By Peter Reat Gatkuoth
ABSTRACT
December 6, 2019 (SSNA) — The complexity of international arbitration and the growing increase in the rate of multi-party proceedings has led to mass claims and cost constraints followed by demands for a speedy resolution of disputes by the Parties to arbitrarily proceedings. To remedy the situation, arbitrarily institutions have opted and resorted to the use of Information Technology to facilitate and accelerate arbitration.
Despite the role of information technology (IT) in arbitrarily proceedings, many practitioners are reluctant to invoke IT systems due to the fact that international arbitration is quasi-judicial in nature which implies the demands to comply with procedural regularities that impose certain standards and constraints. Additionally, arbitration has resorted to Court like procedures, which in one way or another may not be satisfactorily addressed by technological reforms as suggested by arbitral institutions.
The author seeks to briefly analyze the implications of new emerging technologies on international commercial arbitrators with specific reference to Block Chain Technology. It’s the author’s view and contention that arbitral institutions have opted to understand, evaluate and apply Block chain Technology to enhance the arbitral process. However, arbitrators must consider and put into account the implication of this mode of technology.
Evidence is crucial and fundamental in the resolution of disputes specifically in international arbitration. Basically, the results (outcome) from arbitration of a matter (dispute) is dependent on the evidence adduced by both parties during arbitral proceedings, the claim, written Statement of the defense thereof, and pleadings in general. Essentially, arbitral Tribunal and institutions have designed mechanisms in practice on how to prove allegations during arbitral proceedings. The writer also seeks to look at the approach of the concept of Burden and standard of proof in international arbitration, guidelines, applicability and the foregoing issues in the discussion thereof.
Evidently, it’s the author’s contention and opinion that the concept of Burden and Standard of proof has not received more attention that is required in international arbitration practice. Few commentators submit that there is little authority on the allocation of Burden and standard of proof in arbitral context.
The complexity and quasi judicial nature of international commercial arbitration for instance procedural motions, discovery of disputes and multi day hearing have become prominent and more prevalent in the world today. Significantly, all these implies huge sums of money or costs in form of raising fees to pay arbitrators and administering body among the other things. In order to remedy the situation, arbitrators have opted to use some of the available tools of technology in order to increase on efficiency and reduce on costs. However, the applicability and the use of technology in international commercial arbitration has become a controversial issue, for it raises question of fairness and equality between parties to arbitral proceedings (Petrochilos, 2004).
Introduction
Fairness and equality in using technology during arbitral proceedings may not be substantially achieved between parties, particularly in international matters. For example, parties may have equality to explore the technology and on the other hand, one of the parties may be financially incompetent to use the available technology. This fundamentally posses’ difficult questions for instance; To what extent in any of these cases should the panel be changed to level the playing field, potentially even to the point of prohibiting the use of any technical aid which is not equally available and usable by both parties? The answer to this question is not simple or uniform and it’s inevitably controversial because it’s practically hard and very difficult for a panel of arbitrators to ensure that both parties to arbitral proceedings archive equal access to technology.
In the case of Rompetrol Group NV vs Romania, the burden and standard of proof was defined as proof which a party must establish in order for the case to prevail. The standard of proof means how much evidence is needed to establish either an individual issue or the party’s case as a whole. The burden of proof imposes certain obligations and duties to either party to arbitral proceedings to prove their cases. This follows the general principle under the ordinary law of evidence that “he who asserts must prove.” Fundamentally, the burden of proof aids arbitrators to discharge their duties and obligation, notwithstanding uncertainties and inconsistencies in evidence tendered in by the parties to arbitral proceedings (Petrochilos, 2004).
When the arbitral tribunal suggests any inference and draws conclusions that evidence adduced by parties to arbitral proceedings is substantial, it suggests an inference that the burden of proof required has been discharged to prove the case. The general rule states that factual positions argued (burden of the allegation) but not proven (burden of proof), ought to be rejected by the arbitral tribunal. On the other hand, the standard of proof in civil matters is a “balance of probabilities” or “preponderance of evidence” given the nature and character of civil matters. Such a standard means that the allegations or facts of the case appear more probable than not (Petrochilos, 2004). The House of Lords in the case of Miller vs The Minister of Pensions stated the concept of balance of probabilities implies that “the evidence is such that the tribunal can say ‘We think it is more probable than not.’ The burden is discharged, but if the probabilities are equal, then it is not” in reiterating the same principle. This implied that the standard of proof has minimal concerns when dealing with some matters (Petrochilos, 2004).
