Impact of COVID -19 on Arbitration
Introduction
The Coronavirus (COVID- 19) has impact on arbitration in many aspects. In an environment where the courts and domestic litigation is heavily affected, arbitration’s flexible nature to adapt, and its eligibility to online tools, may increase its use, internationally. This unfortunate era could create a free environment to find new routes, and make adjustments to arbitrations.
In this respect, most of the arbitral institutions have declared their willingness and preparation to continue their services (i.e. International Chamber of Commerce (“ICC”), the London Court of International Arbitration (“LCIA”), International Centre for Settlement of Investment Disputes (“ICSID”) amongst many others)[1]. Many major arbitral institutions have published notes, guidelines and resources for the parties, counsel, and the tribunals, to provide guidance during the ongoing COVID-19 pandemic.
In this respect, on 09.04.2020, the ICC released its Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic (“ICC Guidance”).[2] This newsletter article will provide general considerations on the impact of the COVID-19 on arbitrations and highlights of the ICC Guidance.
Emergency Arbitrator and Expedited Rules
In light of the COVID-19, emergency arbitrator provisions have become a useful tool for parties who seek emergency relief. Emergency arbitrator is a procedure that aims to provide fast relief in situations where parties do not wish to wait for a tribunal to be established. Many arbitral institutions have established rules in this respect.[3] This could be a good solution for parties who would like to overcome some pressing issues affecting their business and, especially, force majeure issues can be addressed more quickly through an emergency measure granted in the form of an order.[4]
On the other hand, expedited procedure provisions offered by some institutions like the ICC can also be useful tools to shorten the duration of the proceedings (i.e. six months from the case management conference according to the ICC Expedited Procedure Provisions). It also provides a simplified procedure that allows tribunals to decide on documents without conducting a hearing, limit the number of submissions, and avoid signing terms of reference.[5]
ICC Guidance
The ICC, through its Guidance, aims to provide case management tools and measures to mitigate the effect of the COVID-19 on arbitrations. The ICC Court, in its webinar, COVID-19 Briefing, of 15.04.2020,[6] put forth that the ICC Court and the Secretariat are functional; the ICC is giving high importance to business continuity, while paying great attention to the safety of their staff. This will help many ongoing disputes to proceed with a minimum of disruption and will enable new disputes to be filed.
The ICC Guidance reminds parties, counsel, and tribunals of the existing measures already available, and provides guidance for the filings, conferences and hearings.
General Considerations
The ICC ensures that the deliberations of the Tribunal, and preparations of the draft awards, should not be delayed, as they may be conducted remotely.[7] The Guidance refers to the many already existing tools of the ICC to facilitate proceedings, and encourages all participants to implement effective case management techniques.[8] These tools include the Guidance, found in Appendix IV to the ICC Arbitration Rules (“ICC Rules”), Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration, as well as reports entitled Controlling Time and Costs in Arbitration and Effective Management of Arbitration – A Guide for In-House Counsel and Other Party Representatives. The ICC also highlights Article 24(3) of the ICC Rules. Article 24(3) allows tribunals to adopt appropriate procedural measures or to modify the procedural timetable.[9] This flexibility and discretionary power granted to the tribunals will become useful during the on-going pandemic.
The Guidance provides a detailed list of possible measures in this regard. It encourages the parties and the tribunals to communicate frequently to seek more efficient measures throughout the proceedings. The following list of possible measures is not exhaustive:[10]
- Dispose of some of the claims or defences;
- Resolve issues through partial awards, if more efficient;
- Determine which issues can be decided without evidentiary hearings;
- Determine issues that the parties can agree upon;
- Conduct procedural conferences to determine the most relevant issues;
- Consider whether dispositive issues can be decided without the document production phase;
- Identify issues that can be decided without witness/expert statements or through written questions;
- Determine if site visits/inspections can be replaced with video presentations or joint expert reports;
- Consider tribunal appointed experts;
- Use audioconference or videoconference;
- Ask for an agreed chronology of facts, joint list of issues, etc.;
- Consider how to limit the number/size of submissions; and
- Consider whether the parties agree to opt-in the ICC Expedited Rules.
Service of Documents
The ICC, through the Secretariat’s Communication of 17.03.2020, requested filings to be made electronically. Tribunals and parties were also asked to sign the Terms of Reference in counterparts, and in electronic form. The ICC further encouraged parties to agree on electronic notification of the award.[11]
Virtual Hearings
The ICC Guidance focuses on conducting virtual hearings and conferences, considering travel restrictions and safety considerations, and portrays the issues that should be considered while conducting such virtual hearings.
