Exploring expedited arbitration and inquisitorial procedures

Peter Davey*

Introduction

Clause 3(1)(a) of the Second Schedule of the Arbitration Act 1996 (the Act) gives an arbitrator the default power to adopt “inquisitorial processes”. However, there seems to be little guidance as to what an inquisitorial process involves. This begs the question as to how an inquisitorial process can be used to expedite an arbitration under the Act and provide better access to justice?

The Law Commission’s report, which formed the genesis of the Arbitration Act, provides little assistance.1 The Commission in its earlier discussion paper noted that: “The Australian Acts move away from the idea that the arbitral procedure should be modelled on that of a court case” and that apart from natural justice “the common law’s constraints of an adversarial procedure modelled on the courts would not seem to apply”.2

Unless the parties agree otherwise, it appears that the Act deliberately intends to depart from the adversarial approach and permit the arbitral tribunal to “seek out matters of evidence or law that it considers are conducive to a just outcome”, subject to the rules of natural justice.3

Inquisitorial processes are traditionally found in civil law jurisdictions, such as those in continental Europe. However, there seems to be no common “Civil Law procedure” and the processes adopted vary from one country to another.4 Further, the distinction between inquisitorial and adversarial systems appears to be blurred in international arbitrations.5

In 2018 the Inquisitorial Rules on the Taking of Evidence in International Arbitration were launched in Prague (the Prague Rules) as an alternative to give a more civil law flavour to arbitration procedure than the IBA Rules on the Taking of Evidence in International Arbitration. The Prague Rules provide some useful guidance on the possible inquisitorial processes that could be used under the Act.

In 2021 the UNCITRAL Expedited Arbitration Rules6 were adopted and other international arbitration institutions have expedited arbitration rules.7 Rule 11 of the AMINZ Arbitration Rules also sets out an expedited arbitration process that can be adopted by parties (the AMINZ Expedited Arbitration Rules)

The expedited procedures favour the appointment of a sole arbitrator although the Prague Rules simply refer to the arbitral tribunal. As we will see, many of the expedited arbitration procedures already adopt inquisitorial processes.

Early case management conference

An early case management conference is a key component of both expedited arbitration rules and an inquisitorial process. Under the Prague Rules the arbitral tribunal is required to hold a case management conference “without any unjustified delay after receiving the case file.”8 The Prague Rules also encourage the arbitral tribunal to take a proactive role at the case management conference by clarifying the relief sought, the disputed and undisputed facts and the legal grounds on which the parties base their position.9

Similarly, the AMINZ Expedited Arbitration Rules require the arbitrator to “consult with the parties, through a case management conference or otherwise, on the manner in which it will conduct the arbitration” within 14 days of appointment.10

This may give an arbitrator an early opportunity to assist the parties to mould the arbitration to best suit the particular dispute, such as requiring the parties to submit all relevant documents, witness statements and expert reports with the points of claim and defence.

Discovery

It is well-recognised that discovery can be a timeconsuming and costly exercise, which often fails to reveal any “smoking gun”. The Prague Rules state that extensive production of documents, including any form of e-discovery, is to be avoided but a party may request the arbitral tribunal to order another party to produce specific and identified relevant documents.11 The arbitral tribunal may on its own initiative also request a party to produce a document which it considers to be relevant and material to the outcome of the case.12

Similarly, the AMINZ Expedited Arbitration Rules state that there shall be no request for disclosure of documents. The parties are to produce all documents and evidence which they rely on but the arbitrator may direct what other documents and evidence the parties should produce.13

Investigating the facts

Prior to the introduction of the Act, the High Court had stated that arbitrators must confine themselves to material put before them by the parties unless the contrary is agreed.14

Under the Prague Rules the arbitral tribunal is encouraged to take an active role in investigating the facts of the case.15 For example, the arbitral tribunal may indicate at the case management conference, or at a later stage, the evidence that would be appropriate to prove the disputed facts and order the parties to produce evidence or expert reports.16

Similarly, under the AMINZ Expedited Arbitration Rules the arbitrator “shall direct what written statements shall be required from the parties or may be presented by them (and limit the number of pages of evidence and submissions that may be filed by the parties).”17 The arbitrator may also “decide which witnesses, including expert witnesses, shall give evidence at the hearings, if hearings are held.”18

If the arbitral tribunal undertakes any factual investigations, then it needs to ensure that natural justice requirements are met. One of the fundamental natural justice requirements is that the parties are “treated with equality and each party is to be given a full opportunity of presenting that party’s case.”19

Article 24(3) of the Act also states that “any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.”

