An interesting decision issued in February 2017 by the Paris Court of Appeal (Cour d'Appel) may have an important impact on arbitral practice. The Court endorsed an ICC arbitral award based, in part, on the 'adverse inferences' principle under the IBA Rules on the Taking of Evidence in International Arbitration.
 
Adverse inferences is a form of legal reasoning where one party's unjustified silence or failure to produce the requested evidence is interpreted to the advantage of the other party. It is more established in common law jurisdictions than in civil law.
 
There are two main advantages of adverse inferences. First, it compels each party to comply with a request to produce documents. Second, it enables a party to assert a positive case if crucial evidence is withheld by the other side. Otherwise, in the absence of documents provided by that party or short of an adverse inference, the claimant would lose.
 
Article 9(5) of the IBA Rules reads as follows: "[i]f a Party fails without satisfactory explanation to produce any Document requested in a Request to Produce [...] or fails to produce any Document ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal may infer that such document would be adverse to the interests of that Party".
 
The fact that this principle, as well as the extensive use of document production pertain more to the common law, makes the decision of the Court – usually an adamant guardian of the civil law jurisdiction against common law and other international novelties – all the more interesting.

Facts of the case:

 In the arbitration between a group of Spanish shareholders of Grupo Guascor and two companies of Dresser-Rand Group over a share purchase agreement, the majority of the tribunal decided partially in favour of the shareholders. The arbitrators relied, among other things, on the defendant's failure to produce the requested material. However, the tribunal itself did not order Dresser to produce these documents or to explain their lack. Most importantly, the court based its reasoning largely on the evidence actually presented by the parties.
 
Dresser contested the ICC award before the Paris Court of Appeal, claiming that the tribunal could not rely on the IBA Rules and had treated Dresser unfairly by not having requested explanations for the non-production of the exhibits.
 
The Court found that the IBA Rules, explicitly mentioned in the Procedural Order, were clearly applicable to the case. It also highlighted that the adverse inference drawn by the tribunal had a merely supplementary character to the decision, which was otherwise based mainly on the evidence provided.

Conclusion:

Although the Paris Court of Appeal is widely known to be 'arbitration-friendly', its welcoming approach to as inherently common law concept as adverse inferences, is an important sign of judicial deference to applying alien legal ideas in civil law arbitral tribunals, provided the parties agree to it.
The crucial thing is that the tribunal, when drawing adverse inferences, is under no obligation to ask the parties to explain the non-production of the requested documents. It also applies in cases where the documents were requested by the parties themselves. If the applicable rules allow, the arbitrators may draw adverse inferences without prior notice and judicial control of the arbitral process will not prevent that.
 
Yet, there remains the question of whether judicial deference would have been the same if adverse inferences were a much more important (or even the only) ground for an award. Nevertheless, following this decision arbitrators may feel more at liberty to use adverse inferences without warning the parties. At the same time, the parties themselves should to take a close look at the arbitration rules on document production before relying on them.

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