In the light of the impact of COVID-19, the primary and overwhelming concern is the health and safety of businesses' staff and clients (in that order).
Beyond that, the pandemic is having significant implications for businesses. Delays and failures to perform contracts are taking place. It is likely that some contracts will become impossible to perform or certainly will be more onerous than originally anticipated.
The purpose of this Note is to consider some of the advantages and strengths of the arbitration process, in particular in the present circumstances, to deal effectively with the resolution of disputes which are likely to emerge. It considers the mechanisms available in arbitration to deal with matters expeditiously.
The Note also considers how the present challenges of COVID-19 may also be utilised as a launching pad for changes to be made to the arbitral process in order to make it more effective and cost-efficient at a time when the pressure on cash flow is likely to become severe for all businesses.
Embracing technology: virtual hearings and the use of video conferencing
- Much has been written recently concerning the use of virtual hearings in order to maintain a functioning judicial system at a time of some challenge. However, unlike the court system, arbitration has historically proceeded with a minimum of physical hearings taking place. Very few interlocutory hearings are conducted in person. The majority of such interlocutory applications are determined by the Arbitral Tribunal on paper – meaning on the basis of written submissions without any oral submissions (and I return to this below). If oral submissions are considered necessary, they have historically been undertaken by telephone conference calls (often now supplemented by video conference link).
- There has been and is no requirement for physical meetings with witnesses in order to obtain statements or with experts in order to discuss matters. All such issues can be undertaken either by telephone or (preferably) by video link – a necessity where overseas travel is banned or very limited.
- In the context of International Commercial Arbitration, the only occasion usually when a physical hearing has traditionally taken place is the substantive hearing – in other words the trial.
- The methodology of video conferencing for the trial is appropriate in the more straightforward cases. Undoubtedly it can work where the submissions are principally ones of law and there is limited or no cross examination of witnesses. However, there are limitations on virtual hearings. In more complex arbitrations with, for example, a curial seat in London with a plethora of perhaps 10 or 15 witnesses in 4 different jurisdictions, there are substantial practical issues not least concerning time-zone differentials. In these cases, the limitations of conducting a trial by video link become evident. For example, will justice be achieved if a witness is required to give evidence either very early in the day or very late?
- In these circumstances, the Tribunal needs to weigh in the balance whether the examination of say 15 witnesses and 2 experts can be conducted fairly, appropriately and consistently with justice. Failure to take an informed and measured approach to such matters could result in a breach of the duties of the Tribunal under Section 33 Arbitration Act 1996 which could lead to any adverse award being liable to be set aside under Section 68 Arbitration Act 1996 on grounds of serious irregularity.
- It is suggested that taking evidence by video conference link is sub-optimal compared to having the witness physically present in Court or before the Tribunal – although it has practical benefits including considerable saving in time and costs. As a matter of English law, the Court performs an assessment in considering the possible prejudice that each party may suffer if the use of video link is or is not permitted. In McGlinn v Waltham Contractors Limited  EWHC 2322, His Honour Judge Peter Coulson QC stated:
"Whilst, of course, that [cross-examination over a video link] is never quite as satisfactory as direct cross-examination, no real prejudice to the Defendants has been or, in my judgment could be identified as a consequence of this…[even where the Defendant's] credibility was directly in issue and where the circumstances of his cross-examination were therefore of the greatest significance. I accept that giving evidence at a video suite may be less stressful than being in the witness box but that, it seems to me, is a matter which the court can take into account when it comes to the evaluation of all the witnesses in the case".
In this case it was held that a non-resident claimant's application to give evidence by video link at the trial of his action would not be refused on public policy grounds simply because the reason for the application was to avoid a potential liability to Capital Gains Tax. The judgment followed the House of Lords decision in Polanski v Conde Nast. Thus, under English law, it is clear that it is considered that the use of evidence to be given by video link should not be reserved for exceptional circumstances.
- The quality of video conferencing technology can vary. There is experience of difficult witnesses deliberately procrastinating by complaints about the quality of the sound. From the perspective of the advocate, the lack of immediacy in having the witness physically in the witness box can limit to a certain extent a rigorous and effective cross examination. Video conferencing does not replicate in quite the same way the cut and thrust of cross examination in court.
Adjournment of the Hearing
An indication has been given above of the kind of circumstances where a video conference link would have limitations and where it may be necessary for a physical hearing to take place. If in person hearings are necessary, the parties or the Tribunal may consider adjourning until a later date. It may be necessary to adopt this approach in the interests of justice but it can create delay bearing in mind that the diaries of Arbitrators and Counsel are often heavily booked in advance. A raft of adjournments will create a backlog in the system. But the paramount concern must always be the delivery of justice.
