False Testimony In International Arbitration
As one would expect, the participants in an arbitration, both parties and third-party witnesses, will wish to know what legal obligations are imposed upon them when they give evidence, what redress a party may have if a witness for the other side tells a lie, and what effect false testimony could have on the enforceability of an award. This issue is often overlooked by legal advisers, and the purpose of this newsletter is to consider the issue of false testimony in international arbitrations, and particularly those arbitrations that take place with English law governing the proceedings.
A. THE LEGAL OBLIGATIONS OF A WITNESS IN ARBITRATION PROCEEDINGS
No Obligation To Give Evidence Or To Tell The Truth
Witness evidence before arbitrations are procedurally governed by English law has two characteristics which are relevant in the context of false testimony:
- Witnesses attend arbitration hearings freely and voluntarily, as private persons giving evidence to private persons. They have no legal obligation to testify at all unless they have been summonsed to do so, which under the English Arbitration Act 1996 (the "Arbitration Act") can only be done with the assistance of the High Court.
- It is most likely that a witness will not be under a positive legal obligation to tell the truth. Witnesses giving evidence before an English court swear on oath that their testimony is truthful, and can therefore be said to have a legal obligation to be honest. However, the same is not necessarily true of witnesses before an international arbitral tribunal. Although tribunals in English arbitration proceedings have a discretion under the Arbitration Act to examine witnesses on oath, it is by no means standard practice for them to do so. In addition, the parties may agree in the arbitration agreement to exclude this power altogether.
These two characteristics do not mean that there will no legal consequences arising from false testimony in international arbitrations. However, they may affect the applicability of some sanctions as follows.
Criminal Liability For False Testimony
- The Perjury Act 1911
- Perverting the course of justice
- Fraud
The classic crime committed by the giving of false evidence under English law is perjury. This has a statutory base in the Perjury Act 1911 and carries a maximum sentence of imprisonment for seven years. However, a witness cannot be found guilty of perjury unless the false evidence was given under oath.
An untruthful arbitration witness might also be guilty of the English common law crime of perverting or attempting to pervert the course of justice. It is clear that this crime can be committed by the giving of fabricated or untruthful evidence to a court or by tampering with evidence to go before an arbitral tribunal. By implication therefore, lying to an arbitral tribunal could constitute perversion of the course of justice. This is punishable by a fine and imprisonment at the discretion of the court.
Another crime which might be committed by the giving of false testimony is fraud. The general offence of fraud under the Fraud Act 2006 can be committed in three ways, two of which are relevant to witnesses.
Fraud by false representation requires a false representation which is made dishonestly with the intention to make a gain for the maker or another person or to cause a loss to another person. "Gain" and "loss" are defined neutrally as well as positively and negatively: a "gain" includes keeping what one has, and a "loss" includes not getting what one might get.
Multi-Tiered Dispute Resolution Clauses
False evidence given by a party with the intention of obtaining a favourable award could therefore be within this definition.
Fraud can also be committed by a failure to disclose information when the witness is under a legal obligation to do so. However, as discussed above, it is not clear that there is such a legal obligation where evidence is not given under oath. Furthermore, even if evidence is given under oath it may be difficult to establish a duty to disclose specific information rather than simply a duty to be truthful with the information that was actually disclosed.
Civil liability for false testimony in tort
It is conceivable that a witness who lied to a tribunal could find himself open to civil liability in tort. It is unclear under English law whether the "witness immunity rule" or "privilege", which protects witnesses from civil liability arising out of the giving of their evidence, applies to evidence before international arbitral tribunals. If not, tortious liability might arise in several ways.
- Injurious or malicious falsehood
- Defamation
- Unlawful interference with business
- Deceit
This requires falsehoods, maliciously published, calculated to produce actual damage and which produce actual damage. However, the key element of "malice" is difficult to prove.
A witness who made a defamatory statement in their spoken evidence could commit a slander (defamation in transitory form), while the reading by a witness of a defamatory document could constitute the publication of a libel (defamation in more permanent form, usually written).
It has been suggested that where a lie told by a witness contributes to or causes an adverse award and therefore caused "damage" to the business of one party to an arbitration, this could constitute the tort of unlawful interference with business. This requires "unlawful" means to be employed in causing the damage, but as noted above, a duty to testify honestly may be merely moral rather than legal. Unlawful interference with business would probably only be applicable, therefore, where a witness gave their evidence on oath and therefore had a legal duty to tell the truth (and could also be prosecuted for perjury).
It is arguable, but unlikely, that this tort may be committed by a witness giving false testimony. This is because deceit requires reliance by a "victim" on a false representation and resulting loss by that victim. In the arbitration context, it is likely that the recipient of the misrepresentation would be the tribunal, whereas any loss would be to the other party, and so this requirement would not be satisfied.
Arbitrations Other Than Those Governed By English Procedural Laws
The extent of sanctions available in respect of false testimony varies substantially from jurisdiction to jurisdiction. Swiss law, for example, imposes the same criminal sanctions for false testimony in arbitration as it does in court proceedings even if the testimony is unsworn. However, in Germany and Austria the situation is similar to England: generally, there are no criminal sanctions for unsworn false statements given in arbitration proceedings unless they constitute fraud or defamation. Only if the arbitral tribunal invokes court assistance so that testimony is heard by a judge on behalf of the arbitrators will the provisions incriminating false statements in judicial proceedings apply.
B. EFFECT OF FALSE TESTIMONY UPON THE AWARD
The criminal and civil sanctions discussed above are important from the perspective of a person giving evidence who wishes to know what obligations are incumbent upon him in doing so. However, a party that receives an adverse award as a result of false testimony is likely to be more concerned with overturning the award rather than pursuing criminal or civil remedies against the witness.
Under English law, the award could be challenged under the Arbitration Act as having been obtained by fraud and therefore causing the losing party a "substantial injustice". A successful challenge could result in the remission of the award to the tribunal or in the award being set aside or declared to be of no effect. However, a challenge on this basis is only likely succeed if the fraud is on the part of a party or its representative. If the false testimony was from a third-party witness who acted without influence from a party this will not justify remission of the award.
Public policy is one of the limited grounds for setting aside or not enforcing awards under the New York Convention, which governs the recognition and enforcement of arbitral awards obtained in other jurisdictions. However, this ground is generally construed narrowly and in the absence of the fraud by one of the parties is unlikely to apply to a case of false testimony. A US court considered a challenge to an award on this basis when testimony was given in arbitration which was inconsistent with that in earlier proceedings. The court declined to set aside the award on the basis that inconsistent testimony does not violate basis notions of morality or justice, and on the contrary public policy required the court to uphold the award in the interest of speedy and effective arbitration proceedings.
Conclusions
Lying to a tribunal could potentially give rise to a criminal conviction for fraud, perjury or perverting the course of justice, all serious offences. A party that received an adverse award as a result of the untruthfulness of a witness could seek to challenge the award, but only where the witness was a representative of the other side rather than a third party. In addition, although untested, some heads of action in tort might arise, to which a party seeking financial recovery for an adverse award could resort. Both parties and third-party witnesses should therefore be mindful that although the consequences of untruthfulness before international arbitral tribunals are not as certain as they would be in an English court, considerable scope for redress and sanctions exists if those proceedings are subject to English law.
Should you wish to discuss any of the issues outlined in this newsletter, or any other legal issues that may be relevant to your business, please do not hesitate to contact us.
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.
