UPDATE [5]: “NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES

This fifth update to a blog post initially dated 7 April 2020 has been updated to take into account developments between 14 May – 28 May 2020. These include various institutional changes (set out in the table attached to the blog) as some venues start to reopen in light of changing conditions and the easing of government restrictions, as well as details on new guidance that has been issued by HKIAC on virtual hearings and the SCC on the SCC Platform.

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UPDATE [4]: “NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES

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.

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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
Craig Tevendale
Partner
+44 20 7466 2445

Charlie Morgan
Charlie Morgan
Senior Associate
+44 20 7466 2733

Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

Kevin Hollis
Kevin Hollis
Associate
+33 1 53 57 78 39

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
Craig Tevendale
Partner
+44 20 7466 2445

Charlie Morgan
Charlie Morgan
Senior Associate
+44 20 7466 2733

Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

Kevin Hollis
Kevin Hollis
Associate
+33 1 53 57 78 39

“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.

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ARBITRATION OF CLIMATE CHANGE DISPUTES

On 28 November 2019, the International Chamber of Commerce Task Force on Arbitration of Climate Change Related Disputes released their Report on Resolving Climate Change Related Disputes through Arbitration and ADR  (“ICC Report“). The 66-page ICC Report explores existing and anticipated climate change-related  disputes and the benefits of using arbitration to resolve these.

Over the last five years, major arbitral institutions have witnessed a steady increase in disputes involving climate change issues.[1] Typically, these have been intrinsically linked to the energy transition away from traditional energy sources such as fossil fuels and coal to increased investments in renewable energy, the modernization of power grids and the improvement of energy and data storage.[2] The ICC Report considers the nature of these disputes and focuses on the following features of the ICC Rules which can enhance existing procedures to effectively adjudicate climate change-related disputes. It also provides extensive guidance on additional language parties may wish to include in their arbitration agreement to tailor these to the types of climate-related disputes which they anticipate may arise.

Expertise of arbitrators and experts

The ICC Report acknowledges that access to appropriate scientific expertise is often critical in climate change disputes. It highlights the parties’ ability under the ICC Rules to have a decisive impact on the choice of arbitrators, including by:

  • setting out the competence and skills they require their arbitrators to have in their arbitration agreements;
  • requiring the ICC Court to consult them prior to appointing a sole arbitrator or presiding arbitrator; and even
  • challenging arbitrator appointments “whether for an alleged lack of impartiality or independence or otherwise“.[3] Interestingly, the ICC Report suggests that the catch-all “or otherwise” opens the door for challenges where parties consider that arbitrators appointed lack the requisite qualifications to hear a dispute.

The ICC Rules similarly leave the door open for the use of both party-appointed experts and/or tribunal-appointed experts in proceedings. This ensures that a tribunal has access to any climate change-related expertise it needs to determine the issues in dispute. The ICC can assist with the appointment of tribunal-appointed experts by providing expert recommendations as well as assisting with the administration of expert proceedings.

In contrast with other institutions such as the Permanent Court of Arbitration (“PCA“), the ICC does not maintain a formal list of specialised environmental arbitrators or technical and scientific environmental experts.[4] The ICC Report highlights this as a potential working point, and issues a recommendation to the ICC to reach out to climate change scientists and other technical and modelling experts.

Measures and procedures to expedite early or urgent resolution of issues

The ICC offers flexibility in the method of resolution of disputes. The parties’ options are not limited to arbitration. They can choose to mediate their dispute or refer these to expert determination, which may facilitate the early neutral assessment of technical facts in issue. The ICC also assists in the formation and use of standing dispute resolution bodies which are uniquely suited to handle disputes arising in long-term infrastructure projects, or projects where funding is subject to the Equator Principles (which require Equator Principles Financial Institutions to have an ongoing grievance mechanism to facilitate the resolution of concerns and grievances about a project’s environmental and social performance).

