Arbitration Focus Week: The Prague Rules of Arbitration – A Game Changer for International Arbitrations?

Arbitration Focus Week: The Prague Rules of Arbitration – A Game Changer for International Arbitrations?

Arbitration Focus Week: The Prague Rules of Arbitration – A Game Changer for International Arbitrations? 1102 734 Hugill & Ip
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With the recent launch late last year of the Prague Rules, much attention is being given to how this new set of arbitration rules will both compliment and contrast with the major rules that are currently the standard choice for international arbitrations.

What are the Prague Rules? Why were they created?

The new Rules on the Efficient Conduct of Proceedings in International Arbitration (“Prague Rules”) launched in December of 2018 in the Czech Republic with the goal to provide a framework to increase efficiency and reduce the costs of arbitral proceedings. The development of these new rules arose from a growing dissatisfaction with both the costs and the length of proceedings that are becoming ever more common with international arbitrations. Thus, while international arbitrations were once celebrated for their swift proceedings and low costs (which made arbitration the most viable alternative to litigation before state courts), these features are now seen by many as arbitration’s main disadvantages.

The drafters of the Prague Rules believed that one of the main causes of the increasing costs and length of proceedings is that arbitral tribunals are not sufficiently proactive in implementing cost efficient and time-saving procedures. The approach used in these new rules is closer to civil law than common law traditions, with the tribunal proactively managing the dispute from the start.

What are the IBA Rules?

First issued in 1999, the IBA Rules on the Taking of Evidence in International Arbitration (“IBA Rules”) were drafted as a resource to parties and to arbitrators to provide an efficient, economical and fair process for the taking of evidence in international arbitrations. Since their issuance, the IBA Rules have gained wide acceptance within the international arbitration community as a mechanism to bridge the gap between the common law and civil law traditions of taking evidence. The rules have had such a significant influence on the practice of international arbitrations that it is common for arbitral tribunals from different legal traditions to apply the IBA Rules, be it on their own motion or at the request of the parties, regardless of an express choice for the IBA Rules.

What are the differences between the Prague Rules and the IBA Rules?

The drafters of the Prague Rules have criticized the fact that the IBA Rules, while intended to create a level playing field in international arbitration, are still closer to common law traditions for taking evidence and follow a more adversarial approach regarding document production, fact witnesses, party-appointed experts, and cross-examination. This, the drafters claim, causes inefficiency and leads to increased costs and unnecessarily protracted proceedings. In contrast, the Prague Rules openly adopt a more inquisitorial approach more in line with the civil law tradition.

The key distinction between the inquisitorial approach advanced by the Prague Rules and the more adversarial approach used by the IBA Rules relates to the distribution of burdens and powers between parties and the arbitral tribunal. An inquisitorial proceeding requires the tribunal to take an active, initiating role both in fact-finding (production of evidence) and in the determination of law. The adversarial approach, on the other hand, requires the parties to advance those actions themselves and gives the tribunal a more passive duty to preside over the proceeding and to rule on the dispute in a sort of “umpire” role.

As the Prague Rules center around the key principle that the arbitral tribunal should take a proactive role in the proceedings, many of its key provisions reflect the concepts of the inquisitorial system:
• Extensive disclosures (including any form of e-discovery) are to be avoided.
• There is no automatic right to cross-examine factual witnesses.
• If expert evidence is required, the default position is for the arbitral tribunal to appoint an expert, rather than each party appointing its own.
• The arbitral tribunal is to actively assist the parties in reaching an amicable settlement.

Are the Prague Rules incompatible with the IBA Rules?

On the whole, even when there are differences in procedures under the two sets of rules, the Prague Rules do not present a fundamental change to the status quo. As they are intended to supplement the IBA Rules, not replace them, the Prague Rules will play an important role in giving parties more options to customize their arbitration process to best fit their interests and needs.

Our team at Hugill & Ip has extensive experience in dealing with Dispute Resolution issues – so if you need further advice on this subject, get in touch with us.

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.

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