A federal district judge in New York has rejected an attempt by a securities broker-dealer, involved in ICDR arbitration related to Bernard Madoff’s Ponzi scheme, to change the arbitral forum by a retroactive amendment to its customer agreement. Anwar v. Fairfield Greenwich Ltd., 2010 U.S. Dist. LEXIS 87449 (S.D.N.Y. Aug. 20, 2010).

Four months after Madoff had admitted the Ponzi scheme in December 2008, the Standard Chartered Bank sent its account holders a new customer agreement, retroactive to November 2008. The new agreement was with a successor entity, a new broker-dealer, and provided for arbitration before a panel appointed by the Financial Industry Regulatory Auhority (“FINRA”). (The original agreement had provided that the bank could modify it on written notice to the customer.)

The customers, mainly Chilean investors holding 24 accounts, started an ICDR arbitration as a consolidated rather than class action. The claim was that Standard Chartered had invested Claimants’ money in a Madoff “feeder fund” without adequate due diligence.

In a partial award in June 2010, the ICDR tribunal ruled that it had jurisdiction despite the purported substitution of FINRA arbitration retroactively, and also held that proceeding with all 24 investor claims on a consolidated (but not “class action”) basis was proper.

The broker-dealer then started this action, seeking declaratory and injunctive relief that the ICDR Tribunal lacked jurisdiction, that consolidated arbitration should be disallowed, and that discovery in the arbitration should be stayed for the duration of the discovery stay in related Madoff class action federal securities fraud cases pending before the federal district judge to whom the application was made.

Turning first to the question of ICDR jurisdiction, the Court, applying traditional injunction criteria, expressed doubt whether arbitrating before an ICDR rather than a FINRA tribunal would qualify as irreparable harm, but focused it analysis on Standard Chartered’s likelihood of success on its claim to have validly changed the arbitration clause. It found the broker-dealer’s position wanting, in part because of deficiencies in the giving of notice of the amendment, and in part (agreeing in this regard with the Tribunal’s analysis) due to the arguable substantive unconscionability of a change in an arbitration clause which (i) shifted proceedings to an arbitral forum, FINRA, admitted to be more favorable to securities broker-dealers, and (ii) required claimants to arbitrate separately in duplicative proceedings their identical claims against the predecessor and successor broker-dealers entities responsible for managing their accounts.

On the consolidation issue, the court found that the broker-dealer could scarcely claim irreparable injury, because the FINRA arbitration rules it sought to enforce provide expressly for consolidation. As to the merits, the court found that the ICDR tribunal’s partial award was subject to only the limited, deferential standards for vacatur specified in Section 10 of the Federal Arbitration Act (fully applicable to international arbitrations with a U.S. seat), because the consolidation question was properly viewed as an issue of arbitration procedure rather than arbitrability. The question therefore was whether the ICDR tribunal had exceeded it powers, and, finding that the tribunal had reasonably relied on New York law and industry custom and usage in construing an ambiguous clause, the court held that the tribunal had acted within its mandate. Further, taking note of the U.S. Supreme Court’s remarks in the Stolt-Nielsen case about the fundamentally different character of class arbitration, the court found that “[u]nlike the differences between bilateral and class arbitration, the differences between the limited consolidation here and bilateral arbitration are not so great.”

The court also gave “significant deference” to the tribunal’s ruling denying a stay of discovery. It went on to note that there was no merit to Standard Chartered’s argument that the stay of discovery in federal securities litigation pending resolution of motions to dismiss, mandated by federal law, extends to arbitrations of claims similar to those pending before a court.

One final comment is in order. The court assumed that FAA standards for vacatur were relevant to its review of the consolidation and discovery stay issues, presumably because the tribunal had included these rulings in a partial award. But these were merely procedural rulings in an ongoing arbitration, and the tribunal presumably retained power to amend them. Further, the proceeding was not brought under the FAA as a motion to vacate the partial award, but in effect as a petition to enforce the amended arbitration agreement providing for FINRA arbitration. The FAA contains no express provision for an action seeking to enjoin a pending or proposed arbitration. The court might have properly resolved the consolidation and discovery issues simply by holding that there is no statutory basis for interlocutory review of procedural orders in an ongoing arbitration.

