Place Of Arbitration Critical To Compelling Pre-Hearing Evidence From Non-Parties

Originally published in The Institute for Transnational Arbitration newsletter, Spring 2007.

The importance of the place of arbitration to obtaining evidence for an international arbitration is highlighted by the contrasting outcomes of three court decisions from three different parts of the world: Canada, England and Hong Kong. In each case, the court was asked to assist in the taking of pre-hearing disclosure evidence from a non-party for an international arbitration.

Article 27 of the Model Law, entitled "Court assistance in taking evidence," provides as follows:

In 2006, a Canadian court in Jardine Lloyd Thompson Canada Inc. v. SJO Catlin granted its assistance for pre-hearing disclosure (discovery/deposition of witnesses) from a non-party on the basis of article 27.¹

Both the English Commercial Court in 2003 in BNP Paribas & Others v. Deloitte & Touche LLP ² and the Hong Kong High Court in 1994 in Vibroflotation A.G. v. Express Builders Co. Ltd.³ had declined assistance for pre-hearing disclosure, ruling that article 27 (and its English Arbitration Act 1996 equivalent, section 43, "Securing the attendance of witnesses"⁴) did not apply to enable a party to an arbitration to obtain broad pre-hearing disclosure from a non-party.

The differing outcomes in the interpretation and application of these "taking of evidence provisions" were not due to a lack of consideration of the prior decisions but to the fact that the places of the arbitration were different, and the interpretation and application of these provisions in the place of the arbitration were in accordance with the law and practices in that jurisdiction.

The BNP Paribas decision arose from an ICC arbitration in London between BNP Paribas and Avis arising out of BNP’s acquisition of a group of Avis companies. In general terms, BNP alleged that Avis misrepresented the value of the business of the companies. Avis denied the allegations and relied, in part, on the fact that the Avis accounts for the relevant years were audited by Deloitte & Touche LLP, which signed off without qualification. In support of Avis’s case, a witness statement by the Deloitte & Touche audit partner was filed. No allegations were made against Deloitte & Touche in the arbitration. On the basis of the defense and the witness statement, an application was made to the English Commercial Court to issue a witness summons to obtain from Deloitte & Touche specified categories of documents alleged to be relevant to the arbitration and/or referred to in the witness statement.

The court had before it a letter from the arbitral panel expressing its belief that the documents "are or may be relevant to the issues in dispute in this arbitration" and giving its permission to the parties to request production from Deloitte & Touche, if necessary, pursuant to section 43 of the Arbitration Act 1996." Both BNP and Avis had been asking for this approval from the arbitrators, although Avis neither supported nor opposed the court application and did not appear or take any part in it.

The court defined the issue as whether it had power under the Arbitration Act 1996 to order a non-party to disclose documents to enable BNP to see if the documents undermined the reliance by the Avis on the work of Deloitte & Touche and the evidence of its audit partner.

The court held that section 43 did not give the court, in respect of arbitration proceedings, power to order disclosure from a non-party. It reasoned, in part, that Article 27 of the Model Law, from which BNP argued section 43 was derived,

The court concluded that section 43 deals with production of documents in evidence at the hearing, not disclosure, and under that procedure "it is not permissible to go ‘document hunting’ with a view to trawling though documents to see what turns up." The court left open what would be the outcome of a targeted application relating to specific documents that could be said to be required to be adduced in evidence. The court went on to say that it "would have ordered disclosure in this case had I the power to do so because [it] can quite understand BNP’s concerns about their ability effectively to cross-examine" the audit partner. The court noted that it would be for the arbitral tribunal to decide whether the audit partner’s evidence would be admitted without the disclosure and if it were admitted, whether it would have any, and if so what, evidential weight without the disclosure.

The Vibroflotation decision arose from the arbitration of a dispute between a sub-subcontractor and a subcontractor on a Hong Kong airport project. As this was an international arbitration, the Model Law was held to be applicable.

The sub-subcontractor issued a writ of subpoena duces tecum against the main contractor for the production of certain documents, alleging that without those documents it would not be in a position to plead its case on the basis of a fundamental breach of the contract by the subcontractor. The lower court set aside the subpoena, and the sub-subcontractor appealed to the High Court.

The High Court expressed sympathy for the sub-subcontractor, which was confident that documents possessed by the non-party would show that the sub-subcontractor’s equipment performed as required, but which would not have access to the documents until the arbitration hearing unless the subpoena was reinstated. The court held that under Hong Kong civil procedure, "parties are not generally allowed to get discovery against non-parties nor are they, as is done in the United States of America, permitted to cross-examine their adversaries at pre-trial deposition hearings" and that subpoenas duces tecum are used for the purposes of having documents brought to trial. The court concluded that the subpoena was correctly set aside "on the ground that it was outside the jurisdiction of the court to grant the same at this stage of the arbitration."

The 2006 Jardine decision arose from the arbitration of an insurance-coverage dispute between an insured and its insurers in the Canadian province of Alberta. Western Oil Sands was constructing a northern Alberta oil sands project. It obtained insurance with several insurers, one of which was SJO Catlin. The insurance was arranged through Jardine Lloyd Thompson Canada, an insurance broker. Western claimed that it suffered losses during construction. When it sought to recover from its insurers, the coverage dispute arose. Western commenced an arbitration against the insurers. Jardine Lloyd Thompson Canada was not a party to either the insurance contract or the arbitration.