Current Practices on use of Technology in Arbitral Proceedings
Fundamentally, The New York Convention of 10 June 1958 on the recognition and enforcement of foreign arbitral awards has become prevalent and prominent in addressing some of the fundamental issues regulating the use of technology in international commercial arbitration. Essentially, over 100 countries have ratified the convention and the fact that it requires a one-party state to ratify it.
Article 2 sets out conditions and form of arbitration agreement (New York Convention, 1958). The said provision states that if parties conclude an arbitration agreement by electronic means, say for instance by way of an email, its deemed conclusive in case of express and unequivocal terms. Ironically, this analogy implies that the signature of parties is not profound and required when an agreement is required and contained in exchange of letters or telegram. Case law has in different jurisdictions and reaffirms the principle by allowing faxed and telexes as comparable to letters and telegrams.
Basing on this submission, it can be argued and concluded that an arbitration agreement is final and conclusive if it’s contained within an exchange of emails than with telegram or faxes. The argument is, however, not merely persuasive because security procedures (encryption, intervention of a third-party certification body) can give the email an equivalent degree of security as it would be made practically easy than before.
Generally, the fundamental risk in this matter is the possibility of hard copies being exposed and subjected to fraud, concealment, mistake and all other vitiating factors. This cannot be put forward and argued especially in terms of a written agreement. When a contract is concluded on website, it invites the parties to such an agreement to fill out electronic forms and to click on terms and conditions set thereof. However, in my opinion, it appears that electronically concluded contracts appear not to have been signed by parties as required under the UNCITRAL Model Law on electronic signatures or by the transposition of Directive 1999/93/EC on electronic directives.
Impact of Block Chain Technology on International Arbitration
To approach, understand and appreciate the revolutionary approach of Block Chain Technology in resolution of disputes specifically, the field of international commercial arbitration, its fundamental and crucial to consider this form of technology is in line with other existing and emerging forms of technology (Mackinnon, 1996). Traditionally, arbitration has been viewed and embraced as the most effective and expedient way of resolving business and multilateral disputes. However, due to increased transactions and multilateral disputes arising out of commerce and trade; its capacity has proved inadequate and insufficient when it comes to prompt and cost-efficiency. As such, Arbitrators and arbitral institutions have invoked and opted for Block Chain Technology to remedy cost-related issues. Analysts and authors have argued that Block Chain Technology can reach further than merely a currency because it has devised momentum for various ways and modes of resolving commercial disputes more expediency than ever. It has been argued that Block Chain Technology offers a confidential way and an integrated environment designed to create a legally binding and secure encrypted arbitration agreement that is enforceable and executable (Mackinnon, 1996). Of course, this posse fundamental questions to answer in my opinion, and such questions may be based on fact and law among which include:
- What is the impact of the Block Chain Technology on international commercial arbitration?
- What is the impact of this form of technology on rules of procedure in international commercial arbitration?
- Does the Block Chain Technology embrace the quasi judicial nature of arbitration?
The answers to these questions, in my opinion, will receive a narrow and a more restricted approach. First and for most, the answer to the first question is in affirmative reason being that Block Chain Technology offers a wide range of tools for drafting and managing Ethereum smart contracts without any programming skills or legal requirements/provisions. This is my view contravenes the provisions of Article 35(2) in UNCITRAL Model Law. The UNCITRAL Model Law requires parties seeking to enforce an international arbitral award to provide the original award and arbitration agreement or “duly certified” copies thereof and the provisions of the New York Convention on Enforcement of Foreign Awards (UNICTRAL MODEL LAW).
Is Block Chain an Appropriate Technology in Arbitration?
