English Court Provides Guidance on Cross-Examination in London-Seated Arbitrations
February 15, 2023, Covington Alert
The English Commercial Court recently considered the flexibility of the rule in Browne v Dunn and its impact on the cross-examination of witnesses in London-seated arbitrations. In BPY v MXV, the court dismissed a challenge to an arbitral award under section 68 of the Arbitration Act 1996 and showed a willingness to support the procedural discretion of the tribunal rather than rigidly applying the rule that a party must properly ‘put its case’ to the opposing party’s witnesses during cross-examination.[1]
Factual Background
In November 2018 BPY commenced LCIA arbitration proceedings against MXV before a sole arbitrator. The seat of arbitration was London. The issue in dispute was whether the parties had made three binding sale and purchase agreements (“SPAs”) on 8 December 2011.
The proceedings culminated in a six-day evidentiary hearing with the cross-examination of 30 witnesses. Prior to the hearing, BPY sought a specific ruling that only key matters in the dispute should be challenged in cross examination. MXV responded that it planned to challenge most of BPY’s evidence but its counsel would determine in what manner. The arbitrator issued the following direction: “I do not expect all points of witness evidence to be expressly challenged in cross-examination. It will remain for me to decide what weight to accord to the evidence before me, regardless of whether it has been expressly dealt with in cross-examination.”[2] BPY did not ask for additional clarification on the evidence that had not been dealt with in cross-examination to which the arbitrator could give weight. The arbitrator dismissed BPY’s claims in June 2021 and issued a costs award.
In the Commercial Court, BPY made an application under s. 68(a), (b), (d), and (g) of the Arbitration Act 1996 (“AA”) challenging the merits award and costs award. BPY raised four grounds of serious irregularities per s. 68 AA in the way the arbitrator reached her conclusions, and that it suffered substantial injustice as a consequence. BPY sought an order for the court to set aside both awards.
BPY’s first ground of complaint was that the arbitrator had determined that there had been dishonesty in the making of the SPAs, when such a case had not been properly put to the witnesses who were accused of fabricating the sham SPAs. Specifically, BPY argued that MXV failed to put to the relevant witnesses a case as to who the sham SPAs were designed to deceive and how or why the relevant witnesses were to be deceived. Further, BPY submitted that the finding that the SPAs were used “for a purpose other than its original paper trailing purpose” was a finding of fraud and conspiracy to commit a fraud, which was an argument not pleaded or put to any of the witnesses.[3]
Legal Background
Under s. 68 AA, an arbitration may be challenged on the ground of serious irregularity, including a failure by the tribunal to comply with s. 33 AA, which is a general duty on the tribunal to act fairly and impartially as between parties, giving each party (amongst other things) a reasonable opportunity of putting its case and dealing with its opponent’s case. This serious irregularity must cause a substantial injustice to the party.
Browne v Dunn, a House of Lords judgment, is cited for the principle that in cross-examination, a party must challenge the witness evidence of an opposing party if it intends to argue that the evidence is not to be believed.[4] Browne v Dunn is also cited as authority that failure to cross-examine a witness on a material element of evidence, or at all, may be treated as an acceptance of the truth of that evidence. Subsequent authorities suggest that this rule may be flexible in certain circumstances (for example, if there is a time-limit to cross-examination and a lengthy witness statement treated as evidence-in-chief).[5]
Judgment
All of BPY’s s. 68 AA challenges were dismissed. The Commercial Court held that the arbitrator had not improperly made findings on matters that were not put to BPY’s witnesses. Therefore, the arbitrator had not breached s. 33 AA. On the first ground of complaint, Butcher J held, “the rule [in Browne v Dunn] is an important one. However, it is not an inflexible one. Procedural rules such as this are the servants of justice and not the other way round”.[6]
Butcher J did “not consider that there was any unfairness in the arbitrator proceeding in accordance with the direction which she had given, and which was not questioned by the parties”.[7] The judge also noted the tight timing to hear from a multitude of witnesses, such that it was not a procedural irregularity when the witnesses were not questioned further on the motives behind the SPAs. BPY’s main witnesses were given “adequate opportunity” to address MXV’s case against them, including allegations of dishonesty.[8]
Butcher J further held that even if there had been a breach of s. 33 AA, it did not cause BPY a substantial injustice.[9] The test to be applied is whether, had there been a fuller cross-examination, the tribunal might well have reached a different view and a significantly different outcome been produced.[10] The judge could not reach this conclusion given that the witnesses in question were considered to be unreliable and BPY had not made any convincing suggestion as to what evidence the witnesses could have given but did not which might have made an impact on the arbitrator's findings.[11]
Comment
This case will be of interest to practitioners, especially given the interplay between the rule in Browne v Dunn and the procedural discretion the LCIA Arbitration Rules afford arbitrators. Under the LCIA Arbitration Rules (which applied to the underlying arbitration), a tribunal is under a general duty to act fairly and impartially between all parties, giving each party a reasonable opportunity of putting its case and dealing with the opponent’s case but also has the discretion to establish the procedure for a hearing in a manner it deems appropriate, including limiting the oral testimony of any witness and the extent to which questions or issues are to be addressed at a hearing.[12]
The decision in BPY v MXV shows a willingness of the English courts to support the procedural discretion of the tribunal rather than rigidly applying the rule in Browne v Dunn, particularly in arbitrations where there are many witnesses, time constraints, and the parties have received clear directions from the tribunal.
The decision should also be considered as part of the wider discussion of the application of the rules of evidence in international arbitration. Arbitration generally falls outside national civil procedure rules in respect of the production and use of evidence and, whilst the law of the seat and the institutional rules may provide guidance, tribunals are typically given wide discretion on the management of evidence. Although the Court specifically commented on the interplay between s. 33 AA and the LCIA Arbitration Rules, the decision likely has application for London-seated arbitrations administered by arbitral institutions other than the LCIA where the relevant institutional rules contain similar provisions regarding procedural discretion. The court’s interpretation of s. 33 AA in BPY v MXV therefore offers useful guidance on how issues around the taking of evidence should generally be approached in London-seated arbitrations.
If you have any questions concerning the material discussed in this client alert, please contact the members of our International Arbitration practice.
[1] BPY v MXV [2023] EWHC 82 (Comm).
[2] Ibid., at [37].
[3] Ibid., at [21].
[4] Browne v Dunn [1893] 6 R 67.
[5] See Edwards Lifesciences LLC v Boston Scientific Scimed Inc [2018] EWCA Civ 673.
[6] BPY v MXV [2023] EWHC 82 (Comm), at [63].
[7] Ibid., at [37].
[8] Ibid., at [39].
[9] Ibid., at [40].
[10] Ibid.
[11] Ibid.
[12] Articles 14, 14.6(ii), and 19.2 LCIA Arbitration Rules.
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