Expert Ethics in International Arbitration: The Indian Context

The role of experts in dispute resolution

The Black’s Law Dictionary defines an expert as someone who can provide the court a specialised opinion about “evidence” or “fact” in issue between the parties.

An Arbitral Tribunal in the course of deciding commercial matters often relies on the expertise of the professional to read the evidence before it, in the right light.

Technical matters on which only professionals can give a sound opinion, as for example, of an engineer on engineering matters, of a surveyor or valuer for estimating the value of a property or assessment of damage to goods in a contract of carriage, of a Chartered Accountant where books of account require to be gone into, etc. Such professional assistance of technical experts can be sought by Arbitral Tribunal.¹

Experts can be pivotal in strengthening a case that requires fairly complex damage calculations or intricate understanding of a particular industry. For instance, cases that require the use of valuation methodologies such as discounted cash flow (DFC) method, internal rate of return, etc. would benefit from an expert who is well versed with such techniques.²

Similarly, cases that revolve around interpretation and application of complex accounting principles as in the case of revenue recognition contracts, valuation of financial instruments, etc. would benefit from an expert who has substantial experience in these fields.³ In a study conducted by PricewaterhouseCoopers Private Limited, companies indicated they used experts in matters relating to valuations (25%), accounting (19%) and foreign law (12%), or industry specific experts in the field of financial services, construction, engineering, oil and gas (41%).⁴

In India, Section 26, Chapter 5⁵, Part I of the Arbitration and Conciliation Act, 1996⁶ deals with appointment of an expert by the Tribunal. It states as follows—

26. Expert appointed by Arbitral Tribunal.—(1) Unless otherwise agreed by the parties, the Arbitral Tribunal may—

(a) appoint one or more experts to report to it on specific issues to be determined by the Arbitral Tribunal; and

(b) require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.

(2) Unless otherwise agreed by the parties, if a party so requests or if the Arbitral Tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.

(3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report.⁷

It is pertinent to note here that the section specifically deals with “tribunal appointed experts” while “party appointed experts” find no mention. One may argue that the introductory words of the clauses “unless otherwise agreed by the parties” point to party autonomy in selecting experts and such role shall only be taken up by the Tribunal if it is not tended to by the parties. That however does not work to fill in the vacuum of legislation to govern party appointed experts. This is one such grey area which has not been penned by legislators while other issues to join the list deal with the primary question of whether experts like arbitrators can be tested on the soil of disclosure?

Independence and impartiality of experts: Is the opinion free of conflicts?

The Arbitration and Conciliation Act, 1996 is based on the 1985 UNCITRAL Model Law⁸ and was enacted to consolidate, define and amend the law in relation to domestic arbitration, international commercial arbitration and the enforcement of foreign arbitral awards in India.⁹

The key objective of the Arbitration and Conciliation Act, 1996 is to ensure that arbitration proceedings are just, fair and effective.

Recent amendments act towards bolstering the stipulated concept of fairness in the procedure. The Arbitration and Conciliation (Amendment) Act 2015¹⁰ introduced the Fifth, Sixth and Seventh Schedule to ascertain as to what grounds give justifiable doubts as to the independence and impartiality of arbitrators. Whilst the amendments were made with reference to arbitrators, the paradigm shift giving more weightage to disclosure in terms of relationship with the parties and counsels, the connection or interest to the matter in dispute, previous engagements with parties are all steps to make the arbitration process more just, fair and free from any bias.

The courts have not yet dealt with the issue of independence and impartiality of appointed experts however it would be fair to assume that extension of the current disclosure duties of the arbitrator would be a step in the right direction.

Section 18¹¹ of the Arbitration and Conciliation Act, 1996 provides that the parties to an arbitration proceeding shall be treated with equality and each party shall be given a full opportunity to present his case.¹² The essence of the section is to ensure a fair trial by an impartial tribunal.

While prior relationship with the expert may lend a degree of comfort to the appointing party, it is important that the expert is viewed by the Tribunal as independent from the counsel, client and facts of the case.¹³

The Tribunal appointed experts must remain independent of the parties, as well as the Arbitral Tribunal. The standard of independence for a tribunal appointed expert should be the same that of an arbitrator.¹⁴ The expert is required to observe procedural due process and is entrusted with a duty to act in good faith.¹⁵

While pillars of independence and impartiality are yet to be cemented by the higher judicial courts in India it is fair to say that institutional level ground work has already begun. Regulation 32 of the India International Arbitration Centre (Conduct of Arbitration) Regulations, 2023¹⁶ discusses the appointment of experts by Arbitral Tribunal. Regulation 32(4) of the Regulations makes it mandatory for an expert so appointed to furnish a declaration that he is and shall continue to be impartial and independent.