You will find, in the Legal Developments section of my general website, a summary analysis of the Second Circuit’s decision concerning the Alien Tort Statute in Kiobel v. Royal Dutch Petroleum Co. Please click on the link at the bottom of this message box. Thank you. Kind regards.

Marc Goldstein

For arbitration lawyers outside the United States, the allocation of adjudicatory power, in arbitration-related cases, between U.S. federal courts and courts of the individual states, is considered to be a rather arcane subject. But it is a subject of keen interest to American lawyers acting for their foreign clients because of the perceived decisive advantages of litigating issues arising under the New York Convention and the Federal Arbitration Act (“FAA”)  before a federal district court judge.

Certain provisions in federal procedural law allow for a defendant in a case brought in a state court to insist that the case proceed instead in federal court. The transfer process is called “removal.” Removal is always conditional upon the existence of a statute granting subject matter jurisdiction over the dispute to a U.S. federal court. Chapter 2 of the FAA contains, in Section 205, what is said to be the broadest removal provision in all of federal law.  It provides for removal of any case that “relates to” an arbitration agreement or award falling under the New York Convention. Section 202 of the FAA provides that any case that “falls under the Convention” is deemed to arise under the treaties and laws of the United States, and thus to involve a “federal question” that a federal court has jurisdiction to adjudicate.

A recent decision from the federal district court in New York identifies a case that is clearly not removable from state court under FAA Section 205: one involving orders of attachment to obtain execution of a court judgment entered upon a Convention award. Samsun Logix Corp. v. Bank of China, 2010 U.S. Dist. LEXIS 96306 (S.D.N.Y. Sept. 9, 2010).

The defendants seeking removal in the Samsun case were Chinese banks allegedly holding deposit accounts of the judgment debtor.

The Court seems to adopt a sensible position that for an action to be “relat[ing] to” the New York Convention, it should be at least “conceivable” that a claim or defense in the action could depend on an interpretation of the agreement to arbitrate or the award. It gives, as an example, a case in which plaintiff had asked a New York State court to dismiss the arbitration panel that had been constituted pursuant to the parties’ agreement. In that case the Court found that the dispute had a clear relationship to the arbitration agreement, the panel having been constituted purportedly pursuant to the arbitration rules therein adopted. Accordingly, removal under Section 205 in that case had been upheld.

But in this case not only was the arbitration concluded and an award entered, but judgment had been entered on the award. A point not mentioned in the opinion is that under U.S. law the judicially-confirmed award is considered to be merged into the resulting judgment, and it ceases to have a separate existence. This principle would seem to reinforce the notion that there was nothing about the judgment creditor’s ability to obtain execution through a garnishment process against the defendant banks would conceivably turn upon interpretation of the arbitration clause or the award.  As the defendant banks offered no contention that the award somehow immunized the deposit accounts from execution, their defenses depended entirely on applicable law concerning execution of judgments and aspects of the bank-depositor relationship that might perhaps protect the accounts.

This is the initial draft of what will eventually be a longer and hopefully more thoughtful article concerning the difficulties, under existing American law and practice, of arbitral subpoenas in U.S.-seated international arbitrations. Your comments on this draft, on this site or to the author privately, are most welcome.

Parties to international commercial contracts often select New York as the place of their arbitration, and they do so for a variety of reasons, some of them related to the hospitable legal and professional environment for arbitration, including New York’s concentration of skilled arbitrators who are well-versed in New York commercial law.  