The ICC Report highlights the availability of a number of measures and procedures to expedite the early resolution of issues in climate change-related disputes, such as emergency arbitration, interim and conservatory measures and other time and cost management techniques. The ICC Rules do not go as far as the PCA Optional Rules for Arbitration of Disputes Relating to the Environment and/or Natural Resources (“PCA Environmental Rules”) which expressly empower tribunals to order interim measures to “prevent serious harm to the environment falling within the subject matter of the dispute“,[5] or the UN Convention on the Law of the Sea (“UNCLOS“) Rules which give tribunals the powers to prescribe provisional measures where necessary to prevent serious harm to the marine environment pending a final decision. However, the ICC Report suggests that should they wish, the parties could include a provision to this effect in their arbitration agreement or in the Terms of Reference.

Transparency and public participation

The ICC Report acknowledges that a major concern in the context of climate change-related disputes is transparency, and the lack of transparency typically associated with commercial arbitration has acted as a barrier to it being viewed as a satisfactory dispute resolution mechanism for climate change-related disputes.

It suggests that increased transparency in relation to climate change-related disputes could be achieved by: (i) opening the proceedings to the public, (ii) publishing case documents; and (iii) publishing awards. The ICC Rules prevent neither open proceedings nor publication of case-related documents, and the parties are free to agree to enhanced transparency wording in their arbitration agreements. The ICC currently promotes a certain degree of transparency, for example by providing for the publication of awards in commercial arbitrations from 1 January 2019 onwards, two years after notification of the award to the parties, absent any objection by the parties. This does provide some additional transparency but falls short of other more extensive transparency provisions, for example, those in the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration.

In addition, should the parties wish, the interests of third parties such as NGOs, environmental protection agencies or scientific research entities, may be taken into account in a contractual arbitration through: (i) the joinder of an additional party, or (ii) non-party participation such as through a written amicus curiae brief.[6] Again, appropriate wording would need to be included in either the arbitration clause or the Terms of Reference to provide for this.

Comment

The ICC Report responds to the IBA Climate Change Justice and Human Rights Task Force‘s call to all arbitral institutions to “take appropriate steps to develop rules and/or expertise specific to the resolution of environmental disputes, including procedures to assist consideration of community perspectives“.[7] Its publication reflects the growing concern climate change represents, not just for individuals but for corporates alike, and the need to ensure that appropriate fora are available to resolve the increasing number of climate change-related disputes, be they claims against companies and governments for breaches of human rights, claims against governments to accelerate climate change prevention, shareholder claims against companies for failing to adequately disclose the environmental impact of their operations, insurance disputes, company disputes in the energy sector, or other climate change-related disputes.

Herbert Smith Freehills’ partner Thierry Tomasi, who participated in the ICC’s Task Force on Arbitration of Climate Change Related Disputes observes that: “stimulating discussions in the context of the Task Force’s sessions have led to a report which provides both a comprehensive assessment of the current state of play in relation to arbitrating climate change related disputes, and a very useful roadmap for the ongoing reflection, within the ICC, on this growing field of investigation“.

The ICC Report highlights the availability of an existing number of provisions which could make arbitration under the ICC Rules an attractive forum for climate change-related disputes. In particular, provisions can be adopted for increased transparency, the involvement of third parties, interim and conservatory measures, as well as the appropriate expertise of arbitrators appointed. As ever, the flexibility of the arbitration process means that it can be purposefully adapted to suit the dispute resolution needs of the parties. However, the ICC makes it clear that the onus is on the parties to tailor their arbitration agreements or Terms of Reference to suit the particular requirements of their likely disputes.

The ICC Report highlights certain areas where the ICC can focus its efforts, for example by building a more extensive database of climate change-related experts. It does not, at this stage however, propose any changes to its Rules to cater to these types of disputes. This contrasts with  other institutions such as the PCA which have taken a more radical approach to climate change disputes, by enacting new rules specifically designed to attract new users who have climate change-related disputes.

