Allsop, Justice James --- "Principles of Transnational Civil Procedure" (FCA) [2005] FedJSchol 17

Paper delivered at

Seminar on UNIDROIT Work on International commercial Contracts, Finance and Arbitration and its Relevance for Indonesian Business

28 November 2005

Jakarta

The Honourable Justice James Allsop
of the Federal Court of Australia

Principles of Transnational Civil Procedure

Unidroit and the American Law Institute (ALI) are bodies whose aims are the harmonisation and standardisation of law:

➢ Unidroit in the wider world with countless national legal systems in a number of families of legal systems
➢ ALI in the, at times, chaotic jungle of United States’ law with no unifying national ultimate court of appeal in all areas of law in the largest economy in the world

They chose to work jointly on harmonisation of procedure for transnational litigation, in particular commercial litigation.

What I wish to do today is discuss

(a) the history and purpose of what has been done
(b) why it is important
(c) the elements of the Principles
(d) the way countries such as Indonesia and Australia can foster and enrich this work

The Principles can be obtained from the Unidroit website.
I enclose a brief introductory reading list.

(a) The history and purpose of what has been done

In 2004 the Principles of Transnational Civil Procedure were accepted by unanimous approval by the Governing Council of Unidroit and by the members of ALI at their respective annual meetings. This approval was the outcome of a project which had been begun almost ten years before.

The project had been begun by distinguished American and European professors. Their vision was to develop a body of principles for transnational cases which could apply in national courts and in so doing replace domestic procedural rules whenever the parties to litigation involved nationals of different states or where the case could otherwise be described as international.

Relevant to understanding the project is the perception that there was a huge gap between what are often referred to as the common law and civil law litigation traditions. The attempt made was to prepare a body of principles which combined the most attractive features of these two families of systems: common law and civil law. It was first thought to be impossible – the gaps between the two families seemed too great.

Drafts were prepared from 1996 and an important stage was reached in 2001 with an earlier version of Principles and Rules. There has been worldwide scholarly comment and participation. Various versions of the principles have been translated into many languages.

What has now been developed is a body of Principles which have been adopted by Unidroit and ALI. There also exist more precise Rules which as yet have not finally emerged from the working groups and reporters and have not yet been adopted by either Unidroit or ALI.

I will concentrate upon the Principles in this lecture.

The Principles are an attempt to summarise basic rules of international personal jurisdiction. As such, they are an attempt to approximate, in a flexible way, important issues common to all legal systems. There has been compromise between the civil law and common law methods, the precise extent of which will continue to work itself out in the development of more precise rules, in due course.

There are international conventions on service (at the beginning of the litigation) and on recognition and enforcement (at the end). The Principles are an attempt to combine the best elements of the civil law and common law traditions for the conduct of the case (between the beginning and the end). They are expressed in language familiar to all legal traditions.

The Principles are accompanied by an explanatory commentary.

Without intending for one moment to diminish the role and achievement of scholars and scholarship in this field (it having been their product). I think it is important not to over intellectualise the Principles by reference to analytical characteristics. What has been done is to prepare an approved body of compromises creating a body of principles for the fair and practical running of litigation, which is an intensely practical undertaking.

(b) Why it is important

Transnational litigation is growing. It is growing in particular in this region. That fact is simply a by-product of the vast economic development occurring in this region and its transnational so-called “globalised” character. As part of that, there will grow a number of centres of commercial litigation. However, it is vital to the economic development of the region that there develop comprehensively and broadly, in as many legal systems and centres as possible, a recognition of the importance of resolving disputes, in particular commercial disputes, by reference to recognised and accepted world standards of procedure and method. Arbitration plays and will continue to play a central role. But not all commercial disputes can be settled by an agreed arbitral forum.

It is not necessary to require all systems to have identical rules. Anyone who has attempted to bring different court systems together even in a domestic context will recognise the mountains to climb to make identical basic forms about procedure. A forced and artificial identity of rules which does not reflect regional, national, provincial or local needs and customs will simply be by-passed by the development of local custom not embodied in the rules.

It was both wise and important that the first and primary aim of harmonisation or approximation has been to the fundamental principles. As these Principles begin to be understood and accepted by different nation states and different regions the role for more precise rules reflecting the application of the principles can be worked out.

