In Russia, there is a kind of superstition that a leap year brings troubles. Yet, even by those standards, 2020 has already brought about too many (and it is not even over yet); of course, the COVID-19 pandemic stands out by any standards.
In addition to causing major devastation and human tragedy, COVID-19 related quarantine measures, lockdowns and travel bans are having an unprecedented impact on cross-border (and local) businesses in almost every country. As lockdown measures are being lifted in some parts of the world, it may seem like the pandemic is already behind us, but unfortunately this is not yet the case. It is indeed very possible that some restrictions and lockdowns will be reintroduced in different parts of the world until there is more or less universal consensus that the disease has been brought under control. What is perhaps even more important is that the pandemic has shown us how fragile the world we took for granted some nine months ago was, and how quickly everything we knew was flipped on its head. For all these reasons, I think we, as an arbitration community, need to take the lessons of COVID-19 on board and think of how to improve international arbitration so that it is more resilient and better equipped to deal with similar crises.
Duty to conduct arbitration expeditiously and efficiently
Most arbitration laws around the world will instruct tribunals that they need to treat parties equally and grant them a full (or at least a reasonable) opportunity to present their cases. While this duty is of course not unlimited and was never intended to give parties a free ride to abuse the procedure, taken in isolation, this duty may lead to “due process paranoia”.
To avoid this, the obligation to treat parties equally and give them an opportunity to present their case should be counterbalanced with the duty to conduct arbitrations efficiently and expeditiously. Thus, section 33(1) of the English Arbitration Act 1996 provides that the tribunal shall not only “act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent”, but also “adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.”
Arbitration legislation in other jurisdictions seem to lack similar provisions, but the arbitration rules of all leading arbitral institutions around the world provide that arbitrations should be conducted efficiently and expeditiously. Interestingly, some rules assume that this is the duty of a tribunal only, for example:
- Article 23(2) of the Stockholm Chamber of Commerce (SCC) Rules.
- Article 19.1 of the Singapore International Arbitration Centre (SIAC) Rules.
- Article 28.1 of the Vienna Rules of the Vienna International Arbitration Centre (VIAC).
Other sets of rules consider it the joint responsibility of the parties and the tribunal, for example:
- Article 22.1 of the International Chamber of Commerce (ICC) Rules.
- Article 14.5 of the London Court of International Arbitration (LCIA) Rules.
- Article 13.5 of the Hong Kong International Arbitration Centre (HKIAC) Rules.
- Article 15.7 of the Swiss Rules of International Arbitration.
Balancing the need to allow parties to present their respective cases with the need to conduct proceedings efficiently and without undue delay becomes particularly important now, when the procedures we know and adopted, almost without a second thought, come under unprecedented pressure due to COVID-19 related restrictions. At the same time, this is perhaps an ideal moment to step back and think of how the procedures can improve.
Disruptions to pending arbitrations
Significant parts of modern day arbitration do not require the physical presence of parties or the handling of paper documents. Submissions and evidence are filed electronically, correspondence is conducted via emails, and case management conferences can and usually are conducted by telephone or videoconference. Yet, restrictions imposed by national governments in response to COVID-19 did not go unnoticed.
Evidentiary hearings in arbitration have suffered most from COVID-19 related restrictions. Indeed, we are accustomed to hearings where everybody is in the same room, with perhaps some videoconferencing for the odd fact or expert witness. With everyone in the same room, you can observe the body language of the tribunal and opposition; this is sometimes more informative than anything else. You can have an informal chat with opposing lead counsel about hearing logistics, for example, during coffee breaks. You can even have senior management for both sides gather finally in the same premises, which can lead to settlement discussions at a commercial level. With travel bans, quarantine and social distancing measures, all of this has suddenly become impossible.
The choices have essentially been between adjourning hearings or finding an acceptable solution so that the case can move forward. While adjourning hearings seems to have been the option that many parties and tribunals chose during the early days of lockdown (for the EU, this was back in March 2020), and it has quickly become clear that this has not been ideal. As a result, many turned to virtual hearings as the way to move cases forward; not everyone is a fan. Technology allows many aspects of the physical hearing to be replicated, but certainly not all of them. People mostly lack feedback from, and real interactions with, other participants. It is more difficult to concentrate for an extended amount of time, when staring at a screen. Technology is also not universally available, so connections may be slow, and image and audio can be distorted. There are also concerns about IT security. Thus, virtual hearings do not appeal to many as they cannot completely substitute physical hearings. However, this is where the duty to conduct proceedings expeditiously and efficiently comes into play.
In the current circumstances, it is not clear when it may become possible (or acceptable) to gather everybody in the same hearing room. People travelling from different corners of the world to spend a few days, if not weeks, locked in relatively small premises may be (or at least seem to be) unsafe from an epidemiological perspective. Therefore, adjourning hearings so that everybody can gather in the same hearing room may now amount to adjourning hearings indefinitely.
