The IBA Rules and US courts
Nathan D O’Malley
Partner, Musick Peeler & Garrett, Los Angeles
The IBA Rules on the Taking of Evidence in International Arbitration (the ‘Rules’ or ‘IBA Rules’) have enjoyed considerable success as the pre-eminent set of evidentiary standards in international arbitration. The application of the Rules throughout the world indicates that most arbitrators, counsel and parties find them to be both useful and reflective of good practice, but can the same be said of courts sitting in review of arbitration-related matters? This article addresses that question from the perspective of United States Federal courts by reviewing several recently published decisions that consider the standards set forth in the Rules.
Empowering the tribunal as gatekeeper of the evidence-taking process
A provision of the US Code familiar to many international arbitration practitioners is section 28 USC 1782(a) (‘section 1782(a)’) which, in essence, authorises, but does not require, a US district court to ‘assist [an] applicant in gathering evidence for use before foreign tribunals’.1 Much has been said about what constitutes a ‘foreign tribunal’ and whether this section applies to commercial arbitration, but that discussion is beyond the scope of this article. Of interest here is the view held by US courts of IBA Rule 3.9 vis-à-vis section 1782(a). The following portion of Rule 3.9 bears directly on the issue of gathering evidence from non-parties using provisions like section 1782(a):
‘If a Party wishes to obtain the production of Documents from a person or organization who is not a party to the arbitration and from whom the Party cannot obtain the Documents on its own, the Party may, within the time ordered by the Arbitral Tribunal […] seek leave from the Arbitral Tribunal to take such steps itself.’2
The Rule is drafted utilising the permissive term may, a choice that has led some to interpret it as affording a right, but not a duty, to seek leave and assistance from a tribunal before applying to a court. More than one US court, however, has interpreted IBA Rule 3.9 as restrictive, in effect empowering the tribunal with control over applications to the courts for assistance regarding non-party evidence. For example, in a 2020 case before the US District Court for the Southern District of Florida, the Court considered a section 1782(a) application by a party to an arbitration seated in Brazil in which the IBA Rules were applied. When weighing whether to grant the application, the Court took the position that IBA Rule 3.9 ‘requires at the very least that a party put the arbitral panel on notice of its efforts to obtain discovery’.3 Also, in a prior 2015 decision by the US District Court for Colorado issued in consideration of a similar application, the Court interpreted IBA Rule 3.9 as follows: ‘the IBA Rules, under which parties have agreed to arbitrate, expressly limit third-party discovery, requiring advance authorization from the panel of arbitrators for its collection and use’.4
These rulings build on earlier case law from 2010, which considered that under the prior iteration of IBA Rule 3.9 (Rule 3.8 of the 1999 version) parties were required to obtain permission from the tribunal before applying to the court for assistance.5 Thus, US Courts have, in at least some instances, found the IBA Rules to provide useful guidance on the role and function of tribunals in regard to the taking of evidence, relying on IBA Rule 3.9 to vest arbitrators with a gatekeeping function over applications brought under section 1782(a).
Weighing the burden of document disclosure
Under IBA Rule 9.2(c), a party may object to a document request because it raises an ‘unreasonable burden to produce the requested evidence’.Determining what poses an unreasonable burden may seem highly subjective. Nevertheless, arbitrators often weigh the cost of obtaining the evidence against its probative value to make this determination.6 Even so, parties disappointed by a tribunal’s refusal to order production on the basis of burden may be tempted to look to the courts for help in obtaining the same evidence.
This was the situation in the 2019 case of Islamic Republic of Pakistan v Arnold & Porter Kaye Scholer LLP,in which an attempt to circumvent a tribunal’s burden ruling was made utilising a section 1782(a) application before the US District Court for the District of Columbia. The application concerned 70 ‘back up tapes’ of electronic data which the petitioner sought for use in an ICSID arbitration. The applicant had originally sought the tapes within the arbitration, but been denied because the Tribunal ‘concluded that, in light of [Claimant’s] previous production and the absence of any evidence of spoliation, “restoring 70 pre-April 2010 backup tapes is excessively burdensome”’.7 Although production of these tapes might be permitted in discovery practice before US courts, the District Court was swayed, in part, to deny the application because of the standard found in IBA Rule 9.2(c), noting that: ‘the Tribunal has authority to order discovery of the tapes and has repeatedly refused to do so. Asking this Court for that same discovery […] is clearly an end-run around the Tribunal’s evidentiary procedures’,8 and, further, because the application ‘ignores substantive findings by the Tribunal that restoring 70 pre-April 2010 back-up tapes is excessively burdensome in this case’.9
Arbitrators may find it difficult to apply the burden objection, particularly in large and complex cases where considerable document production is taking place. Nevertheless, the Islamic Republic of Pakistancase shows that even in the context of an evidentiary phase which takes years to complete, as it did in the underlying ICSID arbitration, arbitrators should not be afraid to draw clear lines where the requests have become burdensome. Reviewing US courts are often inclined to uphold such decisions, particularly where the IBA Rules are applied.
