This fourth update to a blog post initially dated 7 April 2020 has been updated to take into account developments between 30 April – 14 May 2020. These include various institutional changes (as set out in the table attached to the blog), the alliance between Maxwell Chambers, ICDR, and the Arbitration Place of Toronto and Ottawa to provide “global hybrid hearings”, and developments in the guidance being issued by a collaboration of large international law firms led by HSF.
Tag: Craig Tevendale
LOW OIL PRICE – HIGH DISPUTES RISK: THE SCOPE FOR DISPUTES IN A WORLD OF LOW OIL PRICES
Oil prices have collapsed since the start of the year, driven down by concerns around oversupply, compounded by the collapse in demand caused by COVID-19 and the price war between Russia and Saudi Arabia.
This briefing published on our website here looks at the implications of low oil prices on certain key trading and operational agreements for oil companies, and considers the scope for disputes to arise. It considers the position under English law, which is commonly adopted by parties in the oil and gas industry, but many of the same themes apply to contracts governed by other common law systems.
For more information, please contact Paula Hodges QC, Partner, Craig Tevendale, Partner, James Baily, Partner, Steven Dalton, Partner, James Robson, Senior Associate, or your usual Herbert Smith Freehills contact.
Paula Hodges QC
Partner
+44 20 7466 2027
Craig Tevendale
Partner
+44 20 7466 2445
James Baily
Partner
+44 20 7466 2122
Steven Dalton
Partner
+44 20 7466 2537
James Robson
Senior Associate
+44 207 466 2641
ENGLISH COURT OF APPEAL ISSUES CLEAR GUIDANCE ON THE LAW GOVERNING ARBITRATION AGREEMENTS AND GRANTS ANTI-SUIT INJUNCTION RESTRAINING PARTY FROM PURSUING RUSSIAN COURT PROCEEDINGS
In Enka Insaat ve Sanayi AS v OOO Insurance Co Chubb [2020] EWCA Civ 574, the English Court of Appeal restrained Chubb Russia Investment Limited (“Chubb Russia”) from pursuing Russian court proceedings brought in breach of an arbitration agreement. In this important decision, the Court of Appeal set out how the court of the seat should handle applications for an anti-suit injunction, confirming that forum conveniens questions are irrelevant for this purpose. In addition, the Court of Appeal has sought “to impose some order and clarity” on how the governing law of the arbitration agreement should be determined (the “AA law”) under English law.
Background
Enka Insaat ve Sanayi AS (“Enka”) was a party to a contract under which it was to perform equipment installation works at a power plant (the “Contract”). The Contract contained an arbitration agreement, which provided for disputes to be resolved by London-seated arbitration under the ICC Rules (the “Arbitration Agreement”).
Following a fire at the power plant, Chubb Russia paid out US$400 million in respect of the resulting losses to its insured, the other party to the Contract. Chubb Russia argued that it was subrogated to the claims of the counterparty and sought to recover from Enka in the Russian courts in respect of the sums Chubb Russia had paid out (the “Russian Court Claim”).
Russian court proceedings
Chubb Russia filed the Russian Court Claim in May 2019. However, due to various deficiencies in the Claim, which were not eliminated until September 2019, the substantive hearings took place only in January and February 2020. In March 2020, the judge announced the operative part of the judgment (with the reasoning to follow) dismissing both (i) the Russian Court Claim on the merits; and (ii) Enka’s motion seeking dismissal without considering the merits, in reliance on the Arbitration Agreement.
English court proceedings
As discussed in one of our previous blog posts, Enka made an urgent ex parte application for interim relief to the English Commercial Court, seeking an order requiring the defendants to withdraw the Russian Court Claim, and seeking a stay of the Russian court proceedings. The Court found that the matter was not in a position to proceed, because it was insufficiently prepared to enable there to be a fair hearing. It then determined that there should be an expedited trial commencing in December 2019.
After the trial the Court refused, on forum non conveniens grounds, to grant an anti-suit injunction restraining Chubb from pursuing the Russian Court Claim. The Court also noted that the scope and the governing law of the Arbitration Agreement should be determined by the Russian court. It held, in the alternative, that the anti-suit injunction should be refused due to Enka’s (i) delay in bringing proceedings in the English courts; (ii) degree of participation in the Russian Court Claim; and (iii) failure to commence arbitration proceedings. Enka appealed, arguing, in particular, that the Court’s approach to deciding the case on forum non conveniens grounds was wrong in principle.
The Court of Appeal decision
The Court of Appeal agreed with Enka, allowing the appeal. It concluded that: (i) the English court as the court of the seat was necessarily an appropriate court to grant an anti-suit injunction and questions of forum conveniens did not arise; (ii) the Arbitration Agreement was governed by English law; and (iii) there were no other reasons to refuse relief.
