RISE IN ARBITRATION CASES IN 2020 DESPITE REDUCED VOLUME OF IN PERSON HEARINGS DUE TO CORONAVIRUS PANDEMIC

Most arbitration institutions that have released their statistics for 2020 have reported increased caseloads and/or claim amounts, despite the COVID-19 coronavirus pandemic impacting in person hearings.  The strong demand for arbitration services and the fact that most arbitration institutions were able to move quickly to virtual hearings and avoid costly delays to proceedings establish arbitration as a resilient and reliable choice for commercial dispute resolution.  In this blog post we review both interim and full caseload statistics so far released for 2020.

HKIAC

The Hong Kong International Arbitration Centre broke a number of its own records this year.  With 318 cases, HKIAC received its highest number of new arbitration filings in over a decade.  The total amount in arbitration disputes handled by HKIAC was HK$68.8 billion (approximately US$8.8 billion).  Again, this is a record high since 2011.

203 of the arbitrations filed were administered by HKIAC (under rules such as the HKIAC Administered Arbitration Rules, the UNCITRAL Arbitration Rules and the HKIAC Electronic Transaction Arbitration Rules), representing a 20% year-on-year increase.  The amount in dispute for administered cases was HK$51.3 billion (approximately US$6.6 billion).

There was a small reduction in the proportion of new arbitration filings that were “international” (defined as at least one party not being from Hong Kong).  The proportion of all arbitration cases that were international also recorded a small drop.  The vast majority of cases (99.4%) chose Hong Kong as the seat of arbitration.  Hong Kong law was also the most commonly selected governing law for disputed contracts handled by HKIAC.

In 2020, HKIAC processed 22 applications under the Hong Kong-Mainland China Interim Relief Arrangement (Arrangement), which came into force in October 2019.  The total value of the evidence, assets or conduct sought to be preserved amounted to ¥6.4 billion (approximately US$988 million), of which ¥4.4 billion (approximately US$683.3 million) were successfully preserved.  This is an encouraging number, as it shows in the early days of the Arrangement that there is a realistic chance that assets and evidence sought to be preserved would likely be ordered to be preserved.

Fourteen emergency arbitrator applications were submitted to HKIAC in 2020. This is a large number, particularly given that only twenty-seven emergency arbitrator applications in total had been filed with HKIAC before 2020.  While it appears that 11 of the 14 applications were made in related arbitrations (which likely refer to a series of arbitrations arising from a related set of contracts or arise from the same or similar set of facts), there were still more applications than in past years.  Only three emergency arbitrator applications were filed in 2018, while none were filed in 2019.

The HKIAC granted 24 applications for expedited procedure in 2020, from a total of 28 applications.

There was a clear pivot to virtual hearings in 2020: 80 out of 117 hearings hosted by HKIAC in 2020 were fully or partially virtual, doubtless as a result of the pandemic.  Only 37 hearings were in-person, hosted at the HKIAC’s Hong Kong premises.

Fifty-two HKIAC arbitrations were concluded by Final Award in 2020, while four reached party settlement.

Finally, HKIAC released statistics on diversity of arbitrator appointments.  Of the 149 arbitrator appointments by HKIAC in 2020, 34 were of female arbitrators.  This continues an upward trend from 17.6% in 2018, to 20.5% in 2019 and 22.8% in 2020.

SIAC

The Singapore International Arbitration Centre is expected to report its full case load information later this year, but it has already announced that it had crossed the 1000-case threshold with 1005 new cases in 2020 as of 30 October 2020.  This is another record year for SIAC, breaking the previous record caseload it had reported in 2019.

CIETAC

The China International Economic and Trade Arbitration Commission also saw growth in its caseload in 2020.  A total of 3615 ongoing cases were registered by CIETAC, representing an 8.5% year-on-year growth.

CIETAC reported that it handled disputes amounting in total to ¥112.130 billion (approximately US$17.3 billion).

There was growth not only in the number of cases handled by CIETAC, but also in terms of its international caseload.  In 2020, 739 cases were categorised as “foreign-related cases”, compared to 617 in 2019.  67 of these were cases where both parties were considered “foreign”, which was a record high for CIETAC.  CIETAC made 5213 arbitrator appointments in 2020.

As part of its response to the pandemic, CIETAC also established new virtual hearing centres, handling 819 virtual hearings.  This was an increase of 628 cases that were heard virtually.

