20 January 1995, Geneva, Switzerland
The Conduct of Arbitral Proceedings Under the Rules of Arbitration Institutions; The WIPO Arbitration Rules in a Comparative Perspective
(Articles 48 to 58 and 73 to 76)
by Jan Paulsson
Freshfields, Paris
One of the benefits of attending a Conference such as this--because it is the initial conference of the WIPO Arbitration Center--is that you may find out some things which will not appear in subsequent articles and other studies that trace the legislative history of the WIPO Rules. Since Francis Gurry has not indicated the constraints under which the Drafting Committee were operating, I feel none and will therefore reveal my recollection of how some of these provisions came to be. You may find this of some interest, either if you are historically minded or for use in your work.
Article 48 relating to evidence contains nothing particularly remarkable. It is simply a re-structuring of UNCITRAL Arbitration Rule 24. If you look at Article 48(b), you will see that we combined UNCITRAL Articles 24(2) and (3), perhaps an uncharacteristic example of these Rules making things shorter than they appeared in the precursor text we used as a model.
At this point we come to some Articles where there is no precedent, in other words where the WIPO Rules in my belief may be innovative. They come in a series: on Experiments, Site Visits, Agreed Primers and Models (Articles 49 to 51). If you read through these, you will see that they are entirely optional; the tribunal may do this or may do that. It might occur to the cynic that, since the tribunal may do something, it is just as free to take another course. One might thus ask why, given the wide discretion conferred on arbitrators, particularly in international cases, to proceed in the way they consider to be appropriate, is it necessary to guide them along and tell them what they may do, when they may as well not do it? The Rules here proceed from an intent that proceedings under the WIPO aegis should be particularly sensitive to the needs of disputes connected to intellectual property. (I might say that the particular inspiration for these three Articles came from Nick Carter of the Freshfields Intellectual Property Department, who is sitting in the back of the room. So, if any of you have complaints about these particular Articles, you may take it up with him in the discussion at the pause. On the other hand, if you find that the Articles are perfect the way they are, perhaps the Drafting Committee will be persuaded to take full credit.)
As I understand Article 49, which I have never seen in any other arbitration rules, it enables a party which wants to memorialize the results of tests or experiments to do so in a somewhat formalized manner. If you did not have these Rules and if you did not have this idea, you might carry out an experiment on your own and then at some later time, perhaps much later, have to try to demonstrate that you conducted an experiment even though you did it unilaterally without putting anyone on notice, that you had done so in a careful way and that it should be given weight. Article 49 allows you to raise the stakes immediately by announcing your intention to rely on such an experiment, thereby putting the other side on notice of its possibility to comment on or challenge the method used, and drawing inferences if it remains silent. Thus is provided a way of both memorializing and verifying the result of that experiment. This mechanism my or may not have appeal, depending on what special area of intellectual property is involved.
The site visit provision (Article 50) is not particularly remarkable, except that you will see in the second sentence that site visits may be provoked by a party. The usual idea is that arbitrators might on their motion, or if asked by a party, consider the wisdom of making site visit. Here the indication is given that it may also be important for the purposes of examining, for example, machinery, that a party unilaterally moves for a site visit prior to the hearing.
Agreed Primers and Models (Article 51). Like Article 49, Article 51 is one which I have not seen in other arbitration rules. Consider that when you have a three-member tribunal, the odds are that the arbitrators expertise will be unequal. Hence, in the appropriate case, the notion of agreeing words or certain technical concepts or the basic presumptions under which parties are discussing technical matters might be very useful for the tribunal in understanding the case and for counsel in presenting it. Thus one may establish nomenclature or a set of concepts which are common to everyone participating in the arbitration, and no one needs to worry that some novel understanding of nomenclature is only going to come up one day in deliberations without notice to the lawyers or to the parties.
Article 52 deals with trade secrets and confidential information. Some of you may be aware of the fact that, in the WIPO Rules, the concept of confidentiality was thought so important there there is an entire section of the Rules devoted to the subject of confidentiality. (That subject will be my last series of remarks.) So you might ask why this particular provision is to be found in this part of the Rules; why does it come in here, in a general description of procedure; this should fit in the special section on confidentiality. The answer is simply that Article 52 deals with a procedural problem that arises in the course of an arbitration when one party is asked to produce documents and says "I do not want to do so because these are trade secrets or other confidential information." This Article--I will not go through it step by step--explains how that party might make a submission to the arbitral tribunal, without the other party seeing the documents, and represent to the tribunal the reasons for which this information should not be disclosed to the other side. There is a particularly innovative provision which came from the fertile brain of Professor Albert Jan van den Berg. This is to be found in Article 52(d), which for "exceptional circumstances" invents the device of a "confidentiality advisor." Now the idea here is that, in exceptional circumstances, a party may say "not only do I not want to disclose documents generally in this arbitration so that my adversary and its expert can see it, I dont even want the tribunal to look at it for the purpose of determining whether my claim of privilege is justified." Under those circumstances, if the tribunal agrees that a confidentiality advisor should be appointed, this person will then look at the documents and advise the tribunal as to his views on the claim of privilege. Why in the world would one need a confidentiality advisor beyond the tribunal? You may think it is a horrible idea. I can give you two reasons why it might be useful. The first is technical and the other one verges on the ethical. The technical reason might simply be that the arbitrator or the arbitral tribunal, given the particular trade secrets or confidential information involved, may not feel equipped to deal with the claim of privilege and therefore wants to appoint a particularly competent person. The other reason--one is almost reluctant to imagine the case arising--would be found in a case of such intense mutual distrust that one party does not want the tribunal to see the documents because it assumes that the other party has appointed an unscrupulous arbitrator who will be the source of a leak. This circumstance, which one ardently hopes will never arise, would be catered for by the appointment of a confidentiality advisor.
