Virtual International Arbitration: Critical Analysis
Written by Vasant Neel Kamleshbhai [i] and Aman Tenguria [ii]
Fifth Year students of Symbiosis Law School, Pune
Source: Global Arbitration Review
Disclaimer: Please note that the views expressed below represent the opinions of the article's author. The following does not necessarily represent the views of Law & Order.
Introduction:
The damaging effects of the novel Coronavirus (COVID-19) is known to all of us and businesses across the world have suffered a major hit as the entire world was locked up. COVID19 was a nightmare for all types of businesses as the obligations under their contracts were left unfulfilled. Additional to the detriment to trade and commerce, the processes of arbitration were also affected by the pandemic. [1] The speed of hearing matters was reduced substantially primarily due to lack of a set procedure for filing pleadings, raising objections resulting in delays causing a loss of millions of dollars to the parties.[2] Though the world’s leading arbitration institutions such as Singapore International Arbitration Centre (SIAC), The London Court of International Arbitration (LCIA), Hong Kong International Arbitration Centre (HIAC), International Chamber of Commerce (ICC) among others took steps to conduct pending or fresh arbitrations through video conferencing.[3]
The authors of this article seek to analyse the pros and cons of conducting arbitrations online and would further critically look at the effect on standard principles of arbitrations affected by conducting these proceedings online.
Institutional Rules: How have they fared:
Nowadays, a majority of international agreements contain a dispute resolution clause wherein a dedicated institution is named for the settlement of their disputes. All these arbitration institutions have their own set of rules which are to be followed by the parties. Not many institutes had envisaged the situation of a pandemic of such nature in their framework of rules, however the parties had used the power of a tribunal to extend the period of arbitral proceedings. For instance, the International Chamber of Commerce rules, 2017 allows the tribunal to extend the time period beyond the mandate of 6 months in appropriate cases.[4] The arbitral tribunal so formed under the ICC rules have the power to change the agreed procedural timetable on application of either of the parties or can act suo moto.[5] The same goes with the rules of the German Arbitration Institute.[6]
The rules of the International Commercial Arbitration Courts of the Chamber of Commerce & Industries of Russia Federation[7] also provides the discretion to the tribunal to allow virtual hearing as well as examination of witnesses and experts. Allowance of such extension is a matter of complete discretion of the tribunal, however when looking at the scope of virtual Alternative Dispute Resolution system, these rules do provide an option to the parties. ‘Netcase’ is a system developed by the ICC in 2005 which allows consenting parties to conduct the matter online without shelling any extra money from their pocket and is offered to participants in every ICC arbitration.[8]
The international chamber also has guidelines expected to be followed by the parties so desiring to opt for virtual ADR mechanism.[9]
Arbitral institutions across the world had in some form or other a set mechanism to conduct matters virtually and COVID-19 gave a much needed momentum in this direction. It is only after COVID-19 that the parties to the dispute as well as these arbitration institutes experimented with the virtual setting and it has been a great success so far as seen from various benefits it offers to the parties which have been elaborated on below.
Benefits – Virtual International Arbitration:
Money and time are two things which are of utmost importance to parties in any form of dispute, it is more so in cases of international arbitration as the cost factor is very high. In an international arbitration conducted physically, the parties have to bear additional cost of their lawyers’ travelling expenses and accommodation expenses among other things if they are hired from their home countries, which is the case most of the time.
A virtual arbitration is very cost effective as the need of submitting hard copies of documents is not required.
This may not sound to be much of an expense but in a highly contested and complex international arbitration the volume of paper is huge, which in a virtual setting is only required in the soft copy format.
Furthermore, these meetings are conducted on Skype, Cisco Webex or other such applications and this also helps the client to be a party to the submissions made by their lawyers during the course of the arbitration. It is true that clients could accompany their lawyers physically as well but it is easier for them to understand and navigate through the files in a virtual setting.
Venue of the Arbitration:
In any arbitration dispute ‘the place of arbitration’ plays a very important role as it helps in determining the curial law. Before delving into the effect of virtual arbitration on the concept of ‘place of arbitration’ let us first understand different types of laws involved:[10]
The substantive law – Also referred to as the governing law of the contract. The rights and liabilities of the parties are determined based on the substantive law that the parties have agreed upon. The parties may also decide to be governed by another substantive law for the purpose of interpretation of the arbitration clause. The parties are free to choose different substantive laws i.e., one governing the provisions of the contract and other the arbitration as the arbitration clause is said to be separate from the contract.
The curial/procedural law – The arbitral proceedings are conducted based on the regulations entailed under the curial law.
The ‘place of arbitration’ is the factor which determines the curial law that shall be governing the arbitration process.
Furthermore the ‘seat of the arbitration’ and the court which shall have jurisdiction over the proceedings shall also be based on the curial law. It is open for the parties to change the venue of the arbitration and hence conducting the arbitration virtually eliminates the prospect of prejudice to the parties.
Formal Requirement of Curial laws:
The curial/procedural law to be followed is left upon the parties to decide and many such laws lay down a specific requirement to be satisfied. For instance, the Arbitration & Conciliation Act, 1996 (Indian) provides that the award of the arbitration to be in writing and shall be signed by the tribunal members.[11] Such a written and signed award then shall be delivered to the parties.[12] The English Arbitration regime is little flexible in this regard as parties are given discretion to decide the form of the award. This implies that an e-award also passes this test which means that it is at par with the traditional paper award.
