechanism has been devised there are a number of ancillary questions that may need to be addressed. For example, these may include defining the nature and scope of the material subject to the protective measures, deciding how confidential materials are to be referred to in submissions and witness/expert evidence and award, how oral evidence relating to those matters is to be presented and challenged, and how confidential or sensitive documents are to be provided for in hearing bundles or for cross-examination. These are practical matters that need to be considered in order to ensure that the arbitration runs smoothly.

12.351  One approach to redacted documents prepared for the arbitration is to file two versions of the documents—a redacted and a non-redacted version—with the latter being made available only to the confidentiality ‘club’. As to hearing bundles, in our experience, confidential documents will often be placed in a separate bundle with each page marked ‘confidential’ and made available only to members of the relevant confidentiality ‘club’. If a witness or expert is to be cross-examined on that material, special directions may have to be given as to who may remain in the hearing room during the examination and a redacted version only of the transcript provided to those not in the confidentiality club. An order made in one ICC arbitration provided that:292

Whenever any Particularly Sensitive Material [previously defined] or the information contained therein is to be used in connection with the giving of testimony before (p. 495) the Tribunal (a) only persons who are authorised under paragraph 3 of this Order to have access to Particularly Sensitive Material shall be in attendance, and (b) no witness shall be permitted to review the portions of an transcripts or Documents containing Particularly Sensitive Material without first executing a copy of [an agreement to be bound by a confidentiality order].

12.352  In another case under the 1998 ICC Rules, the arbitral tribunal ordered that no one outside the hearing room should be allowed simultaneous access to the hearing transcript. In another matter, the arbitral tribunal issued an order relating to the confidentiality of oral testimony.293

12.353  Special arrangements may also be necessary in the more unusual situation where the identity of the witness, as well as the content of her or his testimony, needs to be kept confidential.294

12.354  A further issue is the question of how long any confidentiality obligation should remain in place and what should happen to confidential evidence, and any copies or related working notes made, after the arbitration proceedings are closed. Applicable data protection regulations may also be relevant.295 When formulating confidentiality protections the tribunal and the parties should give consideration to these matters. The provision made will generally provide either for return or destruction of the material but the point of contention between the parties may be the timing of such steps. For example, the party required to return or destroy may wish to keep the materials for a certain period after the arbitration is completed for reasons connected to potential enforcement or challenge proceedings.296 Given the uncertainty that may exist about the nature of timing and forum for such action, drafting to take account of such matters can be complex. Where fixed deadlines for return or destruction are imposed it is suggested that a useful approach may be to stipulate different periods of time for different categories of recipient of the confidential information – for example, that the parties should return/destroy the confidential information more or less immediately but counsel should be permitted to retain it for a longer period.297

(p. 496) 12.355  Securing enforcement of confidentiality obligations can also raise difficult issues in themselves, but those issues can, to some extent, be addressed by including enforcement provisions in the relevant confidentiality orders.298

12.356  Michael Hwang has developed a model confidentiality order (the ‘Hwang Model Procedural Order on Confidentiality’). Among other matters, this includes a draft definition of the ‘confidential information’ to be protected, the confidentiality obligation itself, exceptions to the obligation and a detailed procedure for giving notice of an intention to rely on an exception, an express statement as to duration, and provision for the Court of the seat of arbitration to perform the role of tribunal under the order in the event of the arbitrator/s becoming functus officio.299

L.  Adverse Inferences

  1. 9.5.  If a Party fails without satisfactory explanation to produce any Document requested in a Request to Produce to which it has not objected in due time or fails to produce any Document ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal may infer that such document would be adverse to the interests of that Party.

  2. 9.6.  If a Party fails without satisfactory explanation to make available any other relevant evidence, including testimony, sought by one Party to which the Party to whom the request was addressed has not objected in due time or fails to make available any evidence, including testimony, ordered by the Arbitral Tribunal to be produced, the Arbitral Tribunal may infer that such evidence would be adverse to the interests of that Party.

1.  Introduction

12.357  Articles 9.5 and 9.6 make express provision for the drawing of adverse (also known as negative) inferences by a tribunal in circumstances where evidence has been withheld by a party to the arbitration. The mechanism of adverse inference is considered at 12.53-12.56 in the broader context of assessment by the tribunal of the weight of available evidence pursuant to its powers under Article 9.1 of the IBA Rules.

(p. 497) 12.358  When considering the use of adverse inference by a tribunal, it is important to bear in mind that, even with the assistance of the local courts,300 it is not always possible to guarantee compliance with a tribunal order for the production of evidence. This is in contrast to the position prevailing in relation to national courts, who have coercive powers to compel performance of court orders. Given these practical limitations, it is suggested that the use of adverse inferences is an essential part of the arbitrator’s toolbox.301

12.359  Each of Article 9.5 (documents) and Article 9.6 (other relevant evidence, including testimony) empower the tribunal to ‘infer that such [document or other relevant evidence, including testimony] would be adverse to the interests of [the non-producing] Party’.302

12.360  Absent a valid excuse, it may be reasonable (if not logical) to assume that the withheld information is adverse to the interests of the party controlling it and the tribunal may form a view on the kind of information or evidence that is being withheld.303 However, the mechanism of adverse inference must be used appropriately and cautiously. Articles 9.5 and Article 9.6 understandably contain no guidance on the nature of the adverse inference to be drawn. As mentioned, they merely state that the tribunal may ‘infer that such [document/evidence] is adverse to the interests of the [defaulting] Party’. The appropriate adverse inference (if any) to be drawn will be case specific—the drawing of a conclusion from known or assumed facts. Those facts must be identified and the precise inference that can be drawn from them must be carefully formulated. We suggest that it is up to the requesting party to explain to the tribunal the precise nature of the adverse inference it asks to be drawn and why such an inference is a reasonable one.