ICC

Like HKIAC, the International Chamber of Commerce Court of Arbitration also announced record demand for its arbitration services last year.

ICC reported 946 new arbitration cases in 2020, the highest since 2016.  The majority of the new cases (929 cases) adopted the ICC Rules of Arbitration, while the remaining 17 (which were ad hoc cases) were filed under the ICC Appointing Authority Rules.

LCIA

The London Court of International Arbitration also reported a record breaking 444 cases referred to the institution in 2020, which broke the record caseload LCIA had reported in 2019 by an increase of about 10%.  These results were published on an interim basis and further statistics are expected to be released later this year.

VIAC

The Vienna International Arbitral Centre received 40 new cases in 2020, with the majority of cases involving an Austrian party.  The total amount of disputes handled by VIAC by the end of 2020 was €428 million (approximately US$518 million).

Compared to 2019, where VIAC saw 45 new cases, there was a small drop in the number of new cases received.  However, looking at the statistics for VIAC over the past few years, the number of new cases each year has generally ranged from 40 to 60 cases, so the small drop is likely part of a normal fluctuation over a longer period.

While the number of new cases did not grow, on the diversity front, more than 30% of arbitrators nominated or appointed in VIAC cases were female arbitrators.  This is the highest that VIAC has seen in recent years, and is a highlight for the institution.

DIA

The statistics from the Danish Institute of Arbitration indicate that it is primarily focused on domestic arbitrations, but about one-fifth of its cases were international in nature.  At 28 cases in 2020, DIA’s international caseload was approximately the same as during  the past five years, which ranged from 27 to 33 cases.

SCAI

The Swiss Chambers’ Arbitration Institution reported 83 new arbitration cases in 2020, with 61 being international.  While the number of new cases was not the highest that SCAI has received, it continues an average growth trend over the past decade.

AAA-ICDR

The American Arbitration Association-International Centre for Dispute Resolution reported that it handled 9538 cases in 2020, worth approximately US$18 billion.  This is a slight drop from 9737 cases in 2019, but – notably – an increase in claim amount when compared to the US$15 billion in claims in 2019.  AAA-ICDR also saw an increase from 94 filings for emergency arbitration in 2019 to 111 filings in 2020.

The largest claims, in aggregate, were from the technology sector (US$1.4 billion) followed by financial services, telecommunications and energy (in that order).  This is in contrast to the largest claims in 2019 coming from life sciences (USD 1 billion) followed by construction, real estate and technology.

In terms of changes in caseload by sector, cases related to the cannabis industry saw a 100% increase, the largest rise of any sector (the same industry saw a 225% increase in 2019, which was also the largest sector rise in 2019).

On the diversity front, AAA-ICDR reported 33% of appointments as “diverse appointments” (which refers to gender and ethnic diversity).

Commentary

A majority of arbitration institutions globally reported growth in case load and/or claim amounts in 2020, many of them even breaking their previous records.  This goes to show that arbitration remains a robust dispute resolution mechanism, which has proven its ability to adapt to the highly challenging circumstances of the past year.

It was also a clear side effect of the pandemic that there was a significant shift to virtual hearings.  While users have been slowly moving towards virtual hearings for a number of years, it appears that 2020 will be recognised as the year in which virtual hearings went mainstream, allowing arbitral institutions all over the world to continue to serve the needs of their users.

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Rebecca Warder
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COEXISTING WITH COVID-19 [2]: A CATALYST FOR PROGRESS IN INTERNATIONAL ARBITRATION?

This blog post was originally published on 16 July 2020. This version of the post has been amended to include an updated table of the individual steps taken by different arbitral institutions and organisations as at 02 October 2020 in response to the evolving situation. 

As the Covid-19 pandemic continues, infection rates in many countries are starting to fall, and businesses and governments alike are seeking to establish a “new normal” recognising that the virus will be present in society for some time yet. Other countries still face climbing numbers and a peak yet to come. For all, the prospect of multiple waves of high infection rates throughout the year and beyond remains. As such, we will continue to see an ever shifting patchwork of lockdowns and other government responses internationally.

In our earlier series of blog posts, we highlighted the individual steps taken by different arbitral institutions, organisations and the wider community as an initial crisis response to the pandemic. We produced a table setting out those steps and will continue to monitor and update this information going forward. An updated table, accurate to 02 October 2020, can be found here.

