Can arbitration learn lessons from the Jackson reforms?

Can arbitration learn lessons from the Jackson reforms?

When the volume of paper in litigation and arbitration is felt to be getting out of control, we ask whether there is anything to be learnt from the Jackson reforms that could assist international arbitration practitioners and tribunals to limit the volume of witness evidence produced. This paper was first given by Catherine Reeves at the ICC YAF event ‘Paper, paper everywhere’ on 6 May 2014.

In considering whether the evidence presented in international arbitration is getting out of hand, I wanted to look specifically at witness evidence. In some cases the crux of the case rests on documentary evidence but in many cases the outcome rests on whose side of the ‘he said, she said’ argument is most-credible and, perhaps, a part of that is which is ‘best presented’. The preparation of witness evidence takes a great deal of time and effort. While the statement must present the witnesses’ version of events and be in the witnesses own words, they will usually require at least some level of assistance from the relevant legal team to prepare such important evidence for the arbitration. Even when they are going to present oral evidence, their witness statement will form the basis of any cross-examination from opposing counsel and questions from the tribunal.

While many believe that arbitration leads the way in the development of dispute resolution practice, and that any harking back to the Civil Procedure Rules would be a step backwards, given the overhaul of those rules in 2013, we should look to see if there are any lessons to be learnt.

So, what was the perceived need for changes to the Civil Procedure Rules?

In 2010, Lord Justice Jackson concluded his civil litigation costs review to ‘establish the effect case management procedures have on costs and consider whether changes in process and/or procedure could bring about more proportionate costs’. (See Summary of the April 2013 reforms for a brief overview).

The resulting report culminated in the ‘Jackson reforms’ implemented on 1 April 2013 (and in increments thereafter) making sweeping reforms, in particular to the rules on costs and case management, to the Civil Procedure Rules which set out the rules and procedures for dispute resolution in the courts of England & Wales.

Prior to the ‘Jackson reforms’ witness statements, particularly on the multi-track, were often criticised for being too long, too discursive, addressing irrelevant issues, being more akin to submissions than the story of a lay person, etc. These ‘issues’ were felt to result in additional, perhaps disproportionate time and cost spent in preparing, reviewing and responding to these witness statements. The costs of this perceived over-extensive witness evidence was criticised as often serving 'no useful purpose' in the litigation and often being disproportionate to the value of the dispute.

In his review, Jackson LJ identified witness evidence as one of the areas in which litigation costs could potentially be significantly reduced. He hoped to achieve this through several methods, including by reducing the volume of irrelevant or inadmissible material by limiting the witnesses, the issues they address and the number of pages in which they do so, and focusing the parties', and the court's, minds at an early stage, on the extent of the witness evidence required.

What does the revised CPR actually say?

Under CPR 32.2(3) (new in 2013), the court may give directions:

  1. identifying or limiting the issues to which factual evidence may be directed.

  2. identifying the witnesses who may be called or whose evidence may be read, or

  3. limiting the length or format of witness statements

The Jackson reforms also focused on the sanction for failure to comply with case management directions (powers which the court actually already had) and very much encouraged the court to take a strict approach to compliance. In particular:

  1. breaches would be factors to be taken into account when deciding the amount of costs

  2. the court would disallow a (potentially significant) proportion of the costs of 'non-compliant' statements.

  3. imposing costs sanctions on any party that adduces evidence that is irrelevant or that does not go to the facts in issue

  4. making wasted costs orders against the legal profession where the rules have not been adhered to

Jackson was however aware that an over-officious focus on case management could in fact drive up costs for example ,via endless applications following minor delays. As such, he recognised the need for a sensible balance between the over-officious meddler (resulting in additional costs to no useful purpose) and laissez-faire litigation.

What has happened since Jackson? Have the English courts used the new power and revolutionised the face of litigation?

Well, no.

Although there has been turmoil in the courts as a result of harsh approaches to applications for extensions of time, nothing has really happened in relation to the courts exercising their case management powers in relation to witness statements.

There is only one reported case under the new CPR 32.2(3), MacLennan v Morgan Sindfell, a personal injury case in which the claimant wanted to tender the evidence of 43 witnesses covering four separate issues within the category of lost earnings. The defendant sought an order under CPR 32.2(3) seeking to limit the number of witnesses called at trial.