2.  Conditions for Adverse Inferences

12.361  Articles 9.5 and 9.6 set conditions for the drawing of adverse inferences by the tribunal:

  1. (a)  The document or evidence in question was requested by a party or ordered by a tribunal;

  2. (b)  No objection to production has been raised or, if it has, the objection has been overruled by the tribunal and an order for production made;

  3. (c)  The producing party has failed to produce the document or other evidence requested or ordered; and

  4. (d)  There has been no satisfactory explanation for the failure to produce by the party in default.

(p. 498) 12.362  The first three factors are straightforward matters of fact that should not be controversial. The last factor may require more detailed consideration.

12.363  It will be a matter for the tribunal’s discretion as to whether any explanation provided by the defaulting party for the non-production is considered satisfactory. The reasons given will be case specific and will have to be assessed by a tribunal on their merits, and sometimes taking into account prior issues of default or conduct by that party.

12.364  One obvious possible explanation for non-production is that the party said to be in default does not have the relevant document or other evidence. It is suggested that tribunals should only resort to use of adverse inferences if they are confident that the party in default has the evidence but is refusing to produce it.304

12.365  Similar issues may arise where the evidence in question is held by an associated company of the party in default and there is a dispute as to whether or not the party has access to it. The question of whether, in such circumstances, a document is in the possession, custody, or control of a party to the arbitration is addressed at Chapter 6 paras 6.165–6.198. However, if the tribunal concludes that the document is available to the defaulting party, if it is not produced, then there seems to be no reason why a tribunal should not consider drawing an adverse inference. Sharpe supports this view:

Occasionally, however, a party’s purported inability to produce evidence is pretextual, as the evidence sought might well be in the hands of a parent, subsidiary or related company. In such cases, the arbitral tribunal may determine that the requested documents are in fact accessible to the requested party, and may draw appropriate inferences from their non-production.305

12.366  Of course, regardless of what the tribunal’s initial conclusion may have been on the issue of ‘possession, custody or control’, if (for whatever reason) the third party proves uncooperative in permitting access to the document, and this can be demonstrated to the satisfaction of the tribunal, the pre-conditions for use of adverse inferences set out in Article 9.6 are unlikely to be met.306

12.367  Furthermore, while it may be appropriate to draw adverse inferences where it is established that the party had a document but deliberately destroyed it to avoid production,307 some tribunals may require that it first be established that the defaulting party had an obligation to preserve evidence and/or was aware of that obligation.308

(p. 499) 3.  The Nature of the Inference to Be Drawn

12.368  Even if a tribunal is persuaded that, as a matter of principle, the drawing of adverse inferences is justified, it is not an easy task to identify what particular inference can or should be made. The content of the document or other evidence withheld may not be known and the precise subject matter in relation to which an adverse inference might be drawn not readily apparent. Even where, in a case of withheld oral testimony, the witness has previously provided a witness statement, the position is difficult. In certain circumstances it might be inferred that the witness has failed to attend an evidential hearing to give oral testimony because, under cross-examination, that evidence will be different to that contained in the witness statement, but in what respects?

12.369  One helpful illustration of the difficulty of formulating an appropriate adverse inference is a dispute involving a construction delay claim where the contractor refuses to produce all construction schedules. Is it reasonable for the tribunal to draw an adverse inference that the contractor breached the requirement to maintain scheduling records or, alternatively, would it be fair for the tribunal to infer that the contractor concealed from the owner the fact that the project would be delayed?309 A further illustration is that described below:

[W]hen a requesting party pretends that its opponent has an internal document (e.g. board minutes) that contains an acknowledgement of its debt to the requesting party, what adverse inference can a tribunal draw from the debtor’s refusal to produce the document? It will probably infer that the debtor acknowledged that it owed something to the requesting party. But it will be unable to infer whether the acknowledgement was for the total amount of the debt or only a part thereof, whether it was an unconditional acknowledgement and whether any modalities were linked to the acknowledgement.310

12.370  There is a dearth of guidance as to how a tribunal should approach the formulation of adverse inferences, most likely because of the necessity for such inferences to be case specific. One of few statutory provisions that explicitly authorizes arbitrators to draw negative inferences is the English Arbitration Act 1996, s 41(7)(b), which states that if a party fails to comply with a peremptory order,311 the tribunal may ‘draw such adverse inferences from the act of non-compliance as the circumstances justify’.312 However, that provision is also very general in terms and simply ties the inferences to be drawn to the circumstances of the case.

(p. 500) 12.371  As a matter of practice, the drawing of adverse inferences can be problematic for a tribunal even in relation to fact evidence. In relation to expert evidence, the position is even more difficult because the issues upon which experts are asked to opine are rarely binary in nature. On the rare occasions when expert evidence is withheld, it may be impossible to define the appropriate inference that might be drawn from the withholding of that evidence.

12.372  It is been suggested that any inferences drawn must be reasonable,313 but other authors suggest that ‘reasonableness’ is not a helpful guide to determining precisely what inferences may be justified.314

12.373  Of course, there are circumstances where it is possible to make a reasonable case for the drawing of a particular inference. For example, in a minority shareholder dispute, the majority shareholder may claim that the terms of a particular related-party transaction, which the majority shareholder caused the company to enter into without approval of the minority shareholders, was beneficial for the company to which the dispute relates, but refuses to produce a category of documents that might verify this. In such a case, the tribunal might infer that the transaction was not beneficial for the company and, therefore, that it had a negative effect on the company’s value. This conclusion is justified and reasonable because the evidence can only produce a binary result—the transaction is either beneficial, or it is not. Had it been beneficial, the document would have been produced. As it has not been produced, the tribunal is entitled to infer that the documents would prove that the transaction was not beneficial to the company. What the tribunal cannot do, in the absence of other evidence, is to make any inference as to the measure of financial damage caused to the company as a result of the transaction.