The ICC, throughout its Guidance, underlines that the tribunals should consider cost-effective and expeditious measures. These considerations play an important role in planning hearings. Tribunals, by consulting the parties, and considering the surrounding conditions, should determine whether holding an in-person hearing at in a single location is essential. If it is imperative, and possible, to hold an in-person hearing, sanitary measures must be taken to minimize risks.[12]
However, in cases in which it is not essential to hold the hearings at a single location, the parties and the tribunal could agree to hold a virtual hearing. If this is the situation, there are many procedural aspects that should be considered. Tribunals should be diligent if a party objects to a virtual hearing; such objections can create enforcement problems.
The Guidance provides that the parties and tribunals consider enacting a “cyber protocol,” and Annex II of the Guidance lists some clauses that may be included in cyber protocols. Such cyber protocols can ensure compliance with applicable data privacy regulations.[13]
The Guidance further points out procedural considerations to procure equality between the parties and due process; Annex I lays out a checklist and a draft procedural order for virtual hearings, which includes:
- Time zones, start and end of times, and number of days;
- Logistics;
- Forms of recording;
- Interpretation;
- Procedure to verify identity;
- Procedure for taking evidence;
- Use of demonstrative exhibits; and
- Electronic hearing bundle.
Seoul Protocol
The Seoul Protocol on Video Conferencing in International Arbitrations (“Seoul Protocol”), published on 18.03.2020 by the Korean Commercial Arbitration Board, can be a useful tool for virtual hearings. Parties and tribunals can adopt some of the recommendations provided as per their needs and surroundings. The Seoul Protocol is a short document, including sections on venue, documents, witness examination, observers, obtaining documents to which a witness might refer, technical requirements, interpretation, technical backup, recording and preparatory arrangements (i.e. seating plan).
ISTAC Virtual Hearings
Istanbul Arbitration Centre (“ISTAC”) is one of the arbitration institutes continuing its services during the COVID-19 pandemic. In order to provide appropriate tools to parties and tribunals during this period, ISTAC published the Procedures and Principles of Virtual Hearings. These rules and principles include ten provisions and provide that the virtual hearings can be held when requested by a party or when decided by the tribunal. The provisions contain rules on preparatory works, attendees of the hearings, procedure of the hearings, document submission, right to a fair trial, witnesses and experts, translators and recording of the hearings. These provisions, which would be applicable to disputes under the ISTAC Rules, can serve as a useful tool for holding hearings and to minimize disruptions.
Conclusion
Obstacles that the national courts are facing, as well as interruptions in time limits, provide new opportunities for alternative dispute resolution mechanisms - foremost for arbitrations. The approach of arbitral institutions like the ICC, and arbitration’s adaptable nature, will facilitate parties to continue with their ongoing proceedings and file new ones. Cooperation among parties and tribunals, as well as tools and guidance provided by the arbitral institutions can enable the parties to turn challenging situations to near-normal resolutions.
[1] Many of these arbitral institutions came together and released a joint statement to put forth their cooperation. Please see; https://iccwbo.org/publication/arbitral-institutions-joint-statement-in-the-wake-of-the-covid-19-outbreak/
[2] For the full text of the Guidance, please see; https://iccwbo.org/publication/arbitral-institutions-joint-statement-in-the-wake-of-the-covid-19-outbreak/
[3] Balikci, Melissa: “ICC Report on Emergency Arbitrator Proceedings”, Erdem & Erdem Newsletter, February 2020; Isik, Fatih: “The New Emergency Arbitrator Procedure Under The ICC 2012 Rules”, Erdem & Erdem Newsletter, June, 2013.
[4] For detailed information on ICC Force Majeure and Hardship Clauses please see; Erdem, H. Ercüment: “An Update from the ICC: The ICC Force Majeure and Hardship Clauses 2020”, Erdem&Erdem Newsletter, March, 2020.
[5] Erdem, H. Ercüment: “Current Issues in Expedited Procedures in Arbitration”, Erdem&Erdem Newsletter, November, 2017; Babur von Schwander, Ezgi: “ICC Expedited Procedure Rules in accordance with the ICC Note on the Conduct of Arbitration”, Erdem&Erdem Newsletter, March, 2017; Isik, Fatih: “ICC Rules on Expedited Procedure”, Erdem&Erdem Newsletter, October, 2016.
[6] For the presentation, please see; https://icc.academy/covid-19-resource-hub/
[7] Guidance, par. 5.
[8] Guidance, paras. 6,7.
[9] ICC Rules Article 24(3): “To ensure continued effective case management, the arbitral tribunal, after consulting the parties by means of a further case management conference or otherwise, may adopt further procedural measures or modify the procedural timetable.”
[10] Guidance, par. 8.
[11] Guidance, sec. B.
[12] Guidance, par. 20.
[13] Guidance, paras. 26, 27.
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