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'Prague rules' issued for international arbitration

New rules designed to limit some of the burdens associated with arbitration proceedings have been issued, giving businesses wider choice over procedural rules applicable to their disputes.18 Dec 2018

Jean-François Le Gal, who specialises in international arbitration and multi-jurisdictional litigation at Pinsent Masons, the law firm behind Out-Law.com said the new Rules on the Efficient Conduct of Proceedings in International Arbitration, known colloquially as the Prague rules, are designed to offer an alternative to the International Bar Association's (IBA's) Rules on the Taking of Evidence.

"The Prague rules are seen as a way to address criticisms made regarding international arbitration regarding the costs, time, and heavy procedures," Le Gal said.

"They also appear to be a reaction to some civil law lawyers, who consider the IBA rules as being too 'common law' oriented for permitting extensive disclosure and prolonged cross-examination of witnesses", said Le Gal, a qualified barrister in England & Wales and an avocat at the Paris Bar.

Le Gal said that it is too early to say whether the Prague rules, which were only issued on 14 December, will be a true "game-changer" for arbitration. However, he highlighted some of the features of the new rules that could prove attractive to some businesses.

The Prague rules encourage Arbitral Tribunals to limit document production, including any electronic discovery process.

They also encourage the Tribunal to restrict the number and examination of witnesses, and even promote dispute resolution on a 'documents-only' basis.

The Arbitral Tribunal is also free, under the Prague rules, to "apply legal provisions not pleaded by the parties if it finds it necessary" following the conclusion of the hearing.

The Prague rules also provide explicitly for the Arbitral Tribunal to help the businesses in dispute reach "an amicable settlement" at any stage of the proceedings. The tribunal can also be asked, if all parties agree, to give preliminary views on the "respective positions" of the parties and to act as a mediator.

A working group made up of representatives from around 30, mainly civil law, countries drafted the Prague rules. The new rules were originally intended to only cover rules on the taking of evidence, but have developed during drafting to provide for other case management techniques. In a note issued alongside the new rules, the working group referenced the background to its work.

"It has become almost commonplace these days for users of arbitration to be dissatisfied with the time and costs involved in arbitral proceedings," the working group's note said. "One of the ways to increase the efficiency of arbitral proceedings is to encourage tribunals to take a more active role in managing the proceedings (as is traditionally done in many civil law countries)."

According to the note, debate among practitioners led the working group to find that the Prague rules could "be used in any arbitration proceedings where the nature of the dispute or its amount justifies a more streamlined procedure actively driven by the tribunal", and not just "in disputes between companies from civil law countries".

Le Gal of Pinsent Masons said: "The Prague rules will certainly be considered by a number of clients, counsel and arbitrators keen to avoid heavy document production exercises. However, it is worth noting that a number of principles enshrined in the Prague rules are already contained in the rules of some arbitral institutions, such as the ICC Expedited Procedure Provisions. Overall, while the Prague rules may in time prove popular, the IBA rules are currently widely used and will probably remain the point of reference."