The Facades of Oral Testimony in International Commercial Arbitration: The Good, the Bad and the Ugly

[Malvika and Vaanika are students at Dr BR Ambedkar National Law University, Sonepat.]

Oral testimony in the adjudication of international commercial arbitration disputes can be called a double-edged sword. On one hand, it offers various advantages, by providing opportunities for dynamic and interpersonal interactions, which help in better judgment. On the other hand, it poses multifarious challenges ranging from language barriers to unreliability of recollection. Moreover, unethical practices such as witness intimidation and presentation of misleading statements, undermine the credibility of oral testimony, thus hampering the process of justice.

The Recording of Evidence

Arbitration agreements and awards in 169 countries across the globe are governed by the 1958 New York Convention, also called the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Cornell Law School describes evidence as an item or information proffered to make the existence of a fact more or less probable, which can take the form of testimony, documents, photographs, videos, voice recordings, DNA testing, or other tangible objects. Arbitrators in international commercial arbitration are tasked with obtaining all possible evidence to uncover and establish material facts. The recording of evidence is governed by the International Bar Association (IBA) Rules. Evidence includes exhibits, legal authorities, witness statements, and expert reports. 

In international commercial arbitration, the evidentiary hearing may take the form of oral testimonies, memorials with exhibits, or documentary evidence which the parties submit with their claims. Oral testimony in international arbitration refers to the verbal statements given by witnesses during arbitration hearings. These witnesses may include parties to the dispute, experts, or other individuals with relevant knowledge or information pertaining to the dispute. The primary purpose of oral testimony is to present evidence, clarify issues, and provide firsthand accounts that support each party's case.

The general order of witnesses used in many instances for oral testimony is outlined in Articles 8.4(a), (b), and (c) of the IBA Rules: claimant’s witnesses, respondent’s witnesses, and experts. Oral testimony can be a powerful tool in arbitration, providing a dynamic and interactive method for presenting evidence. However, lurking beneath its surface, oral testimony in international arbitration also carries a shadow of controversy and complexity, sparking a myriad of concerns that demand attention and scrutiny. It has its own good, bad, and ugly.

The Good

In General Electric Co. v. Deutz AG, 2001, the Third Circuit of the Unites States Court of Appeals accepted oral testimony as a legitimate form of evidence and highlighted its significance in resolving disputes. In CBS v. CBP, 2021, the Singapore Court of Appeal ruled that the arbitrator had violated natural justice by refusing to permit a hearing for oral witness testimony.” 

Oral testimonies provide a method of examination that is personal and gives a peek into the conscience of the witnesses. They can prove to be more reliable and credible in comparison to written statements, which can be manipulated and twisted. In order to ensure that all material required for a fair adjudication is available, complex claims that may be presented in international commercial arbitration nowadays require greater discovery, which is made possible when parties are carefully heard and examined.

According to Article 8(5), witnesses have an obligation to speak the truth since arbitral processes are similar to judicial proceedings in the sense that they lead to a legally binding verdict. For the majority of oral testimonies, taking sworn testimony in arbitral procedures is not prohibited by law, but in such cases, an untruthful witness may face consequences under the local civil and criminal laws. This lends credence to the truthfulness and reliability of the claims made by the parties. In Case 4A_669/2012 (17 April 2012), the Swiss Federal Supreme Court ruled that the right to be heard entails a minimum obligation to consider all issues relevant to the case’s outcome, as balanced with the tribunal’s autonomy to give the evidence the weight it deems appropriate. Thus, the oral testimonies also play a crucial role in determining the arbitral award.

Paper tends to be less persuasive than emotions and live testimony.[1] The emotions of the witnesses can be assessed via oral testimonies in a better fashion since it involves human interaction which also leads to more transparency. Further, the revised IBA Rules remove logistical barriers by explicitly providing for video conferencing and other new technologies to support oral testimony, thereby streamlining and modernizing the oral testimony processes.

