Cultural Misunderstandings and Why They Continue to Matter in International Arbitration

In this article, we outline why, despite the rise of an increasingly uniform “arbitration culture”, with an ever expanding body of soft law, cultural misunderstandings (resulting from different backgrounds among stakeholders – arbitrators, counsel, party representatives, witnesses) continue to play a material role in many international arbitrations. We then offer a number of examples of misunderstandings from anecdotes told by friends, together with some relevant take-aways.

As cross-border trade has increased so too has the use of international commercial arbitration clauses. This, in turn, has given rise to standards of international best practice, often built around popular guidelines on issues such as document production, conflict of interest and counsel conduct. The guidelines issued by the International Bar Association and the Chartered Institute of Arbitrators are particularly influential in this regard, but there are numerous others.

Regardless of their country and culture of origin, practitioners – both party representatives and arbitrators – increasingly form a cohesive “arbitration community” of lawyers familiar with international best practice, and therefore approach arbitration proceedings with very similar expectations as to what is and is not good conduct.

This is not always the case, however. As renowned arbitrator Michael Hwang has pointed out, there are still many parties and lawyers who do not fit into the global mould, and who will, accordingly, not conform to expected modes of behaviour. [1]

On one hand, Hwang identifies what he terms Arbitration Guerillas respondents that are familiar with international standards of practice, but who take the tactical decision to disrupt proceedings as they are convinced of a negative outcome, e.g. by disputing the jurisdiction of the tribunal at every turn, or by circumventing it in going to the local courts.

On the other hand, Hwang identifies parties and their representatives that are either wholly new to arbitration (what he calls Arbitration Neophytes) or have very little experience, which moreover is oftentimes negative (Arbitration Atheists, Arbitration Agnostics and Arbitration Wannabes). Such stakeholders will frequently cause disruption by not following international best practice, either because they are unfamiliar with best practice or because they genuinely object to arbitration or some of its aspects as a dispute resolution tool.

In our experience, the latter phenomenon is by far the most prevalent and important in practice. Dealing with Arbitration Neophytes, in particular, can be a tricky issue. Their behaviour is not tactical (and can, accordingly, not be countered by tactical measures) but is rather due to lack of familiarity with the arbitral process. For parties (and occasionally arbitrators) who are ‘neophytes’, the problem with arbitration tends to be a cultural question more than anything else. They will have certain ingrained expectations arising out of the culture (and particularly legal culture) in which they are at home, extending to issues such as the credibility of witnesses, approaches to document production, communications with the tribunal etc. They expect that international arbitration conforms to those expectations. This can give rise to cultural misunderstandings which – even though this may not be at all intended – can disrupt or even derail arbitration proceedings if not responded to carefully and sensitively.

With these general observations in mind, we outline below a few specific examples of such cultural misunderstandings. The list is very much non-exhaustive.

The fact that the examples are heavily tilted towards cultural misunderstandings between developed “Western” economies and other jurisdictions, and between Civil-law and Common-law ones, is purely owing to the fact that these happen to have been the real-life examples under discussion.

A tribunal relying on documentary evidence to the exclusion of witness testimony

A number of years ago, a friend was involved in an arbitration brought by a respondent from a Western Common-law jurisdiction against a respondent from a Civil-law jurisdiction. The arbitral tribunal was entirely made up of lawyers from the respondent’s country and neighbouring countries. The country in question is characterised by a corporate culture where a number of very large enterprises play an important role not only economically, but in politics and society as a whole, and in the lives of employees who work there.

The parties placed heavy reliance on the evidence of fact witnesses who were, in all cases, in the employment of the party on whose behalf they gave evidence. The claimant, in particular submitted comprehensive witness evidence, amounting to a very significant investment of time and underpinning a compelling narrative of the claimant’s position.

The respondent submitted scarcely any evidence. In their award, the arbitrators chose – without much explanation – to discount the witness and expert evidence in its entirety and instead to rely on its own reading of the contemporaneous documents.