The ‘narrow and specific’ requirement upheld by US courts
Document production under the IBA Rules is differentiated from domestic practices found in common law jurisdictions in several ways, not least of which is the principle stated in IBA Rule 3.3(a)(ii), requiring each request to be framed by ‘a description in sufficient detail (including subject matter) of a narrow and specific requested category of Documents’. The ubiquitous acceptance of this rule notwithstanding, arbitrators acting in international matters seated in common law jurisdictions may find they are confronted with requests seeking ‘all’documents of a certain type. Some parties and their counsel may feel that this is an appropriate and fair way to proceed because it reflects local practice.
In a 2014 decision out of the US District Court for the Southern District of New York, Landmark Ventures, Inc v InSightec Ltd,10 the respondent, Landmark, sought to vacate the final award by accusing the arbitrator of misconduct because she had ‘limited document requests to specific requests narrowly tailored to the issues pursuant to the IBA Rules’.11 Per customary practice, the IBA Rules had been adopted in the first procedural order. The respondent subsequently submitted ten requests which generally sought ‘all documents’ of a certain type, leading the arbitrator to deny eight of them either in part or in full.12 Far from finding that the arbitrator had acted inappropriately, the Court found her rulings were in line with the IBA Rules, and thus:
‘Landmark had ‘an adequate opportunity to present its evidence, but simply failed to take advantage of this opportunity by failing to submit proper document requests. Arbitrators are empowered to enforce procedural requirements and to control discovery, and the Arbitrator here did not commit misconduct by denying Landmark’s document requests.’13
Similarly to the Court in Landmark, the US District Court for the Southern District of California also considered a motion to vacate an ICC award, in which the respondent again complained about the application of the IBA Rules. As in Landmark, the arbitrator in Aeryon Labs Inc v Datron World Communicationscautioned the parties against disregarding the international nature of the arbitration and submitting requests for ‘all documents’, directing them instead to the standard in IBA Rule 3.3(a)(ii).14 Despite his warnings, the respondent submitted a number of broadly framed requests, which the arbitrator denied, explaining that he would not permit what he described as a ‘fishing expedition’:
‘For the purpose of grounds for refusing disclosure, I have amalgamated what I might describe as a “fishing expedition” with non-compliance with the Article 3 of the IBA Rules on the Taking of Evidence in International Arbitration (“IBA Rules”) and the need for a request to be a “narrow and specific category” under the term “too broad.” By “fishing expedition” I mean the situation where a party seeks a broad range of documents often over a lengthy period without specificity which is not supported by a precise allegation in its pleading and with which documents it seeks to bolster its case, yet where the onus of proof remains on the party making the allegation.’15
Once more, the disappointed party complained about the application of the narrow document production standards in the IBA Rules. In reviewing the arbitrator’s decision, and the applicable arbitration rules the District Court found as follows: ‘the Court concludes that the arbitrator’s refusal to order disclosure of certain requested documents was not done in “bad faith” and was not “so gross as to amount to affirmative misconduct”’.16
Irrespective of local practice, arbitrators sitting in arbitrations seated in the US can take confidence from the fact that reliance on the IBA Rules to narrow the scope of document production is a position that has been upheld by US courts.
The IBA Rules have recently been criticised by some for being too oriented towards common law practices and approaches. As set forth above, however, a review of recent case law shows that far from introducing discovery standards common to US or other common law courts into arbitration, the IBA Rules can be an effective hedge against such practices. Those who support the development of an international arbitration system that is transnational in character and not dependent on local practices, should find that to be a good thing.
In re Bio Energias Comercializadora de Energia Ltda, No 19-CV-24497, 2020 WL 509987, at *1 (SD Fla 31 January 2020).
See n 1 above, at *4 (‘Bio Energias does not acknowledge or discuss Article 3.9 of the IBA Rules, which requires at the very least that a party put the arbitral panel on notice of its efforts to obtain discovery’).
In re Grupo Unidos Por El Canal, SA,No 14-MC-00226-MSK-KMT, 2015 WL 1810135 (D Colo 17 April 2015).
In re Application of Caratube Int’l Oil Co LLP, 730 F Supp 2d 101, 108 (DDC 2010).
See N D O’Malley, The Rules of Evidence in International Arbitration, an Annotated Guide, 2nd Edn (Informa/Routledge 2019), p 306.
Islamic Republic of Pakistan v Arnold & Porter Kaye Scholer LLP, No MC 18-103 (RMC), 2019 WL 1559433, at *3 (DDC 10 April 2019).
Ibid, at para 7.
Landmark Ventures Inc v InSightec Ltd, 63 F Supp 3d 343, 348 (SDNY 2014), aff’d, 619 F App’x 37 (2d Cir 2015).
Ibid, at 352.
Ibid, at 348.
Ibid, at 352.
Aeryon Labs Inc v Datron World Commc’ns Inc, No 3:19-CV-02168-WQH-LL, 2020 WL 1046849, at para 3 (SD Cal 4 March 2020).
Ibid, at para 4.
Ibid, at para 5.