Forum conveniens questions irrelevant
The Court of Appeal explained that forum conveniens questions were irrelevant when a court of the seat decided whether to grant an anti-suit injunction. The choice of the seat is an agreement of the parties to submit to the jurisdiction of the courts of that seat in respect of such powers as the seat confers. The grant of an anti-suit injunction to restrain a (threatened) breach of the arbitration agreement is an exercise of such powers. If a court of the seat were to defer on forum conveniens grounds to the non-curial court, this would defeat the considerations of certainty and party autonomy.
The Court of Appeal further noted that, when faced with the question of whether to grant an anti-suit injunction, the English court must address the following two questions: (i) whether the foreign proceedings are a breach of the arbitration agreement (under the AA law); and (ii) if so, whether relief should be granted as a matter of discretion. Therefore, the Court of Appeal concluded that the Court was wrong not to decide whether the Russian Court Claim was a breach of the Arbitration Agreement.
Governing law of the Arbitration Agreement
The Court of Appeal noted that “the time [had] come to seek to impose some order and clarity” on the significance of the main contract law and the law of the seat for the purpose of determining the AA law, setting out the following principles:
Applying the above principles, the Court of Appeal concluded that the Arbitration Agreement was governed by English law. The term “Applicable Law” was defined in an attachment to the Contract so as to cover Russian law, with a particular focus on relevant regulatory legislation. The Contract did not have a clause which provided that it was governed by the Applicable Law, but merely provided that the terms used in the Contract would have the definitions set forth in the attachment.
Therefore, there was nothing to suggest an express choice of Russian law as the governing law of the Contract and/or the Arbitration Agreement. Accordingly, in the absence of any countervailing factors which would point to a different system of law, the parties had impliedly chosen that the Arbitration Agreement was governed by the law of the seat, i.e. English law.
The Court of Appeal then noted that the parties to the Contract would expect all aspects of the dispute, whatever their legal basis, to be covered by the Arbitration Agreement, concluding that the Russian Court Claim was brought in breach of the Arbitration Agreement.
No other reasons to refuse relief
According to the Court of Appeal, Enka’s failure to commence arbitration proceedings was not a relevant factor. As confirmed in AES Ust-Kamenogorsk (discussed in one of our previous blog posts) an arbitration agreement contains an independent negative promise not to commence proceedings anywhere in the world. Likewise, Enka’s degree of participation in the Russian Court Claim could not be a matter for legitimate criticism.
The Court of Appeal referred to Ecobank Transnational Inc v Tanoh (discussed in one of our previous blog posts) to confirm that Enka’s delay in bringing proceedings in the English courts could, in principle, justify a refusal to grant relief. However, it concluded that Enka could not be criticised for not seeking relief until it became clear that the Russian Court Claim would be accepted by the Russian courts in September 2019, and Enka sought injunctive relief only 12 days later. As for the Court’s reproach regarding Enka’s handling of the interim application, this did not result in any delay in obtaining injunctive relief. Therefore the Court of Appeal held that there were no other reasons to refuse relief.
Comment
This case has clarified the English law position in relation to the role of the court of the seat when granting anti-suit injunctions. The judgment confirms that forum non conveniens is not a relevant factor to consider when assessing whether anti-suit injunction relief should be granted and illustrates the English courts’ robust approach to breaches of arbitration agreements.
This Court of Appeal decision is also a welcome clarification of how the law of the arbitration agreement should be decided. The case is important in this respect and is likely to become a significant English law authority on the applicable principles. While the case has emphasised the importance of the law of the seat in ascertaining the governing law of the arbitration agreement, the starting point remains a consideration of any express choice of law. In some cases, the choice of law in the main contract will still be considered to be an express choice of law for the arbitration clause itself. The courts will also still assess the legal system with which the arbitration clause has the closest and most real connection. Some uncertainty is therefore likely to remain in relation to how the test will be applied in individual cases. The decision highlights once again the importance of including an express choice of law in the arbitration agreement itself.
For further information, please contact Craig Tevendale, Partner, Rebecca Warder, Professional Support Lawyer, Olga Dementyeva, Associate or your usual Herbert Smith Freehills contact
Craig Tevendale
Partner
+44 20 7466 2445
Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418
Olga Dementyeva
Associate
+44 20 7466 7644
AD HOC ARBITRATION ALIVE AND WELL IN LONDON: THE LATEST STATISTICS
Leading arbitral institutions regularly publish their case statistics, meaning there is reasonable visibility for the popularity of institutional arbitration. However, it is more difficult to reliably gauge ad hoc international arbitration trends across all sectors and jurisdictions. It is certainly clear from the new figures recently released by the London Maritime Arbitrators Association (“LMAA”) that London-seated ad hoc arbitration is thriving, and there are a number of other indications that ad hoc arbitration continues to be widely trusted.
