Jerome F. Rock –
A foundational principle of Arbitration is that it based on an agreement between the parties to submit their dispute for a binding decision by a neutral third party. The Federal Arbitration Act and companion state laws provide basic requirements governing arbitration, such as requiring that the arbitration agreement be expressed in writing, while the details of the process are left to the parties. Numerous institutions publish rules governing various aspects of the domestic Commercial Arbitration process, including the American Arbitration Association (AAA), the International Institute for Conflict Preventions and Resolution (CPR) and JAMS. Within these rules, the parties are expected to choose from different procedural options and may further modify the rules to achieve their objectives.
It is often stated that Arbitration is flexible, more efficient, less costly, and faster than conventional litigation. Although specialty Business Courts may focus on efficiently resolving commercial disputes, the characteristics of arbitration including confidentiality of the proceedings, the limitation of appeal rights and the opportunity to customize the process continue to make arbitration the preferred dispute resolution forum for many commercial transactions.
This discussion focuses on one aspect of the domestic commercial arbitration that is gaining acceptance based on the positive and longstanding practice of international arbitration practice.
A distinction has always existed between Domestic and International Arbitration practice. Narrative or Written Witness Statements are routinely used to introduce direct witness testimony in International Arbitration for good reasons. There are often multiple legal systems as well as languages among the parties or neutrals requiring translation, there are greater distances between parties and the tribunal requiring costly and time-consuming travel, and the focus of the arbitration is often on documentary evidence and issues. As a further catalyst to the emerging trend, recent amendments to the International Dispute Resolution Procedures of the International Centre for Dispute Resolution (ICDR), the international division of the American Arbitration Association, clarified and expanded instructions for the use of testimony by Written Witness Statements from “permissive” to “compulsory.” The commentary to the revisions suggested “[F]or US practitioners who may be more comfortable and familiar with oral direct witness testimony, the ICDR Rules’ support for the use of witness statements is a change of practical note.”
Although the various domestic arbitration rules granted the arbitrator and the parties the flexibility to use Written Witness Statements as evidence; by default, the customary litigation format of direct oral examination of witnesses at the hearing often prevailed.
As part of a continuing effort to improve efficiency and streamline proceedings, the explicit reference to Written Witness Statements is emerging in standard domestic arbitration rules. As an example, the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association (effective September 1, 2022) include two separate sections dealing with Preliminary Hearing Procedures. The first of these sections, “P-1 General”, provides:
(a) In all but the simplest cases, holding a preliminary hearing as early in the process as possible will help the parties and the arbitrator organize the proceeding in a manner that will maximize efficiency and economy, and will provide each party a fair opportunity to present its case.
(b) Care must be taken to avoid importing procedures from court systems, as such procedures may not be appropriate to the conduct of arbitrations as an alternative form of dispute resolution that is designed to be simpler, less expensive, and more expeditious. (emphasis provided)
The next section, referred to as “P-2 Checklist” suggests topics that the parties and the Arbitrator should address at the Preliminary Hearing,
(xii) whether, according to a schedule set by the arbitrator, the parties will
- identify all witnesses, the subject matter of their anticipated testimonies, exchange written witness statements, and determine whether written witness statements will replace direct testimony at the hearing. (emphasis provided)
Arbitrators strive to balance the level of effort necessary to permit each party to effectively present all relevant evidence and testimony supporting their claim or defense, with the plan that counsel often initially suggest that reflects pre-hearing procedure and discovery that mirror their litigation practice, which are often at odds with the objectives of arbitration. The explicit reference in the P-2 Checklist presents the opportunity for a change in basic assumptions by presenting Written Narrative Witness Statements as an option to the standard litigation format, to be addressed in a timely manner, at the Preliminary Hearing. But this opportunity is not without its challenges.
As an Arbitrator, I have long encouraged the use of Narrative Witness Statements as a method of presenting direct testimony of witnesses under the control of a party. I submit an Agenda to counsel in advance of the Preliminary Hearing, which includes those topics presented in the P-2 Checklist under the AAA Arbitration Rules, as well as my suggestion to consider use of Narrative Witness Statements as a way of improving the efficiency and cost effectiveness of the process. This advance notice prepares Counsel to address the topic thoughtfully at the Preliminary Hearing.
Initially, my suggestions to adopt Written Witness Statements were met with apprehension. This resistance reflected a reluctance to deviate from standard practice, and a lack of understanding how the process of using the Written Witness Statements could positively impact the Hearing.