As a working judge, who was once an advocate, I have always found that the most daunting obstacles for clients and litigants is not so much understanding substantive law, but in understanding what was happening. Too often legal procedures are mystifying. If there is no confidence in the process, the client will either not participate in that jurisdiction commercially, that is it may not invest at all; or, if it does invest, it may approach commercial disputes in a way assuming that it cannot or should not participate in the local dispute resolution system. If this occurs, then the cost of doing business in that jurisdiction rises exponentially. Profit margins and returns have to recompense parties for the occasions in which rights have to be abandoned in the absence of vindication

If people have confidence that a foreign forum will have procedures reliably based on international norms of practice and with which they are comfortably familiar the kinds of costs to which I have referred will be reduced or eliminated.

These Principles also represent a form of international law through suggestion and practice. If legal systems of quite different cultural origins can agree upon a standard approach in principle for the disposition of international commercial disputes, a significant step in the development of a procedural ius commune can be made. By this, a degree of denationalising guiding principles, leaving national or local practice to develop rules conformable therewith and thus deepen the use of the Principles.

(c) The elements of the Principles

The Principles begin, in Principle 1, with the fundamental guarantees of independence, impartiality and the qualifications of the court and its judges. These are matters of politics (in the broadest sense) and matters of effective procedure. The adjudication system in which transnational disputes are decided must have the confidence of the parties of true independence, impartiality and skill and the relevant court.

Principle 2 deals with jurisdiction over parties. The terms of Principle 2 set out basic acceptable standards of assertion of jurisdiction: consent, substantial connection of the forum with the party or transaction, habitual residence or place of business of the defendant, location of the relevant property in the jurisdiction. The most notable aspect of the compromise is the inadequacy of temporary presence of a defendant within the jurisdiction, except when no other forum is reasonably available.

Principle 2 also deals with provisional measures with respect to personal property, even if the court does not have jurisdiction over the ultimate controversy. Thus, forms of attachment may arise in what is sometimes called “quasi in rem jurisdiction”.

It is to be noted that a degree of importance is to be given to prior agreement as to jurisdiction: see Principle 2.4. The growth of anti-suit injunctions in recent years in some courts has led to a degree of tension which might be ameliorated by a recognition within the Principles of a difference to be applied to jurisdiction clauses found in freely negotiated contracts compared to contracts of adhesion.

The terms of Principle 2 also recognise the role of courts in declining jurisdiction where there is a more appropriate forum such as the place where the dispute is already pending or where the litigation is more appropriately brought.

Principle 3 deals with the procedural equality of the parties and the provision of a reasonable opportunity for litigants to assert or defend their rights. These are matters of confidence building, a process which is essential in transnational litigation.

One aspect of that is that the foreign litigant should not face procedures which discriminate against it on the basis merely of its foreign status. Due allowance should also be made for the difficulties created for a litigant by its foreign status. This is not always an easy principle to apply in practice. For instance, Principle 3.3 provides that a person should not be required to provide security for costs solely because the person is not a national or resident of the forum state. Often jurisdictions (Australia is one) require, as of course, foreigners to provide security for costs because of an assumed difficulty in foreign enforcement of costs orders. With the improvement of mutual recognition and enforcement of judgments such security should only be granted for the additional cost of registering and enforcing a judgment debt. Over time with the growth of efficiency in mutual recognition, Principle 3.3 may well bring about changes in procedures in this respect.

Principle 4 deals with the right to engage a lawyer. This recognises the vital role of an independent and skilled legal profession. It is to be noted that the principle enshrined in 4.1 recognises that states not only should permit local legal representation, but also recognise a place for legal assistance of a foreigner. This should not be seen as an encroachment or incursion into the forum’s legal system. Just as the reduction of uncertainty by the confidence in procedures meeting international norms will engender confidence, the familiar presence of the trusted usual attorney will engender confidence in the client. It is not suggested that the forum state abandon any role for its own practitioners who owe it (that is the forum’s courts) duties. However, if a forum will permit foreign lawyers to be involved to a degree in the litigation process that will enable the client, through its usual trusted lawyer, to evaluate and gain confidence in the forum, if the forum is otherwise worthy of that confidence. The Principle recognises that the forum lawyers should be in charge of the litigation.