UPDATE [3]: “NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES
Please Note: This blog post has been updated. The updated post can be found here.
This third update to a blog post initially dated 7 April 2020 has been updated to take into account developments between 23-30 April 2020. These include various institutional changes (as set out in the table attached to the blog), the SCC’s hearing platform, the African Arbitration Protocol on Virtual Hearings and the recent HSF podcast on this topic.
The arbitration community has steadily adopted new technologies over time to assist in the resolution of disputes. For example, it has become fairly commonplace for case management conferences to be run using virtual meetings or video conferencing, and it is not uncommon – where the circumstances justify it – for cross-examination of some witnesses and experts to take place remotely. The international nature of disputes has also made electronic document storage, trial presentation and electronic bundling a practical option for many arbitrations. All that being said, until very recently, remote hearings at the substantive stages of the case remained the exception rather than the norm and printed hearing bundles remained commonplace.
The COVID-19 pandemic has created an unprecedented need for arbitral institutions and organisations to adapt at very short notice to new and different ways of working, and offer solutions to parties and practitioners that will enable disputes to continue to be resolved in a time of quarantine and enforced social distancing. The leading arbitral institutions have issued a joint statement encouraging parties and tribunals to be constructive in their approach to the challenges presented by COVID-19. Many arbitral institutions have come up with several innovative responses, enabling cases to be filed, parties and tribunals to communicate and, where necessary, for merits hearings to be conducted virtually. This blog piece considers some of those new processes, before setting out the specific offerings of key arbitral institutions and organisations.
A table listing key institutions and organisations’ specific offerings (as at 30 April) can be viewed and downloaded here.
Joint statement from Arbitral Institutions on COVID-19
On 16 April 2020 leading arbitral institutions (the CRCICA, DIS, ICC, ICDR/AAA, ICSID, KCAB, LCIA, MCA, HKIAC, SCC, SIAC, VIAC and the International Federation of Commercial Arbitration Institutions) released a joint statement to the market on COVID-19. While these institutions have engaged constructively and collegiately with other initiatives from the wider community (such as the Equal Representation in Arbitration Pledge), this is a “first” in being a truly cross-institutional initiative.
The statement can be found here. The statement expresses the ambition of these institutions to support international arbitration’s ability to contribute to stability and foreseeability in a highly unstable environment, including by ensuring that pending cases may continue and that parties may have their cases heard without undue delay. The institutions acknowledge the current challenging times, stating their support for parties and arbitral tribunals. The statement also encourages parties and tribunals to deal with the challenges presented by COVID-19 in a constructive way. This includes by consulting each institution’s website for guidelines on running an arbitration in the current landscape and the services offered by those institutions to assist parties and tribunals.
Institutional and organisational responses: Administration
Staff, offices, and pending cases
Most institutions have closed their offices and, like the LCIA, ICC and SIAC (as examples) have moved to remote working arrangements for all or a majority of employees. ACICA, VIAC and CRCICA continue to have some staff members in office for limited purposes (like receiving post) or on a restricted timetable (only on a couple of days a week). Some institutions like FINRA, SCC and VIAC digitalised aspects of case management processes before the pandemic struck, and they are therefore seeking to operate as close to business as usual through those new tools (e.g. the SCC platform or the FINRA Portal).
Almost all institutions have also put in place business continuity and contingency plans for pending cases. Most pending cases are continuing with remote support functionality from institutions or limited in-office support at institutions like the SCC and the DIS. The SCC is allowing parties with pending cases initiated before September 2019 to transfer case data to the SCC Platform.
Some organisations offering sets of rules for ad hoc arbitrations have been less affected by the pandemic, as many arbitrations under these sets of rules are primarily conducted online. While some 400-500 awards are issued each year in LMAA arbitrations, the vast majority of cases are dealt with “on the documents” with only around 20% of their cases involving an oral hearing.
General case administration
Almost all institutions have permitted requests/notices of arbitration to be filed via email for the duration of the pandemic, while some (like ICSID, SCAI and DIS) have continued to accept hard copies using ad hoc arrangements. Other methods of receiving such requests include telefax (DIS), USB (CRCICA) and bespoke portals (AAA-ICDR, LCIA and FINRA). Some institutions and organisations have also developed interim measures relating to payments and transmission of awards. The information available about changes in general case administration practices varies from institution to institution with DIS providing extensive detail and FINRA, SCC and VIAC not being required to drastically change their case administration practices, which already could take place largely online.
Communications
All organisations have shifted to electronic or telephonic means of communication, and only a few still permit documents or communications to be sent via courier or post. Institutions like the SCC or DIS, which had already adopted electronic methods as the standard means of communication before the pandemic, are not required to introduce drastic changes in how they communicate with parties to the proceedings they administer. The SCC, in partnership with Thomson Reuters, has made its digital platform (SCC Platform) available free of charge for ad-hoc arbitrations globally commenced during the pandemic.