But the ability of the arbitral tribunal seated in New York to secure the testimony and records from witnesses other than the parties is likely not a major consideration.  Foreign companies, even when represented in contract drafting be competent counsel, probably have only a hazy understanding of the territorial limits that U.S. law and procedural rules place upon the effectiveness of an arbitrator’s subpoena to require the appearance of a non-party witness.  This is understandable, as a well-developed body of case law on this subject has only recently begun to emerge, and many issues have not been addressed.

American arbitration lawyers who gain familiarity with the UNCITRAL Model Law and other modern national arbitration laws have a general understanding that the courts in countries having such laws have the power to require the appearance of a non-party witness to testify, and that this power effectively extends from border to border. If a foreign lawyer made the same assumption about the United States, she might be surprised to find that American judges and practitioners generally consider the arbitral subpoena power to be territorially limited to a certain radius around the juridical seat of the arbitration.

The reason is that the subpoena power of an international arbitrator sitting in New York (or elsewhere in the U.S.) is no different than that of an arbitrator sitting in New York in a non-international case that involves interstate commerce and to which the Federal Arbitration Act (“FAA”) therefore applies.

The subpoena power under the FAA is governed by the same provision for domestic and international cases — Section 7. Section 7 is found in Chapter 1 of the FAA, in the original arbitration statute enacted in 1925, 45 years before the U.S. accession to the New York Convention.[1]

Under Section 7, the subpoena of an arbitrator is required to be served upon the witness “in the same manner as a subpoena to appear and testify before the court.” Therefore, the service requirements of Rule 45 of the U.S. Federal Rules of Civil Procedure (“FRCP”) apply, and those requirements scarcely reflect policies attuned to international arbitration, but rather reflect pragmatic compromises made in consideration of the vast expanse of American territory:

1) in the case of an individual, the subpoena must be delivered in person to the witness.

2) the subpoena may be served (i) within the federal judicial district of the seat of the arbitration[2], or (ii) outside that district but within a 100 mile radius of the seat of the arbitration[3], or (iii) within the state of the seat of the arbitration, if a statute or court rule of the state permits statewide service of a subpoena (as New York’s Civil Practice Law and Rules, for example, does).

In an international arbitration (and indeed in some domestic arbitrations), these limits will often leave many witnesses beyond the generally-understood reach of an arbitrator’s subpoena. If an important witness might for example be a retired officer or employee of a corporate party who has moved her primary residence to Florida or Arizona, the subpoena of the arbitral tribunal sitting in New York cannot be served with legal effect unless she is found, for personal delivery, in New York State or within 100 miles of New York City.[4]

Whereas the party who applies to the tribunal for issuance of the subpoena is (by custom) responsible for its effective service, parties will sometimes ask the tribunal to issue a subpoena even though the witness’s residence is known to be outside the permitted range for service. This presents something of a dilemma for the arbitral tribunal.

The tribunal might issue the subpoena, leaving its effectiveness to be determined by the actions of the party that requested it. A process server instructed by the party or its counsel might conceivably locate the witness in New York and deliver it to her at a conference or in a hotel room.  But it is more probable that the party will put the subpoena in the hands of a process server in Florida, Arizona, etc., and the witness, if she is not represented by counsel, may proceed under the mistaken impression that the subpoena is legally effective to require her compliance by traveling to New York to appear and give testimony on the date specified.

In the latter case, the arbitral tribunal has been made a party to a deception, unless the subpoena on its face indicates the conditions for its effectiveness. Here, the arbitrator has the ability to take practical steps, because the content and format of the arbitral subpoena are for the arbitrator to decide. Thus, the tribunal might elect to include a legend that the subpoena will only be valid if it is served “in compliance with territorial restrictions on effective service provided by the Federal Arbitration Act and the Federal Rules of Civil Procedure.” That formula, without delving into the details, should give the witness fair notice that a subpoena calling for an appearance to testify at a distant venue may not be valid, and that the witness should consult counsel to find out whether the subpoena is valid.