Importantly, the Principle also recognises the need for recognition of the lawyer’s professional independence and his or her duty of loyalty to the client and client confidences.

Principle 5 deals with due notice and the right to be heard. The principles set out in this section deal with the fair identification of the nature of the case and the provision of opportunities to be heard whenever the court is dealing with the dispute. Whilst the language of the proceeding will ordinarily be that of the forum provision is made for the translation of material. Provision is also made in Principle 5.8 for urgent and necessary ex parte applications proportionate for the needs of justice at the time.

The specific mechanisms of fulfilling Principle 5 will be many and varied. However, the fundamental guarantee is that due notice and a right to be heard will always be given in relation to all steps involved in the proceedings.

Principle 6 deals with languages.

Principle 7 deals with the prompt rendition of justice. This is a matter not only for the Court but also the parties. I would like to dwell upon these matters for a moment. It goes without saying that the Court should render its decision within a reasonable time. Principle 7.2 is very important. It should be read with Principle 11 on the obligations of parties and their lawyers. This states that the parties have a duty to co-operate in the conduct of litigation. There has been a revolution in procedure in the conduct of litigation, certainly in Australia and England and no doubt elsewhere, in the last 20 to 30 years. Written rules are now catching up with judicial practice. The matters contained in Principle 7.2 have been at the heart of that practice. There is a recognition that litigation is expensive (almost necessarily so, given the skills required and tasks involved) and that the state only has finite resources to devote to the court system. This means that the parties and their lawyers must co-operate for the reasonable use of litigation. This means that parties and lawyers must co-operate to identify what can be agreed and what is really in dispute. Between reasonable commercial parties and reasonable and skilled practitioners a significant amount of dispute resolution can be achieved by reducing the issues in litigation to those reasonably necessary to be fought. This notion of reasonableness involves the notion of proportionality. What is reasonable conduct in a piece of litigation may depend on the size and importance of the litigation and upon the identity and resources of the parties.

This Principle enables and indeed expects courts to require parties not to engage in procedural abuse and to engage in sufficient co-operation to identify the matters which need to be resolved by litigation. Thus, the practice of large corporations grinding smaller opponents into insolvency by a process of protracted litigation can be stopped and should be stopped by the courts in enforcing the duty of the parties to limit their disputes to what truly is in dispute in a proportionate way. To do this requires skilled and experienced judges knowledgeable both as to practice and as to the subject matter of the suit.

Principle 8 refers to provisional and protective measures. These are sometimes called interlocutory matters and embrace the concept of injunctive relief, preservation of property and attachment. Sometimes such measures are required to be done ex parte, that is in the absence of the other party. However, any such relief must be limited to urgent matters where there is a preponderance of considerations in favour of making the order. The matter should be brought back before the Court promptly to enable full reconsideration.

Principle 9 is central to the compromise involved in the Principles. It deals with the structure of proceedings. Historically there was a difference between the fundamental structure of civil and common law proceedings. Civil law proceedings saw the judge through a series of small hearings gathering evidence, building up and developing the file until sufficient material was collected for the court to make a decision. Thus one saw in what was sometimes called the Italian-canonical procedure a three stage model with a written introductory phase with claims and response, a fact finding phase with the taking of evidence by the instructing judge over a number of hearings and a final hearing stage without the taking of evidence with the material put before a judicial panel that had no direct knowledge of the evidentiary procedure.

A contrary model was the Anglo-American trial model (very often with a jury trial at the end) in which, after written pleadings, there follows pre-trial phase designed for the collection of facts and the means of evidence necessary for presentation of a case at trial. The third phase is the once only trial at which all evidence is presented.

A third model which has developed in the recent past in civil law as well as common law countries can be described as a “main hearing model”. This has been adopted by the Principles. In this there is a written introductory stage with pleadings, then a period of preparatory clarification takes place through conferences or directions hearings between the court and the parties. These meetings deal with the applicable law, the true issues in the case and the available means of evidence. Once the relevant issues clarified from this process are identified to the court and the parties these issues will be tried in a concentrated main hearing where evidence will be presented and the parties will provide argument. The process is flexible enough to allow smaller preliminary hearings if there are issues that may be decisive or very important in the resolution of the dispute. This main hearing model requires close case management by a judge from the beginning of the proceeding and is not adapted to jury trial. It is this judicial case managed process, though with party control of the boundaries of the dispute, which has become the model for the structure of the proceedings in Principle 9. Depending upon the issues the court can order the exchange of evidence in writing or require notice of what oral evidence will be led.

