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How COVID-19 might affect international arbitration

The worry currently at the forefront of everyone’s mind is understandably the 2019 novel coronavirus disease (COVID-19) outbreak. On 12 March 2020, the World Health Organization (WHO) officially declared the outbreak a pandemic, meaning drastic measures have been taken across the globe to prevent its further spread. At the time of publication, there have been over 1.4 million confirmed cases and over 82,000 deaths worldwide as a direct result of the virus. Lockdown and social distancing measures are in place in many countries across the world, with the aim of stemming the rapid increase in cases. As it has affected our personal and working lives in one way or another, it has also disturbed the arbitration world.

Current impact on arbitration

Arbitration boasts an inherent flexibility that makes it an attractive dispute resolution tool. However, it is by no means insusceptible to disruption from the COVID-19 outbreak. The variety of locations in which parties to a single international arbitration case may be based, adds to its vulnerability to the current disruption.

Even before COVID-19 was declared a pandemic, international arbitration in Asia had already felt the impact of the virus, as travel to and from locations such as China had already been advised against in certain countries. Travellers from mainland China and Hong Kong were advised to take 14 day leaves of absence and self-isolate; this immediately acted as a deterrent to attending hearings in those affected areas, unless absolutely necessary. Initially, hearings were delayed and rearranged to locations deemed safer, but now with global travel restrictions, in-person hearings have been postponed or cancelled by the vast majority of arbitration centres.

Many arbitral bodies took precautionary steps shortly after COVID-19 received its pandemic status, to safeguard the health and wellbeing of their employees, as well as their users. The most common and obvious step taken has been to instruct all staff to work remotely, a measure that by now has also been taken by a significant number of law firms and other companies. Naturally, with remote working in place for most parties involved in arbitration, there is a necessary period of adjustment on all fronts. Various arbitration institutions have stated that they expect to remain operational. However, there is likely to be an influx of enquiries relating to pending cases, which may cause a backlog of communications.

Despite the probable disruption to the progress of arbitration matters, a logical prediction is that the number of matters being referred to arbitration may increase in the short term and almost certainly in the long term. Law firms find themselves currently advising clients on force majeure provisions and the ability or inability to fulfil contractual obligations as a result of the pandemic. As arbitration is an increasingly popular choice in commercial contracts, those invoking their contractual dispute resolution clauses may very soon find themselves submitting requests for arbitration to their chosen institution.

Commencing and continuing cases

Although there may be an increase in contractual disputes, a tentativeness to commence new cases immediately would not itself be surprising. In times of economic and financial strain like these, companies are focused primarily on their ability to continue operating as a going concern, and seek to turn to dispute resolution at a later date. Nevertheless, it may in fact be more prudent for companies to consider their arbitration options sooner rather than later, especially given the commitment of arbitration institutions to operate as normal during these times. Furthermore, the almost inevitable influx of cases in the medium term, as a result of events during the outbreak, makes it advisable to commence a case as soon as the necessary facts have been established.

We are fortunate that we live in a very technologically advanced world. The prescribed method of commencing arbitration proceedings will depend on the provisions of the arbitration agreement between the parties. However, there are rarely (if ever) complete prohibitions to starting the process electronically, and many institutions have explicitly dispensed with the need for hard copy submissions. Requests for arbitration and evidentiary submissions can be made via email with little additional effort.

Case progression may indeed be slower due to the aforementioned remote working environments taken up by the parties involved, but electronic submission of documents and correspondence is fairly unaffected and tends to be the preferred method in any case. Specific institutions have already informed parties to ongoing arbitration that all correspondence between the institution, parties and arbitrators will occur by email only. This is so as both to reduce the risk of contagion and to accommodate for the lack of employees’ physical presence at arbitration centres. Electronic correspondence is something that presents very little concern for commercial parties.

Emergency arbitrators

In recent years, many arbitral bodies have established emergency arbitrator provisions which can be utilised where urgent relief is required. Recourse to these provisions has risen in international commercial arbitration proceedings and may be even more attractive during the COVID-19 pandemic. Access to emergency relief could provide companies speedy resolution to a dispute and allow them quickly to turn back to other pressing issues with their businesses.

Emergency arbitrators could find themselves more frequently used for preliminary determination on the applicability of default, termination and material adverse change clauses. Applications for emergency arbitrators have also been digitalised by certain arbitral institutions.

Alternatives to in-person hearings

The biggest impact of the pandemic will be on hearings, as in-person hearings are in the meantime unworkable. Again, a reliance on technology prevents serious delays to final decisions being received by parties to the arbitration. It is very likely that virtual hearings will be considered as the technology certainly exists, despite it not being heavily utilised in international arbitration. In fact, there are a number of benefits virtual hearings would provide, even outside the circumstances in which we currently find ourselves.

As already mentioned, parties between which there is considerable distance can find themselves party to the same arbitration. Utilising virtual hearings could reduce time and costs, particularly those related to travel and accommodation. It is already fairly common to have witnesses to legal proceedings provide evidence via video-link; this could potentially be extended to allow all parties to a matter to be present virtually at a hearing. With travel bans and isolation measures in force globally, virtual hearings will be seriously considered if arbitration hearings are to take place at all.

There are, nevertheless, obvious drawbacks to virtual hearings. Even using state of the art platforms, disruptions resulting from technological issues are not uncommon. When using these platforms for significant periods of time, the likelihood of tech problems increases. Furthermore, it is simply human nature to lose concentration during lengthy virtual meetings; perhaps inexplicably, but a reality nonetheless. Parties in very disparate locations could also find that at least one of them is subjected to unfriendly sitting hours, potentially providing one party with an advantage.

A further alternative to in-person hearings would be to have the issues decided on written submissions only. This would provide the parties with a final resolution but could be undesirable for other reasons. The arts of advocacy and cross-examination would be lost in such scenarios, tools a party may find crucial to its likelihood of success in the case. It may, on the other hand, be possible to have the case partially decided on written submissions. The flexibility of arbitration could further allow the parties to come to an agreement on this for ongoing cases, as well for matters yet to be referred to arbitration.

Conclusions

The impact of COVID-19 is reaching far beyond what we have seen on this planet in recent years. Of paramount importance is the health and public safety impact the pandemic will have. We each have a duty to take recommended precautions to prevent the spread of the virus. As this duty also extends to those organising and conducting arbitral proceedings, careful consideration of the impact of the virus on arbitration, and the measures which can be taken to halt rapid spread, remain necessary.

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