12.374  It is right that a tribunal should consider very carefully what inferences it is possible to draw from the non-production of a particular piece of evidence. However, it is also important for the tribunal to have in mind the prejudice that may be caused to a party to the dispute where its opponent deliberately withholds material evidence helpful to that party’s case. The point has been made that the more reluctant tribunals are to draw negative inference in appropriate cases, the more incentive there may be for parties to act in bad faith.315

4.  The Weight to Be Attached to Adverse Inferences

12.375  Adverse inferences do not remove the need for other evidence relating to the same subject matter. The appropriate adverse inference (if any) is the drawing of a conclusion from known or assumed facts. Those facts must be identified and the precise inference (p. 501) that can be drawn from them must be carefully formulated. A failure to produce documents or other evidence does not shift the burden of proof on to the defaulting party316 and any resulting adverse inference is likely to carry less weight than other direct evidence.317 Vera van Houtte describes the position this way:

An adverse inference belongs to the category of indirect evidence. It is in fact a presumption that a party that presumably has control over certain evidence does not produce it because it is harmful to its case. An arbitrator who, as a fact-finder, makes an unfavourable deduction based on a party’s failure to produce evidence that is favourable to it accepts indirect evidence and cannot as such give it the same weight as direct evidence.

Because of its reduced evidential weight, the adverse inference in itself is insufficient evidence to justify an intime conviction or to create a ‘preponderance of evidence’. Its value is relative and depends on the existence and weight of other evidence and its consistency with that other evidence.318

12.376  Other authors have expressed similar views:

To the extent that a point is proved through the submission of an inference, the tribunal still must determine whether the direct evidence used as a foundation for the inference is probative and credible—i.e., it must determine whether the evidence states what the party relying upon it submits it does and must further determine whether the evidence is credible. This part of a party’s submission remains subject to the same standard of proof as before.319

12.377  However, while it is correct that adverse inferences belong to the category of indirect evidence, and may therefore have less weight than direct evidence, they still have evidential value. There are many examples of facts being established on the basis of indirect evidence, particularly where there is a large body of such evidence pointing in the same direction.

12.378  That said, the tribunal will still have to decide the case on the basis of the totality of evidence before it. If the inference sought is inconsistent with the available documentary record, the tribunal should refuse to draw the inference.320 In addition, a tribunal may (p. 502) refuse to draw negative inferences when the non-defaulting party has itself not done its best to produce corroborative evidence of the inference sought.321

12.379  In addition, tribunals are generally reluctant to hold that a fact is proven by negative inferences alone, without being corroborated by other (even if indirect) evidence.

5.  Due Process

12.380  Attempts are sometimes made to set aside an award in circumstances where it is alleged that a tribunal has either drawn negative inferences it should have not drawn, or has not drawn inferences where it was appropriate to do so. Courts are generally averse to setting aside an award on this basis because findings of fact and the weighing of evidence are matters for the tribunal.322

12.381  However, in some circumstances, there may be justified criticism of procedural steps relating to a tribunal’s decision on the use of adverse inferences. It is important that due process is followed, and that the parties—in particular, any party threatened with adverse inferences—has a fair opportunity to make submissions on that point to the tribunal. In order to ensure due process, it is suggested that a tribunal should make clear the consequences of non-compliance with an order for production of documents or other evidence, including the fact that the adverse inferences may be drawn if the evidence is not produced.323 The defaulting party may not otherwise fully appreciate the need to produce the document or other evidence in order to remove the grounds for an adverse inference being drawn. The unsatisfactory nature of such a situation will be heightened when a document in question actually contains evidence that disproves the inference that is later requested to be drawn. For example, in the example described in 12.369, the mere production of a complete set of scheduling records will answer an allegation (and inference sought to be drawn) that the producing party was in breach of an obligation to maintain such records.324

12.382  Consistent with these considerations, the risk of adverse inferences being drawn is highlighted by some tribunals in document production orders. A number of such orders in ICC cases have been found to include such warning.325 In other cases, the (p. 503) warning may be given by way of a peremptory order making clear the consequences of default. Where the tribunal has invited the non-defaulting party to make submissions on the nature of the inference that it is said can be drawn from the default, the defaulting party should also be given an opportunity to respond. Whether a failure to warn the relevant party will provide grounds on which to challenge the tribunal or the award will depend very much on the facts of the case and the significance of any inferences drawn to the outcome of the case. We think the cases in which such a challenge is warranted will be relatively rare.326

6.  Examples of Adverse Inferences

12.383  Sourgens, Duggal, and Laird suggest that tribunals frequently make findings of facts by means of inferences, particularly when documents are scarce and witness evidence is self-serving.327 In our experience, tribunals are cautious about drawing an adverse inference and, when they are prepared to draw one, they will often avoid placing significant reliance on it in the award. Unsurprisingly, it is difficult to find published awards where the nature and effect of adverse inferences is considered in any detail. This does not mean tribunals do not regularly draw adverse conclusions when weighing the evidence;328 rather, simply that they prefer not to say so explicitly and tend to rely on such inferences in conjunction with other supporting evidence.329

12.384  A helpful example of adverse inferences can be found in NAFTA arbitration case Feldman,330 where the claimant alleged that Mexico improperly refused to rebate excise taxes applied to his company while extending these benefits to Mexican companies in the same position. The tribunal held that the claimant ‘established a presumption and a prima facie case that the claimant had been treated in a different and less favourable manner than several Mexican-owned cigarette retailers, and the respondent had failed to introduce any credible evidence into the record to rebut that presumption.’331 The tribunal concluded that, had evidence withheld by Mexico been favourable to its case, Mexico would have produced it. On that basis the tribunal drew a negative inference that the claimant had been discriminated against (although one arbitrator dissented).

