Evaulating the Prague Rules in International Investment Arbitration

International arbitration is renowned for its procedural flexibility, allowing parties to tailor proceedings to their needs. However, concerns over rising costs and delays have triggered a search for alternative frameworks to streamline the process. Traditionally, the IBA Rules on the Taking of Evidence have played a crucial role, especially in investment arbitration. Yet, the IBA Rules reflect common law traditions, which has occasionally made them less accessible to practitioners from civil law backgrounds[1].

In 2018, in response to these challenges, the “Rules on the Efficient Conduct of Proceedings in International Arbitration” — better known as the Prague Rules — were introduced. Designed primarily with civil law traditions in mind, the Prague Rules advocate for a more inquisitorial approach, granting arbitrators greater control over the evidentiary process and seeking to minimize costly practices like fishing expeditions and due process paranoia[2].

Are the Prague Rules Suitable for Investment Arbitration?

While the Prague Rules offer attractive efficiency gains, their compatibility with international investment arbitration is debatable. Investment arbitration proceedings often emphasize broad document production and extensive witness examination — elements deeply embedded in common arbitral practice[3].

For instance, document production plays a pivotal role in uncovering evidence, particularly when a state is a party to the dispute. The IBA Rules Article 3.3 provides structured guidance on document requests, supporting transparency and fairness[4]. By contrast, the Prague Rules (Art. 4.2) encourage minimizing document disclosure, aiming for efficiency over expansiveness. This approach might conflict with the expectations of investment arbitration parties, where access to evidence is often fundamental to a party’s case[5].

Similarly, the Prague Rules allow tribunals to decide that witnesses need not be heard even if written witness statements are provided (Art. 5.6). While this expedites proceedings, it may undermine the right to cross-examination, which is central to fairness in investment arbitration[6].

In terms of hearings, the Prague Rules suggest resolving disputes on a document-only basis wherever possible (Art. 8.1). Although cost-effective, this practice contrasts with the deep-rooted oral traditions of investment arbitration, where hearings, cross-examinations, and oral arguments are considered vital for due process[7].

Conclusion

The Prague Rules offer a promising alternative for commercial arbitration, particularly where parties seek a cost-effective, expedited process with a civil law flavor. However, their wholesale application to investment arbitration may not always align with the procedural expectations and fairness considerations typical in this domain. Investment arbitration cases frequently demand extensive document production, witness examination, and oral hearings to uphold parties’ rights effectively. Consequently, while the Prague Rules present useful ideas, parties and tribunals in investment arbitration should carefully evaluate their appropriateness on a case-by-case basis.

References

[1] Adinolfi, Giovanna, “Soft Law in International Investment Law and Arbitration,” Italian Review of International and Comparative Law, 2021, p. 90.

[2] Dubovsky, Miroslav/Trchalikova, Pavlina, “Adverse Inferences Drawn in International Arbitration under the Prague Rules,” Romanian Arbitration Journal, 2019, p. 24.

[3] Mert, Baver Mazlum/Türkmen, Süheyla Ahsen, “Milletlerarası Tahkimde Delil İkamesi Hakkında Prag Kuralları ve IBA Kurallarının Karşılaştırılması,” 2022, p. 45.

[4] Demir Gökyayla, Cemile, Milletlerarası Tahkimde Belge İbrazı, 2014, p. 122.

[5] Amaral, Guilherme Rizzo, “Prague Rules v. IBA Rules and the Taking of Evidence in International Arbitration: Tilting at Windmills — Part I,” Kluwer Arbitration Blog, 2018.

[6] Dubovsky, Miroslav/Trchalikova, Pavlina, “Adverse Inferences Drawn in International Arbitration under the Prague Rules,” Romanian Arbitration Journal, 2019, p. 29.

[7] Ferrari, Franco/Rosenfeld, Friedrich Jakob/Czernich, Dietmar, “Due Process as a Limit to Discretion in International Commercial Arbitration,” 2020, p. 18.