The Challenge in International Commercial Arbitration

International commercial arbitration has been vastly developed as one of the most efficient and preferable methods of commercial dispute resolution internationally — one which results in the involvement of parties worldwide that come from different legal systems. Such differing backgrounds often result in some gaps or unfamiliarity within the arbitration proceedings, including when it comes to the rules of evidence, as each legal system has its own rules of evidence.

The laws of evidence are the rules that govern the relevance, admissibility and weight of documentary and oral evidence tendered by a party, including the preparation and presentation of documents, witnesses of fact, expert witnesses and inspections, and the actual conduct of evidentiary hearings, in order to support or contest a fact in issue in the course of legal proceedings. Such laws of evidence vary across countries due to the variety of legal systems. Such variety is also reflected in various international commercial arbitration rules.

Only the The American Arbitration Association (AAA) and the United Nations Commission on International Trade Law (UNCITRAL) Rules contain provision concerning the burden of proof. Those regulations stipulate that each party has the burden of proving the facts relied on to support its claim or defense, with the only exception related to the propositions that are so obvious, or notorious, that proof is not required.

In general, it can be distinguished that there are three basic standards of proof applied in international arbitrations, i.e. a general, underlying standard, an elevated burden of proof, and a very low standard or insufficient explanation of the reasoning.

Regarding the first, a general standard is perhaps a reference to the principle known by common law lawyers as a balance of probabilities, i.e. the evidence must show that something is more likely to be true than not be true, but the standard is not as great as is required for criminal convictions.

Civil law lawyers, in contrast, are more accustomed to what may be a higher burden of proof referring to the inner conviction of the judge. However, in any circumstances, it should be realized that the real general standard is and must be a test of preponderance of evidence.

Document disclosure under the common law system means the disclosure of all relevant documents. It is seen as an obligation for a party to produce every single relevant and admissible document in its possession to the court, not merely the one that supports its case. The failure to comply with a disclosure order in litigation proceedings may lead to severe sanctions.

This phase is commonly executed after the submissions of the parties’ claims and defenses (which usually do not contain evidence), but before the exchange of witness statements and the commencement of the hearing.

In general, the provisions concerning discovery in IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules) allow one party to request that the other party produce some additional documents to the Tribunal.

However, such a request is subject to certain limitations. For example, a request for production of documents must contain a description of a particular document or a category of documents, with sufficient particularity to enable it to be identified, and a description of how the document is relevant to the proceeding. It must also be accompanied with a statement that the document is not in the possession of the party making the request and why it believes it is in the possession of the party to whom the request is being made.

Although discovery of evidence is currently quite common in international commercial arbitrations, such a thing is often a new experience for parties domiciled in civil law countries, where such discovery is not permitted under local law. For such parties, the discovery process carries obvious risks.

In international commercial arbitration, the discovery phase is commonly known as the “pre-hearing discovery” phase, as it is mostly conducted before the commencement of the hearing.

In the International Chamber of Commerce (ICC) of the Court of Arbitration and SIAC (Singapore International Arbitration Centre) arbitration proceedings, the pre-hearing discovery stage is initiated by the issuance of the Procedural Order by the Tribunal, which clearly orders each party to submit a request for disclosure of the documents considered relevant to the case, and thereafter obliges every party who has been requested, to provide such required documentary evidence to the court and exchange it with the other party within the time limit set out by the Tribunal in the Procedural Order.

Under the Indonesian civil law system, judges in civil proceedings are bound by the principle of “passive judge”. The “passive judge” principle means that the civil judge’s authority to accept and dispute the issues in the dispute are limited only to claims and evidence submitted by the parties. Therefore, the judges are not allowed to ask the party to submit or add additional evidence during the proceeding.

Even though the Arbitration Rules in the Indonesian National Arbitration Agency (BANI) are different from the normal rules of civil litigation proceedings in Indonesia, the rules applied in BANI are derived from the rules of civil litigation proceedings, which governed in Het Herziene Indonesisch Reglement (HIR) or Indonesian Civil Procedural Code.

Until now, Law No. 30/1999 on Arbitration and Alternative Dispute Resolution (Indonesian Arbitration Law) and BANI procedures have not stipulate the discovery of documentary evidence, therefore arbitration proceedings at BANI have not yet recognized and applied the process of discovery found in international commercial arbitration.

There is only one provision under Indonesian Arbitration Law which authorizes the arbitrator or arbitration tribunal to require the parties to provide written submissions of explanations, documentary or other evidence as may be deemed necessary, within the time limitation as determined by the arbitrator or the arbitral tribunal.

Nevertheless, with continued legal knowledge development of BANI’s arbitrators concerning the applicable procedures in international commercial arbitration, BANI arbitrators are currently being more flexible in utilizing the Indonesian Arbitration Law that authorizes them to order the parties to produce additional documents, and less strict in applying the “passive judge” principle.

The underlying importance of gathering all possible evidence is to find and prove the material fact(s). This aim could be achieved by requiring the parties to present and show all of the evidence to support and strengthen their arguments. Each party’s argument would be judged by the arbitrator based on the presented evidence and subsequently the award will be rendered.

The principle of fairness becomes the key in the mechanism of evidence in arbitration, and the effort to balance the process of evidence, i.e. on the one side by observing written evidence, but on the other side by also observing the witness testimony, is something that should be implemented comprehensively.

An active role on the part of the arbitrator is required to explore the evidence and testimony in order to find out the material fact(s) of the case, which will eventually lead to the issuance of a just and impartial award.

The process of discovery of documentary evidence should be implemented comprehensively in all forums of arbitration, while still respecting the applicable legal system in the lex loci arbitri.
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