The effect of breach of such ethos of independence and impartiality is seen by the courts as violation of principles of natural justice¹⁷ and are a valid ground to set aside an award. The Supreme court has through a series of judgments recognised that the court would have the power to set aside an arbitral award if it is contrary to “justice” or “morality”.¹⁸ The applicability of “fundamental policy of Indian law” is tested on the touchstone of Article 14¹⁹ of the Indian Constitution²⁰ which ensures right to equality and any term arrived at because of unequal bargaining power would be ultra vires the Constitution of India.²¹

Thus, if there is a violation of Section 18 of the Arbitration and Conciliation Act, 1996, it would be interpreted to be a violation of the principles of the natural justice²² and would be a ground to challenge the award itself and would be viewed as a conflict with the “most basic notions of morality and justice”.²³ “Most basic notions of justice” has been interpreted by the court to mean substantively or procedurally, some fundamental principle of justice which has been breached and which shocks the conscience of the court.²⁴ Hence, the system of checks and balances bringing arbitral morality under the conscience compass of the Supreme court ensures that the process is fair until it is formally instrumentalised in law.

Lack of a clear regulatory framework applicable to party-appointed experts: Ships without anchors

As per the UNCITRAL report on Adoption of Model law, a proposal was made to amend the opening words of the para (1) to read: “Unless otherwise agreed by the parties before an arbitrator is appointed….”²⁵ However, since Article 26²⁶ represented a compromise between the common law system of adjudication²⁷ and the civil law system²⁸ the balance of compromise was not disturbed.²⁹ Thus the said proposal of deletion of the opening clause was deleted. Article 26 deals with experts appointed by the Arbitral Tribunal, it does not deal with expert witness a party may present.³⁰

This sets the undertone of the intent of the legislature to frame guidelines specifically for tribunal appointed experts while leaving party appointed experts to be regulated by discretion of parties. [SD1]

The autonomy of the parties is of manifest importance in domestic as well as commercial arbitrations. This permeates through the provisions of all three sub-sections of Section 26, which are prefaced with the phrase “unless otherwise agreed by the parties”. The provisions of this section are non-mandatory. The parties may, by agreement, determine whether an expert is required to be appointed in the arbitral proceedings. This may be done either in the arbitration clause, or the agreement to submit disputes to arbitration, or by following standard rules of a particular trade, or an arbitral institution.³¹

Such autonomy becomes risky when the experts are treated as “Hired Guns”³² or forming part of a camp. The aforesaid vacuum in national and institutional rules is not mirrored in soft law instruments.³³

An antidote to such unregulated party appointed experts can be found in Section 6³⁴ of the Arbitration and Conciliation Act, 1996. For appointment of expert witness by parties, Section 6 provides that to facilitate the conduct of arbitral proceedings, the parties may arrange for administrative assistance either by a suitable institution or person. Under this provision an appointment can be sought by parties.³⁵

Even though Section 6 is an option the parties may choose and not a requirement, it would still be effective to fill the gaps indirectly which Section 26 misses to address.

Expert reports as too long/complex: Decoding jargons

The role played by experts in a dispute resolution process is usually technical, which may result in overly complex reports that would be difficult to decipher without making the expert a part of the procedural aspect too.

Section 19³⁶ of the Arbitration and Conciliation Act, 1996 gives the Arbitral Tribunal wide autonomy to determine the rules of procedure. Section 19(2) gives the parties the power to agree to procedure to be followed by the Tribunal. In case the parties are not on the same page so as to decide the procedure as per Section 19(3) the Arbitral Tribunal has the power to consider the proceedings in the manner it considers appropriate and Section 19(4) further strengthens this power by giving the Tribunal power to determine the admissibility, relevance, materiality and weight of any evidence.

Section 26(2) of the Arbitration and Conciliation Act, 1996 states: Unless otherwise agreed by the parties, if a party so requests or if the Arbitral Tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.

