REUTERS | Ueslei Marcelino

COVID-19 and arbitration in the Middle East: a cloud with a silver lining?

The 2019 novel coronavirus disease (COVID-19) pandemic has paralysed the world economy and the majority of industry and service sectors in most parts of the world, including the Middle East. The systematic lockdown now in place across the Middle East has changed the way we interact with each other and the way we do business today. Naturally, it has also had a profound impact on the way we conduct arbitrations.

The impact is tangible and as such felt in everyday arbitration practice across the board, affecting both onshore arbitrations and arbitrations seated in the judicial free zones, such as most prominently the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM). This is in particular due to the disruptive effect the virus is having on regional and international travel.

By way of illustration, in the present lockdown, arbitrating parties, their witnesses (whether fact or expert) and arbitrators can neither undertake short nor long haul travel to hearing destinations agreed between the parties and the tribunal. Nor can arbitrators meet for collegiate deliberation to facilitate the issuance of procedural orders or in preparation for rendering jurisdictional or final awards. Arbitrators are also facing challenges over the in-person signing of awards as well as the delivery of awards to local arbitration centres for onward notification to the parties. With all stakeholders, including arbitration institutions, being in complete lockdown, the ways of old work no more.

The current situation therefore requires the swift adaptation of all stakeholders in order to ensure the seamless continuity of the services on offer. As a result, the interaction between tribunals and the parties has started to move entirely online, in-person meetings between relevant stakeholders becoming too high-risk in a highly contagious environment. This might initially pose challenges, but these will likely be short-lived.

GCC telecommunications networks more specifically are, generally speaking, well developed and offer access to electronic platforms that facilitate the holding of virtual case management conferences and hearings without the parties, the witnesses or tribunal members having to be present physically in one location. The ADGM Arbitration Centre (ADGMAC) in Abu Dhabi, in particular, provides state-of-the-art hearing facilities for hosting procedural meetings and hearings that facilitate the remote participation of both party counsel and witnesses, whether fact or expert. The risk of contagion will also promote the electronic submission of pleadings, evidence and hearing bundles. In this sense, virtual hearing venues and the use of artificial intelligence at all levels of the arbitral process will increase exponentially and, as such, create significant traction for the ADGMAC’s smart arbitration offering.

As a consequence, care will have to be taken to sensitise the local courts to novel practices of oath administration (for example, by video-conferencing) in an attempt to comply with the prevailing mandatory requirements of the laws of evidence that continue to apply to the taking of fact and expert witness testimony in the region. Such practices will receive support from more modern-worded regional arbitration laws, such as the 2018 UAE Federal Arbitration Law (FAL), which expressly authorises the remote participation of parties and experts in hearings before the tribunal.

In the terms of Article 33, FAL, “hearings may be held through modern means of communication without the physical presence of the Parties at the hearing.” Further, according to Article 35, FAL, “[t]he Arbitral Tribunal may question witnesses, including expert witnesses, through modern means of communication without their physical presence at the hearing.” Notably also, and to illustrate the adeptness of procedural rules in place in the Middle East that perfectly assist in mounting the procedural challenges that the arbitral process is facing in a COVID-19 environment, Article 28.4 of the CRCICA Rules provides that “[t]he arbitral tribunal may direct that witnesses, including expert witnesses, be examined through means of telecommunication that do not require their physical presence at the hearing (such as video conference).”

In a similar vein, the increased use of digital technology across the arbitral process will arguably relax requirements for the overly formalistic physical execution of arbitral awards in favour of electronic signatures, which, according to some commentators, are already permitted by a literal reading of the FAL. Again, the FAL leads by example, promoting, within the meaning of its Article 41(6), the signature of awards “by the members of the Arbitral Tribunal outside the place of arbitration, […], whether by all the members of the Arbitral Tribunal at one sitting or separately by each member to whom the award was forwarded for signature, or by electronic means” (emphasis added). In this sense, the FAL disconnects the place of signature of an award from its qualification as a domestic or international award. This, in turn, promotes the electronic execution of awards, the place of signature of the award (whether in or outside the seat of the arbitration) having become irrelevant. With this in mind, the Dubai International Arbitration Centre (DIAC) has already started to show flexibility in accepting electronically signed awards for onward electronic notification to the parties within the meaning of Article 37.8 of the DIAC Rules (following supportive party consultation).

Last but not least, some regional arbitration laws relax the notice requirement, allowing parties to process any arbitration-specific communications by email. Article 24(1), FAL, for example, facilitates the service of any notices, arguably including notices of dispute as well as the parties’ substantive pleadings, “at the email address previously used by the Parties in their dealings or previously advised by either Party to the other in its communications.” Importantly, Article 24(2), FAL confirms that notifications by email are deemed received “when transmitted upon receipt of confirmation or error-free transmission.” Incidentally, Article 24(1), FAL, read together with Article 44, FAL, which specifically deals with the notification of awards, also supports the view of the electronic notification of awards, requiring a tribunal to “notify the Parties of the award by communicating [arguably including electronically in accordance with Article 24(1) FAL], to each Party, an original or a copy of the arbitral award […]” (emphasis added), that is, no original nor a certified copy of the award being required for formal notification to the parties (although this provision remains presently untested before the competent courts).

In the light of the foregoing, it is arguably fair to conclude that despite the grief it is causing in so many respects, the COVID-19 cloud may ultimately come with some silver lining. More likely than not, the forced use of digital technology in the current pandemic environment will take arbitration practice and procedure (in the Middle East at least) into the 21st century, making full use of technology at all levels of the arbitration process. Out of necessity, the local courts will be likely to view favourably the pervasive use of digital technology in the conduct of hearings, in the administration of the oath and in the award execution process. In turn, this will render online arbitration a virtual reality in the not too distant future in this part of the world. This will, no doubt, serve the procedural efficiency of arbitration and create significant cost savings over time.

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