Technologists contend that Block Chain Technology eliminates and has done away with the need for disputes by offering a forum for which parties can bargain and agree expeditiously in the decentralized manner based on terms and condition set thereof. In the alternative, Block Chain technology assumes perfect competition which is unrealistic in economic world. Ironically, though Traditional commercial contracts are entered into a physical world, Block Chain Technology application is digitized to guarantee efficiency in the execution of contracts between parties. Given the fact that arbitration is quasi-judicial in nature which demands compliance to the Rules of procedure, analyst and authors contend that Block Chain Technology has yield negative results in international commercial arbitration (Petrochilos, 2004). It must be noted that it is more likely than not that parties may enter into an agreement based on Block Chain technology applications and software without a sound legal basis for enforcement of such a contract or an agreement. In actual sense parties that invoke such a new and an emerging technology face the challenge of determining the applicable laws when it comes to issues of enforcement of agreements and resolution of such disputes arising from the same (Mackinnon, 2004).
Critics on Applicability of Technology in International Arbitration
Fundamentally, it has been argued by analysts and authors that the use of technology in arbitral proceedings inhibits the principle of equality of parties to arbitral proceedings which is the cardinal principle of a fair trial (Emannuel, 2007). It’s useful to consider and evaluate the approach and methodology the panel of arbitrators’ employ in arbitral process and also to determine whether or not the use of a particular technology is useful or not and if it is useful, whether or not its implications should be permitted in arbitral process will be look into. In determining and revisiting such a concept, multiple tests have been adopted and employed by arbitral tribunal and arbitral institutions to that effect (Emannuel, 2007). Normally, arbitral tribunal is always faced with challenges in determining whether or not the available technology invoked by parties to arbitral proceedings are afforded equal opportunities during arbitral proceedings.
The answer in the author’s opinion is “NO” as a matter of principle and policy grounds; there is no statutory provision of an international treaty applicable to the enforcement of arbitral awards that would require a dully constituted tribunal. There is no vital ground or point to refuse the parties ability to advantage the use of superior technology that is at a greater disadvantage than the other party to arbitral proceedings. Fundamentally, it’s safe to conclude that in most jurisdictions, non of statutory requirements or judicial decisions save for exceptional circumstances, raises the question of equality or equal treatment of parties and the use of technology while presenting their case before the arbitral tribunal.
In most cases, the procedural standards require the need to set a minimum standard to guarantee that each party to arbitral proceedings has a full and a fair opportunity to present the case and as such, this would impact on a panel’s decision on whether or not to allow a particular technology to be used or not. Generally speaking, a panel cannot proceed if the use of the technical aid would deprive a party of fundamental procedural fairness. However, it should be noted thereof that the generally accepted procedural fairness grounds for vacating an arbitral award does not specifically provide in terms of the use of particular technical aids and are rather directed to the underlying effects of that use.
Principles on Burden and Standard of Proof in International Arbitration
Arbitral rules rarely provide and address the concept of burden and standard of proof in international arbitration. Few exceptions are enshrined under Article 27(1) UNCITRAL Model Arbitration Rules. The said provision states that “every party to the claim shall have the burden to prove facts relied on” (Petrochilos, 2004). Analysts and authors submit that “the burden of proof is virtually reflected in public awards” especially in international commercial arbitration. The principles were set forth in the case of Asian Agricultural Products Ltd. v. Sri Lanka, where the arbitral tribunal observed that “there exists general principle of law placing the burden of proof upon the claimant” even though using the term claimant, the tribunal further clarified that “with regard to proof of individual allegations advanced by the parties in the course of proceedings, the burden of proof rests upon the party alleging the fact” ((Petrochilos, 2004). The same principles were reiterated by arbitral tribunal in the case of Tokios Tokelés vs Ukraine, where the tribunal observed that the burden of proof rests and lies upon a party who desires a ruling from Court from any administrative body with quasi-judicial powers (ICSID Case n ARB/02/18, Award of July 26, 2007).
In the case of Salini Costruttori S.P.A. and Italstrade S.P.A. vs Jordan, the arbitral tribunal observed that “it is a cardinal principle of law and justices that he who alleges must prove all allegations of fact, and in this matter, the Burden of proof always rests on claimant in civil matters” (ICSID Case n ARB/02/13, Award of Jan 21, 2006). Commentators urge that arbitral rules, domestic legislation and other relevant authorities are silent on the concept of standard of proof especially on matters concerning international arbitration. Arguably, it has been recorded to be sad and disappointing that even the leading decisions of arbitral tribunals do not address the concept of standard of proof in international arbitration.