In this blog post, we turn to the future and look at how the arbitration community continues to respond to the challenges of operating internationally, as different countries prepare in different ways to live with the Covid-19 virus in the medium term at least.

A steep learning curve: the initial response

The initial wave of the pandemic 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 would enable disputes to continue to be resolved at a time of quarantine, enforced social distancing and fast-changing government guidance from across the globe. What became clear was that there was no “one size fits all” approach to be taken by those institutions or organisations. Some institutions (such as the SCC) already functioned largely online with online filing systems. For other organisations (such as the LMAA) the majority of their cases were resolved “on the papers” rather than in face-to-face hearings. Other institutions (such as the ICC or LCIA) needed to introduce changes in their processes, enabling cases to be filed virtually while their secretariats worked remotely and for parties and tribunals to communicate online.

As the truly global nature of the pandemic unfolded, one of the first questions faced by parties, arbitrators and practitioners was whether merits hearings ought to be held virtually or postponed. While electronic communication and the use of other online tools in an arbitration is nothing new, most arbitrations, until now, involved a face-to-face substantive hearing on the merits. For many, a shift to a fully virtual merits hearing was, at least initially, viewed as a step too far. We saw many arbitration hearings in March and early April being postponed to later in the year. However, with the realisation that this “new normal” might be with us on a global scale for some time came a change in attitude towards virtual hearings.

The institutional joint statement in April 2020 mirrored the approach of many national courts in encouraging parties to continue with the resolution of disputes, and many arbitral institutions began encouraging arbitrators to adopt virtual hearings wherever possible. As a consequence, many parties with upcoming merits hearings found their arbitrators inclined towards that option.

Where a decision has been taken to hold a hearing virtually, the arbitrators, practitioners and clients involved have been on a steep learning curve. Just as we have all become used to operating through Skype, Teams and Zoom in the workplace, we have adapted to using that same virtual technology (and others) to hold hearings.

There has been a very positive response from a number of practitioners who have participated in virtual hearings, with many surprised at how well they have worked. We have seen the development of guidelines, protocols and procedural orders to govern the efficient and effective running of virtual hearings and to ensure that the hearing remains fair to all.

We have also seen other new ideas and initiatives come from within the community during this challenging time. New websites and initiatives have been launched to help keep practitioners up to date with Covid-19 developments or to facilitate the use of online platforms to enable cases to truly operate virtually.

Responding to an ever-shifting international picture: the need for flexibility

So what does the “new normal” mean going forward?

Commercial arbitration has grown in popularity over the past decades as parties recognise the benefits it brings in cross-border transactions by offering a neutral forum and an adaptable, international, procedure. But the international nature of the parties, practitioners, institutions and arbitrators also means that arbitration must be able to adapt and flex to fit the unique requirements of those international participants, both in terms of their transactions and disputes, but also to the specific implications of the pandemic for each country in which those participants reside.

Clearly, if circumstances require it, all those involved in the process should be able to revert back to “lockdown” ways of working. And if circumstances require it, all the learning of the past months will be able to be put into use in continuing to hold wholly virtual substantive hearings. But what seems more likely is that we will see more flexible and adaptable approaches to respond quickly to the immediate, and often changing, circumstances.

“Hybrid” or “semi-virtual” hearings are likely to be the answer to that need for flexibility. A mixture of virtual and physical attendance will help to mitigate the effects of travel restrictions and local or national lockdowns. They will also enable those involved in hearings (such as the parties and their counsel, the Tribunal and any witnesses or translators that might be involved) to participate to the fullest extent possible. Some participants may meet in a single or in multiple locations, with appropriate social distancing, while others attend virtually. These hybrid hearings can be set up to change format at short notice, enabling those involved to plan for a myriad of different scenarios but ensure that the final hearing remains fair, offering each party the opportunity to put their case.

Impact on the future: a catalyst for change in the post-Covid world?

Many sectors of the economy have proven themselves to be extremely adaptable in the face of the pandemic, and arbitration is no different in that regard. At this stage, however, it is difficult to gauge the longer term impact of Covid-19 on the process and procedure of arbitration globally, particularly if a future vaccine were to reduce or remove the need for social distancing.

