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”.

As arbitral institutions and organisations move towards re-opening and adapting to the new-normal, we are also pleased to announce that we will be launching a new blog post series in the coming weeks that will focus on the new initiatives of organisations and institutions as they rebuild and overcome the fresh obstacles of this next stage.

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 9 July 2020) 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

Staff, offices, and pending cases

Most institutions closed their offices in response to the pandemic and, like the LCIA, ICC and SIAC (as examples), moved to remote working arrangements for all or a majority of employees. ACICA, VIAC and CRCICA continue to have some staff members in the 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).

As governmental restrictions on social distancing are being eased in light of changing conditions in certain jurisdictions, some institutions have re-opened their offices (such as KCAB, AIAC and SCAI). JAMS announced the phased re-opening of most of its Resolution Centers whilst still adhering to social distancing guidelines, whilst the AAA-IDRC is starting to consider how to re-open its hearing facilities following the phased approach to the re-opening of case management offices.

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, have avoided the need for 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.

New dispute resolution initiatives

The CIArb and CEDR (known for its mediation work) has announced a collaboration to offer a fast, low-cost service for resolving commercial disputes The Pandemic Business Dispute Resolution Service is fixed cost and online. The service was established to give the courts “breathing space” and is intended for disputes that have arisen for businesses interrupted by COVID-19. For a business to be eligible, the amount in dispute must be between £5,000 – £250,000. The service is designed for two-party disputes, but could be adapted for additional parties in consultation with CIArb and CEDR.

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.

Institutions have started to report on the increased usage of virtual hearings: HKIAC has seen a significant increase in demand for its e-hearing services, with approximately 85% of all hearings in April and May requiring virtual hearing services either in full or part.[1] Seoul IDRC has observed that demand for its virtual hearing services is “significantly rising”, reporting that the number of cases using its virtual hearing services have increased by 500% and the number of days of hearings held virtually have increased by 460%.

Some institutions and organisations have started to re-open hearing venues in light of the easing of social distancing restrictions, including the AIAC, ICC, ADC, IDRC, HKIAC, KCAB and JAMS. These hearing venues have all indicated that strict hygiene and social distancing, measures will be in place. However, many  institutions and organisations will continue to offer virtual hearing options or combination hearings for parties where not all those who need to be in attendance can do so in person. Other institutions continue to advise remote hearings where possible.

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. The newly announced alliance between Maxwell Chambers, the Arbitration Place of Toronto and Ottawa, and the IDRC (“The International Arbitration Centre Alliance”) offering of “global hybrid hearings” involving a mixture of virtual and physical attendance during the pandemic might provide some indication as to what this future might look like. These “global hybrid hearings” are aimed at mitigating the effects of travel restrictions introduced in response to COVID-19 by enabling 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 in the circumstances. As the AAA-IDRC has started to consider re-opening its hearing venues, it has emphasised the possibility of using its facilities in hybrid hearings where practical.

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. HKIAC has also released guidance on virtual hearings, which can be found here. Most recently, VIAC has published “The Vienna Protocol – A Practical Checklist for Remote Hearings” which provides practical guidance for remote hearings in arbitration proceedings administered by any institution. The Vienna Protocol can be found here.

Following joint effort between the SCC and Thomson Reuters to make the SCC Platform available free of charge for all ad-hoc arbitrations commenced during the COVID-19 pandemic, the SCC has produced sets of guidance on the SCC Platform for participants in SCC administered arbitrations and ad-hoc arbitrations. Both sets of guidance are available here, and aim to instruct participants in both types of arbitration on how to use the SCC Platform, as well as address any questions that may arise.

Further guidance has also been released for public consultation by 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. The product of this collaboration, “The Protocol for Online Case Management in International Arbitration”, has now been launched for public consultation until 20 August 2020 and can be found here. More information on this can be found in our blog post here.

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.

The arbitral community has additionally responded with the creation of a forum called “Virtual Arbitration” (here) that serves as a platform for members of the arbitral community to share “news and recent developments in the law and practice of arbitrating on web-based meeting platforms”. The platform contains guidance for conducting virtual hearings whilst also serving as a hub for the latest commentary on the impact of COVID-19 on virtual hearings.

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 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 9 July 2020) can be viewed and downloaded here.

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