We can, of course, only speculate about the rationale behind the tribunal’s thinking. The most compelling explanation we have, however, and one which is corroborated by other such instances we have come across and heard about, is that the arbitrators, steeped in a culture where corporate loyalty is far more important than it would be in the West, instinctively mistrust evidence given by witnesses on behalf of their employer.

An expert witness faltering under cross-examination

Another anecdote concerned an arbitration that revolved heavily around a particular unsettled question of law of a certain jurisdiction. The question was the subject of a long-running academic debate in the jurisdiction in question.

One of the parties engaged a pre-eminent academic expert on the relevant area of law. The expert submitted a written report in which he unequivocally stated one clear answer to the question at hand. Yet at the hearing he failed to offer the same unequivocal endorsement of his answer. In particular, he declined, when pressed, to maintain that what he had written on the issue should be regarded as right and the diametrically opposed thesis of some other scholars should therefore be regarded as wrong. The tribunal did not follow the expert’s views and the party that had engaged the expert lost its case as a direct result.

The expert subsequently indicated that it was simply not done, in their culture, to talk of oneself as being absolutely in the right.

This highlights, in our view, that there tends, not infrequently, to be a difference between written expert reports and statements made in oral hearings, all the more so when experts at the hearing encounter fellow specialists from the same (often quite narrow) field.

Fact witnesses under cross-examination

Friends have told of a large number of cross-examinations gone wrong. The problem is rarely that a witness changes its mind, or contradicts itself, or has gaps in his or her memory. Instead, by far the most prevalent problem in cross-examination is that the witness feels intimidated by the questioning, becomes flustered, is looking for a way to end the ordeal, perhaps even feels the urge to agree with the questioner. It is significantly more likely that this sort of thing happens where the witness is from a legal culture that does not know cross-examination.

Cross-examination is very much a Common-law procedural tool. In Civil-law jurisdictions, it is primarily the Court that questions the witnesses. Party representatives may only ask supplementary questions once the Court is satisfied that it has made all the enquiries it needs to make. Importantly, training in examination technique does not tend to be part of legal training in most Civil-law jurisdictions.

Of course, the clash between an experienced Common-law interrogator and a timid witness from a Civil-law country can go both ways. One friend recalls a charming and soft-spoken witness interrogated rather harshly by an archetypical counsel raised in the Common-law tradition. The witness complained, quite rightly, about the counsel’s discourteous treatment. The tribunal – made up, as it happens, of a mix of Common and Civil lawyers – was not amused.

Coaching witnesses

There is no prohibition against coaching witnesses in international arbitration doctrine as such.[2] Doing so is, however, strictly taboo as a matter of professional conduct in a number of national legal systems. English lawyers are, for instance, prohibited from coaching any witness about the specifics of the case at hand, though they can, and do, provide witnesses with more generalised training to familiarise them with what to expect at the hearing, most especially cross-examination. This is not, however, a Common-law vs Civil-law thing. For example, witness preparation is accepted and routinely practised throughout the United States.

This can lead to misunderstandings on a number of levels. It is not uncommon for a panel made up of English lawyers to instinctively assign less credibility to a witness who has obviously been coached, despite the fact that in that witnesses’ own legal culture such coaching is de rigeur, and so the witness was not aware of doing anything wrong. It is similarly not unheard of for a witness from, say, England to be reluctant to undergo coaching, even though he or she would be entitled to do so before appearing before, say, a US forum.

Document production

Document production is one of those areas where most progress has been made in recent years in terms of developing a uniform set of guidelines (and expectations). The IBA Rules on the Taking of Evidence in International Arbitration, in particular, have been invaluable in this regard. They govern or guide a substantial proportion of arbitration disclosure today. Under these rules (which in reality operate more as guidelines) a party is – to simplify things slightly – entitled to all non-privileged documents relevant to the case and material to its outcome that the other party possesses, provided it can make sufficiently narrow requests that demonstrate the relevance and materiality of such documents.

Gone are the days when the stereotypical American party on one side of the dispute would make sweeping demands for “discovery” that essentially boiled down to access to all the opponent’s documentation, only for such demands to be angrily resisted by the equally stereotypical Continental European party on the other side, which would categorically refuse to hand over any documents other than those it relied on.