(p. 504) 12.385  In Riahi, the claimant struggled to prove ownership of 510 bearer shares in a company involved in trading steel. The claimant invited the tribunal to draw adverse inferences from the failure of the respondent to submit any corporate records of the company to contradict the claimant’s ownership of shares. The claimant invited the tribunal to infer that the records, if produced, would correspond to a list of shareholders filed by the claimant. Although the tribunal noted the possible difficulties that an owner of bearer shares can face in proving ownership of shares without a share certificates, the tribunal in this case found that the inference that it was asked to draw was not an appropriate one on the facts of the case. It found that:

With respect to the Claimant's request that the Tribunal draw an adverse inference from the Respondent's failure to produce Khoshkeh’s share register, the Tribunal notes that the matter in respect of 510 shares concerns bearer shares and that Iranian law does not require that transfers of bearer shares be entered into share registers of the companies. In addition, Article 10 of the Articles of Association of Khoshkeh provides that only the transfer of registered shares requires the approval of the board of directors and recording in the share register. The Tribunal therefore is not convinced that the share register or other requested corporate records of Khoshkeh would show that the Claimant owned these 510 bearer shares and that the transfer of those shares from her spouse took place before his shares were expropriated. Accordingly, the Tribunal finds no need to consider the issue of whether the Respondent has complied with the relevant Tribunal Orders as far as Khoshkeh is concerned.332

12.386  However, a dissenting arbitrator questioned this conclusion against the background of a repeated failure by the respondent to produce the relevant documents and suggested that a failure to draw negative inferences left the claimant with no effective remedy:

[T]he Award arbitrarily denies the Claimant any ability to have satisfied this extraordinary burden of proof. Correctly, the Tribunal ordered the Respondent, not once, but twice, on 18 November 1994 and again on 18 May 1995 (five years and more prior to the Hearing), to produce, inter alia, the share registers (and some related documents) of each of the six corporate entities it had expropriated in which the Claimant alleged an interest, as well as financial statements and audit reports of five of those six entities. (Footnote omitted) [ . . . ]

The Respondent never denied possession of the requested records; indeed, such possession was confirmed by its selective inclusion in later written submissions of an outdated portion of the share register of one company (Tarvandan) and certain financial records of others (Khoshkeh and Iran Bohler). The twice-ordered production, (p. 505) however, was never made. When the Tribunal by Order of 10 July 1995 deferred until an unspecified ‘later stage of the proceedings’ any decision on ‘the question whether the Respondent has complied with the Tribunal's [production] Orders’ (which it clearly had not), the Claimant requested that the Tribunal draw the usual inferences against the Respondent and in her favor establishing her claimed ownership interests, (footnote omitted) a request repeated thereafter with both frequency and force. Quite evidently, the Claimant, though able to make out a prima facie case, was in no position to prove her case ‘beyond a reasonable doubt’ without such inferences, for the drawing of which she had satisfied all applicable criteria.333

M.  Costs Sanctions for Lack of Good Faith

9.7. If the Arbitral Tribunal determines that a Party has failed to conduct itself in good faith in the taking of evidence, the Arbitral Tribunal may, in addition to any other measures available under these Rules, take such failure into account in its assignment of the costs of the arbitration, including costs arising out of or in connection with the taking of evidence.

1.  Introduction

12.387  Article 9.7 enables a tribunal to take a party’s failure to act in good faith into account when allocating costs of the arbitration.

12.388  Preamble 3 states that the taking of evidence shall be conducted on the principle that each party shall act in good faith.334 That statement might be read as merely aspirational were it not for Article 9.7 of the IBA Rules,335 which makes clear that a party’s failure to act in good faith may attract a financial sanction, thereby confirming the existence of an obligation to act in good faith.336

(p. 506) 2.  Assignment of Costs

12.389  Article 9.7 of the IBA Rules makes express provision for a tribunal to impose costs sanctions where a party fails to conduct itself in good faith in the taking of evidence. That provision states:

If the Arbitral Tribunal determines that a Party has failed to conduct itself in good faith in the taking of evidence, the Arbitral Tribunal may, in addition to any other measures available under these Rules, take such failure into account in its assignment of the costs of the arbitration, including costs arising out of or in connection with the taking of evidence’.337

3.  The Scope of the Power to Assign Costs

12.390  The emphasized words in the above extract require close attention.

12.391  The costs sanction provided by Article 9.7 relates only to a failure to act in good faith ‘in the taking of evidence’. This is consistent with the nature and scope of the IBA Rules—namely, the management of conduct relating to the taking of evidence.

12.392  However, the power to assign costs relates to the entire ‘costs of the arbitration’—ie the costs that may be assigned against a party that has failed to act in good faith are not limited to costs incurred in connection with the taking of evidence. This adds greater weight to the sanction and makes its practical application more straightforward.338

12.393  Martinez-Fraga has argued that giving a tribunal the express power to impose costs penalties for lack of good faith conduct ascribes to the arbitration process a public policy objective that it does not have.339 It has also been suggested that extending the potential costs sanctions to costs not arising out of the taking of evidence goes beyond the mandate of the IBA Rules.340 However, while these are valid points to make, these views may give insufficient weight to the internationally recognized duty of a tribunal to ensure a fair and efficient process, a principle that is widely reflected in domestic arbitration laws and institutional rules,341 and importantly, is enshrined in the IBA Rules themselves.342 Bad or obstructive conduct will nearly always involve wasted time and increased costs.