Even if the subpoena has been validly served, the attempt to secure testimony from a witness located far from the where the arbitrators are sitting may fail. Rule 45(d)(3) FRCP provides that “the issuing court must quash” a subpoena that “requires a person who is neither a party nor a party’s officer to travel more than 100 miles from where that person resides, is employed, or regularly transacts business in person….” (except within a state that provides for statewide service of process). Here the language of Rule 45 and FAA Section 7 produce a complication.

The Rule 45 motion to quash procedure is not directly applicable to a subpoena issued by an arbitral tribunal as opposed to an “issuing court.” Further, Section 7 of the FAA does not provide for a motion to quash.[5] Instead it provides that if a person fails to comply with a validly served subpoena, the federal district court for the district in which the arbitrators are sitting “may compel the attendance of such person or persons….” The phrase “may compel” leaves the court with discretion to deny a motion to compel under the circumstances in which the court would quash a judicial subpoena. But this result is not compelled by the text. There does not appear to be case law on this point, as it is understandable that the instances when an arbitral subpoena can be effectively served within its territorial limits on a witness who normally resides beyond those limits, will occur infrequently. But given the overall position of the FAA to make the obligation of a non-party to participate as an involuntary witness more limited in arbitration than in judicial proceedings, a court should normally exercise it discretion to decline to compel attendance of a witness before an arbitrator sitting in a particular place, if the court could not compel the same witness to comply with, and indeed would be required upon motion to quash, a judicial subpoena of a similarly-located witness to appear and give testimony.

Another issue that may arise is whether Section 7’s empowerment of arbitrators to subpoena witnesses to “attend before them” might be construed to permit an arbitral subpoena that calls for a witness to testify by video conference. This issue does not appear to have been addressed in any reported case. One would think that under settled rules of statutory construction, the 1925 arbitration statute should be interpreted according to the ordinary meaning that its terms had at the time of their enactment, and so “attendance” should be interpreted to mean a physical appearance in the presence of the arbitrators. In that case, a subpoena for video or telephonic testimony, designed to avoid the requirement that the witness travel more than 100 miles to the place of the arbitration, exceeds the powers of the arbitrator under the current law.

A solution that is sometimes discussed in arbitration circles — but how frequently it is practiced is unclear — is for the tribunal to move its “sitting” place to the location where the witness can be effectively served with an arbitral subpoena. In international arbitration the selection of the “seat” or “place” of arbitration by the parties, or in default of a party choice by the administering institution, has considerable legal significance. That significance lies in the resulting invocation of the legal regime governing arbitration at the seat, including the powers of the courts to set aside awards and to support the arbitral process as needed. But it is more than arguable that the word “sitting” as used in Section 7 of the FAA (“….upon petition the United States District Court for the district in which the arbitrators, or a majority of them, are sitting” may compel compliance with the subpoena) refers not to the legal seat of the arbitration as that term is understood in contemporary international practice, but simply to the physical location where the arbitrators, by agreement of the parties, convene to hear testimony. If the parties have adopted arbitration rules, such as ICDR Article 13(2), that permit the tribunal to convene at any location they deem appropriate to hear witnesses[6], then the agreement of the parties fully supports the Tribunal in “sitting” for FAA Section 7 purposes, wherever it needs to “sit” to obtain power to compel the appearance of a witness. The New York-based tribunal’s subpoena for the Houston-based witness should simply command the witness to appear before the tribunal (or at least one of its members, as Section 7 provides) at a Houston location on the specified date, and the arbitrators (or one of them) should plan to be there. A motion to compel compliance could then properly be brought before the federal district court in Houston, which would be where the tribunal is “sitting” in relation to this particular witness and subpoena for Section 7 purposes, even if the “place” of arbitration designated by the parties or the ICDR is in New York.

