08 May 2019
Academic events tend to be just a nice excuse for a get-together, particularly in an international setting. Occasionally, however, they produce rare opportunities for real life learning. Quite occasionally, to be honest. Without any great expectations, this author accepted an invitation to arbitrate some of the pre-moot rounds in Brazil for this year’s Vis Moot competition. The problem involved a sale of goods contract, with an issue on which would be the law of the arbitration agreement, with the option between a civil or a common law jurisdiction. As a side question to that was, of course, the point about the Parol Evidence Rule. Being Brazil a civil law jurisdiction, my bringing up the infamous rule to every evidence tendered upon the previous negotiations of the parties came to the total desperation of the students.
According to the Parol Evidence Rule, no extrinsic evidence can be admitted to vary a written instrument. According to Treitel, ‘where a contract has been reduced to writing, neither party can rely on extrinsic evidence of terms alleged to have been agreed, i.e. on evidence not contained in the document.’ This is a quintessentially common law rule, virtually unknown in many civil law jurisdictions.
The moot point, therefore, was very instructive to show students what often occurs in an international arbitration involving cross-jurisdictional deals. Parties coming from different legal backgrounds have sometimes conflicting expectations when it comes to the interpretation of their agreements. Arbitrators also should beware of adopting a rigid stance on international arbitration as, even though the choice of whether to apply the Parol Evidence Rule or not might be legally correct, it may still open the possibility for challenges against the award in the enforcement jurisdictions.
That is particularly important in jurisdictions where evidence is a question of procedure and therefore a strict application of the Parol Evidence Rule might fall under Article V 2(b) of the New York Convention 1958. Erik Mårild, for instance, analysed an interesting judgement of the Svea Court of Appeal, in which the Swedish court judged a challenge to an arbitral award issued by the Arbitration Institute of the Stockholm Chamber of Commerce. Under the SCC Rules for Expedited Arbitrations, the sole arbitrator excluded witnesses’ statements, under the Parol Evidence Rule, for being a rule of substantive law under the law of the State of New York, which governed the parties’ agreement. The claimants challenged the award on the basis of procedural fairness, as they argued that, with the exclusion of extrinsic evidence of the contract, they were denied a proper opportunity to fully present their case. The Svea Court of Appeal upheld the award on the basis that the parties have chosen New York law as the substantive law of the contract, and, therefore, accepted that the Parol Evidence Rule was a matter of substantive and not procedural law, but recognised that the exclusion of evidence might indeed lead to the invalidity of the award.
Under the civil law tradition, the jurisprudential nature of the rules of evidence is quite controversial. The traditional position is that evidence is a question of substantive law, but its rules of admissibility are a question of procedure. Some of the greatest scholars in this tradition, such as the Italian Professor Giuseppe Chiovenda, however, argued that in fact all matters concerning evidence must be treated as questions of procedural law. Professor Chiovenda’s position has indeed found increasing support in the last decades and nowadays counsel might not be surprised by courts openly applying this position.
As Erik Mårild rightly pointed, ‘the distinction between procedural and substantive issues is of considerable practical importance as an award generally may be challenged on procedural errors only.’ International arbitrators, therefore, must be extra careful when the jurisdictions of enforcement of their awards are from the civil law tradition before adhering too strictly to the Parol Evidence Rule. Quite surprisingly, taking part in an academic competition might indeed be useful to raise awareness of the many pitfalls involved in an international arbitration. This author would reluctantly recommend taking part in them.
Paulo Fernando Pinheiro Machado FCIArb is an advocate, diplomat and arbitrator, Managing Partner of Pinheiro Machado & Co in Brazil.
 The Law of Contract (14th ed, Sweet & Maxwell, 2015) 233
 ‘Oral presentation of evidence and the application of the parol evidence rule in international arbitration’, The American Review of International Arbitration, 2013, vol. 24, n. 2.
 Ibid, 325: ‘Judgment T 6238-10, dated Feb. 24, 2012, by the Svea Court of Appeal, available at http://www. skiljedomsforeningen.se/file/hovr-ordre-public-t-2010-6238.pdf.’
 Ibid, 326
 Ibid, 331
 J.E. Carreira Alvim, Teoria Geral do Processo (19th ed, Forense, 2016) 8/38
 ‘Oral presentation of evidence and the application of the parol evidence rule in international arbitration’, The American Review of International Arbitration, 2013, vol. 24, n. 2, 330