The Bad

The challenges that come along with oral testimonies are several and undeniable including issues with witness reliability. The witnesses may give testimonies that are hazed and have loopholes due to the limitation of human recollection.

Further, the language barrier and translation issues that are faced in international arbitration also pose a concern for the fair adjudication of awards. The cons of witness oral testimony include duration and costs of examination, impact on the preparation of the cross-examination, and risk of irrelevant and confused statements. Particularly when the testimony pertains to intricate technical matters, interpretation is frequently imprecise, and not all witnesses are proficient in the arbitration’s language. On top of it, there is always the obstacle of logistical support as for oral testimonies, the witnesses have to travel to the place of seat of international commercial arbitration. Although as discussed above, arbitral evidence rules are attempting to bridge this gap.

Hearings may take twice as long when oral testimony is used since the length of the direct examination, cross-examination, and re-examination has to be considered. There is no assurance that oral testimonies will result in more focused, relevant, and lively explanations. Furthermore, especially in complex instances, the notion that arbitrators would be more effective and able to guide the witness to the pertinent points may turn out to be merely theoretical.

Further, the stark difference between the Common Law System and Civil Law System among various countries of the world worsens the uniformity of the value of oral testimonies in international arbitration.  Even though live testimony from witnesses can be very important in a civil law case, civil law normally regards live testimony significantly less serious than common law does, and it views the testimony of witnesses connected to or employed by a party with significant suspicion. Achieving a balance between the common law and civil law traditions is the goal of the current standard procedure in international arbitral proceedings.

In re TA G v H Company, the Swiss Federal Supreme Court ruled that, if the norm is consistently enforced, and does not fundamentally conflict with the parties’ desires, the right of the parties to be heard does not include the right to be heard orally.” Thus, the arbitration process can even be sustained without the oral testimonies.

The Ugly

Another adverse facet of oral testimonies is the witness coaching which leads to biases. In certain jurisdictions, such as the United States, the witness preparation process may involve showing witnesses films of examinations, bringing them to court, or conducting a mock examination during which challenging questions are asked and appropriate responses are guided through. This has sparked discussions about “coaching the witness”, which is unwelcome.

The ugly side of oral testimonies in international commercial arbitration surfaces in various unethical practices. Witnesses may be improperly coached, their testimony carefully prepared and rehearsed in advance. False or misleading witness statements can be presented, and some witnesses may not appear due to counsel’s control, depriving the process of their crucial evidence. Additionally, witnesses can face intimidation or disrespectful treatment, all of which undermine the fairness and integrity of the arbitration process.

The integrity of oral testimony is damaged by these tactics, which also jeopardizes the pursuit of justice in international commercial arbitration. To ensure that the arbitration process remains honest, these matters must be handled with strict guidelines and close monitoring.

Way Forward and Conclusion

Despite a few cons, oral testimony remains one of the most effective ways of gathering significant evidence for reaching a viable decision. The possible solution could be an efficient and effective implementation of the use of oral testimony in a way that its pros outweigh its cons, leading to its constructive usage. According to WW Park, one of the ways by which this could be done is by limiting the horizon of oral direct testimony by way of affidavits. Generally, the practice with oral testimonies involves parties submitting affidavits along with the memorandums, after which they give their oral testimonies and are then cross-examined. 

The value of oral testimony can further be strengthened through cross-examination of the witness. Even testimonies which have been prepared with utmost professional integrity may undergo reform as a result of cross-examination, allowing the ‘whole truth’ to come to light. Thus, cross-examination by the opposite party or the arbitrators can prove to be effective in assessing any false testimony, and thereby the whole truth.

[1]“Lara M Pair JD, Cross-Cultural Arbitration: Do The Differences Between Cultures Still Influence International Commercial Arbitration Despite Harmonization? 9(1) ILSA Journal of International & Comparative Law 57, 74 (2002).