Para (2) guarantees a fundamental procedural right, which is another concrete implementation of the principles laid down in Article 19(3) of the Model Law (corresponding to Section 18). The parties are given the opportunity to interrogate the expert, after he has delivered his written or oral report, and to present expert witnesses in order to testify on the points at the issue. Such opportunity may be taken in hearing, which the Arbitral Tribunal must hold if one party so requests or which the Arbitral Tribunal may call on its own if it considers necessary.³⁷

The Supreme Court of India in Ssangyong Engg. and Construction Co. Ltd. v. NHAI³⁸ discussed how principles of due process would apply as “right to comment” on evidence and arguments submitted by other party. The Court elaborated that the Section 26 is an important pointer to the fact that when an expert’s report is relied upon by an Arbitral Tribunal, the said report and all documents, goods, or other property in the possession of the expert, with which he was provided in order to prepare his report, must first be made available to any party who requests for these things. Secondly, once the report is arrived at, if requested, parties have to be given an opportunity to put questions to him and present their own expert evidence in order to testify on the points at issue.³⁹ In practice, challenge to expert’s report has been done through a written communication/affidavit to the Tribunal, or during hearing itself.⁴⁰

Thus, even if the expert report is too long or complex the statute provides a way for the expert to testify and explain the methodology of the report, scope of work, the assumptions made while preparing the report and the instructions received before preparing the report which brings clarity and transparency to the process.

Lack of coordination between party-appointed experts: Ships passing in the night?

The ripple effect of lack of clearly applicable framework applicable to party appointed experts is a lack of coordination between party-appointed experts often referred by the metaphor of ships passing in the night and speaking to each other in the passing.⁴¹

A trend towards preparation of joint reports⁴² by the experts of each of the parties is seen which gives the Arbitral Tribunal a clearer picture of the contentions between the parties. Another trend which has made a soft debut in the Indian scenario is the procedure of “hot tubbing” used to record depositions of experts appointed. The process of hot tubbing however does include preparation of joint report as the preliminary step.

Concurrent evidence⁴³ provides for multiple experts in a case to be sworn in together to allow the court to hear their (potentially differing) opinions at the same time.⁴⁴

Rather than giving evidence consecutively, hot tubbing is a method of giving evidence where both experts of the same discipline sit together and the Judge chairs a discussion between them.⁴⁵,⁴⁶

The Delhi High Court in Micromax Informatics Ltd. v. Telefonaktiebolget LM Ericsson⁴⁷, provided its observations on “hot tubbing” as it was the procedure which had been recommended for acceptance by the parties in course of the suit (which was settled by the parties by mutual consent). The Court noted that at present there are no norms or rules that guides the country, with respect to the procedure of hot tubbing that could be used for a swifter resolution of disputes especially in more complex matters of patent cases which involve technology and scientific expert testimonies and evidence.

The Delhi High Court has also vide its Notification of the “Delhi High Court Intellectual Property Rights Division Rules, 2022”⁴⁸ stated that evidence in cases of experts may be recorded by resorting to procedures such as hot tubbing. Further the Delhi High Court (Original Side) Rules, 2018 have also been amended to include the concept of hot tubbing⁴⁹ via Annexure G, Chapter XI Rule 6.

This frees the resolution process from shackles of an adversarial process and allows for a setting where experts respond directly to each other. As per the procedure set by the Court, if a specific party wishes to rely on hot tubbing method to record the deposition of expert witness, then both the parties are to prepare a joint statement which shall consist of the agreed statement of facts and disputed issues. Next, a copy of the suggested questions which are to be directed to the expert witness is to be filed by the parties. Finally, a hearing is conducted on the disputed issues where counsels may put questions to expert witness if permitted by court. Once the proceeding concludes, the court would draw up the issues on which the expert witness agree and disagree. On the issues of disagreement, the court then records their statement.

The advent of the hot tubbing method thus holds the potential to make the expert deposition process more coordinated while also saving time and money involved in the arbitral process.

Conclusion

The role of experts in complex technical issues is indispensable and can act as the Ace leading a party to win the case. However, ethics of justice and morality appear to be more powerful and have the effect of trumping the Ace. Recent advancements like amendments to encourage full disclosure and requirement of arbitral forums like India International Arbitration Centre for statement of independence and impartiality by the experts all work towards abating the impact of absence of written law to the particular effect. Further, the Supreme Court through its judgments has time and again reiterated the importance of principles of natural justice and notions of morality as cardinal to the arbitral process. Adoption of procedures of joint reports and hot tubbing work towards improving corresponding weakness of absence of regulations to regulate party appointed experts. In conclusion, the present legislations and precedents ensure that the expert arbitral ship does not sink but it would, with time, require new waves of legislation to move ahead.