Hearings
Virtual meetings and hearings
In most cases, in-person hearings have been cancelled and rescheduled, with some meetings and hearings being held virtually. Some organisations like the ICC, SCC, JAMS, AAA-ICDR, IDRC and the LMAA, are using or proposing the use of commercially available services like FaceTime, Skype, Vidyocloud, Microsoft Teams,Zoom, or Bluejeans, while other organisations are offering more bespoke services – examples being SIAC in collaboration with Maxwell Chambers’ Virtual ADR service, ICSID’s video conferencing platform, JAMS’ EndisputeTM mediation platform,IDRC’s collaboration with Opus 2, and the Stockholm International Hearing Centre’s platform for digital hearings. HKIAC has seen a significant increase in demand for its e-hearing services: 70% of hearings booked in April and May will involve e-hearing services in some form. Looking to the future, the IDRC is already anticipating the development of “semi-virtual” hearings where only the arbitrators and counsel are at the centre and other participants such as the parties and witnesses participate by videoconference even after the pandemic has ended.
Guidance and advice
While it is hugely beneficial to have the services available to facilitate online hearings, such hearings will only be effective if they are well run. This requires tribunals, counsel and parties to cooperate to ensure that learning in the use of this technology is shared and adopted. Given the sensitivity of many arbitrations, it will also require that they ensure that cybersecurity is maintained throughout and that any personal data only processed in ways that are compatible with applicable laws. The ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration and the consultation draft of the ICCA/IBA Joint Task Force’s Roadmap on Data Protection in International Arbitration, both released earlier this year, offer helpful suggestions to maintain cybersecurity and comply with data protection requirements in any arbitration, however conducted.
Other helpful guidance has been provided by arbitral institutions and organisations in the past few weeks, such as (i) the ICC’s Guidance Note on possible measures aimed at mitigating the effects of the Covid-19 pandemic, which contains a number of helpful suggested clauses to incorporate in cyber-protocols and procedural orders dealing with the organisation of virtual hearings, as well as a checklist to assist parties in dealing with the logistics of holding such hearings, (ii) the Delos checklist, which has been publicised by the SCC and the VIAC, and (iii) the Seoul Protocol on Video Conferencing in International Arbitration providing guidance on best practices in conducting arbitration hearings through video conferencing. Despite the timely release of the Seoul Protocol, it was not released in response to the COVID-19 pandemic, but is the product of discussions within the arbitral community since 2018. While focused, in the main, on witness evidence, it still provides some useful advice that may be helpful for virtual hearings taking place in the present circumstances. The Africa Arbitration Academy has also published a Protocol on Virtual Hearings in Africa 2020, which provides guidelines and best practices for virtual hearings in Africa. The protocol includes, among other things, a model virtual hearing clause, a model pre-virtual hearing agreement, and a model tribunal issued cyber protocol. The Africa Arbitration Academy hopes that the protocol will encourage both African institutions and governments to make references to virtual hearing in their rules and laws.
Further guidance is expected to be issued in the coming weeks by a collaboration group of large international law firms set up and led by Herbert Smith Freehills LLP, in consultation with arbitration institutions, ad hoc arbitration organisations and technology providers, addressing the characteristics and functionality that parties should require of the tools they use for the exchange of data online in their proceedings.
It is also important to consider that the decision to substitute a virtual hearing for an in-person hearing may not be agreed between the parties. In practice, it is likely to be difficult to proceed to a virtual merits hearing where one party insists on an in-person hearing. Nonetheless, there is likely to be a trend towards more virtual hearings, particularly for cases requiring limited or no oral evidence. Appendix 1 to the Delos checklist lists some of the considerations that might influence a party’s decision whether or not to agree to postpone the hearing, instead of substituting a virtual hearing for an in-person one.
A decision on whether to hold or postpone a hearing will ultimately need to be made by the tribunal on a case-by-case basis considering all the relevant circumstances. These include the availability of the Tribunal members and parties’ counsel to hold the hearing in-person in short order, if it were to be postponed (especially in light of uncertainty as to when travel restrictions will be lifted and the likelihood of congested diaries in the aftermath of COVID-19), the potential due process implications of merits hearings not being held in-person and the institutional rules in question. Given the institutional joint statement mirrors many national courts in seeking to continue with the resolution of disputes during this challenging time, it is likely that those institutions will encourage arbitrators to adopt virtual hearings wherever possible. For example, the SCC currently expects parties “to live up to their obligations under the SCC Rules and make efforts to keep to established timetables by, when necessary and deemed possible, for example transferring the arbitration to a fully digital environment, including using audio- and visual meeting facilities in the proceedings”. Delos have reported that this part of their checklist was expanded in response to institutional feedback that many parties had initially assumed proceedings would be temporarily suspended, rather than moving forward virtually.