Understandably, there were more questions, and often no place to get answers to these important concerns:
- Which witnesses will be subject to the Written Witness Statement procedure?
- Will it take more time, or cost more to provide Written Witness Statements?
- Will the format be Q and A, or more like Affidavits?
- Are leading questions permitted, or will strict rules limit narrative testimony?
- When are the Written Witness Statements Exchanged?
- Can the Witness Statements be amended or supplemented? On what conditions?
- Will depositions be eliminated/permitted?
- If the witness is not present at the Hearing for cross-examination, will the Written Witness Statement be excluded?
- Can the witness still testify on direct examination at the Hearing so the arbitrators can assess the character and credibility of the witness?
As I provided more of the rationale, logistics and details for Written Narrative Witness Statements, explained the Question-and-Answer format, affirmed opportunity for cross examination, and emphasized the significant efficiencies and cost savings, that initial reservation shifted to acceptance, and in many instances, enthusiasm.
Eventually, I summarized these instructions, incorporating many of the suggestions of Counsel, and now issue them as a Protocol. These instructions are provided to Counsel prior to the Preliminary Hearing, at which time narrative witness statements can be discussed with other “Checklist” items, modified as required by the needs of the case, and eventually incorporated into a Preliminary Hearing Order.
The Protocol is then a step-by-step instruction manual for the attorneys to prepare the Written Witness Statements resulting in standard format for all witnesses under the control of each party. The detail provided in the Protocol removed the uncertainty associated with a nonstandard approach and gave the attorneys the confidence each side would operate under the same rules. The complete Protocol is available as a download at the author’s website https://www.JeromeRockLaw.com and may be used without restriction.
The following section describes some of the benefits and challenges of using Narrative Witness Statements as a vehicle for introducing direct witness testimony as evidence at the Arbitration Hearing, as well as the new challenges and opportunities made available with Video Conferencing.
Direct Witness Testimony.
First, the Narrative Witness Statement should be the testimony of the Witness, and not the legal argument of the attorney. The attorney can assist, review, and focus the witness to describe the facts. The Narrative Witness Statement Protocol supports the process with detailed instructions and procedural ground rules that mimic the typical direct examination format where leading questions are permitted; first question, then witness answer.
The Narrative Witness Statement becomes a written work product that is carefully reviewed for accuracy and completeness by both the attorney and the witness, affirmed under oath by the witness and prepared to be submitted as direct evidence at the Hearing. This thorough preparation also relieves much of the anxiety of the witness. Their direct testimony is flawless, and they are under less stress and more confident when they respond to cross-examination.
Counsel may be concerned that the use of Narrative Witness Statement limits the Arbitrator’s opportunity to gauge the many dimensions of witness credibility, since the Arbitrator will only observe the witness under the pressure of cross examination. To address this concern, the Protocol permits the lawyer to put their witness through as little or as much of the full direct examination in front of the Arbitrator as they feel necessary, using the Narrative Witness Statement as the outline.
Timing for the exchange of Written Narrative Witness Statements is important. Attorneys usually expect to present their witness testimony at the Hearing and changing this schedule requires some explanation. When the exchange of the Written Witness Statements is set early in the discovery process, both parties’ benefit. The claimant focuses the issues which can eliminate the need for the respondent to delve into tangential topics to avoid surprise testimony at the Hearing. The testimony of Respondent’s witnesses is also narrowed and focused.
Further, if a party has the complete direct examination of a witness available as a Written Statement, the need for a pre-hearing deposition of that witness may be obviated or, at least, reduced.. Decreasing the number of depositions saves time and costs..
Finally, every case filed as a demand for arbitration will go through a mediation phase where the parties will attempt to resolve the dispute voluntarily. The Arbitrator should be aware of the opportunity to assist the parties in preparation for this exercise. Written Narrative Witness Statements, when exchanged early, can provide a strong factual foundation for effective mediation. The Narrative Witness Statements eliminate much of the uncertainty or confusion of expected testimony and force the parties to adjust their bargaining and settlement positions, accordingly, increasing the likelihood that the parties will resolve the case on their own terms.
Following the instructions of the Protocol, the time and effort spent preparing Narrative Witness Statements should be consistent with pre-hearing preparation for witnesses under conventional practice, but with tangible benefits.
Cross Examination by the Adverse Party.
The first reaction to the suggestion of Written Witness Statements focused on whether the right to cross examine the witness would somehow be diminished. The Narrative Witness Statements are always subject to cross examination at the request of the adverse party. The opportunity to prepare for cross examination of direct fact witnesses well in advance of the Hearing is obviously a distinct advantage to counsel; well-prepared cross examination is expected to be thoughtful and focused.
