24 June 2020
Virtual hearings are the new reality in international arbitration. Travel restrictions may be easing but there is no certainty that borders will remain open in the short-term and it is difficult (and in some cases impossible) for tribunals and parties to schedule face to face hearings.
Sophisticated parties actively engaged in arbitration proceedings have, in the main, embraced technology and the leading arbitral institutions around the world have issued guidelines on good practice for virtual hearings. Many also provide the video platforms and logistical support for the conduct of those hearings.
There are, however, always parties resistant to change. In arbitral proceedings, this will include dilatory or reluctant parties (who choose for strategic reasons to oppose a virtual hearing), parties who genuinely believe that they will be prejudiced if they do not have the opportunity to make submissions in person or cross examine a witness in a face to face hearing, and those who do not have ready access to technology or reliable internet services.
The 2015 Queen Mary University of London International Arbitration Survey discussed the “perceived reluctance by tribunals to act decisively … for fear of the arbitral award being challenged on the basis of a party not having had the chance to present its case fully”. The rapid transition to virtual hearings highlights this concern.
Many sole arbitrators and tribunals will be acutely aware of the risk to enforcement where orders are made to respond to the ‘new regime’ resulting from COVID-19. This is particularly the case where those orders lead to the adoption of different procedures in the arbitration to those which the parties contemplated when entering into their arbitration agreement.
We suggest five practical steps a tribunal can take to mitigate against claims of lack of procedural fairness or failure of the tribunal to provide the parties with full or reasonable opportunity to be heard.
The issue of inequality of resources has always been a potential issue in international arbitration, but it comes into sharp focus during the current pandemic.
Each party to the arbitration proceedings will be subject to travel and social distancing restrictions in its own jurisdiction and these may have a material impact on the party’s ability to engage in the arbitral process. Parties may also have differing access to technology and reliable internet, often outside of the party’s control.
Tribunals making procedural orders during COVID-19 should have regard to these factors.
If the tribunal is unable to make procedural orders which alleviate disparity in resources or access (to the extent that the disparity arises from the current restrictions), the tribunal must reconsider whether those orders are compliant with the requirement for due process.
It is not appropriate for a tribunal to make assumptions about the circumstances of a party where the tribunal has a concern that those circumstances might impact due process. There is an elevated risk of subsequent complaints from one or more of the parties where the tribunal does so during the current restrictions. The risk undermine the integrity of the arbitration process, particularly if it impacts adversely on enforcement.
Arbitration is the parties’ process – the tribunal should transparently consult with the parties about the proposed procedural orders and, if necessary, ask for submissions to be made in writing addressing the challenges faced by each party. The tribunal can then make orders including, where appropriate, orders for a virtual hearing, fully apprised of the parties’ respective views. The matters raised by the parties can be recorded in the procedural order (see step 3).
There is no standard template for procedural orders in international arbitration.
Many international arbitral institutions provide sample or template orders for tribunals conducting arbitrations under that institution’s rules.
However, in practice, the form of the procedural orders issued to parties is left to the discretion of the sole or presiding arbitrator. Different tribunals adopt different levels of formality in the way in which they record procedural orders and communicate those to the parties.
Procedural order 1 is usually a comprehensive and structured document – this makes sense because it provides a roadmap for the conduct of the proceeding. Subsequent procedural orders may be communicated by email (particularly where the orders amend dates in the timetable) or in standalone documents.
Good practice suggests that where substantive orders are made, the tribunal should include matters to which the tribunal has had regard in making those orders, as a preamble to the orders themselves. This might include reference to communications between the parties and the tribunal or the circumstances which have led to the making of the orders. In the interests of efficiency, this practice is not implemented as often as it might.
COVID-19 has created unprecedented challenges. Tribunals have moved swiftly to virtual hearings but an order by the tribunal for the evidentiary hearing to proceed as a virtual hearing is not without challenge, particularly where one or even both of the parties oppose the order.