Determination on the basis of documentation alone
If a dispute can be determined on the basis of the documentation without any oral submissions and without any cross-examination of witnesses or expert evidence, this can obviate the need for any physical hearing. In the context of an Arbitration, the parties will usually have decided upon an Arbitral Panel or sole Arbitrator who are bespoke for the purposes of the issue in question - with specific knowledge of and experience in the nature of the matter in dispute. The Arbitrator or Arbitrators are likely to be more specialised than a High Court Judge. This can be another mechanism for avoiding physical hearings (and so particularly relevant in the context of the present COVID-19 pandemic). As noted above, many decisions are already made on the basis of written submissions alone.
Mediation will continue to be used in parallel with arbitration to seek to resolve disputes. Virtual mediations have been taking place in the USA for some years and the reported success rates are as high if not higher than mediations involving the physical presence of the parties and mediator.
Streamlining the Arbitral Process
It is suggested that the challenge of the COVID-19 pandemic may be perceived as a stimulus not only to introducing a substantially increased use of technology both before the Courts and Arbitral Tribunals but also in order to reconsider mechanisms for streamlining the arbitral process. This could save both time and costs for the users of arbitration – namely commercial business people who are seeking a swift, cost-effective and final determination of their dispute. The issue of cost will be particularly germane during this pandemic both now and in the future for businesses experiencing cash flow issues. Perhaps now would be an opportune moment to reconsider the following relatively modest amendments to the standard arbitral process (which within the limited confines of this article are profered by way of example only):-
- Pleadings (Memorials) in International Commercial Arbitration are often extremely lengthy and detailed constituting a combination of both fact and law. Often these Pleadings are duplicative at least in part of the contents of the Witness Statement evidence and Opening Statements, not to mention in some cases PowerPoint presentations. In the circumstances, it is suggested that all Pleadings in International Commercial Arbitration could be limited to, say, 25 pages unless, exceptionally, the Tribunal on application agrees that a more detailed exposition is justified. This would mirror the approach taken in relation to Pleadings by the Commercial Court in London, it would dramatically reduce the existence of prolix and unnecessarily detailed submissions and reduce costs at a time when many businesses will be facing challenging times.
- Over time, the international arbitral process in terms of procedure has been seen to mirror elements of the procedure before the English Courts (or more widely the common law world). This is particularly so with reference to disclosure of documentation. Often by e-disclosure, hundreds of thousands if not millions of documents are disclosed many of which will be at best of marginal relevance or peripheral to the principal issues in dispute between the parties. A number of practitioners are of the view that Redfern Schedules are of limited assistance in attempting to streamline the disclosure process. Whilst common law jurisdictions require substantial disclosure of documents (with an obligation on parties to search for all relevant documents whether helpful or not to the case of the party), in civil law jurisdictions there is generally no obligation to produce documents – and the range of documentation produced is far more narrow.
- It is suggested that it may also be possible to minimise the amount of personal attendance by witnesses before a Tribunal. Evidence will be placed before the Tribunal in the form of detailed Witness Statements. One focus could be on identifying the areas of disagreement and therefore limiting the scope of cross-examination. Again, in civil law countries, evidence produced by the parties carries less weight because it is not subject to detailed cross examination.
- In the same way, it is suggested that cross-examination of expert witnesses could be limited. Experts for the most part will not be giving evidence on matters of a factual nature, but rather their interpretation of issues or expressions of opinion from an expert perception. These matters will in any event have been set out in considerable detail in expert reports.
Parties may be well advised for a variety of reasons, some of which are outlined above, to consider Arbitration as a dispute resolution mechanism rather than the Court system. That approach is highlighted in the context of the present issues raised by the COVID-19 pandemic. By agreement, the parties can proceed to arbitration whatever the dispute resolution provisions in their contractual arrangements may provide.
It is fair comment that Arbitration is perhaps better placed to deal with the practical difficulties which have arisen and the economic pressures which will undoubtedly arise in the context of the present pandemic. International Commercial Arbitration offers a more flexible and adaptable process for dispute resolution than the Court system in particular in the present environment. It is not a perfect methodology. A number of suggestions have been outlined above whereby it can be potentially streamlined. A number of these suggestions could be agreed between the parties with a view to emphasising in these difficult times the commonality of interest in dealing with matters of an administrative nature in a spirit of cooperation.
As indicated, the proposed mechanisms for streamlining the process will require the consent of all parties. As ever, in the context of dispute resolution, and now more so than ever when all are faced with a common enemy from without, the element of cooperation is critical to the smooth running of the process and will facilitate matters for the benefit of all concerned.