Consequently, the nature of the standard of proof is overwhelmingly and extremely disputed. Arbitral rules have had differing views and approach, for example, Article 19(2) of the 2006 UNCITRAL Model Law states that the “power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.” According to Article 25 (1) of the 2012 ICC Rules, the arbitral tribunal shall “within a short time as possible establish the facts of the case by all appropriate means.”
Approach on Burden and Standard of Proof in International Arbitration
The general approach and applicability of the concept of burden and standard of proof varies from jurisdiction to jurisdictions, and well as common law jurisdiction treats it procedural. It is therefore, possible to identify at least three approaches to the nature of the burden and standard of proof in the literature (Emanuel, 2007). The first approach is concerned by burden and standard of proof as it procedural appears that more weight is attached to the concept and the role it does play during arbitral proceedings in allocating obligation and duties to parties to arbitral proceedings and to prove all allegations of fact and law asserted. Writers also submit that evidentiary, matters available in the case might influence rules on the burden of proof (such as the availability or unavailability of discovery) (Emmanuel, 2007).
The second approach advances that the concept of burden and standard of proof must be viewed as a substantive matter when it comes to issues of international commercial arbitration. Different authors opinionated and say that the main argument under this approach is to determine “how easy or how difficult it is for the claimant to enforce a claim” (Petrochilos, 2004). Conversely, few analysts and authors urge on the other hands that the concept of burden and standard of proof are conceptually related to the claim presented by parties and they have the capacity to determine whether or not a claim exists. It must be noted that foresee-ability is crucial in this matter because parties to arbitral proceedings may have a right to choose substantive law before commencing arbitral proceedings.
The third approach states and advances an intermediate position which is to the effect that there is a need to acknowledge a strict clarification. Accordingly, Red Fern Hunter, in his book submits that the arbitral tribunal must allocate the burden and standard of proof in line with the applicable substantive law and procedures adopted by parties during arbitral proceedings. Furthermore, Red Fern Hunter submits that arbitral Tribunal may waive the requirement to apply the burden of proof rules of any specific jurisdiction but can instead fashion specialized rules in light of the particular substantive issues and procedures.
Conclusion
The applicability and use of technology in international commercial arbitration has yield problems and difficulties in arbitral process which raises controversial issues among which include the question of fairness and equality between parties to arbitral proceedings. The arbitral tribunal in most cases is faced with the challenge of regulating the differing technology between the contending parties to arbitral proceeding i.e. Parties with superior vs. inferior Technology. Given the fact that arbitration is quasi-judicial in nature, the ultimate goal of which is to attain a fair, impartial and independent hearing. It is the author’s view and contention that the use of technology in international arbitration has some good attributes. In the alternative, it has proved disappointing by occasioning injustice on parties to arbitral proceedings. Much as the concept of burden and standard of proof is fundamental and profound over factual matters in international commercial arbitration, it has not been attended to and catered for. Burden and Standard of proof have the potential to affect a given disposition of a claim in the arbitrators’ fact-finding process. Well as the burden of proof denotes who bears the duty to prove certain facts, the standard of proof, on the other hand, designates how much a party to a claim must prove.
Generally, it has been established that litigation in ordinary courts of law and international arbitration as well, the claimant bears the burden to prove all allegation of facts asserted in civil matters. Conversely, the standard of proof is an idea that is more prevalent in common law jurisdictions that substantially adopt a quantitative or statistical probability approach. In civil law systems, some commentators assume the standard of proof as being the inner conviction of the adjudicator.
It’s the author’s view and contention that in civil matters, Judges are interested in a party proving before a court that his case is more probable than not “preponderance of evidence” with no requirement of an absolute certainty. On the other hand, in international arbitration, despite the complexity in assessing the degree of proof required to discharge the burden of proof, it is unlikely to exist any difference in practice between the degree of proof required by arbitrators in Civil and Common Law Jurisdictions.
The author of this small note is a citizen of South Sudan and can be reached at [email protected].
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