(p. 507) 12.394  Before imposing a cost sanction, the tribunal should satisfy itself that a party has indeed acted in bad faith.343 Issues may arise around whether counsel, or the party instructing them, is primarily responsible for the conduct in question.344 However, in each case, counsel will still be acting as agent or representative of his or her instructing party and the question of whether the conduct was driven by the client or by counsel will be irrelevant to the issue of whether a breach has arisen. However, the tribunal may consider it a relevant factor in deciding whether and how to sanction the conduct.

4.  Practical Examples

12.395  Whether a tribunal will impose a costs sanction in response to a failure by a party to act in good faith will depend upon the facts of the case, the nature of the conduct complained about, the history of the proceedings to date, and the views and attitudes of the particular tribunal. Each case will be different. Nonetheless, it is helpful for both parties and tribunals to consider what approaches and responses have been proposed and adopted in other cases.

12.396  We are aware of cases where a party has been penalized in costs in relation to the taking of evidence—in particular, in relation to document production. For example, in one LCIA case the tribunal felt it appropriate to increase the percentage of costs payable by a respondent by approximately 50 per cent to take account of that party’s poor conduct in relation to production of documents. The Commentary on the IBA Rules refers expressly to a failure to comply with an order to produce documents as rendering a party susceptible to an order under Article 9.7.345

12.397  Published ICC cases provide many examples of costs sanctions imposed for reasons of party conduct. Although the corresponding provision in the ICC Rules does not contain an express reference to a party’s failure to act in good faith, it does permit the tribunal to take into account all relevant circumstances and the extent to which each party has conducted the arbitration in an expeditious and cost-effective manner.346 The provision provides a basis for argument that a party has acted in bad faith and should be penalized in costs.

12.398  In one such case involving a dispute over the sale of manufacturing plant, although neither party had been completely successful in its claims, the tribunal ordered that the whole of the costs of the arbitration should be borne by one party. The tribunal’s decision was based on its view that the paying party had failed to act in good faith and (p. 508) should be penalized in costs.347 The tribunal listed the cumulative instances of default it had taken into account:

The defendant made none of the advance payments on costs which are required for the proceedings. Further, not only did it file its counterclaim belatedly, that is, only after the first draft of the terms of reference; it also refused to sign the terms of reference, which had been modified according to its wishes, notwithstanding a detailed explanation by the arbitral tribunal of the terms’ meaning and legal consequences, and it did not participate in the oral hearings although it had been given sufficient notice to appear. Further, it also contributed to unnecessary delay and confusion in the proceedings by appointing counsel at the last moment, that is, after the closing of the oral hearings and shortly before the expiry of the latest time limit for a statement concerning the minutes of the hearings; compounded by counsel’s renunciation to the mandate only a few days afterwards.348

12.399  Although in this case the incidents of delay and obstruction did not relate to collection and presentation of evidence, a similar approach might properly be taken when a party obstructs progress in the arbitration by persistent conduct undermining the effective presentation of evidence. For example, this may include the failure to identify all expert witnesses on whose testimony the party intends to rely with the intention to ambush or surprise the other party at a later date, raising objections to production of documents under Article 3.5 without a reasonable and good faith basis for doing so, and deliberately withholding production of documents that are known to exist and that fall within an order for production by a tribunal.349

12.400  On a wider interpretation, the obligation of good faith might also extend to the prohibition of conduct that undermines effective operation of the IBA Rules in achieving the provision of an ‘efficient, economical and fair process’, as required by Preamble 1. For example, this may include where a party, with the intention of causing delay or of increasing the other party’s costs, submits document requests that are intentionally burdensome, or produces a significant volume of documents with only peripheral relevance to the matters in dispute but which an under-resourced receiving party will have to review in order to establish this fact.350

12.401  In an ICC case under the IBA Rules, the losing respondent sought to obtain an award of costs based on alleged improper conduct relating to document production requests. (p. 509) The respondent argued that the claimant had submitted improper requests that did not comply with the IBA Rules—including some that had already been rejected by the tribunal; that the claimant had made assertions concerning the deficiency of the respondent’s document production that had necessitated a search by the respondent to demonstrate that available material had already been produced; that the claimant refused to provide un-redacted copies of key documents; and the necessity for the respondent to seek the tribunal’s intervention in order to obtain an adequate level of detail about the claimant’s claims of privilege.

12.402  The tribunal rejected the respondent’s claim. It said that, as the claimant had been the winning party, the starting point must be that the claimant should have its costs, thereby placing the onus on the respondent to demonstrate that there were facts justifying a departure from this position. On the facts of this case, the respondent had failed to do so. The tribunal appears to have concluded that the conduct relied upon was not unusual and that, where the claimant’s conduct was questionable, the respondent had not suffered any prejudice because the tribunal had taken steps to prevent this happening.351

12.403  The ICC Commission Report (Decisions on Costs in International Arbitration) provides further examples of conduct relevant to the taking of evidence that tribunals have taken into account when allocating costs, including, in some cases, an assessment of whether the parties acted in good faith. Cited examples of conduct giving rise to cost-shifting include a failure to reply to document production requests; withholding of evidence needed by another party; and obscuring factual and legal matters.352 (p. 510)


1  See: The IBA Arbitration Guidelines and Rules Subcommittee, ‘Report on the Reception of the IBA Arbitration Soft Law Products’ (International Bar Association, 2016) paras 46–48 <www.ibanet.org/Document/Default.aspx?DocumentUid=105d29a3-6261-4437-84e2-1c8637844beb> accessed 27 November 2018 (hereafter ‘2016 IBA Report’). It should be noted that the distribution of references to different provisions of the IBA Rules varies according to jurisdiction.