The judge considered that:

  1. the court needed to use all the powers at its disposal to ensure the efficient and fair conduct of a trial. He felt that the power to prohibit the calling of witnesses sat towards the more extreme end of the court’s powers and hence was a power a judge would ordinarily consider after less intrusive measures and thereby avoid the need for further evidence to be adduced

  2. a judge asked to prohibit adducing evidence that has already been prepared (ie before trial) may turn out with the benefit of hindsight to have made an error and have caused unfairness to one party in the conduct of the trial. Therefore, a court asked to take this step must be satisfied that it has the fullest information available to it

  3. in cases where a court does seek to limit the calling of witnesses it will need to introduce a safety valve which liberty to apply/vary the order by consent. He saw the imposition of costs sanctions as a blunt instrument whereby the court may express its displeasure, it being better for the parties to co-operate with each other in advance

In the event, the court permitted the claimant to call 14 witnesses on the issue of comparative earnings, 14 additional witnesses on other aspects of the case plus the evidence of the claimant and his wife. ie 30 of the original 43. The court also gave directions to determine the issues to be covered by each witness and liberty to apply to vary the directions given.

The fact that there is only one reported case on this either means that the court are routinely making orders to curtail witness evidence and the parties are merrily going along with it ( suspect not the latter). The alternative is that the power is not being used or that it is simply too early to tell yet whether the courts will use this power more in the future.

What can we learn (if anything) from the English courts’ approach that could be useful in arbitration?

Do tribunals have the same powers as the courts?

Taking the Arbitration Rules of the International Chamber of Commerce (the ICC Rules) as an example, though other institutional rules do make similar provisions, the tribunal already has the power to limit evidence in the arbitration:

  • Art 22(1) provides that ‘The arbitral tribunal and the parties shall make every effort to conduct the arbitration in an expeditious and cost-effective manner, having regard to the complexity and value of the dispute’
  • Art 22 (2) 'In order to ensure effective case management, the arbitral tribunal, after consulting the parties, may adopt such procedural measures as it considers appropriate, provided that they are not contrary to any agreement of the parties.’
  • Art 25(3) 'The arbitral tribunal may decide to hear witnesses, experts appointed by the parties or any other person, in the presence of the parties, or in their absence provided they have been duly summoned.'
  • ICC Appendix 4 – sets out case management techniques for use by the arbitral tribunal to limit the length and scope of written submissions and written and oral witness evidence (both fact witnesses and experts) so as to avoid repetition and maintain a focus on key issues
  • Are those powers backed by sanction?

ICC Art 37 (5): In making decision as to costs, the arbitral tribunal may take into account such circumstances as it considers relevant, including the extent to which each party has conducted the arbitration in an expeditious and cost effective manner.

While not so prescriptive as the CPR, a tribunal does therefore have a sanction at its disposal.

Are both subject to the same general duty of fairness?

ICC Art 22(4) provides that iIn all cases, the arbitral tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.’

In arbitration, fairness also comes into play in the potential of an award being challenged in the courts. In the English court, an award may be challenged on grounds of the tribunal’s failure to act fairly and impartially as between the parties giving each party a reasonable opportunity of putting his case and dealing with that of his opponent (AA 1996, s33 and s68(2)(a)). Perhaps these potential challenges are a good indicator of why tribunals are cautious about using their case management powers to limit evidence.

The court is subject to the same duty of impartiality and ‘ensuring that the parties are on an equal footing’ under the Overriding Objective at CPR 1.1. While a court judgment is not subject to the same appeal criteria both nationally and internationally (via the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards) as an arbitral award, one of the grounds on which an appeal court will allow an appeal is where the decision of a lower court was unjust because of a serious procedural or other irregularity in the proceedings in the lower court (CPR 52.11(3)).

What lessons can we learn?

On the face of it, an ICC tribunal has, largely, the same powers as the courts to curtail evidence, under the same overriding duty of fairness and backed by sanction. Anecdotal evidence from practising layers I speak to is that the courts are focussing on the Jackson reforms in terms of managing costs budgets submitted by the parties but that this management of evidence in terms of limiting statements is not so prevalent. Clearly, orders may be being made and complied with which therefore never become reported cases but this is not the impression I get.

Are tribunals limiting witness evidence? Again, anecdotally, not particularly. The tribunals do have a focus on limiting evidence, particularly electronic evidence, not allowing fishing expeditions and trying to keep the volume of ‘disclosure’ to a minimum but that in the context of factual evidence there is a real fear of an appeal on grounds of ‘unfairness’ and the inclination is to allow the arbitration to proceed in the way the parties (assuming they are of reasonably equal standing) wish to present their cases.

Is the volume of paper really an issue?

There is some comfort in knowing that the well-respected English courts seem to have similar problems to those faced in international arbitration, arbitration is not ‘missing a trick’. Our rules on this issue are broadly similar and our focus on fairness between the parties is the same.

I think that while it is pointless to adduce evidence just for the sake of it or to flood an opponent with paper (which I’m sure none of us would), parties should be able to put their evidence forward and tell their stories in sufficient detail – without being constrained by artificial limits on the number of witnesses or the number of pages they may present. While the value of a claim may be an indication of complexity (which may warrant more voluminous evidence), we all know that some cases can be incredibly complex even if quantum is not that high. Perhaps ‘paper, paper everywhere’ is, after all, a necessary evil.

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