An application was made to the arbitral tribunal for an order to allow pre-hearing examinations (discovery, depositions) of present and former employees of Jardine Lloyd Thompson Canada. The parties had agreed that examinations for discovery would be available along the lines of the Alberta Rules of Court. The arbitral tribunal granted pre-hearing discovery of non-parties. It noted that it was not bound to apply the Rules of Court but considered them a useful guide for production and discovery and that under those rules, examinations of the type requested would be permitted.

SJO Catlin asked the Alberta Court of Queen’s Bench to grant assistance to enforce the arbitration tribunal’s order; Jardine asked the court not to do so.

The court held that the arbitral tribunal lacked jurisdiction to order non-parties to submit to pre-hearing discovery examinations, much less allow a party leave to seek the assistance of the court to enforce such an order. It concluded that article 27 was not applicable to lend assistance to require witnesses to attend for pre-hearing examinations for discovery. In doing so it relied on and quoted from Paribas and Vibroflotation.

The Alberta Court of Appeal allowed an appeal from that lower court decision, upheld the arbitral tribunal’s order and granted court assistance to obtain the evidence. It focused on the fact that the parties had not agreed to place any limitations on either the scope of examinations for discovery or the persons to be examined; rather, they had agreed to examinations along the lines of the Alberta Rules of Court. The court held that the tribunal was required, under article 19 of the Model Law⁵, to conduct the arbitration according to the agreement of the parties.

It held that Alberta courts could and would assist to enforce an arbitral tribunal’s order for the pre-hearing examination of current and former employees of a non-party in an international commercial arbitration sited in Alberta and taking place under the Alberta International Commercial Arbitration Act. The Alberta Act incorporates the Model Law. The court interpreted article 27 of the Model Law to permit an Alberta court to assist an arbitral tribunal sited in Alberta by enforcing its order for the taking of pre-hearing discovery evidence of non-parties.

The Court of Appeal held, first, that the appeal turned on the interpretation of article 27 and, second, that as the Model Law is part of the law of Alberta, it must be interpreted according to the meaning of its words in Alberta – in particular, the words "assistance in taking evidence" in article 27.

It held that article 27 is not limited to "evidence at the hearing." It noted that in a letters rogatory context, the Supreme Court of Canada had ruled that "testimony" was obtainable for pre-trial as well as for trial proceedings; and that the relevant statute makes no distinction between pre-trial and trial proceedings. "Neither does Article 27" said the Alberta Court of Appeal: "Evidence is evidence whether taken at discovery or trial."

It reasoned as follows:

• 40 The ordinary and plain meaning of evidence includes evidence gathered by way of discovery.... If the drafters of Article 27 had intended that assistance would only be given for taking evidence at the hearing, they could have expressly said so. This distinction was not made and in the context of an arbitration proceeding conducted in Alberta, the word "evidence" must be given its ordinary meaning which includes all evidence whether pre-hearing or at the hearing itself.

• 41 Article 27 should be interpreted in the light of its objects and purposes. The obvious purpose of Article 27 is to facilitate the tribunal in its search for the truth. I do not conceive that a tribunal has any less desire for, or need for, the truth to reach a fair and proper result than does a court of law.

• 42 With respect, limiting the scope of examinations for discovery in arbitration proceedings cannot be justified on the basis that arbitration is not a parallel to the court system. It is the forum that the parties have determined and arbitration litigation is not some lesser form of litigation than that being conducted in the courts. There are, of course, many distinguishable features but the ability to procure relevant evidence should not necessarily be one of them. This is especially so when Alberta law permits the tribunal to adopt its own rules of evidence without distinguishing between pre-hearing and hearing evidence. The need for relevant evidence is the same whether the dispute is being conducted by a tribunal or in the courts.

• 43 It is correct, of course, that the parties themselves cannot by their own agreement intrude into the affairs of a third person so as to entitle them to take evidence of any nature from such person. But the Model Law empowers a tribunal to seek the assistance of the court to take evidence in a manner consistent with the laws of the place of the arbitration. The policy of the law is to provide assistance to tribunals in appropriate circumstances where the tribunal has satisfied itself that the evidence is relevant to the issues before it.

• 47 With respect to the judgments from other jurisdictions cited by the chambers judge, discovery practices in other jurisdictions are different and it is not evident from the judgments that the discovery sought for the arbitration proceedings would be available in accordance with the rules governing litigation in those jurisdictions. In any event, for reasons already stated, I cannot, in the context of Alberta practice, read into Article 27 an unstated limitation that the evidence be taken solely at, and only for, the hearing.

It is important to note that the Alberta Court of Appeal’s decision did not turn on the fact that the parties had agreed on the application of the Alberta Rules of Court and a wide scope of examinations for discovery analogous to what would occur under those rules. Had the arbitral tribunal not had the benefit of the parties’ agreement on the subject and made the same order relying on its discretion,⁶ it appears from the court’s reasoning that the result would have been the same.

The trio of court decisions discussed in this article highlights that the Model Law, as incorporated into the laws of many different jurisdictions, will be interpreted and applied in the place of the arbitration according to the relevant law and practices in that jurisdiction. This will mean that in different jurisdictions there will be different interpretations and applications of provisions of the Model Law, and certainly of the provision regarding court assistance in taking evidence.

This conclusion in turn highlights yet another important consideration for contracting parties’ choice of a place of arbitration for an international arbitration, and the significance of a party’s negotiating the place of arbitration in an informed and strategic manner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.