December 2018 should see the official release of “Rules on the Efficient Conduct of Proceedings in International Arbitration”, otherwise referred to as the ‘Prague Rules’. The Working Group, which has drafted the Prague Rules, believes that while the IBA Rules on Taking of Evidence in International Arbitration have attempted to marry civil and common law systems, these latter rules lean towards a common law approach, where proceedings are adversarial in nature, rather than inquisitorial.
The stated intention behind the preparation of the Prague Rules is the belief that “developing the rules on taking evidence, which are based on the inquisitorial model of procedure and would enhance more active role of the Arbitral Tribunals, would contribute to increasing efficiency in international arbitration”.
Neither the IBA Rules, nor the Prague Rules (once released), have force of law. They are, at best, guidelines that can be adopted by parties to an arbitration, either fully or in part, with respect to procedures to be followed by the arbitral tribunal and the parties, while conducting trial. The Prague Rules, arranged under twelve ‘Articles’, deal with topics such as fact-finding, documentary evidence, expert testimony and hearings, and the processual role of the arbitral tribunal in respect of each of these aspects. The preamble to the Prague Rules also states that they are not intended to supplant, but only to supplement, existing rules of arbitral institutions for the conduct of arbitrations.
In India, most arbitrations are ad-hoc in nature. Though there has been a push in recent times by the government to promote institutional arbitrations, this is an initiative that may take some time to fructify.
Insofar as such ad-hoc arbitrations are concerned, they are governed by the provisions of the Arbitration & Conciliation Act, 1996 (“A&C Act”). Section 19(1) of the A&C Act provides that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Evidence Act, 1872. Section 19(2) thereafter provides that, subject to the mandatory provisions of Part I of the A&C, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
In theory, therefore, there is nothing that prevents parties to a Part I A&C Act arbitration from choosing to apply either the IBA Rules or the Prague Rules. However, in Indian arbitrations one rarely sees such a choice being exercised. Often, even if one party suggests adoption of these or similar guidelines, the other party will oppose the request.
As a result, very often there is a lack of available guidance for arbitral tribunals, particularly those consisting solely of non-judicial members. Even those tribunals that comprise of judicial members tend to fall back upon the provisions of the Evidence Act, and the procedures set out therein, which are oftentimes not required and prove to be cumbersome.
The amendments brought about to the A&C Act in 2015 included, amongst other things, the introduction of the Fifth and Seventh Schedules to the A&C Act. These schedules were framed based on guidance drawn from the IBA Guidelines on Conflicts of Interest in International Arbitration and were intended to provide guidelines on arbitrator ineligibility and potential situations of bias.
The very fact that the IBA Guidelines were given statutory recognition (even if in a slightly modified form) leads to a strong inference that the intent of the legislature is to clarify and strengthen provisions relating to arbitration. Assuming this to be correct, there is no reason why similar steps cannot be taken with respect to procedure to be followed by arbitral tribunals.
Arguably, mandating adoption of either the IBA Rules or the Prague Rules may run counter to the concept of party autonomy, which is considered to be the leitmotif of arbitration. However, if a provision is framed which mandates such adoption “absent any agreement to the contrary” or which provides that the tribunal would follow one or the other of the aforesaid rules, or a legislative guidance based on the rules, in the absence of a contrary agreement, may pass muster even with purists. At the very least, arbitrators need to start suggesting incorporation of such guidelines as a rule, rather than an exception.
The time may also have come in India to encourage, at least in arbitrations, a shift towards a more inquisitorial approach, where arbitral tribunals exercise greater control, rather than letting parties dictate the process by adopting an adversarial approach.
The latter approach, though it is the basis of the common law system, has the effect of leading to increased time and cost in arbitrations. Even in the absence of a statutory mandate in this respect, maybe we need a new breed of arbitrators who are more concerned with a correct decision, given in a timely manner, and without the albatross of ‘due process paranoia’ hanging around their necks.
The writer is Partner, J. Sagar Associates. The views expressed are personal.