However, the longer arbitral participants are required to work in a different way, the more those new ways of working will be seen as the norm. The more positive experiences participants have of virtual or hybrid hearings, the more likely it is that these will remain at least options for future merits hearings. When faced with participants from across the globe, parties may become less comfortable with the expense of holding a face-to-face hearing if they are reassured in the effectiveness of a virtual or hybrid option. Indeed, the dramatic reduction in the carbon footprint of these virtual and hybrid hearings may lead to an environmental “silver-lining” to the pandemic in terms of changes in business practice for many, including in international arbitration.

Most importantly, we have seen innovation and blue sky thinking at its best in the last few months. And that shift in mind-set towards different ways of delivering the product of arbitration effectively and efficiently has been exciting to see and experience. That ability to adapt and change to challenging circumstances is likely to continue, and we will see the longer term impact of that innovation for many years to come.

For more information, please contact Craig Tevendale, Partner, Vanessa Naish, Professional Support Consultant, Charlie Morgan, Senior Associate, or your usual Herbert Smith Freehills Contact.

Craig Tevendale
Craig Tevendale
Partner
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Vanessa Naish
Vanessa Naish
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Charlie Morgan
Charlie Morgan
Senior Associate
+44 20 7466 3868

COEXISTING WITH COVID-19: A CATALYST FOR PROGRESS IN INTERNATIONAL ARBITRATION?

As the Covid-19 pandemic continues, infection rates in many countries are starting to fall, and businesses and governments alike are seeking to establish a “new normal” recognising that the virus will be present in society for some time yet. Other countries still face climbing numbers and a peak yet to come. For all, the prospect of multiple waves of high infection rates throughout the year and beyond remains. As such, we will continue to see an ever shifting patchwork of lockdowns and other government responses internationally.

In our earlier series of blog posts, we highlighted the individual steps taken by different arbitral institutions, organisations and the wider community as an initial crisis response to the pandemic. We produced a table setting out those steps and will continue to monitor and update this information going forward. An updated table, accurate to 16 July 2020, can be found here.

In this blog post, we turn to the future and look at how the arbitration community continues to respond to the challenges of operating internationally, as different countries prepare in different ways to live with the Covid-19 virus in the medium term at least.

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UPDATE [8]: “NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES

This eighth (and final) update to a blog post initially dated 7 April 2020 takes into account developments between 25 June – 9 July 2020. These include various institutional changes (set out in the table attached to the blog), as well as perspectives on the development of “hybrid hearings” as some venues start to reopen in light of changing conditions and the easing of government restrictions. This updated blog post also includes the news of the launching of the “Protocol for Online Case Management in International Arbitration” for public consultation (produced by a working group led by Herbert Smith Freehills LLP) and VIAC’s recently announced Vienna Protocol – “A Practical Checklist for Remote Hearings”.

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RUSSIAN MINISTRY OF JUSTICE CLARIFIES RUSSIAN ARBITRATION LEGISLATION UPON JOINT REQUEST OF HKIAC AND VIAC

In February 2020, the Hong Kong International Arbitration Centre (the “HKIAC”) and the Vienna International Arbitration Centre (the “VIAC”) jointly applied to the Russian Ministry of Justice (the “MOJ”) and the Council for the Development of Arbitration at the MOJ (the “Council”) for clarification of certain “grey areas” of Russian Arbitration legislation (the “Joint Request“). Both arbitration institutions have recently published the response issued by the Working Group No. 2 on Foreign Arbitral Institutions of the Council (the “Working Group”) on the questions posed in the Joint Request (the “Response“)[1]. Although the position in the Response was declared to be non-binding on the Russian courts, the Working Group’s views might impact Russian court practice on the reformed arbitration legislation.

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UPDATE [7]: “NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES

This seventh update to a blog post initially dated 7 April 2020 has been updated to take into account developments between 12 June – 25 June 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 of the collaboration between the Chartered Institute of Arbitrators (CIArb) and the Centre for Effective Dispute Resolution (CEDR) to offer a low cost online service to businesses affected by COVID-19.

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UPDATE [6]: “NECESSITY IS THE MOTHER OF INVENTION”: COVID-19 DRAMATICALLY ACCELERATES DIGITALISATION OF ARBITRATION PROCESSES

This sixth update to a blog post initially dated 7 April 2020 has been updated to take into account developments between 28 May – 11 June 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 the newly announced “Virtual Arbitration Forum”.

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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