Whether it is prudent for the tribunal to take such a step is a different issue.  Sometimes the distant witness will be one that only one party is eager to present, while the other party might prefer that this witness be treated as beyond the reach of arbitral and judicial compulsion.  Further, the testimony of this witness might be more significant, in the scheme of things, if the proponent’s theory of the case is adopted, while the other side might contend that, on its theory of the case, that witness’s testimony is largely irrelevant. Thus, a tribunal that ventures to be a pioneer in testing uncharted Section 7 waters risks being perceived by the parties, at a relatively early stage, as having has already inclined toward the witness-proponent’s theory of the case. On the other hand, if the witness is clearly an important one on any theory of the case, and the testimony (or records in that witness’s possession) cannot be obtained with the same degree of personal knowledge from others, then the tribunal quite justifiably may wish to test the limits of its Section 7 powers by “sitting” temporarily where the witness is located, and issuing a subpoena commanding the witness’s appearance before them at that location.  (Obtaining the agreement of the parties to add the distant location as a second “place” of the arbitration is another solution, and there should be no doctrinal or practical difficulty in having two “places” of arbitration in the same country and sharing a common legal regime, the FAA, and the same judicial system.  But the agreement of the parties in this respect will not always be forthcoming.)

The need for a tribunal sitting in New York to go through such contortions to compel the appearance of a witness residing in Miami, or else to forego that witness’s testimony, exposes the fundamental problem, which is that the United States has failed to modernize its arbitration law in important ways. At least for international arbitrations, there should be nationwide service of process for arbitral subpoenas. It is against the reasonable expectations of a foreign party that agrees to arbitrate in the United States that there should be no mechanism (or at least no tested and legally established mechanism) to secure the testimony of a former officer of a U.S. corporate party, who resided in New York (where the corporation has its headquarters) at the time of the contract and at the time of events giving rise to the dispute, but who prior to the request for her appearance to testify had retired and moved to Arizona. The Arizona witness should, in turn, have the ability to seek a protective order from the federal district court at the place where she is served with the New York tribunal’s subpoena, and that court should have the power to modify the subpoena to reconcile the competing concerns of the parties, the tribunal, and the witness by, for example, requiring the tribunal (or one of its members) to preside at a hearing in Arizona to hear the testimony, or requiring that the testimony be adduced by video conference.

But modernizing amendments to the FAA are the stuff of arbitrators’ dreams.  In our waking hours, arbitrators should be keenly aware of the precise words of FAA Section 7, and Rule 45 FRCP, and how the unvarnished plain meaning of words like “sitting” in an arbitration statute enacted during Prohibition and the presidency of Calvin Coolidge might sometimes legitimately be used to good advantage in serving the needs of parties to international arbitrations taking place in the United States.

International arbitrators sitting in New York will from time to time need to apply or at least consider New York choice-of-law rules. It is therefore noteworthy when those rules evolve in a particular direction. New York “conflicts” rules (as New York lawyers call them) have for many years been a hybrid of “traditional” rules — based on such talismans as the place of a transaction or the nationality of a party in interest — and the more modern view that “interest analysis” should control. The shift in favor of interest analysis gained momentum recently in a decision of the US Second Circuit Court of Appeals. Bakalar v. Vavra, 2010 U.S. App. LEXIS 18343 (2d Cir. Sept. 2, 2010).

The case involves a dispute over ownership of drawing by the reknowned early 20th Century Austrian artist Egon Schiele. The work allegedly had been stolen by the Nazis in Vienna in 1938 after its Jewish owner was imprisoned and forced to sign a power of attorney over his large art collection and other personal property. The District Court had ruled in favor of the current possessor,  the plaintiff in the action, an American living in Boston who had acquired the drawing in good faith from a New York gallery that had earlier acquired it from a Swiss gallery in the 1950s. The Swiss gallery, it was alleged, had acquired title in Switzerland from surrogates for the Nazi occupiers of Austria, who had prepared documentation purporting to show that the seller was the sister-in-law of the arrested (later murdered) Austrian Jewish owner.