What amounts to an “evidentiary document” has been the subject of some debate. My view is that the best guidance is provided by Fisher J in Methanex Motunui Ltd v Spellman as follows:20

In general an arbitrator must provide notice of, and an opportunity to respond to, issues, ideas, methods, research, investigations and/or studies of the arbitrator that were not reasonably foreseeable in the light of the arguments traversed before the arbitrator.

On appeal, the Court of Appeal stated that “it does not cover research works of general application, matters of which judicial notice could be taken, or legal precedents and articles used as part of the internal reasoning processes of the arbitrator.”21

Inspection of property

One type of factual investigation is an inspection of the property that is the subject of the dispute. Article 24(2) of the Act provides that:

(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of goods, other property, or documents.

In Kyburn Investments v Beca Corporate the parties appointed an experienced valuer to carry out a rent review. The arbitrator had visited the premises and was shown around by one party’s witness for approximately 10 minutes. The witness did not say anything of significance but the presence of the witness was not disclosed to the other party. The Court of Appeal considered that there was little doubt that the arbitrator had breached the requirements of natural justice by visiting the premises in the presence of only one witness, which was exacerbated by the failure to disclose that this had occurred.22 However, the Court determined that it did not have any material effect on the outcome of the award.

There are practical matters that need to be considered as part any inspection, such as:

• When will the inspection take place?

• Who will be present?

• What arrangements need to be made so that the privacy of the arbitration will be maintained?

• What will be said during the inspection and by whom?

• Will the inspection be recorded on video or by audio?

Appointment of experts

Concerns have often been expressed about the impartiality of party-appointed experts. Article 26 of the First Schedule of the Act already provides that the arbitral tribunal may appoint experts unless the parties agree otherwise. This includes requiring the parties “to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods, or other property for the expert’s inspection.” After the expert provides a report, a party may request, or the arbitrator may require, the expert to participate at any hearing, where the parties will have the opportunity to put questions to the expert witness.23

The Prague Rules set out the procedure that should be followed when appointing an expert witness.24 In addition to the above, the arbitrator should:

• seek suggestions from the parties as to who should be appointed but is not bound by the candidates that they propose;

• approve the terms of reference after consulting with the parties;

• request the parties to pay an advance on costs to cover the expert’s report in equal proportion;

• monitor the expert’s work, keeping the parties informed about all communications between the arbitrator and the expert.

However, care needs to be taken that the appointment of an expert does not add an additional cost to the arbitration where the parties already have their own experts.

Issues not raised by the parties

Under a traditional adversarial approach an arbitrator may be reluctant to raise issues that were not relied on by the parties because the focus is on the case that the parties present. However, it is difficult to see how this promotes access to justice.

The English cases have established that, in general, if an arbitrator proposes to decide an issue which has not been raised by the parties then he or she should draw it to the attention of the parties and allow them to present argument on it.25

The Prague Rules also provide that a legally qualified arbitral tribunal is entitled to apply legal provisions not pleaded by the parties provided it seeks the parties’ views on those legal provisions.26 This is based on the based on the maxim of Iura Novit Curia - the court knows the law.

Accordingly, an arbitrator authorised to use inquisitorial processes should be able to follow similar procedures provided the parties are given an opportunity to express their views.

Hearings

Expedited arbitration rules favour the arbitral tribunal determining the dispute based on the documents, rather than having hearings.27 The arbitral tribunal may also be required to deliver an award within approximately six months.28

Under the AMINZ Expedited Arbitration Rules the arbitrator may decide to hold a hearing after inviting the parties to express their views.29 If hearings are held then the arbitrator could take a more active role in questioning witnesses under an inquisitorial process. Employment lawyers will be familiar with the investigation meetings conducted by the Employment Relations Authority. Witnesses are first questioned by the Authority member and cross-examined by the other party’s representative.