Yet even within the universe of the IBA Rules, parties and arbitrators from different backgrounds tend to have widely diverging approaches to what it means for a document to be relevant and material, or to be privileged. Friends have, for instance, seen arbitral tribunals rule that none but the most direct attorney-client communications are privileged. Conversely, tribunals that have made such sweeping rulings on document requests under the IBA Rules that they are closer to US-style discovery than the more moderate process envisaged by the Rules.

The reasoning of arbitral awards

Much, perhaps too much, has been made of the stereotypical divide between the Civil and Common law systems. One point where, in our experience, this stereotype is perhaps more true than elsewhere is in the writing of judgments and awards. Civil-law judgments tend to be very brief by comparison to the more lengthy and mellifluous decisions of Common-law judges. Not infrequently, this writing culture has an impact on arbitral awards, especially if those judges go on to sit as arbitrators post-retirement (a frequent occurrence). Practitioners have told of parties with a Common-law background utterly dismayed by what they perceived to be a lack of coherence in the reasoning in the awards of tribunals made up solely of Civil lawyers.

Conclusions

One main common thread that goes through the above examples is that all the international arbitrations in question were conducted by high-calibre arbitration professionals on all sides (i.e. parties and tribunal), and yet these issues were not foreseen by anyone. Such cultural misunderstandings, in other words, are often the proverbial elephant in the room that can unexpectedly derail, or at least impede, the progress of an arbitration.

There are some simple recommendations that may, it is hoped, be helpful to practitioners seeking to minimise the impact of such understandings:

• Be mindful of culture: Take some time, at the start of a case, to consider the background of all participants, in particular in terms of their “home” legal culture, and how it may shape their expectations regarding the proceedings ahead.

• Involve your clients: Your clients are unlikely to be lawyers, let alone international arbitration professionals. They are far less likely than you to be mindful of the implications posed by the cultural background of their opponents and the tribunal. Take some time to explain the issue to them.

• Make culture a factor in choosing your tribunal: Assume you represent a client coming from one legal tradition against an opponent from a very different culture and tradition. Even if the contract in question purely concerns the law of the opponent’s country, all the facts and assets are located in the opponent’s country, and the parties have agreed for the proceedings to be conducted in that country’s official language rather than in English – a rare occurrence, to be sure, but it does happen – it may not be a good idea to agree to appoint a tribunal made up exclusively of “local” lawyers. Their expectations may be so far removed from your client’s expectations that it makes shepherding the case to a good outcome unfeasibly difficult.

• Make culture a factor in choosing counsel or co-counsel: It is vital to ensure that any team of party representatives is able to “read” the tribunal to the maximum extent possible. Ideally, this should include at least one team member with a solid understanding of each tribunal member’s cultural background.

“Reading” a tribunal is of course an art rather than a science, and can take many forms. Not the least important aspect of it is being able to understand the tribunal members’ body language.

It is, of course, also advisable to consider this particular aspect (body language and the ability to interpret it) when selecting the tribunal (discussed above) and preparing witnesses for the hearing (discussed below).

• Ensure your witnesses are properly prepared (in accordance with appropriate ethical and legal strictures): English lawyers cannot engage in outright witness coaching in relation to the case at hand. But they can ensure that witnesses – including expert witnesses – know what to expect in cross-examination and are not afraid of it.

• Consider expert conferencing: The situation described above where an expert may be uneasy maintaining his or her position at the oral hearing, can often be avoided (or at least partially alleviated) by using conferencing instead of, or perhaps in addition to, the traditional cross-examination process. This tool is not, alas, available for fact witnesses.

[1] Michael Hwang, Why is There Still Resistance to International Arbitration in Asia? Lunchtime address at the International Arbitration Club, Autumn 2007. Available here: http://www.arbitration-icca.org/media/4/92275989554120/media012232972346990why_is_there_still_resistance_to_arbitration_in_asia.pdf

[2] See Nigel Blackaby et al, Redfern and Hunter on International Arbitration, Oxford: Oxford University Press, 2015 (6th ed.) at 6.123-6.124