The pleading phase is set out in Principle 9.2. The interim phase involving close case management by a judge is set out in Principle 9.3. The final hearing phase is set out in Principle 9.4.

Principle 9 reflects a clear break with the passive judge in the common law system. The development of active control and case management has left the entirely passive “umpire” a matter of history in common law litigation without juries in non-criminal matters. The Court has a responsibility to move litigation forward promptly in the interests of the clients and the public.

Principle 10 deals with party initiative and scope of the proceedings. This involves another area of important compromise between the common law and the civil law systems. Subject to case management by the court, the parties have control of the scope of the litigation. The litigation is not defined by the enquiring judge. Its limits are set by the parties, but its progress is under the control of the court.

The role of the control of the parties in commencement and scope of the proceedings is a reflection of compromise with the civilian system. It is not a state controlled enquiry into truth and justice; it is the parties identifying the nature of their claims and defences and thus defining the scope of the controversy.

Principle 11 deals with obligations of the parties and lawyers. This principle reflects the elemental concept in Principle 7.2, above. It provides some structure to the responsibilities of parties and lawyers. Principle 11.1 says that they (parties and lawyers) must conduct themselves in good faith in dealing with each other and the court. Principle 11.2 says that they share with the court the responsibility of the promotion of a fair, efficient and reasonably speedy resolution of the dispute. The notion of what is good faith and a fair, efficient and reasonably speedy resolution of the proceedings will vary from system to system, place to place and from time to time. However, the requirement for parties to refrain from procedural abuse should not be seen as limited to such gross derelictions as “interference” with witnesses or destruction of evidence. It would extend, as I have earlier said, to running points which are not truly in dispute, thereby wasting parties’ and the court’s time and money.

Principle 11.3 embodies an important proposition well known to some common lawyers but foreign to others. Most common law countries in the pleading phase have a requirement to plead facts and their contentions of law. In some jurisdictions in particular the United States of America what is called notice pleading does not require the identification of facts to be proved. This leads in many American jurisdictions to what are seen in other places as extravagant and outrageous claims in the pleadings. The compromise involved here was a requirement to deal specifically with factual and legal issues which are said to lie at the foundation of a claim. The parties have control of the issues by the terms of their pleadings – but they must plead facts that they can prove and do so reasonably and responsibly.

Clause 11.5 reflects the obligation on lawyers to assist parties to observe parties’ procedural obligations. Courts should insist on practitioners (on pain of discipline) complying with those obligations.

Principle 12 deals with multiple claims and parties and intervention. The idea behind the Principle is to provide for the coherent and cohesive dealing with claims in one place at one time and permitting those who are interested to intervene.

Principle 13 deals with a similar notion with the idea of amicus curiae, the friend of the court submission, well established in common law jurisdictions not so much in civil law.

Principle 14 deals with court responsibility for the direction of the proceeding. This is an express recognition of the requirement of the court to case manage and control the movement of proceedings to achieve fair, efficient and reasonably speedy disposition of the case.

Principle 15 deals with dismissal and default judgment. Default judgment permits, of course, termination of the dispute if there is no real issue in dispute or if there is a failure by the defendant to comply with relevant procedures of the court. The Principle emphasises that due caution should be exercised in dealing with cases summarily.

Principle 16 deals with access to information and evidence. One of the great difficulties of modern life and modern litigation is the proliferation of information and its recorded form on paper or electronically. One of the greatest challenges to courts and arbitrators in modern society in the fair and speedy disposition of cases is the control and deployment of information – on paper or electronically. Some countries in the civilian system have dealt with this in a straightforward way: to have little or no access to the information and documents of the other side, especially if they harm that party’s case. This notion is contrary to the practice in the common law system, in which the notion of full discovery of both sides’ documents which help and harm each side’s case has long been a feature. Its purpose is to promote fairness and informed compromise. However, the growth in the cost and complexity of litigation in many common law countries has led to a recognition that discovery must be limited. Such has not occurred however in the United States where not only is there detailed documentary discovery but the right to oral depositions and questioning of opponent and the opponent’s witnesses in the pre-trial phase.