The District Court had applied Swiss law, which provides that a good faith purchaser acquires good title even to stolen property, except that the victim of the theft may assert a superior claim for five years after the property is stolen. Swiss law applied, the trial court concluded, under the traditional New York “conflicts” rule that the law of the situs of a questioned transfer of personal property is controlling. But as the Second Circuit observed, under New York personal property law, a thief cannot pass good title, and, moreover, the burden of proof on the issue of theft rests on the possessor, to prove that there is no theft in the chain of title.

Thus the outcome depended entirely on the choice of applicable law.

The Second Circuit, rejecting the District Court’s reliance upon New York’s “traditional situs rule,” held that this rule “no longer accurately reflects the current choice of law rule in New York regarding personal property.” The Court cited a 1991 New York Court of Appeals case as having rejected the situs rule in favor in “interest analysis,” but acknowledged that the widely-cited Restatement (Second) of Conflicts-of-Law continues to articulate the traditional situs rule but with the caveat that a court may find based on the interests motivating the competing laws at issue that a different choice should be made.

The predominant interest underlying the New York rule that a thief cannot pass good title is, the Second Circuit found, to prevent New York from becoming a more robust marketplace for stolen goods. The Court found no comparably important interest of Switzerland in the application of its rule protecting the expectations of a good faith purchaser.

In the result, the case was remanded for a new determination by the District Court of whether the property had been stolen, under the New York rule placing the burden on the possessor to prove no theft.

A dimension of the problem that should not be overlooked is that counsel in international arbitrations often will leap at the opportunity to accuse an adversary of an ethical violation. This is rather commonplace in the rough-and-tumble context of American civil litigation, and the problem in international commercial arbitrations exists substantially but not entirely because of the participation of American litigators in the process. The tactical deployment of ethical accusations challenges arbitrators to establish rules and regulate attorney conduct even though their jurisdiction to do so is not well-established by national arbitration laws or institutional rules.

I had a recent encounter with such an issue, while appearing as counsel in an international arbitration seated in New York. It involved the use in the proceedings of client-to-client communications related to settlement. American counsel from New York were on both sides, representing US and Chinese parties, respectively, in a contract dispute governed by Hong Kong law and seated in New York. The Sole Arbitrator hailed from a “Commonwealth” nation.

One counsel (your correspondent) submitted in the proceedings e-mails sent from the Chairman of Party X to the CFO of Party Y. The purpose of the use was to show Party X’s intent to arrange its own finances so as to frustrate enforcement of an eventual award. The communications related to settlement, at least to the extent of saying in substance “you should have been willing to settle for a modest sum, because now that we are arbitrating we will make sure there is nothing left when the time comes to enforce the award.” No agreement of confidentiality had been made regulating use of the communications in the proceedings.

Party X’s counsel claimed an ethical violation by Party Y’s counsel, and sought not only a sanction against Party Y counsel but also the exclusion of the e-mails as evidence in support of Party Y’s application for provisional relief. This claim of an ethical infraction was made without citation to any allegedly applicable law, rule, or code of ethics.

Without revealing how the Sole Arbitrator addressed the matter, I raise the question: How should it be addressed? What legal standards should govern?

In terms of arbitral choice of ethical rules, this case was relatively simple: The opposing counsel were admitted to practice in the same jurisdiction (New York) and that jurisdiction also was the juridical seat of the arbitration. The fact that one party was of Chinese nationality and that the law of Hong Kong was to be used to determine the merits does not point in the direction of using the ethics rules applicable to Hong Kong-licensed lawyers to measure the conduct of New York-admitted counsel. New York’s Code of Professional Responsibility does not address the issue of confidentiality of settlement communications or their use in proceedings. Federal and New York rules of evidence for trials before courts do address the subject as a rule of admissibility, and generally provide that such communications may be admitted as evidence for a purpose other than to prove liability or damages. This left the Sole Arbitrator free to adopt an appropriate rule as a matter of discretion. But in this context, following the rules that apply in federal and New York judicial proceedngs would seem to be in keeping with the reasonable expecations of counsel on both sides.