The legal maxim, “justice delayed is justice denied”, may become even more relevant in times of crisis. A party with a good claim should not have to wait for the resolution of its dispute solely because the lawyers prefer in-person hearings, rather than virtual ones. This is certainly not what businesses expect, particularly when they face a significant number of other challenges due to COVID-19.
In addition to delays, such adjournments will also necessarily increase the overall costs of case. Thus, if a hearing is adjourned close to its starting date, one can expect that arbitrators and legal teams will have done most of their preparatory work by this point. Counsel will have prepared their openings and cross-examinations, and arbitrators will have read (or even re-read) all the documents provided to them. When the rescheduled hearing finally takes place, both arbitrators and legal teams will necessarily have to repeat this exercise (and the clients will have to pay for it again).
As there is more and more criticism from clients in relation to the time and costs of arbitration, delaying the resolution of cases during the pandemic will not make arbitration any more attractive. This is particularly so when compared with how quickly state courts in some countries have been able to adjust to the situation. For example, in England, where oral hearings are usually more important than in the courts of continental Europe, judges successfully turned to conducting hearings virtually and thereby avoiding unnecessary delays.
If English judges can hear and English barristers can argue cases virtually, what makes international arbitration so different that only physical hearings should be acceptable? I would say that the majority of disputes can be conducted virtually. It will require some extra effort from every participant and certain adjustments to usual presentation and questioning styles. Although it is still not going to be a full replica of an in-person hearing, the duty to conduct arbitrations efficiently and expeditiously suggests that, in the vast majority of cases, virtual hearings should be favoured over adjournments.
I appreciate that there are disputes in which hearings cannot and should not be conducted virtually. This may be the case for an arbitration of particular size or sensitivity, or where there are significant technical issues in organising full virtual hearings, but such cases are perhaps not that common.
Even when the general feeling is that a virtual hearing is not going to work, parties and arbitrators should conduct a midstream case management conference to discuss ways to keep the case progressing. The options available range from bifurcating the proceedings in order to resolve some of the issues in dispute, all the way to agreeing not to conduct the hearing at all. Again, it is the duty of the tribunal (and often the parties too) to avoid unnecessary delays and costs. In order to discharge this duty, tribunals should not simply accept the adjournment of the case without exploring other solutions with the parties. They should at least discuss what can be done in every case.
Considerations for new cases
Knowing all too well how rapidly and unpredictably things can change in a matter of weeks (if not days), we should now take into account these considerations when planning for new cases, both as counsel and as arbitrators.
COVID-19 has shown that cases need to proceed in a more economic and efficient way. For example, there are cases where witness testimonies are key. This probably includes some post merger and acquisition, and joint venture disputes, some construction disputes, and probably the vast majority of investment disputes. However, in the majority of regular commercial arbitrations, you rarely need a fact witness to testify on every background fact of the matter; in some cases, you do not need fact witnesses at all. The need for fewer witnesses means shorter hearings, which will perhaps be a welcome change in regular circumstances, but becomes even more crucial during full virtual hearings.
To increase the efficiency of arbitration, we arguably need two things:
- Better planning early on.
- More interaction between the parties and tribunals as the case progresses.
Better planning involves, of course, understanding your own case and anticipating that of your opponent. It also requires more courage in developing your strategy, to leave out less relevant things and concentrate on what you believe to be your winning point. Nevertheless, counsel understandably wants to play safe in the interests of their clients and therefore often tries to argue every possible and (sometimes) impossible point. Arbitrators may criticise counsel for lengthy submissions, extensive evidentiary records, and numerous witness testimonies.
One has to bear in mind, however, that in many circumstances, counsel has to navigate the unchartered waters of the arbitrators’ minds. While state court judges usually decide matters under their own law and their errors can be corrected by a court of appeals, international arbitrators usually deal with laws, business practices and industries of which they do not necessarily have very good knowledge and expertise. Coupled with the absence of any appeal on the merits, this may lead to counsel going too many extra miles to cover their clients from every conceivable angle.
This is where more interaction between the parties and their tribunal throughout the case comes into play. An engaged tribunal can discuss with counsel early on and throughout the proceeding what they deem to be relevant and material in the case at hand, what they think counsel should focus on, and what evidence they might want to see. While this can remove some drama and suspense from the proceedings, it will also be of enormous help for everybody involved. Counsel will concentrate on the most relevant things identified by the tribunal, or will be able to correct their errors and misunderstanding, and adjust the arbitrators’ focus early on. The arbitrators will be spared from reading thousands of pages only to see that a few hundred are relevant.
COVID-19 has given the arbitration community a historic opportunity to teach ourselves how to do a better job in the interests of our clients and users alike. We need to come out on the other side of the pandemic with the skills and experiences of handling our cases more efficiently, using modern technology to avoid delays when a crisis strikes, focusing on the important points, and leaving everything else aside. If we manage this, this leap year will create new opportunities for the development of international arbitration and its future success.