In some circumstances it could be appropriate for some parties to consider the need for a hearing at all as opposed to a virtual or in-person hearing, instead conducting the arbitration on a documents-only basis. In certain sectors such as construction, maritime, or commodities, or where the facts are not in dispute, parties may decide to agree to resolving the disputes on the basis of documents alone. Parties assessing such an approach will need to consider whether proceeding on the basis of documents alone is available under their chosen rules and whether the agreement of the tribunal and other parties can be obtained.
Hearing services and service providers
Language service providers for arbitration remain fully operational due to their remote working capabilities and are offering alternatives to their usual face-to-face interpreting services for hearings. Similarly, court reporters remain operational by offering remote transcription services.
Impact on the wider arbitral community: events and conferences
Unsurprisingly, large numbers of upcoming events and programmes have been cancelled by arbitral institutions and organisations, while many of the key conferences in the arbitration community calendar (such as ICCA) have also been postponed to 2021. Several institutions have responded by conducting webinars and training sessions specifically tailored to adapting to the COVID-19 pandemic such as the HKIAC Webinar series, SCC Online Seminars, AAA’s education for arbitrators on cybersecurity, AIAC Webinar series and CPR’s webinar on ADR in the time of COVID-19.
Comment
Arbitral institutions and organisations, like many domestic courts, have responded quickly to the COVID-19 pandemic and offered parties and practitioners innovative ways to keep dispute resolution on track in challenging times. While some institutions were already equipped with technology which could be adapted to the changing situation and much ad hoc arbitration was already dealt with on documents only, other organisations have had to make more rapid changes to their processes. The effectiveness of all these new proposals will depend on the willingness and ability of tribunals, practitioners and parties to embrace these technologies and share best practice in arbitration. To this end, guidance and training offered by arbitral institutions and organisations to educate arbitral participants should be welcomed. Whether this public health crisis will result in longer term changes to the way arbitration is practised remains to be seen.
To hear views on this topic from HSF partners, please do listen to our recent podcast which looks at the impact of the COVID-19 pandemic on ongoing and future arbitral proceedings. The team also shares some practical tips from our recent experience on how to manage virtual hearings given the current restrictions on travel and social distancing.
A table listing key institutions and organisations’ specific offerings (as at 30 April) can be viewed and downloaded here.
For more information, please contact Craig Tevendale, Partner, Charlie Morgan, Senior Associate Vanessa Naish, Professional Support Consultant, Kevin Hollis, Associate, or your usual Herbert Smith Freehills Contact.
Craig Tevendale
Partner
+44 20 7466 2445
Charlie Morgan
Senior Associate
+44 20 7466 2733
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112
Kevin Hollis
Associate
+33 1 53 57 78 39
COVID-19: PRESSURE POINTS: PODCAST “THE CHALLENGES OF RESOLVING DISPUTES IN A TIME OF SOCIAL DISTANCING: THE IMPACT OF THE PANDEMIC ON ARBITRATION” (GLOBAL)
We are pleased to share with you this podcast which looks at the impact of the COVID-19 pandemic on ongoing and future arbitral proceedings. We explore what arbitral institutions and other organisations have been doing to assist parties and arbitral tribunals through this difficult period. The team also shares some practical tips from our recent experience on how to manage virtual hearings given the current restrictions on travel and social distancing.
This podcast is chaired by Vanessa Naish, Arbitration Practice Manager and Professional Support Consultant, who is joined by Craig Tevendale, Head of our International Arbitration group in London, Patricia Nacimiento, co-Head of the German dispute resolution team and Kathryn Sanger, Partner in our Hong Kong office. Along with their roles at Herbert Smith Freehills, Craig, Patricia and Kathryn each have roles at arbitral institutions and also sit as arbitrators, and can therefore share multiple perspectives on the current situation.
This podcast can be listened to here.
For more information, please contact Craig Tevendale, Partner, Patricia Nacimiento, Partner, Kathryn Sanger, Partner, Vanessa Naish, Professional Support Consultant or your usual Herbert Smith Freehills contact.
Craig Tevendale
Partner
+44 20 7466 2445
Patricia Nacimiento
Partner
+49 69 2222 82530
Kathryn Sanger
Partner
+852 21014029
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112
COMMERCIAL COURT OVERTURNS INJUNCTION TO PRESERVE ASSETS GRANTED UNDER SECTION 44(3) OF THE ENGLISH ARBITRATION ACT 1996
In the recent decision of Daelim Corporation v Bonita Company Ltd and Others [2020] EWHC 697, the Commercial Court overturned an injunction previously granted under s44(3) of the English Arbitration Act 1996 (the Act). The injunction had amounted to an anti-arbitration injunction which, the Court held, was not necessary for the statutory purpose of preserving assets.
