Germany: The Prague Rules

Last Updated: 28 March 2019
Article by Michael Pocsay, LL.M., and Christina Thiele

The "Inquisitorial Rules on the Taking of Evidence in International Arbitration", the so-called "Prague Rules", were officially launched on 14 December 2018. The Working Group consists of 46 members from 31 countries, including Germany, Sweden, Russia and the UK.

The aim was to create an alternative to the IBA Rules on the Taking of Evidence ("IBA Rules") as, in the view of the Working Group of the Prague Rules, the rather common law like approach of the IBA Rules contributed to high costs and inefficiency of arbitration. In contrast, the Prague Rules follow the civil law approach to the taking of evidence with the aim of reducing costs and time and to achieve more effective and faster arbitral proceedings.

An arbitral tribunal may apply the Prague Rules upon the parties' agreement or its own initiative after having heard the parties (Art. 1 Prague Rules). The Prague Rules expressly encourage the arbitral tribunal to take a proactive role. Moreover, the approach regarding the taking of evidence through document production, witnesses and experts is more inquisitorial when compared with that of the IBA Rules, which is more adversarial.

Document Evidence

While the IBA Rules allow the parties to request categories of documents, the Prague Rules provide only for limited options of document production. In general, Art. 4.2 states that the parties and the arbitral tribunal "are encouraged to avoid any form of document production". If a party believes it to be necessary to request certain documents, it should indicate this to the arbitral tribunal as soon as possible, preferably even already at the case management conference and explain the reasons why document production may be needed in the particular case. A request for document production at a later stage of the arbitration is only possible in exceptional circumstances. In contrast to the IBA Rules, the parties may in any case not request categories of documents but only specific documents which are relevant for the outcome of the case (Art. 4.5).

Witness Evidence

Under the IBA Rules, the parties decide which and how many witnesses will be examined at the hearing (Art. 8.1 IBA Rules). Under the Prague Rules, it is the arbitral tribunal that ultimately decides which witnesses will be called for examination. Similarities exist, however, regarding the arbitral tribunal's role at the evidentiary hearing. Under both the IBA Rules and Prague Rules, the examination of fact witnesses is controlled by the arbitral tribunal. Such control includes the power of the arbitral tribunal to reject questions to the witness if, for instance, the arbitral tribunal considers the question to be irrelevant or not material to the outcome of the case (Art. 5.9 Prague Rules and Art. 8.2 IBA Rules).

Expert Evidence

With respect to expert evidence, the Prague Rules stipulate that, in general, the arbitral tribunal appoints experts, without prejudice, however, to the parties' right to submit their own expert report (Art. 6 Prague Rules). The IBA Rules mention tribunal-appointed experts and party-appointed-experts as equal means of evidence.

Hearing

Art. 8 of the Prague Rules contains the general rule that disputes be resolved "on a documents-only basis" in order to promote cost-efficiency. An oral hearing may be requested by the parties or held if the arbitral tribunal finds it appropriate but should in any case be organized in the most cost-efficient way, especially avoiding travel costs. The provision names examples like limiting the duration of the hearing and using video, electronic or telephone communication for the hearing.

Amicable Settlement

The Prague Rules expressly encourage the arbitral tribunal to assist the parties in reaching an amicable settlement. With prior written consent of the parties, an arbitrator may even act as a mediator and in addition even continue to act as an arbitrator in case the meditation is unsuccessful and further written consent by the parties is obtained (Art. 9 Prague Rules).

It remains to be seen if the Prague Rules will be widely accepted by arbitration users. Common points of criticism are that common law parties would be reluctant to agree on the use of the Prague Rules and that most of the tools set forth by the Prague Rules to increase cost and time efficiency in arbitration are already available to the arbitral tribunal under most arbitration rules and even the IBA Rules. Common law parties may be surprised by the application of the widely known principle under civil law Iura Novit Curia, granting the arbitral tribunal the power to apply legal provisions, including public policy rules which were not pleaded by the parties, as provided for in Art. 7 of the Prague Rules. Nevertheless, the Prague Rules may be an appropriate choice for disputes involving parties with a civil law background which appreciate the familiar approach to the taking of evidence and the cost and time efficiency which may result from proactively managed arbitration proceedings.

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.

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