[co-authors: Jack Thomas, Leslie Davis]*
In the midst of the COVID-19 pandemic, the flexibility of arbitration is on full display. Unlike courts, which must clear bureaucratic hurdles to implement changes while also adhering to requirements such as public access, arbitral bodies are able to adapt to the times and adopt solutions that meet the needs of the parties and the individual case. No one-size-fits-all solution is needed. That is why arbitrations are now proceeding across a wide variety of videoconferencing platforms, such as Zoom, Microsoft Teams, Skype and BlueJeans. The use of this virtual technology allows business as usual to continue, but it also raises significant technical, procedural, legal and existential challenges.
Courts can have virtual hearings on motion practice, and, in the last few weeks, that has been occurring more and more. But a virtual motion hearing is different than a virtual trial. We will get there in courts, but this will take time.1 We are now squarely there in arbitration, or at least with one institution.
While arbitral bodies have been quick to endorse the use of videoconferencing, few to date have offered detailed guidance.2 The International Chamber of Commerce (ICC) stands out as the exception.3 Last week, the ICC published the “ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic.”
Utilizing Procedural Tools to Mitigate Potential Delays
Arbitration is commonly thought of (but perhaps not always practiced) as having greater efficiency than litigation. Fittingly, then, the ICC Guidance Note begins with the presumption that, even with the difficulties presented by the COVID-19 pandemic, the show must go on — namely, disputes still must proceed expeditiously, as required by Article 22(1) of the ICC Rules of Arbitration. Under Article 25(a) of the ICC Rules, the arbitral tribunal bears the responsibility of proceeding “within as short a time as possible to establish the facts of the case by all appropriate means.” Thus, to satisfy these rules and avoid delays, parties, counsel and tribunals are encouraged to consider case management techniques that can be implemented to streamline arbitrations in a fair and efficient manner.
The recommendations in the Guidance Note demonstrate that the ICC wants tribunals to think creatively about ways to resolve issues expeditiously and without the need for lengthy arbitration hearings. Proposed techniques include bifurcating the proceedings, identifying issues that can be resolved on the basis of documents, or entertaining applications for the expeditious determination of manifestly unmeritorious claims or defenses. Tribunals also are encouraged to entertain potentially dispositive issues without a phase for document production and to consider whether issues may be resolved without the need for “live” testimony from the witness or expert but rather through written questions from the opposite party or the tribunal and written answers from the witness or expert.
This “non-exhaustive list of procedural options” to increase the efficiency of the arbitral procedure aligns with efforts in recent years to make arbitration more cost-effective. Yet, tribunals face two competing concerns: providing a fair and reasonable opportunity for parties to present their case and ensuring that the proceedings are conducted as efficiently as possible. In the past, this balance has often tipped in favor of more fulsome hearings. But, because face-to-face hearings may not be an option for some time, case management tools are likely to play a more prominent role in arbitrations.
Virtual Arbitrations Without the Agreement of All Parties
The most obvious sign of the changing times is the ICC’s recommendation that tribunals use audioconferences or videoconferences for conference and hearings “where possible and appropriate.” Section 3 of the new ICC note provides guidance on how, and whether, to conduct a virtual hearing.
Importantly, the ICC recognizes that situations may arise where a tribunal opts to proceed with a virtual hearing without the agreement of all parties. Under such circumstances, the tribunal must assess whether the award will be enforceable and provide reasons for that determination. This raises the important legal question of whether a party that has objected to presenting its case through a videoconference hearing can challenge the enforceability of the arbitral award. The New York Convention authorizes courts to set aside arbitral awards if a party against whom the award is invoked was “unable to present his case,” or where “the arbitral procedure was not in accordance with the agreement of the parties.”4
The ICC Guidance Note directly addresses these concerns by encouraging tribunals to consider several ICC Rules and practice guidance that support the use of videoconference hearings. This includes:
- Article 25(1), which requires the tribunal “to proceed within as short a time as possible to establish the facts of the case by all appropriate means”
- Article 22(2), which gives the tribunal broad authority to adopt procedural measures it considers appropriate after consulting with the parties
- Article 24(4), which allows the tribunal to conduct case management conferences by videoconference
- Paragraph 77 of the ICC’s January 1, 2019 Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration Under the ICC Rules of Arbitration, which permits the tribunal to hold videoconference hearings on dispositive applications
- Article 3(5) of the Expedited Procedure Rules (if applicable), which allows the tribunal to conduct hearings by videoconference
- Article 22(1), which explains that the overriding duty of the tribunal is to “conduct the arbitration in an expeditious and cost-effective manner.”
The ICC Rules, however, also state in Article 25(2) that “the arbitral tribunal shall hear the parties together in person if any of them so requests.” The Guidance Note interprets this language “as referring to the parties having an opportunity for a live, adversarial exchange and not to preclude a hearing taking place ‘in person’ by virtual means if the circumstances so warrant.” The tension in the rules and the rights at stake are certain to result in future challenges to the enforceability of arbitral awards issued after virtual hearings.
Developing a Cyber-Protocol
If the tribunal decides to hold a virtual hearing — whether by agreement of the parties or its own determination in accordance with the above ICC Rules5 — the Guidance Note suggests that the tribunal and the parties should consult to develop a cyber-protocol that lays out the manner in which the virtual hearing will be conducted. Annex I provides a checklist for a protocol on virtual hearings. Annex II includes suggested clauses for the cyber-protocol. These clauses serve as a “how to” guide for conducting virtual hearings.
Clause 1 relates to participants and requires the tribunal and parties to identify the names of all participants who will take part in the hearing and their log-in locations. This includes witnesses, experts, the transcription provider, support staff and technicians.