When prepared and exchanged early, Narrative or Written Witness Statements can lessen the need for deposition of the witness or at the least reduce the scope and duration of the deposition. The cross-examining party has detailed advanced notice of the witness’ direct testimony and need not rely on a deposition to prepare for effective cross examination.
With effective planning for cross examination, the adverse party should also be prepared for Rebuttal testimony, if necessary, which can be arranged and presented in a timely manner without the need to delay or adjourn the Hearing.
Narrative Witness Statements provide several advantages to the Arbitrator.
The Preliminary Hearing deals with the wide-ranging discovery needs of the parties, while the Arbitrator is challenged to maintain a fair, but efficient and economical process. Attorneys are familiar with the concept of Proportionality and Staged Discovery, with discovery of the least costly or most cost-effective process first, and depending on the results or benefits produced, expand the scope of discovery permitting more intensive discovery methods. The analogy to Proportionality and Staged Discovery then applies to the Narrative Witness Statement as the first step of this discovery journey.
When Narrative Witness Statements for expected fact witnesses are prepared early and exchanged with this strategy in mind, the adverse party can assess the written testimony as that first level fact finding tool, anticipate the effectiveness of their cross examination at the Hearing and either accept the Narrative Witness Statement as prospective evidence, or demonstrate to the Arbitrator their need for the formal deposition of the witness (“in person” or by video conference) in order to properly prepare for cross examination of that witness.
The Preliminary Hearing Order can then be used to phase the schedules for the exchange of Narrative Witness Statements as the Arbitrator monitors the progress, adjusting schedules as needed to accommodate the newly requested deposition of witnesses. Any reduction to pre-hearing discovery effort reduces the cost of the Arbitration.
Since the Narrative Witness Statements are exchanged in advance of the Hearing, the Arbitrator develops a perspective of the entire case and the interplay of expected testimony and the documentary Exhibits. Since the Arbitrator is better informed, they can more effectively manage Pre-Hearing issues without the need for extensive conferences or formal briefing from the parties.
The Arbitrator also uses the Narrative Witness Statements to prepare for the Hearing. The Arbitrator becomes familiar with the testimony in advance, can prepare their own questions, and anticipate the topics of cross examination. The Arbitrator’s note taking is limited to annotating the Narrative Witness Statements. The Arbitrator is not distracted and can concentrate on the witness and managing the Hearing.
There may be a concern that the use of Narrative Witness Statement limits the Arbitrator’s opportunity to gauge the many dimensions of witness credibility, since the Arbitrator will only observe the witness under the pressure of cross examination. As a response to this concern, the Protocol permits the lawyer to put their witness through a brief direct examination in front of the Arbitrator consistent with the Narrative Witness Statement.
The use of Written Narrative Witness Statements directly reduces the number of hours or days of Hearing that would otherwise be required to introduce the direct testimony of witnesses under the conventional format. This means the parties will have the benefit of cost savings due to fewer Hearing days, which in complex cases can amount to tens of thousands of dollars for each Hearing day.
Finally, when it comes to preparing the Award, there is a reassuring level of confidence that all the testimony is readily available for review. The Arbitrator’s contemporaneous reactions to the testimony and cross-examination are preserved as annotations to the Written Narrative Witness Statements. This is often more useful than a post-hearing transcript.
Arbitrators assume a critical leadership role in changing the paradigm from routinely importing procedures from the court systems to introducing those process techniques that are designed to make arbitration a preferred form of dispute resolution that can be simpler, less expensive, and more expeditious. Written Narrative Witness Statements are a critical component that addresses each of these stated benefits of the arbitration process. Educating participants about the advantages of Written Narrative Witness Statements in advance and incorporating this discussion as integral part of the Preliminary Hearing will be a major step in achieving these objectives.
Jerome F. Rock is an Arbitrator and Mediator focusing on Business, Technology and Construction industry disputes. He serves on the Commercial, Construction and Large Complex Case Panels for the American Arbitration Association and the ICDR for both Arbitration and Mediation. He has degrees in Mechanical and Civil Engineering, practiced as a Construction and Technology lawyer and served as executive of a high-tech engineering company. He is a member of the Professional Resolution Experts of Michigan (www.PREMIiADR.org), an invitation only organization of experienced ADR professionals. His approach to ADR, Case Studies and References are available at his web site, www.JeromeRockLaw.com
* Member Emeritus