I will say nothing about the Article 53 on hearings, which I do not think contains anything remarkable.
You will see in Article 54(d)--again you might object to the fact that these Rules tend to be fully explicit, and in the minds of some over-elaborate--that here you have enshrined in the Rules what I consider, and I think most people consider, to be the good international practice today with regard to the use of witnesses. Witness testimony is allowed in written form, with the effect that direct examination of witnesses might be eliminated, or at least substantially cut down, so that the starting point for hearings will be truly controversial questions of the witness evidence.
As far as Article 55 goes, I will simply refer to the UNCITRAL Rules, Article 27, and the LCIA Rules, Article 12, for those of you who want to trace the origins of these provisions.
Next, the default provision (Article 56). Again, for those of you familiar with the UNCITRAL Rules, if you look at Article 28, you will see where our Article 56 originated.
On Article 57, I have nothing to add, except that it is designed to tie in with Article 58 (waiver), which Professor Albert Jan van den Berg mentioned this morning. This follows UNCITRAL Rule 30, with regard to waiver of objections if one participates without protest in arbitral proceedings.
My last remarks then relate to the special section on confidentiality. Nothing like it is to be found in other sets of arbitration rules. You will find this Section beginning on page 59 of your book; it is Section 7, Articles 73 to 76. The legislative history of these particular provisions might be clarified if you consult an article written by Nigel Rawding, one of my London partners, and myself, and which appeared in the ICC Bulletin in May 1994. The title of the article is indicative: "The Trouble with Confidentiality."(1) Now the idea here was that most people assume that arbitration is confidential and that it is a good thing. But an absolute statement that the more confidential arbitration is, the better it is, would be wrong. There are circumstances when a party genuinely needs to disclose information about an arbitration and deserves to have the right to do so. It is not as easy a subject as one might think. National case law on this subject, when it has arisen, is not comforting because it is contradictory. You have cases on both extremes. On the one hand, you have the French Court of Appeals in the Ojjeh case stating that confidentiality in arbitration is absolute. As Mr. Rawding and I suggest in our article, that case arose under rather extreme facts and the Court perhaps did not have the occasion to think through all the complexities of the subject. At the other extreme, American and Australian courts seem to say that, since one cannot find an explicit rule in the particular provisions that are being used, whether the ICC Rules or the UNCITRAL Rules, there is no foundation for any claim of confidentiality at all.
Surely the good answer must be somewhere between. To the extent that parties do not provide for an obligation of confidentiality in the agreement itself, it should be the responsibility of arbitral institutions, who believe that confidentiality in some form, with some limitations, is a part of arbitration, to make stipulations to that effect in their rules. I would certainly expect that we will see that, as other arbitral institutions reform their rules, this problem of confidentiality will be dealt with by new provisions. WIPOs new Rules are, I think, the first attempt to deal with confidentiality. It may be criticized if it does not work perfectly in practice; we will see what problems may arise when Section VII is applied. It surely is not perfect. It is a best-efforts attempt to deal with the issue.
You will see that the solution is a limited form of confidentiality or, put in another way, the positive way, as much confidentiality as is consonant with legitimate expectations. So when does confidentiality evaporate? There are some circumstances when it is appropriate. For example, Article 73 envisages that it may be appropriate for a party to be entitled to disclose the existence of an arbitration, including the names of the parties and the relief requested, e.g. "we have been sued for a hundred million dollars." Those circumstances might be when the party wishing to make a disclosure is required to do so by a regulatory authority. That was the problem in the Australian case I referred you to a few moments ago. There might be circumstances when it is absolutely mandatory for a publicly traded company to make a disclosure to its shareholders or future shareholders. There are circumstances of good faith bargaining in the context of the practice of mergers and acquisitions, where it would be unconscionable for a party not to reveal to someone who is contemplating a share purchase that an arbitration has been brought against the target company for a particular amount. Similarly, joint-venture partners who are casting their lot together with another business unit may have a legitimate right to know of this event. What I have just mentioned concerns the existence of the arbitration.
As to the confidentiality of disclosures made during the arbitration, I would make only this point, regarding third parties who participate in the arbitration. I do not mean third parties who participate as parties (e.g. assignees or subrogees); I mean third parties who are witnesses or experts appearing in the arbitration. This may create great difficulty. The more confidential and complex and sophisticated the information involved, the more necessary it might be for the tribunal to be advised by experts, and perhaps the more desirable it will be for the parties to present unilateral experts on the particular subject. That expert will not be able to give very credible evidence unless he has seen what the other party is producing in the arbitration. So what sense is there in having a general confidentiality provision which binds the two parties which have agreed to these rules on a basis that would not bind a witness or an expert who enters into the arbitration? We tried to solve that problem in these WIPO Rules. Perhaps the solution is not very good; our approach was to leave the burden entirely on the parties. As you see in Article 74(b), a party calling a witness or an expert is responsible for obtaining from such a third party witness or expert adequate assurances of that persons accepting the confidentiality of the arbitration, and his or her undertaking not disclose information which that person receives only as a result of participating in the arbitration.
Confidentiality of the award: this goes back to the same principles as those underlying Article 73. There are circumstances where regulatory agencies might require information. Obviously if you want to enforce an award or inform your shareholders, or to inform parties with whom you dealing, there may be circumstances when it is appropriate to be allowed to reveal the fact of an award or indeed the contents of an award in order to protect legal rights.
Article 76 I need say nothing about. It seems uncontroversial that the Center itself, or an arbitrator participating under its aegis, should be held to the strictest standards of confidentiality, and so under these Rules they are.
Notes
1. The ICC International Court of Arbitration Bulletin, Vol.5, No.1 (May 1994), at 48.
Commentary - Gerald Aksen
Commentary - Michael Schneider
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