Clause 2 outlines technical requirements. This clause requires the parties to meet and confer on the technical requirements and specifications, including the videoconference platform. If an agreement cannot be reached, the proposed clause suggests that the parties submit separate proposals to the tribunal and allows the tribunal to seek expert advice in analyzing the proposals. Clause 2 also includes mechanisms to avoid logistical and technical problems, such as offering tutorials for participants on the videoconference platform, agreeing on contingency measures in the event of technical failures, and conducting at least two test runs in advance of the hearing.
Clause 3 addresses confidentiality, privacy and security concerns. It requires disclosure of all participants and sets forth rules relating to recording and transcribing the hearing. The parties bear the burden of proposing additional measures necessary to comply with all applicable laws relating to privacy, confidentiality or data or to otherwise recommend security measures to safeguard the integrity of the hearing.
Clause 4 proposes a set of rules of online etiquette and due process considerations. These rules govern items such as how and when speakers are allowed to talk and the manner in which objections shall be made.
Finally, Clause 5 relates to the presentation of evidence and examination of witnesses and experts. The clause anticipates issues such as whether witnesses/experts and parties/counsel are permitted to engage in chats through concealed channels of communications6 and who may sit in the same room as the witness/expert. The clause also contemplates making witnesses/experts available for a hot-tubbing session if needed.
Addressing Procedural Concerns
The ICC Guidance Note recognizes that unique procedural challenges are presented by virtual hearings that must be addressed to ensure each party is treated fairly and given the full opportunity to present its case. These considerations include the fact that participants live in different time zones, which might impact the start and finish times of the hearing day. Interpreters may be required for witnesses or experts, which requires the tribunal to consider whether special arrangements must be made, including whether interpretation will be simultaneous or consecutive. The tribunal also should consider the extent to which participants will be in the same physical venue. This might create fairness concerns, particularly if the witnesses or experts for one party have the ability to appear in the same room as counsel, but, due to public health and safety restrictions, other parties do not have this option.
Disadvantages of Virtual Arbitration
The ICC’s thoughtful guidance helps parties think through, and hopefully avoid, issues that might arise during the hearing or down the road in the form of legal challenges to the award. Yet, existential challenges remain. Is justice truly served when a hearing is conducted through a videoconference?
An in-person hearing allows the tribunal to assess the credibility and strength of the witnesses and experts in ways that are not possible when that same testimony is presented by videoconference. When the tribunal is not able to see a witness live, it is difficult to discern body language or tonal changes.
An in-person hearing also gives counsel the opportunity to gauge the reactions of the tribunal and to take the pulse the room. In a live hearing, counsel knows when notes are being passed at the opposing party’s table. These insights are lost when counsel passes notes via chat rooms and text messages.
The inability of counsel to meet in person with clients, witnesses and experts also makes videoconference hearings less desirable. These formal meetings and the informal dinners that follow help counsel develop trust with their clients and witnesses. Something is inevitably lost when hearing preparations are done remotely.
Where Do We Go From Here?
From a practical standpoint, the formal nuts and bolts of international arbitration can take place virtually. Lawyers have proven their ability to continue serving their clients’ needs from home offices, kitchens and basements, even in these challenging times. But there are intangible aspects to the practice of law that will be missed in the absence of face-to-face meetings, conferences and hearings. Although virtual hearings are possible, it is unlikely that they will become the new normal, particularly in complex cases. In the meantime, the COVID-19 crisis is providing tribunals with the opportunity to sharpen their case management skills and perhaps utilize new tools to streamline arbitrations. The lessons learned during these challenging times may be the push needed to help arbitration better fulfill its purpose of providing an expeditious and cost-effective means for the final resolution of disputes.
1 For example, in England, the High Court of Justice recently rejected an application to adjourn a five-week trial listed in June 2020 and instead ordered a fully remote trial to take place on the scheduled trial dates. Re One Blackfriars Ltd (in liquidation)  EWHC 845 (Ch) (Apr. 6, 2020), https://www.bailii.org/ew/cases/EWHC/Ch/2020/845.html. The judge referred to two fully remote trials that have taken place since March 16, 2020. See id. ¶¶ 44-46. It is unlikely that jury trials in the United States could be organized and held remotely, but some courts have proceeded with bench trials. See e.g., In re RFC & ResCap Liquidating Tr. Action, No. 0:13-cv-3451, 2020 U.S. Dist. LEXIS 44607 (D. Minn. Mar. 10, 2020) (ordering the final two days of a bench trial to be held by videoconference).
2 For example, the American Arbitration Association-International Centre for Dispute Resolution has offered to assist with alternative hearing arrangements but has not published any guidance on how these hearings will be conducted remotely. See https://go.adr.org/covid19.html.
3 Given the competitive nature of arbitral bodies, we should expect others, such as the London Court of International Arbitration (LCIA) and the Singapore International Arbitration Centre, to take similar steps. This may be especially true for the LCIA in light of the rapid use of virtual hearings in England.
4 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Art. V(1) (June 10, 1958).
5 Under the analysis set forth in the Guidance Note, any arbitration agreement that incorporates the ICC’s Rules of Arbitration, and particularly the Expedited Procedure Rules, could be construed as acceptance of a virtual hearing, whether or not virtual hearings are mentioned in the agreement’s dispute resolution clause.
6 Barristers and solicitors are doing just that in virtual hearings before English courts, apparently with court approval. See Bonnie Eslinger, All Rise? How The UK Is Coping With Remote Hearings, Law360, Apr. 9, 2020, https://www.law360.com/articles/1261992/all-rise-how-the-uk-is-coping-with-remote-hearings.
* Troutman Sanders LLP