Sharon Schmidt features in the IR Global Disputes Virtual Series – Fairness & Impartiality: Are witnesses truly independent in your jurisdiction?
Foreword by Andrew Chilvers
Global commerce is by its nature a complex beast and it is inevitable that sometimes disputes arise between companies doing business across the world.
As more international deals are signed off – often in greater degrees of complexity than will have been done in the past – it has also led to a rise in the number of disputes that end in arbitration.
Indeed, international arbitration was the preferred method of dispute resolution for 97% of respondents in the 2018 International Arbitration Survey, conducted by the School of International Arbitration at the Queen Mary University of London, in association with White & Case LLP.
Moreover, 99% of respondents said they would recommend international arbitration to resolve cross-border disputes in the future – which shows the strength of the system across the world.
An important aspect of the arbitration process is the use of expert witnesses. There are few cases where an expert witness is not called on to give evidence on a range of technical, financial, legal and, on occasion, scientific issues to help the arbitration tribunal to understand the evidence on complex matters and help them form a decision.
Those involved in disputes must be aware of how expert – and also the fact – witnesses are used in different jurisdictions, as this can vary markedly between territories.
The independence of witnesses is a subject that crops up repeatedly – especially around who they serve, their effectiveness and how they are viewed by judges in arbitration tribunal panels.
Another factor that must be considered is the different rules between jurisdictions and the impact that can have on proceedings. Many jurisdictions have their own arbitration rules, and there are also the international ICC and IBA rules to consider, among others. Often, the litigant will try to steer proceedings to use their home rules – and if they are unfamiliar to the other party, they will need to engage experts in the local laws.
How important are cross-cultural issues regarding arbitration rules and witnesses in your jurisdiction?
First and foremost, it is important to draw a distinction between witnesses and expert witnesses. I am going to solely refer to the latter
Cross-cultural issues play a fundamental role in relation to witnesses and how arbitral proceedings are being conducted. They influence the line of questioning used and impact our notion of what constitutes permissible or adequate witness preparation. The willingness of parties to arbitrate often merely extends to a general agreement, while cultural considerations carry significant weight in actually helping participants reach a consensus on the detailed expectations with which they enter into the arbitration. Aiming to resolve arbitration disputes solely through employing legal tools falsely disregards the fact that many of the answers are likely to be driven by cultural understandings that if neglected can significantly impede the arbitral process. Cultural differences not only impact expectations of stakeholders, they can also determine the course of an arbitration. As such it may be the case that arbitrators assign less credibility to a witness that appears to have been ‘coached’ by a party in order to ‘advocate on its behalf’ even though such conduct may be regarded as common practice in the witnesses’ home jurisdiction.
In Austria, cross-examination is not relied on in the same way as it is compared to common law jurisdictions like the U.S. Witness questioning is mostly carried out by the judge while additional supporting questions may be posed by counsel afterwards. However, the focus really is on the inquisition and therefore diverts quite remarkably from adversarial common law jurisdictions. Witnesses in Austria are mainly called upon to provide insights on issues that require specific technical knowledge or expertise and it is up to the judge to evaluate these statements and determine its weight. One could say that the function of the witness is that of an adviser to the tribunal rather than an advocate acting on behalf of a party
How important is witness independence when attempting to solve complex, transnational disputes? What roles can practitioners play to test for independence?
Reaching a settlement in an arbitration proceeding may require intricate knowledge or technical skills that extend beyond the purview of the experience of counsel or arbitrator. Therefore, the central task of a witness is to provide an objective account on the subject matter by offering an independent and unbiased perspective on the disputed issue. This is particularly crucial since the perception of a witness as partisan can undermine any credence accorded to their testimony. It also prevents counsel from assessing the client’s chances of reaching a satisfactory outcome in a meaningful manner.
It would therefore serve practitioners well to ensure that witnesses are sufficiently qualified in their respective fields, that their conclusions are supported by sufficient facts or data and that reliable methods are applied in supporting their findings. Practitioners may also want to consider whether the witness has been author of reputable publications, whether these contributions concern issues identical or similar to the disputed subject matter as well as whether the witness has prior experience in acting both in the same capacity and with respect to the same subject matter for which their expertise is being sought. Practitioners would also be well advised to conduct interviews and consult law or consultancy firms that keep a database of witnesses with a good reputation in their respective fields. One may also instruct a legal team to test the witness’ ability to respond to conflicting views, strategies or theories. Procedurally it is also useful to find out why the witness reached a particular conclusion, whether other methods have been used before and if so whether these led to different outcomes. Similarly, practitioners ought to determine whether a witness has previously served in a similar capacity during other arbitration proceedings and if so whether they did so on behalf of one or either side of the issue that is being disputed.
Although IBA rules are not binding internationally, how important are they for arbitration rules in your jurisdiction?
The Austrian Supreme Court has repeatedly drawn on the IBA rules, particularly in relation to independence and impartiality questions, but also regarding rules of evidence.
With respect to the former, the Austrian Supreme Court continues to highlight the importance of IBA Guidelines as an instrument to assist parties and the tribunal in the proper application and definition of the terms ‘independence’ or ‘impartiality’. This has been reinforced by a recent Austrian Supreme Court decision (18 ONc 1/19w). In this case, the arbitrator who had been jointly appointed by six respondents, disclosed that his law firm had been retained by a party to an unrelated arbitration. It was revealed that this party had also engaged counsel for two of the respondents to the present arbitration. The issue thus centred on whether an arbitrator acting in a dual capacity of party counsel in one arbitration and co-counsel in another would offend the principle of arbitrator independence and thus give rise to disqualification. The Court adopted a stringent standard reinforcing the notion that justice must not only be done, but must be seen to be done. It established that an integral part of these efforts is not only a display of competence but of trust in independent, unbiased state court judges and an impartial judicial system as a whole. The Supreme Court referred to the IBA Guidelines and underlined their importance in arbitral challenge proceedings. However, unlike the IBA Guidelines, which suggest that acting as current co-counsel or having done so during the course of the past three years could cast doubt on the impartiality of arbitrators, the Supreme Court took a more rigorous stance by singling out current co-counselling as a legitimate justification for removal. In that sense one could argue that the Supreme Court at least in this very instance reached even further than the scope of the IBA Guidelines.
The issue of evidence in the context of arbitration is largely left untouched by national legislation and institutional rules. Austria for one, does not provide specific disclosure rules. As a matter of practice, parties may mutually authorise arbitral tribunals to refer to the IBA Rules on the Taking of Evidence in International Arbitration and make determinative decisions as to the material’s admissibility, collection and submission by resorting to the guidelines thereunder.
I believe the IBA Rules can serve as a fundamental tool in bridging the gap between common and civil law jurisdictions by offering a hybrid approach between e.g. the U.S. tradition (expert recruitment by parties on technical matters) and the continental approach (individual line of inquiry by arbitrators/judges). Although often criticised for lacking in efficiency when it comes to document production, fact and expert witnesses, they also help to complement existing national legal frameworks while establishing the necessary foundation for a richer global arbitration landscape.