The Principles deal with this by way of compromise in favour of limited disclosure. There is a recognition that justice requires the production of information and evidence from the other side. However, there is also the recognition that cost is a real consideration. Thus the Principles permit a measure of limited discovery under the supervision of the court. Principle 16.1 refers to “relevant” evidence and documents. Principle 16.2 refers to the court ordering disclosure of relevant evidence in the possession of the party. These questions of access and disclosure can be seen as closely related to the role of the court in case managing the issues and managing the conduct of the hearing in such a way as not to cause unnecessary expense and oppression but at the same time attempting to ensure that the parties to the litigation meet on an even playing field.

Principle 16.3 enshrines the ability for non-party witnesses to be spoken to by lawyers. That is a common place in many jurisdictions, for instance in Australia. In other jurisdictions, as a matter of principle, it has been seen as tampering with a witness. However, in those latter countries the judge has had control of the flow of evidence. In a party-controlled body of litigation such as contemplated by the Principles, the parties, through their lawyers, must have access to understanding what witnesses will say.

Principle 16.4 leaves to the forum the methods of eliciting testimony but recognises the right of a party to test or question evidence led by the other.

Principle 17 deals with sanctions which the court may impose on parties, lawyers and third persons. Those sanctions must be reasonable and proportionate. These sanctions are identified in Principle 17.3 and include drawing adverse inferences, dismissing claims or striking out defences and the like.

Principle 18 deals with evidentiary privileges and immunities. The Principle, without identifying the substantive nature of these matters , provides for their recognition. Many systems recognise various privileges and immunities against compulsory evidence such as self- incrimination, confidentiality, legal professional privilege, spousal or family immunity and other privacy considerations. The recognition of these by reference to the law of the forum is provided for. They may very often raise quite complex choice of law problems.

Principle 19 deals with oral and written presentations. This principle recognises the importance of orality in presentation of evidence and submissions, though expert evidence will usually be written. It embodies a compromise from the civilian system which is more heavily reliant upon written material. It recognises the importance of the immediacy of oral evidence and argument though subject to the court’s case management control.

Once again the role for case management can be recognised in principle 19.3. Whilst important evidence may be given orally it may perhaps be presented initially in written form in advance of the hearing so that parties can understand the nature of the evidence.

Principle 20 involves the important principle of public proceedings to court litigation. Arbitration, of course, is generally conducted in private. This is one of its perceived advantages for many parties. However, for the administration of justice by the state the Principles recognise the importance of public exposure of the litigation.

Principle 21 recognises the place of burden and standard of proof as a function of the relevant facts which the party needs to prove.

Principle 22 recognises the responsibility of the court for determination of fact and law.

One aspect of Principle 22 is the role of the expert witness. Much debate is presently occurring in England, Australia and America about the role of expert evidence. There is a perception in some quarters that in some cases that expert evidence is undermining the process of litigation by its partisanship. One method of overcoming this is the use of the court appointed expert. However, the principles recognise the importance of the parties ability to present expert evidence.

The Principles also recognise the importance of foreign law in transnational litigation. Rarely in such litigation will foreign law not arise. It is in this context that a court expert may well be very important.

Principle 23 provides for the decision and a reasoned explanation of the decision. This is common place in common law countries and is essential to the integrity of the appellate process. If a client loses (as one always does in a piece of litigation) it is essential to understand why that has occurred in a clear and timely given set of reasons.

Principle 24 deals with settlement. I said at the beginning of this discussion that litigation was related to compromise and settlement. This is more and more recognised with the growth of what is sometimes called “Alternative Dispute Resolution”. The court should be keen to urge, but not force, settlement on parties. Parties forced to compromise feel that their rights have been trampled on.

Principle 25 deals with costs. In the United States costs are not awarded. The Principles recognise a compromise in this regard and that costs should be awarded to the winning party. The role of the court however in overseeing the disposition of cases in an efficient and timely way will assist in bringing about orders for costs which do not cripple litigating parties.

Principle 26 deals with the immediate enforceability of judgments. This is vital. It is also part of a compromise made by the civilian system in these principles. The Principles in this and the following Principle (Principle 27: appeal) give an importance to the first instance judgment well beyond a mere preliminary to the appeal, as is sometimes the case in civil law countries. The first instance judgment should be given effect to unless the court, after judgment, or the appeal court, can be persuaded that a stay of the orders is appropriate. Security may be awarded as a price of the stay. This is an important recognition of the central importance of the first instance hearing and the entitlement of the party of the fruits of the first instance victory.

