The Prague Rules: the proactive arbitrator revisited

The Prague Rules on the Efficient Conduct of Proceedings in International Arbitration have been formally launched. In this update we consider what impact the Prague Rules are likely to have on international arbitration.

What are the Prague Rules?

On 14 December 2018, the official signing ceremony took place for the Rules on the Efficient Conduct of Proceedings in International Arbitration (the Prague Rules). Originally conceived during a discussion at an arbitration conference in Prague a few years ago, the Prague Rules have been developed over the course of 2018 via a number of events that have taken place throughout the world.

The initial idea was that the Prague Rules would draw on civil law traditions to promote an alternative to the prevailing approach to international arbitration procedure, which has been based on court processes in common law countries. The initial draft of the Prague Rules was also expressly set in opposition to the IBA Rules on the Taking of Evidence in International Arbitration, which, it is said, have become too associated in practice with lengthy common law procedures. That direct contrast with the IBA Rules has been dropped in the final version, and instead of focussing entirely on civil law procedures, the Prague Rules have become a repository of various techniques to save time and cost.

What are the key features?

The Prague Rules consists of 12 Articles covering each stage of an arbitration. The main provisions are:

  • Article 2: the tribunal is encouraged to take a proactive role during the first case management conference, making clear its views on how the case should proceed.
  • Article 3: the tribunal is also encouraged to take a proactive role in the fact finding, including asking the parties to submit relevant documentary evidence or make fact witnesses available for examination.
  • Article 4: the parties shall submit the documentary evidence on which they rely, as under the IBA Rules, but thereafter any requests for document production from the other side are limited to specific documents.
  • Article 5: the tribunal will decide which witnesses are to be called to give evidence at the hearing, and the tribunal will control the cross-examination of witnesses, rejecting any question that is irrelevant or redundant.
  • Article 6: the tribunal may appoint an independent expert to present a report on disputed matters which require specialised knowledge. The expert shall be appointed in consultation with the parties.
  • Article 7: the tribunal may take into account any legal provisions that have not been pleaded by the parties (provided the parties are given an opportunity to express their views on those provisions).
  • Article 8: the parties and the tribunal are encouraged to resolve the dispute on a documents-only basis, but, if a hearing is needed, the tribunal must organise this in the most cost-efficient manner possible.
  • Article 9: the tribunal can assist the parties in reaching an amicable settlement, unless one of the parties objects; and if parties both agree, an arbitrator can act as a mediator.
  • Article 10 and 11: the tribunal is entitled to draw adverse inferences from a party’s failure to comply with the tribunal’s orders, without justifiable grounds, and the tribunal can also make adverse costs orders.
  • Article 12: the tribunal shall use its best efforts to issue the award as soon as possible.

In addition to the above, the tribunal is encouraged to use various cost and time-saving techniques that already feature in international arbitration, but perhaps are not as frequently used as they might be: limiting the number of rounds of submissions, limiting the length of submissions, imposing a cut-off date for the submission of evidence, setting time-limits for the cross-examination of witnesses, etc.

What difference will the Prague Rules make?

In one light, the Prague Rules will not make any difference to international arbitration. For the most part, the Prague Rules simply record existing powers of the tribunal, and, since there are relatively few mandatory provisions, the Rules could be largely overlooked by a tribunal. An arbitration under the Prague Rules might look little different from any other international arbitration – and could be more expensive, since there might be an additional stage imposed in which the parties try to persuade the arbitrators to allow them to call particular witnesses.

On the other hand, a proactive arbitrator is likely to find much that is conducive in the Prague Rules: they will provide a release from concerns about due process challenges and will encourage the arbitrator to deliver the most efficient arbitration possible. But what will remain paramount will be for the parties to choose such an arbitrator in the first place, and a tribunal that is prepared to invest time and energy from the start of the process and to remain on top of the case throughout.

A key factor in the success of the Prague Rules, also, will be the willingness of parties to embrace them (Article 1.2 states that tribunals may apply the Prague Rules at their own initiative but it is unlikely they will do so without the parties’ blessing). Many parties have complained about increasing time and cost in arbitration – a complaint that goes back until at least the 1980s. The Prague Rules give parties an opportunity to do something about this. However, the cost of adopting the Prague Rules is for parties to cede some of their control over the process: control over who they may present as witnesses, for example. We will have to see whether parties are willing to pay this price.

The alternative is for parties to pick and choose parts of the Prague Rules, to be copied over into procedural orders, and that is what may be seen more often. The Prague Rules might become a reference-point for best practice rather than an instrument that is regularly adopted as a whole.