At a webinar hosted by the Australian Disputes Centre on 16 June 2020, Professor the Hon Marilyn Warren AC QC, Professor the Hon Clyde Croft AO QC and Dr Drossos Stamboulakis, all members of Monash Faculty of Law and its Commercial Disputes Group, discussed the intersection of party autonomy and the tribunal’s authority in the context of virtual hearings.
The discussion included consideration of whether the COVID-19 restrictions might be taken into account by a court during enforcement proceedings when assessing whether the tribunal adhered to procedural fairness requirements. The answer to this questions remains to be seen.
In the interim, the decision of a tribunal to conduct a virtual hearing should be recorded in a formal procedural order. The inclusion of a brief statement by way of introduction, including the circumstances in which the need for the virtual hearing arose, will assist a court where allegations are made during enforcement that a party did not receive equal treatment or the appropriate opportunity to present its case. This practice should be be adopted as a matter of course during current restrictions.
Very few, if any, procedural orders made prior to COVID-19 will address the jurisdiction of the tribunal and/or the intentions of the parties where face–to-face hearings are prohibited.
Virtual hearings raise different logistical issues to those of face-to-face hearings; the conduct of virtual hearings requires a level of trust between and amongst the parties, their counsel and the tribunal.
It is much easier for a tribunal to call out inappropriate conduct when the ‘rules’ are recorded in a procedural order in advance of a hearing. It is therefore very important to discuss the practicalities with the parties and record the agreement as a virtual hearing protocol.
For example, the parties need a clear agreement as to what materials or documents will be available to a witness, whether anyone else will be in the same room as the witness during evidence in chief or cross examination and whether counsel or a party has a ‘direct line’ via WeChat or messenger to the witness.
The parties and the tribunal must also agree on the timing and duration of hearings (including across multiple time zones), on the timing of regular breaks (which may need to be more frequent than during face-to-face hearings) and the conduct of the parties during those breaks where a witness is giving evidence.
It will also be important to agree a protocol for objections and for appropriate interjections during submissions. This might include the making of comments via the chat function on the video platform, the raising of a hand by counsel for the opposing party in the video or agreement that opposing counsel will have an opportunity to raise questions, objections and make observations at the conclusion of the oral submission.
There should also be clear agreement that where one party or counsel representing a party ‘drops out’ of the hearing, the tribunal or the hearing administrator will immediately suspend the hearing until the connection is re-established.
Where the parties are unable to agree or there is insufficient time for the tribunal to consult fully with the parties, the parties and the tribunal may adopt guidelines or protocols published by an arbitral institution, for example, the ICC Guidance Note or the ACICA Online Arbitration Guidance Note.
Again, this agreement as to the selected protocol should be recorded and the guideline or protocol attached to, or hyperlinked in, the procedural order.
Experienced arbitrators will ask the parties at the conclusion of a hearing if they have any concerns about the manner in which the hearing was conducted or any steps which were taken during the hearing which impacted on a party’s opportunity to present its case.
Tribunals which conduct virtual hearings, particularly where the hearing is the final evidentiary hearing, should adhere strictly to this practice.
Where a party is equivocal in its response, a sensible approach is for the tribunal to stand the matter down for a short period (which translates to suspending the video) for the parties and counsel to consider whether there are any submissions they wish to make. The tribunal should be clear in its message to the parties that it expects concerns to be raised when the hearing reconvenes.
If the tribunal determines that there is foundation to any concern raised by a party, this course provides the tribunal with an opportunity to take steps immediately to address that concern.
The international arbitration community is in a period of steep learning. It is important that practitioners, arbitrators and the users of arbitration services share their experiences of arbitral proceedings during COVID-19.
The true test of the processes adopted during 2020 may not be seen until the awards resulting from current arbitration proceedings are brought before domestic courts for recognition and enforcement. By implementing the steps set out in this article, a tribunal may mitigate a risk of a later plea which will impact adversely on the ultimate enforcement of the award.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.