2  IBA Rules on the Taking of Evidence in International Commercial Arbitration 1999, Article 9.

3  IBA Rules on the Taking of Evidence in International Arbitration 2010, Articles 3.5, 3.7, 3.9, 3.10, 6.3, 7, 8.2, and 8.5 (hereafter ‘IBA Rules’) contain references to Article 9.2.

4  See Chapter 4 paras 4.10–4.56.

5  See SCC Rules, Article 31(1); DIAC Rules, Article 28.2; SIAC Rules, Rule 19.2; LCIA Rules, Article 22.1(vi); PCA Rules, Article 27.4; WIPO Arbitration Rules, Article 50(a); PRIME Finance Arbitration Rules, Article 27.4; ADR Institute of Canada (ADRIC) Arbitration Rules, Rule 4.19.4; Milan Chamber of Arbitration Rules, Article 25; Commercial Arbitration Centre of the Portuguese Chamber of Commerce and Industry Rules of Arbitration, Article 31.1; Madrid Court of Arbitration Rules of Arbitration, Article 29.3; DIFC–LCIA Rules, Article 22.1(vi); HKIAC Rules, Article 22.2; ICDR Rules, Article 20.6; NAI Rules, Article 26.1.. Interestingly, the ICC Rules do not contain a specific provision to the same effect. Article 25(1) of the ICC Rules simply provides that ‘The arbitral tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means’.

6  German Code of Civil Procedure (Zivilprozessordnung) 2013, s 1042.

7  Belgium Judicial Code 2016, Article 1700, para 3 states that ‘Unless the parties have agreed otherwise, the arbitral tribunal shall have discretion in the rules of evidence to be applied’.

8  Netherlands Code of Civil Procedure 2011, Article 1039(5).

9  See Gary B Born, International Commercial Arbitration (2nd edn, Kluwer Law Arbitration 2014) 2146–49 (hereafter ‘Born’). Born cites U.S. Turnkey Exploration, Inc. v PSI, Inc. 577 So2d 1131, 1135 (La App 1991), in which it was said that: ‘Unless a mode of conducting the proceedings has been prescribed by the arbitration agreement or submissions, or regulated by statute, arbitrators have a general discretion as to the mode of conducting the proceedings and are not bound by formal rules of procedure and evidence and the standard of review of arbitration procedures is merely whether a party to an arbitration has been denied a fundamentally fair hearing’.

10  Born (n 9) 2306–13. Born cites decisions of the United States Courts in which it has been said that ‘[a]rbitrators have broad discretion to make evidentiary decisions’ and that ‘arbitrators are not bound by rules of evidence’; see Int’l Chem. Workers Union v Columbian Chem. Co. 331 F3d 491, 497 (5th Cir. 2003); and Generica Ltd v Pharm. Basics, Inc. 125 F3d 1123, 1130 (7th Cir. 1997).

11  English Arbitration Act 1996, s 34.

12  Jeffrey Waincymer, Procedure and Evidence in International Arbitration (Kluwer Law International 2012) 750–51 (hereafter ‘Waincymer’).

13  IBA Rules (n 3) Preamble 1 and 3. See Chapter 2.

14  See further Waincymer (n 12). See also Chapter 4 paras 4.10–4.60.

15  Konstantin Pilkov, ‘Evidence in International Arbitration: Criteria for Admission and Evaluation’ (2014) Arbitration 147, 154 (hereafter ‘Pilkov’).

16  These are set out in IBA Rules (n 13) Article 9.2 and are addressed at 12.57– 12.316. See also Chapter 6 paras 6.76–6.146 on the meaning of ‘relevant to the case and material to its outcome’ for the purposes of Article 9.2(a).

17  IBA Rules (n 3) Article 3.3(b). See Chapter 6 paras 6.76–6.159.

18  IBA Rules (n 3) Articles 3.5 and 9.2(a).

19  See further Julian Lew, ‘Chapter 1. Document Disclosure, Evidentiary Value of Documents and Burden of Evidence’ in Teresa Giovannini and Alexis Mourre (eds), Written Evidence and Discovery in International Arbitration: New Issues and Tendencies (Kluwer Law International 2009). For a discussion of how this issue is treated in international arbitration, see Carol Mulcahy, ‘What Does it Mean? Contractual Interpretation in International Commercial Arbitration’ (2015) Dispute Resolution International 15. The standard of admissibility in civil law traditions is said to be lower than in common law jurisdictions; see Anna Kubalczyk, ‘Evidentiary Rules in International Arbitration: A Comparative Analysis of Approaches and the Need for Regulation’ (2015) 3(1) Groningen Journal of International Law 85, s IV (hereafter ‘Kubalczyk’). There are dangers in such generalizations, but certainly the common law approach may derive in part from a concern that certain types of evidence should be excluded because those who decide on the facts (traditionally, in those jurisdictions, a jury of lay people) should not be permitted to consider certain types of evidence for fear that they may attach undue weight to it (for example, hearsay evidence) or because certain interests need to be protected (for example, documents that are confidential in nature or protected by legal privilege).

20  Born (n 9) 2306–13.

21  ibid.

22  See further Pilkov (n 15) 150–51.

23  This topic is addressed at 12.31– 12.56.

24  ‘Extracts from ICC Case Materials on the Taking of Evidence with References to the IBA Rules’ (2016) 1 ICC Dispute Resolution Bulleting 127 (emphasis added). Waincymer (n 12) 792–800 notes that: ‘International adjudicatory bodies generally consider questions of weight in relation to all submitted evidence and do not wish to hear separate clams as to admissibility’.

25  ibid. The same point is made by other commentators. See, for example, Kubalczyk (n 19).