The ICC Report shortly preceded the publication of the much-anticipated  Hague Rules on Business and Human Rights Arbitration, launched on 12 December 2019 (“Hague BHR Rules“), which propose an arbitration framework to deal with human rights-related disputes and therefore also climate change, environmental, and human rights-related claims. The Hague BHR Rules are accompanied by detailed commentary on issues similar to those raised in the aforementioned IBA Climate Change and ICC Reports, including: (i) having arbitrators with expertise appropriate for such disputes and bound by high standards of conduct, (ii) the possible need for the tribunal to create special mechanisms for the gathering of evidence and protection of witnesses, (iii) prescribing rules for third-party participation in arbitrations, and (iv) other procedural issues relevant to human rights disputes.

While the ICC Report does not suggest any radical overhaul or changes to adapt the existing ICC arbitration procedure to meet the specific needs of climate change-related disputes, its recommendations, which overlap with those made by the IBA or contained in the Hague BHR Rules suggest that there may be a growing consensus in the procedural developments that will take on greater significance in climate change-related disputes.

For more information, please contact Florencia Villaggi, Counsel, Maguelonne de Brugiere, Senior Associate, Christine Sim, Associate, or your usual Herbert Smith Freehills contact.

Florencia Villaggi
Florencia Villaggi
Counsel
+1 917 542 7804
Maguelonne de Brugiere
Maguelonne de Brugiere
Senior Associate
+44 20 7466 7488
Christine Sim
Christine Sim
Associate
+1 917 542 7853


[1] “Resolving Climate Change Related Disputes through Arbitration and ADR,” ICC, 2019, Annex, ¶24.

[2] Supra 1, Section II(B).

[3] ICC Arbitration Rules, Art 14(1).

[4]  Permanent Court of Arbitrators Specialized Panel of Scientific experts, https://pca-cpa.org/wp-content/uploads/sites/6/2016/07/Current-List-Annex-3-SP-SciEXP-update-20190930-184038-v6_.pdf

[5] PCA Environmental Rules, Art 26.

[6]  Supra ¶5.83-5.91.

[7] IBA Climate Change Justice and Human Rights Task Force Report, “Achieving Justice and Human Rights in an Era of Climate Disruption”, 2014, p. 144.

CASELOAD STATISTICS SHOW INCREASING DEMAND FOR ARBITRATION BY MALAYSIAN PARTIES

On 22 October 2019, the Asian International Arbitration Centre (“AIAC“) published its 2018 statistics, showing a steady maintenance of its arbitration caseload. Throughout the years, there has been sustained efforts by the Malaysian government and legal community to promote arbitration as a dispute resolution process of choice for Malaysian parties, with the AIAC largely at the forefront of this endeavour.

In this post, we navigate the trend of Malaysian participation and usage of institutional arbitration based on published statistics of leading arbitral institutions across the world.

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WIND OF CHANGE IN RUSSIAN ARBITRATION: REVIEW OF SUPREME COURT CLARIFICATIONS

The Russian arbitration landscape is undergoing some major changes. Just a few years ago, in 2016, the arbitration regime in Russia was radically reformed with clarifications around the use of arbitration in corporate disputes, and the introduction of an accreditation regime for “permanent arbitration institutions”. While these reforms were aimed at strengthening the legitimacy of commercial arbitration in Russia, two years later, in the Autumn of 2018, arbitration practitioners and representatives of the business community in Russia were left concerned by several Russian court decisions which seemed to indicate that the standard ICC clause may not be enforceable in Russia (see our blog post on the decisions here). However, 2018 ended on a more positive note. On 26 December 2018, the Russian Supreme Court (the “SC“) issued its guidance in relation to various issues concerning international commercial arbitration (the “Overview“), where, in particular, it confirmed that arbitration clauses recommended by arbitration institutions are valid. On the following day, the Russian President signed a Federal Law modifying the current arbitration regime, which entered into force on 29 March 2019.

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Revised ICC note to parties and tribunals: will publication of awards become the new normal?

This post was originally published on the Kluwer Arbitration Blog, 7 March 2019.

ICC’s updated guidance to parties

On 20 December 2018 the International Court of Arbitration of the International Chamber of Commerce (ICC) published an updated Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (Note). The Note, which came into effect from 1 January 2019, introduces a number of significant updates to the ICC’s practical guidance on its Rules of Arbitration.)

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