UPDATED POST: “NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES
This post has been updated, please find our updated post here.
The arbitration community has steadily adopted new technologies over time to assist in the resolution of disputes. For example, it has become fairly commonplace for case management conferences to be run using virtual meetings or video conferencing, and it is not uncommon – where the circumstances justify it – for cross-examination of some witnesses and experts to take place remotely. The international nature of disputes has also made electronic document storage, trial presentation and electronic bundling a practical option for many arbitrations. All that being said, until very recently, remote hearings at the substantive stages of the case remained the exception rather than the norm and printed hearing bundles remained commonplace.
The COVID-19 pandemic has created an unprecedented need for arbitral institutions and organisations to adapt at very short notice to new and different ways of working, and offer solutions to parties and practitioners that will enable disputes to continue to be resolved in a time of quarantine and enforced social distancing. The leading arbitral institutions have issued a joint statement encouraging parties and tribunals to be constructive in their approach to the challenges presented by COVID-19. Many arbitral institutions have come up with several innovative responses, enabling cases to be filed, parties and tribunals to communicate and, where necessary, for merits hearings to be conducted virtually. This blog piece considers some of those new processes, before setting out the specific offerings of key arbitral institutions and organisations.
A table listing key institutions and organisations’ specific offerings (as at 23 April) can be viewed and downloaded here.
Joint statement from Arbitral Institutions on COVID-19
On 16 April 2020 leading arbitral institutions (the CRCICA, DIS, ICC, ICDR/AAA, ICSID, KCAB, LCIA, MCA, HKIAC, SCC, SIAC, VIAC and the International Federation of Commercial Arbitration Institutions) released a joint statement to the market on COVID-19. While these institutions have engaged constructively and collegiately with other initiatives from the wider community (such as the Equal Representation in Arbitration Pledge), this is a “first” in being a truly cross-institutional initiative.
The statement can be found here. The statement expresses the ambition of these institutions to support international arbitration’s ability to contribute to stability and foreseeability in a highly unstable environment, including by ensuring that pending cases may continue and that parties may have their cases heard without undue delay. The institutions acknowledge the current challenging times, stating their support for parties and arbitral tribunals. The statement also encourages parties and tribunals to deal with the challenges presented by COVID-19 in a constructive way. This includes by consulting each institution’s website for guidelines on running an arbitration in the current landscape and the services offered by those institutions to assist parties and tribunals.
Institutional and organisational responses: Administration
Staff, offices, and pending cases
Most institutions have closed their offices and, like the LCIA, ICC and SIAC (as examples) have moved to remote working arrangements for all or a majority of employees. ACICA, VIAC and CRCICA continue to have some staff members in office for limited purposes (like receiving post) or on a restricted timetable (only on a couple of days a week). Some institutions like FINRA, SCC and VIAC digitalised aspects of case management processes before the pandemic struck, and they are therefore seeking to operate as close to business as usual through those new tools (e.g. the SCC platform or the FINRA Portal).
Almost all institutions have also put in place business continuity and contingency plans for pending cases. Most pending cases are continuing with remote support functionality from institutions or limited in-office support at institutions like the SCC and the DIS. The SCC is allowing parties with pending cases initiated before September 2019 to transfer case data to the SCC Platform.
Some organisations offering sets of rules for ad hoc arbitrations have been less affected by the pandemic, as many arbitrations under these sets of rules are primarily conducted online. While some 400-500 awards are issued each year in LMAA arbitrations, the vast majority of cases are dealt with “on the documents” with only around 20% of their cases involving an oral hearing.
General case administration
Almost all institutions have permitted requests/notices of arbitration to be filed via email for the duration of the pandemic, while some (like ICSID, SCAI and DIS) have continued to accept hard copies using ad hoc arrangements. Other methods of receiving such requests include telefax (DIS), USB (CRCICA) and bespoke portals (AAA-ICDR, LCIA and FINRA). Some institutions and organisations have also developed interim measures relating to payments and transmission of awards. The information available about changes in general case administration practices varies from institution to institution with DIS providing extensive detail and FINRA, SCC and VIAC not being required to drastically change their case administration practices, which already could take place largely online.
Communications
All organisations have shifted to electronic or telephonic means of communication, and only a few still permit documents or communications to be sent via courier or post. Institutions like the SCC or DIS, which had already adopted electronic methods as the standard means of communication before the pandemic, are not required to introduce drastic changes in how they communicate with parties to the proceedings they administer.