26  EDF (Services) Limited v Romania (Procedural Order No. 3, 29 August 2008) ICSID Case No. ARB/05/13 [29]–[38] (hereafter ‘EDF v Romania PO3’).

27  Anne Schlaepfer and Philippe Bärtsch, ‘A Few Reflections on the Assessment of Evidence by International Arbitrators’ (2010) International Business Law Journal 217 (hereafter ‘Schlaepfer and Bärtsch’), which references decisions 4A_362/2013 and 4A_448/2013 of the Swiss Supreme Court. For an example of a case where documents leaked online were admitted into evidence, see Caratube International Oil Company LLP and Devincci Salah Hourani v Republic of Kazakhstan ICSID Case No. ARB/13/13. This case is discussed at 12.30.

28  Brigitta John, ‘Admissibility of Improperly Obtained Data as Evidence in International Arbitration Proceedings’ (Kluwer Arbitration Blog, 28 September 2016) <http://arbitrationblog.kluwerarbitration.com/2016/09/28/admissibility-of-improperly-obtained-data-as-evidence-in-international-arbitration-proceedings/> accessed 4 December 2018.

29  This view was expressed by Cherie Blair QC; see Alison Ross, ‘Blair’s Two-Step Test for Illegally Obtained Evidence’ (Global Arbitration Review, 27 April 2017) <https://globalarbitrationreview.com/article/1140718/blair%E2%80%99s-two-step-test-for-illegally-obtained-evidence>accessed on 4 December 2018.

30  Unpublished decision of the tribunal in Caratube International Oil Company LLP v The Republic of Kazakhstan ICSID Case No. ARB/13/13.

31  See, also Alison Ross, ‘Tribunal Rules on Admissibility of Hacked Kazakh emails’ (Global Arbitration Review, 22 September 2015) <https://globalarbitrationreview.com/article/1034787/tribunal-rules-on-admissibility-of-hacked-kazakh-emails> accessed on 4 December 2018.

32  IBA Rules (n 3) Articles 3.3 and 9.

33  ‘Hot-tubbing’, or witness conferencing, is a technique in which two or more fact or expert witnesses presented by one or more of the parties are questioned together on particular topics by the arbitral tribunal and possibly by counsel. See further ICC Arbitration Commission Report on Controlling Time and Costs in Arbitration (International Chamber of Commerce 2018) para 79. See Chapter 11 paras 11.72–11.74. See also Guidelines for Witness Conferencing in International Arbitration (Chartered Institute of Arbitrators, 2019).

34  See, for example, the statement by the tribunal in EDF v Romania PO3 (n 26) [35] that ‘An obvious condition for the admissibility of evidence is its reliability and authenticity. It would be a waste of time and money to admit evidence that is not and cannot be authenticated’.

35  Waincymer (n 12) 797. See also IBA Rules (n 3) Article 3.12(a). See Chapter 6 paras 6.361–6.365.

36  Hearsay evidence is a written or oral statement made otherwise than by a witness giving their own first-hand evidence in proceedings, which is tendered as evidence of the matters stated and which is relied on to prove the truth of those matters.

37  Born (n 9) 2306–13. For discussion about destruction of documents see 12.258– 12.274 for more detail.

38  See further Pilkov (n 15) 152 and citing Audun Jøsang and Viggo Bondi, ‘Legal Reasoning with Subjective Logic’ (2000) Artificial Intelligence and Law 289.

39  Arduina Holdings BV v Celtic Resources Holding plc [2006] EWHC 3155 (Comm) [45]–[46]. See also London Underground Limited v Citylink Telecommunications Limited [2007] EWHC 1749 (TCC) [37], and Sonatrach v Statoil [2014] EWHC 875 (Comm) [44]–[45].

40  IBA Rules (n 3) Articles 9.5 and 9.6; see also Article 9.1.

41  Waincymer (n 12) 762–66; Courtney Lotfi, ‘Documentary Evidence and Document Production in International Arbitration’ (2014) 4 Transnational Dispute Management 6 <www.transnational-dispute-management.com/article.asp?key=2136> accessed on 29 November 2018, s II (hereafter ‘Lotfi’); see also Kubalczyk (n 19) s IV.3.

42  ‘Each party shall bear the burden of proving the facts on which it relies to support its claim, defense or counterclaim and provide the basis for its opinions, arguments and counter-arguments’.

43  ‘Each party shall have the burden of proving the facts relied on to support its claim or defence’.

44  ‘Each party shall have the burden of proving the facts relied on to support its claim or defence’.

45  ‘Each party shall have the burden of proving the facts relied on to support its claim or defence’.

46  See further Born (n 9) 2313–15.

47  The issue of burden of proof was not dealt with in the UNCITRAL Model Law on International Commercial Arbitration (as adopted by UNCITRAL on 21 June 1985 and as amended by UNCITRAL on 7 July 2006) (hereafter ‘UNCITRAL Model Law’) in part because of differences in view between legal families as to whether burden of proof is procedural or substantive. Waincymer (n 12) 762–65. See also Anne Véronique Schläpfer, ‘The Burden of Proof in International Arbitration’ in Albert Jan van den Berg (ed), Legitimacy: Myths, Realities, Challenges (Kluwer Law International 2015). The position is complex. For example, Lord Collins of Mapesbury and others (eds), Dicey, Morris and Collins on The Conflict of Laws (15th edn, Sweet & Maxwell 2012) para 7-034 notes that, ‘Although there is some authority for the proposition that at common law, questions relating to the burden of proof are matters for the lex fori, there is much to be said for treating them as substantive’ (footnote omitted). See further Lotfi (n 41) s II.