Principle 27 deals with appeal. It reflects the notion in common law systems that appeal is for the correction of error based on the record at first instance and not a restarting afresh of the reconsideration of the dispute. This is important in the controlling of costs and in the efficient and timely disposition of the controversy.

Principle 28 deals with lis pendens and res judicata. It is essential to have the controversy dealt with once, and, if possible, in one place and to avoid repetitive litigation or concurrent or successive litigation. The Principles anticipate rules to prevent this.

Principle 29 provides for effective enforcement. There should be procedures available for speedy and effective enforcement of judgments, including money awards, costs, injunctions and provisional measures. One of the essential matters that needs development is the reliable enforcement of orders of foreign courts. To move these matters forward it is essential that increasing confidence be shown in foreign courts. Thus, in one sense, the development of confidence through transnational procedures is of the greatest importance to the efficient and fair disposition of cases in jurisdictions in the region.

Similar comments can be made about Principle 30 on the recognition of judgments.

Principle 31 provides for international judicial co-operation.

The above is an outline of the Principles agreed upon by Unidroit and ALI. Time does not permit a discussion of the rules.

The Principles and the commentary on them provide guidance to national legal systems, governments and judges as to an expected normative standard of their procedures.

(d) The roles for countries such as Indonesia and Australia

The above Principles have been developed by professors and practitioners after discussion and consultation worldwide. The compromises involved in the Principles reflect almost intuitive notions of fairness and good practice. That is not to say that they are mere platitudes. They involve real compromises. Countries such as ours must recognise that their national laws, their provincial laws and their local laws of dispute resolution will involve persons from other countries. It is of the utmost importance that scholars, practitioners and judges within all national legal systems in this region enter a dialogue both within their own countries and internationally to develop a recognition of the importance of these international norms.

As each national legal system, whether it be civilian, common law, Islamic or other, attempts to translate these principles into its own system practitioners, clients and judges of foreign systems will develop trust and confidence in the workings of legal systems that they are otherwise unfamiliar with.

The Transnational Principles are an invaluable source of readily digested international practice against which national and foreign laws can be judged. They could be used as the foundation for a specialist transnational commercial court or as the basis for assessment and reform of domestic court procedure. They are a principled framework for more precise local rules.

The Principles are also a template for arbitral procedures. Time does not permit a discussion of this.

Much remains to be done in all countries in the region in harmonising or approximating our legal systems. We all have much to teach each other and to learn from each other. Laws shared by countries is an agent for peace. It does so in many ways, not the least is the growth of confidence and trust in each other.

The importance of these Principles is that they recognise that how we do things is often more important than what we do. We know this in everyday life and the importance of respect and manners in human exchanges. It should not be surprising that earned trust and respect are vital to litigation.

The Hon. Justice James Allsop
28 November 2005
Jakarta

Bibliography

This is an introductory reading list.

Stürner, R and et al “The Principles of Transnational Civil Procedure: an introduction to their basic conceptions” (2005) Vol 69 Rabels Zeitschrift 201

Goldstein, S “The Proposed ALI/Unidroit Principles and Rules of Transnational Procedure: the utility of such a harmonisation project” (2001) Uniform Law Review 789

Storme, M “Procedural Law and Reform of Justice: from Regional to Universal Harmonisation” (2001) Uniform Law Review 763

Glenn, H P, “The ALI/Unidroit Principles of Transnational Civil Procedure as global standards for adjudication?” (2004) Uniform Law Review 829

Kerameus, K D, “Scope of Application of the ALI/Unidroit Principles of Transnational Civil Procedure” (2004) Uniform Law Review 847

Hazard, G C et al, “Introduction to the Principles and Rules of Transnational Civil Procedure” (2001) 33 New York University Journal of International Law and Politics 769

Rubinstein, J H “International Commercial Arbitration: Reflections at the crossroads of the Common Law and Civil Law traditions” (2005) 5 Chicago Journal of International Law 303

Hazard, G C “Fundamentals of Civil Procedure” (2001) Uniform Law Review 753.