Hearings
Virtual meetings and hearings
In most cases, in-person hearings have been cancelled and rescheduled, with some meetings and hearings being held virtually. Some organisations like the ICC, SCC, JAMS, AAA-ICDR and the LMAA are using or proposing the use of commercially available services like FaceTime, Skype, Vidyocloud, Microsoft Teams or Zoom, while other organisations are offering more bespoke services – examples being SIAC in collaboration with Maxwell Chambers’ Virtual ADR service, ICSID’s video conferencing platform, JAMS’ EndisputeTM mediation platform and the IDRC’s collaboration with Opus 2. HKIAC has seen a significant increase in demand for its e-hearing services: 70% of hearings booked in April and May will involve e-hearing services in some form. Looking to the future, the IDRC is already anticipating the development of “semi-virtual” hearings where only the arbitrators and counsel are at the centre and other participants such as the parties and witnesses participate by videoconference even after the pandemic has ended.
Guidance and advice
While it is hugely beneficial to have the services available to facilitate online hearings, such hearings will only be effective if they are well run. This requires tribunals, counsel and parties to cooperate to ensure that learning in the use of this technology is shared and adopted. Given the sensitivity of many arbitrations, it will also require that they ensure that cybersecurity is maintained throughout and that any personal data only processed in ways that are compatible with applicable laws. The ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration and the consultation draft of the ICCA/IBA Joint Task Force’s Roadmap on Data Protection in International Arbitration, both released earlier this year, offer helpful suggestions to maintain cybersecurity and comply with data protection requirements in any arbitration, however conducted.
Other helpful guidance has been provided by arbitral institutions and organisations in the past few weeks, such as (i) the ICC’s Guidance Note on possible measures aimed at mitigating the effects of the Covid-19 pandemic, which contains a number of helpful suggested clauses to incorporate in cyber-protocols and procedural orders dealing with the organisation of virtual hearings, as well as a checklist to assist parties in dealing with the logistics of holding such hearings, (ii) the Delos checklist, which has been publicised by the SCC and the VIAC, and (iii) the Seoul Protocol on Video Conferencing in International Arbitration providing guidance on best practices in conducting arbitration hearings through video conferencing. Despite the timely release of the Seoul Protocol, it was not released in response to the COVID-19 pandemic, but is the product of discussions within the arbitral community since 2018. While focused, in the main, on witness evidence, it still provides some useful advice that may be helpful for virtual hearings taking place in the present circumstances.
Further guidance is expected to be issued in the coming weeks by a collaboration group of large international law firms set up and led by Herbert Smith Freehills LLP, in consultation with arbitration institutions, ad hoc arbitration organisations and technology providers, addressing the characteristics and functionality that parties should require of the tools they use for the exchange of data online in their proceedings.
It is also important to consider that the decision to substitute a virtual hearing for an in-person hearing may not be agreed between the parties. In practice, it is likely to be difficult to proceed to a virtual merits hearing where one party insists on an in-person hearing. Nonetheless, there is likely to be a trend towards more virtual hearings, particularly for cases requiring limited or no oral evidence. Appendix 1 to the Delos checklist lists some of the considerations that might influence a party’s decision whether or not to agree to postpone the hearing, instead of substituting a virtual hearing for an in-person one.
A decision on whether to hold or postpone a hearing will ultimately need to be made by the tribunal on a case-by-case basis considering all the relevant circumstances. These include the availability of the Tribunal members and parties’ counsel to hold the hearing in-person in short order, if it were to be postponed (especially in light of uncertainty as to when travel restrictions will be lifted and the likelihood of congested diaries in the aftermath of COVID-19), the potential due process implications of merits hearings not being held in-person and the institutional rules in question. Given the institutional joint statement mirrors many national courts in seeking to continue with the resolution of disputes during this challenging time, it is likely that those institutions will encourage arbitrators to adopt virtual hearings wherever possible. For example, the SCC currently expects parties “to live up to their obligations under the SCC Rules and make efforts to keep to established timetables by, when necessary and deemed possible, for example transferring the arbitration to a fully digital environment, including using audio- and visual meeting facilities in the proceedings”. Delos have reported that this part of their checklist was expanded in response to institutional feedback that many parties had initially assumed proceedings would be temporarily suspended, rather than moving forward virtually.
Hearing services and service providers
Language service providers for arbitration remain fully operational due to their remote working capabilities and are offering alternatives to their usual face-to-face interpreting services for hearings. Similarly, court reporters remain operational by offering remote transcription services.
Impact on the wider arbitral community: events and conferences
Unsurprisingly, large numbers of upcoming events and programmes have been cancelled by arbitral institutions and organisations, while many of the key conferences in the arbitration community calendar (such as ICCA) have also been postponed to 2021. Several institutions have responded by conducting webinars and training sessions specifically tailored to adapting to the COVID-19 pandemic such as the HKIAC Webinar series, SCC Online Seminars, AAA’s education for arbitrators on cybersecurity, AIAC Webinar series and CPR’s webinar on ADR in the time of COVID-19.