But suppose that the same alleged infraction occurred in an arbitration seated in Geneva, with French Party X represented by French counsel and New York Party Y represented by its New York lawyer. Suppose further that the French code of professional ethics governing courtroom advocacy would prohibit any use of a client communication related to settlement in a judicial proceeding, but would nevertheless allow a French-licensed advocate when practicing before an international tribunal to follow a more liberal rule applicable in that tribunal. Suppose further that the Swiss code of ethics on this point was essentially the same as French code, including the suspension of the rule’s application in proceedings before an international tribunal that adheres to a more liberal rule.

One can readily see why there such energy being devoted to the enactment of some form of universal code. In this scenario just described, the arbitrators’ sensible first instinct might be to look to Swiss ethics laws for guidance and seek to hold both counsel to the Swiss law ethical standard based on the parties’ agreement on Geneva as the juridical seat of the arbitration (although even this is debatable, as the parties likely agreed upon the seat of arbitration for a number of reasons probably not including its judicial rules of ethics governing advocacy). But the Swiss law in this instance would not provide the needed guidance because it permits compliance even by Swiss-licensed counsel with a rule governing the arbitral proceedings even if the same conduct would be an ethical violation in judicial proceedings. There being no applicable rule concerning use of settlement communications to be found in institutional rules of arbitration or (I presume) in Swiss international arbitration law, the arbitrators are in a position to decide what rule should apply.

One solution certainly is a provision in a uniform ethical code that prohibits all use, or allows particular limited uses, of communications relating to settlement. But until such a code becomes a reality, what is the best practice for arbitrators to follow? As to rules that touch upon advocacy (use of documentary evidence, use of legal authorities, preparation of witnesses, questioning of witnesses, etc.) there must of course be “equality of arms,” and arbitrators would do well to cover a number of such subjects in the first procedural orders. By doing so, tribunals may avoid having to address claims of ethical infractions later on, and will often relieve counsel of a conundrum: whether to engage in the same tactics as the adversary, on the premise that they may be ethically acceptable to the tribunal, or to refrain from such tactics while claiming an ethical infraction, at the risk of giving the other side an advocacy advantage if the tribunal finds the conduct to have been ethically acceptable.

An illustration of this process may be found in the adoption by many tribunals, early in the case, of the IBA Rules of Evidence as “guidelines” for the proceedings. Rule 4.3 of the IBA Rules declares that communications by a party or its counsel with the party’s witnesses in advance of their testimony, to discuss the testimony, is not improper — and this rule is essentially an ethical rule even though it is found in “Rules of Evidence.” The general acceptability of witness contact in international arbitrations, despite its illegality in judicial proceedings in many countries, has come about substantially by virtue of the adoption into procedural orders of the IBA Evidence Rules as guidelines (if not as governing prescriptions).

Much of this ground can be covered with the agreement of the parties, who are likely to be accommodating to the wishes of the tribunal on abstract principles of counsel ethics early in the case. Thus tribunals should have little difficulty securing the agreement of all counsel in most cases that: (i) communications between opposing counsel shall be confidential and not used in the proceedings except by agreement, unless the unilateral use is necessary to disclose that the adversary has acted dishonestly or in bad faith toward the tribunal; (ii) any agreements of the parties concerning the confidentiality of their communications during the proceedings shall be binding upon their counsel regarding use in the proceedings; (iii) counsel shall have an affirmative duty to direct their clients to preserve evidence that may be relevant and material to the proceedings, (iv) counsel shall have an affirmative duty to bring to the tribunal’s immediate attention any circumstances involving an attempt by counsel to influence a witness not to tell the truth, and (v) counsel shall have an affirmative duty to bring to the tribunal’s immediate attention any circumstances indicating a substantive ex parte communication between a party or its counsel and a member of the tribunal.