In that way, natural justice requirements are met as the parties are still able to question the witnesses. However, counsel for the parties may be reluctant to take a lesser role in questioning witnesses by having to wait until an arbitrator has asked questions. Nevertheless, the process could be helpful where at least one of the parties is unrepresented.

Preliminary views

In Germany, the court often shares its preliminary views on the case at the outset of the hearing and identifies areas of risk for each party. The Prague Rules also permits an arbitral tribunal, to the extent permissible under the law of the arbitration, to express preliminary views with regard to the parties’ respective positions if the parties consent.30 This is not considered as pre-judgment or to serve as a ground for disqualification of the arbitrator.

However, there is a real risk under New Zealand law that preliminary views expressed by an arbitrator could be used to subsequently challenge the arbitrator’s impartiality under Art 12(2) of the Act, which would also be counter-productive to ensuring finality for the parties.31

Mediation

The Prague Rules permit the arbitrator to act as a mediator and then determine the dispute if the mediation does not result in settlement.32 This would presumably be similar to a med-arb procedure, which has its own risks that need to be carefully managed. It seems unlikely that an arbitrator could adopt such a process under the Act without the consent of the parties.

Summary

In summary, there is much in common between expedited arbitration procedures and inquisitorial processes that could be adopted under the Act. If an arbitrator is permitted under the arbitration agreement to use inquisitorial processes then appropriate expedited procedures could be used to assist the parties with access to justice.

*Peter Davey is a barrister and Fellow of the Arbitrators’ and Mediators’ Institute of New Zealand. He acts as counsel in civil and commercial disputes and also accepts appointments as a mediator and arbitrator.

REFERENCES

1 Law Commission Arbitration (NZLC R20 1991) at [424].

2 Law Commission Arbitration (NZLC PP7 1988) at [111].

3 A Willy & T Sissons, Arbitration (2nd ed, Thomson Reuters, 2018) at 9.7.1.

4 N Blackaby, C Partasides & A Redfern, Redfern and Hunter on International Arbitration (7th ed, Oxford) at [6.78].

5 Han, Report on a session by the Arbitration Committee at the 2019 IBA Annual Conference in Seoul

6 Appendix to the UNCITRAL Arbitration Rules.

7 For example, Appendix VI of the ICC Arbitration Rules, CIArb CostControlled Expedited Arbitration Rules.

8 Art 2.1.

9 Art 2.3.

10 Rule 11.6.

11 Arts 4.1 and 4.2.

12 Art 4.4.

13 Rule 11.8.

14 Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 (HC) at [460].

16 Art 2.5.

17 Rule 11.7.

18 Rule 11.9.

19 Arbitration Act 1996, sch 1, art 18.

20 Methanex Motunui Ltd v Spellman [2004] 1 NZLR 95 (HC) at [161](d).

21 Methanex Motunui Ltd v Spellman [2004] 3 NZLR 454 (CA) at [159].

22 Kyburn Investments v Beca Corporate [2015] 3 NZLR 644 (CA) at [37]-[38].

23 Art 26(2).

24 Art 6.2.

25 Interbulk Ltd v Aiden Shipping Co Ltd, ICCO International Corn Co NV v Interbulk Ltd, The Vimeira [1984] 2 Lloyd’s Rep 66 at 74.

26 Art 7.2.

27 See Art 11 of the UNCITRAL Expedited Arbitration Rules, Art 3.5 of the ICC Expedited Procedure Rules, Art 5.1 of the CIArb Cost-Controlled Expedited Arbitration Rules.

28 For example, see art 16.1 of the UNCITRAL Expedited Arbitration Rules.

29 Art 11.9.

30 Art 9.2.

31 See Redfern and Hunter on International Arbitration at 4.158 and Auckland Co-operative Taxi Society Ltd v Perfacci Ltd (CIV-2003-404-5495, 10 October 2003).

32 Art 9.3.