Comment
Arbitral institutions and organisations, like many domestic courts, have responded quickly to the COVID-19 pandemic and offered parties and practitioners innovative ways to keep dispute resolution on track in challenging times. While some institutions were already equipped with technology which could be adapted to the changing situation and much ad hoc arbitration was already dealt with on documents only, other organisations have had to make more rapid changes to their processes. The effectiveness of all these new proposals will depend on the willingness and ability of tribunals, practitioners and parties to embrace these technologies and share best practice in arbitration. To this end, guidance and training offered by arbitral institutions and organisations to educate arbitral participants should be welcomed. Whether this public health crisis will result in longer term changes to the way arbitration is practised remains to be seen.
A table listing key institutions and organisations’ specific offerings (as at 23 April) can be viewed and downloaded here.
Craig Tevendale
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Charlie Morgan
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“NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES
Please Note: This post has now been updated. The latest version of this post can be found here.
The arbitration community has steadily adopted new technologies over time to assist in the resolution of disputes. For example, it has become fairly commonplace for case management conferences to be run using virtual meetings or video conferencing, and it is not uncommon – where the circumstances justify it – for cross-examination of some witnesses and experts to take place remotely. The international nature of disputes has also made electronic document storage, trial presentation and electronic bundling a practical option for many arbitrations. All that being said, until very recently, remote hearings at the substantive stages of the case remained the exception rather than the norm and printed hearing bundles remained commonplace.
ENGLISH COURT ALLOWS SECTION 69 APPEAL OF AN AWARD ON A POINT OF LAW – OWNERS WERE REQUIRED TO PROVIDE BILLS OF LADING IN SUPPORT OF THEIR DEMURRAGE CLAIM
The recent decision of Tricon Energy Ltd v MTM Trading LLC [2020] EWHC 700 (Comm) (available here) provides a rare example of the English Court allowing an appeal on a point of law under section 69 of the Arbitration Act 1996 (“s69”).
The Court held that, on the basis of its interpretation of the relevant clauses, and without suggesting that there is a requirement to provide bills of lading where these are not available, in this case the failure by MTM Trading LLC (the “Owners”) to produce bills of lading in support of their demurrage claim barred the entire claim.
Background
Clause 38 of the charterparty between the parties (“cl38”) barred any claim which had not been received by Tricon Energy Ltd (the “Charterers”) with “all supporting documents” within a 90-day period. The Charterers’ case was that the Owners’ claim was time-barred because they had failed to provide copies of the bills of lading. Without such documents, they argued, they could not determine whether the claim for demurrage was well-founded.
The arbitral tribunal held that the Owners’ claim succeeded in full. It found that the Owners’ claim was sufficiently documented for the purpose of cl38 by the statement of facts, which recorded the bill of lading figure and was “in reality all that Charterers need[ed] to check that the apportionment of waiting and discharging time ha[d] been correctly calculated”.
The question of law on which the Charterers were granted permission to appeal by Popplewell J was framed as follows: “Where a charterparty requires demurrage to be calculated by reference to bill of lading quantities, and contains a demurrage time bar which requires provision of all supporting documents, will a claim for demurrage be time-barred if the vessel owner fails to provide copies of the bills of lading?”
The Court’s decision
The Court answered “yes” to the question as formulated, but only on the basis of its interpretation of cl38, and without suggesting that there is a requirement to provide bills of lading where these are not available in a particular case.
The drafting of the charterparty in this case “made it clear” that pro-rating for demurrage purposes had to be calculated by reference to “Bill of Lading quantities”, and required the provision of “all” supporting documentation, not simply “supporting documentation”.
In the Court’s judgment, in the circumstances it was not possible to treat the bills of lading as outside the requirements of cl38. If a bill of lading was not available, then cl38 required that a proper explanation of that fact be provided alongside what was available. In this case, the Owners’ case was not that the bills were unavailable to them, but that they were confidential, which in the Court’s view was not an answer; any sensitive elements could simply be redacted.
Comment
As we reported last month (see here), there has only been a handful of successful s69 challenges in the last few years. While the findings of the Court are likely to be of direct relevance to the shipping industry rather than of wider application, the case is of interest as an example of a rare successful challenge. It remains the case, however, that s69 applications present a high hurdle for success and should not be undertaken lightly.
For more information, please contact Craig Tevendale, Partner, Naomi Lisney, Senior Associate, or your usual Herbert Smith Freehills contact.
Craig Tevendale
Partner
+44 20 7466 2445
Naomi Lisney
Senior Associate
+44 20 7466 3417