48  For example, as a matter of English law, unless otherwise provided by statute, questions of evidence are generally determined by the lex fori and not by the law governing the substantive issue selected by English rules as to conflict of laws. See Hodge Malek and others (eds), Phipson on Evidence (19th edn, Sweet & Maxwell 2013) para 1–26. Under German law, the burden of proof appears to be primarily dealt with as part of substantive law, although procedural law may also have an impact. For example, in relation to the former position, German Civil Code (Bürgerliches Gesetzbuch) 2013, s 363 provides that: ‘Burden of proof in the case of acceptance as performance of contract: If the obligee has accepted performance offered to him as performance of contract, he bears the burden of proof if he does not wish to have the performance considered as performance of contract because it was different from the performance owed or because it was incomplete’. However, with reference to the second category, German Code of Civil Procedure, s 287 provides that the court may ‘estimate the amount of damages on the basis of the court’s discretion, based on its evaluation of all circumstances’ (emphasis added), an approach that is said to relax the burden of proof. Annette Keilmann, ‘How to Prove Your Case: Conflict between Substantive and Procedural Law in International arbitration?’ (Global Arbitration News, 31 March 2016) <https://globalarbitrationnews.com/how-to-prove-your-case-conflict-between-substantive-and-procedural-law-in-international-arbitration-20160324/> accessed 4 December 2018. The author also draws attention to the potential consequences of adopting the substantive provisions of a national system without also taking account of the procedural corollary that may exist in that jurisdiction.

49  Born (n 9) 2313–15.

50  Born (n 9) 2315. See also Sigvard Jarvin, ‘The Sources and Limits of the Arbitrator’s Powers’ (1986) Arbitration International 140, 151, who suggests that where parties and counsel come from different legal traditions the tribunal should adopt an approach that is fair to all sides: ‘The arbitrators, faced with parties and counsel from different legal systems, used to different principles with regard to the burden of proof, and presentation of evidence, should try to find a middle way which can be applied by both sides and thus achieve fairness for both of them. The strict distribution of the burden of proof applied by national courts does not apply in international arbitration’.

51  See further Waincymer (n 12) 762–66.

52  See ibid 771–72.

53  See, for example, SIAC Rules, Rule 29.1: ‘A Party may apply to the Tribunal for the early dismissal of a claim or defence on the basis that: (a) a claim or defence is manifestly without legal merit; or (b) a claim or defence is manifestly outside the jurisdiction of the Tribunal’. See also (well-established) ICSID Arbitration Rules 2006, Rule 41(5) in similar terms.

54  A recent analysis and commentary on tribunal practice in relation to ICSID Arbitration Rules, Rule 41(5) contains an interesting discussion on the extent to which tribunals should and do assume that the facts underlying the legal claim are as stated and (in summary) the circumstances in which it might be permissible to dismiss on the basis that the facts as stated are plainly unsustainable and the benchmark to be applied to reach that conclusion. See Michele Potestà, ‘Chapter 9: Preliminary Objections to Dismiss Claims that Are Manifestly Without Legal Merit under Rule 41(5) of the ICSID Arbitration Rules’ in Crina Baltag (ed), ICSID Convention after 50 Years: Unsettled Issues (Kluwer Law International 2016).

55  Born (n 9) 2313–15.

56  Waincymer (n 12) 766–71 concludes that, despite some comments to the contrary, there is unlikely to be any difference between the two formulations—the real test in each case must be a test of preponderance of evidence. No system allows a party to succeed if their opponent’s contentions are preferred. See also Lotfi (n 41) s II. See also Pilkov (n 15) 153, who opines that, in assessing the sufficiency of the evidence, the tribunal must ‘determine whether there is a valid line of reasoning and permissible inferences which could lead a rational person to the conclusion reached by the arbitrator on the basis of the evidence’.

57  Waincymer (n 12) 774–75. IBA Rules (n 3) Article 3.12(a). See Chapter 6 paras 6.351–6.365.

58  Schlaepfer and Bärtsch (n 27) 217.

59  See further Born (n 9) 2306–15 and Waincymer (n 12) 775–78.

60  The difficulties associated with this exercise are addressed at 12.368– 12.374.

61  In an international law context, circumstantial evidence has been described in a dissenting judgment of the International Court of Justice as: ‘facts which, while not supplying immediate proof of the charge, yet make the charge probable with the assistance of reasoning’; Waincymer (n 12) 793–94, citing the dissenting opinion of Judge Badawi Pash in the Corfu Channel Case, United Kingdom of Great Britain v People’s Republic of Albania (Merits) (1949) ICJ Reports 4, 18.

62  See Chapter 2 paras 2.95–2.97.

63  See IBA Rules (n 3) Articles 3.5, 3.9, 3.10, 4.10, 6.3, 7, 8.2, and 8.5.

64  1999 IBA Working Party and 2010 IBA Rules of Evidence Review Subcommittee, ‘Commentary on the Revised Text of the 2010 IBA Rules on the Taking of Evidence in International Arbitration’ (International Bar Association, 2014) 25 <www.ibanet.org/Document/Default.aspx?DocumentUid=DD240932-0E08-40D4-9866-309A635487C0> accessed 27 November 2018 (hereafter ‘Commentary on the IBA Rules’) confirms the discretion of the tribunal to determine the objections: ‘While the provision states that the arbitral tribunal “shall” exclude evidence meeting one of the specified exceptions (including relevance and materiality) the arbitral tribunal obviously retains its discretion to determine whether one of the specified criteria has been met’.

65  See Hilmar Raeschke-Kessler, ‘The Production of Documents in International Arbitration: Commentary on Article 3 of the New IBA Rules of Evidence’ (2002) Arbitration International 411 (hereafter ‘Raeschke-Kessler’).

66  ibid 422.