With time and age the dispute resolution system must also adopt a liberal approach in interpreting terms. For instance, the term ‘written’ award does not compulsorily mean an award written on paper and an e-award too can be included within the ambit. E-signatures are accepted and considered valid in almost all jurisdictions and hence with wide interpretation awards passed virtually must also be given due legal enforceability. The United Nations Convention on the Use of Electronic Communication in International Contracts[13] provides that where the use of written communication is mandated by law, electronic communication too would satisfy such a requirement if it is accessible for reference.
In order to enforce the arbitral award, Article IV of the New York Convention requires the party to submit the original copy of the award and the arbitration agreement.[14] This requirement can be satisfied even in case of an e-award as the party seeking to enforce the award can print the soft copy of the award along with a covering email of the tribunal. Parties not happy with the award can challenge the award in an appropriate court of law having the jurisdiction within a fixed period of time and this period is counted from the date of delivery of the award. In an arbitration held virtually, the award is to be emailed to both the parties and this requirement is also satisfied, as the period of limitation can be considered to start from the moment the email is received.
Courts in India have started accepting e-awards as a norm due to the pandemic circumstances. For instance, the Andhra Pradesh High Court allowed a Section 9 petition thereby attaching the cargo of the respondent as security for the enforcement of an e-award obtained under the ICC rules.[15]The above discussion can be seen as a conclusion to the point that courts and parties have started reposing their faith in a virtual system of international arbitration to resolve their disputes and the laws too can be moulded in a way to ensure legal recognition to awards passed by virtual international arbitration.
Annulment, Recognition and Enforcement:
Majority of the countries across the world have now adopted the United Nations Convention on the Recognition & Enforcement of Arbitral Awards (New York Convention) which sets a standard to be met for local courts to annul or enforce the arbitral award in its territory. India too has followed the principles of the concentration and have incorporated them in the Arbitration & Conciliation Act, 1996. An e-award is not expressly barred by the convention and this implies that as long as the award satisfies other criteria, it is quite possible to recognize and enforce an e-award. This implies that the arbitrations that took place virtually due to the pandemic are very well governed and can be enforced just like a traditional award with a precondition that other requirements are fulfilled.
Requirements of Due Process:
An arbitration process should follow the process by following the procedural law so selected in their arbitration agreement. Impartiality and fair proceedings are seen to be maintained in the entire process, violation of any of it may lead to the award being set aside. Giving a valid and a proper notice initiating the arbitration proceedings to the other side is a part of the due process requirements. In a virtual setting email can be used for the process of giving notice. Courts in India have allowed serving notice to the defendant on WhatsApp.[16]
The argument that virtual dispute resolution more specifically the international arbitration mechanism should not be adopted due to lack of available resources does not hold any ground in the times we live in. Having a basic computer system and a 4G connection is something which can be easily managed with particularly in international arbitration keeping in mind huge stakes involved. Resisting a positive change which has far greater advantages on grounds of inability to adopt to it must be looked down upon. Apprehension of technological inequality being a barrier to quality representation in a virtual setting can be done away with the help from an arbitral institution conducting the matter by providing assistance in the form of technical knowhow and by ensuring that the technical investment required by the party remains minimal.
Requirements Of Public Policy:
The arbitral award must be in consonance with the public policy of the country where its enforcement is sought. An e-award in all cases does not fall within the ambit of violation of ‘public policy’. For an award to be violating public policy it must either directly or impliedly violate some law of the country. The practice of conducting arbitrations virtually is indeed new, however novelty cannot be a ground to make an award against the public policy requirements. Moreover, the standards to make an award violative of public policy are extremely tough to meet.
Hence, an e-award in no imagination can be argued to be violating public policy.
Conclusion:
While it may prima facie seem to suggest that the virtual arbitration may not fulfil the technical requirements required of an arbitral award, the above analysis does show the contrary, if the same is read liberally. Moreover with the internet revolution around the world and the entrepreneurial wave in India, making virtual international arbitration mainstream would go a long way in boosting the ease of doing business. COVID-19 was a big boost to the idea of settling disputes without having to travel and with the world going back to normal, hope that the legal fraternity does not go back to the normal way of conducting matters physically as the benefits of virtual international arbitration far outweigh the cons if any and it is in interest of the client as well lawyers.
[1] Raid Abu-Manneh, Impact of Covid-19 in International Arbitration, Mayer Brown (2020), https://www.mayerbrown.com/en/perspectives-events/publications/2020/03/impact-of-covid19-in-administered-arbitrations (last visited Dec. 17, 2021).
[2] Aishwarya Iyer, Coronavirus: Indian Arbitration Forum urges Arbitral Tribunals to view requests to adjourn proceedings leniently to minimise health risks, Bar and bench (2020), https://www.barandbench.com/news/coronavirus-indian-arbitration-forum-urges-that-requests-to-adjourn-arbitral-proceedings-be-considered-to-minimise-health-risks (last visited Dec 16, 2021). [3] Asmita Singh, Impact of Coronavirus on International Arbitration, The Arbitration Workshop (2020), https://www.thearbitrationworkshop.com/post/impact-of-coronavirus-on-international-arbitration-asmita-singh (last visited Dec. 17, 2021). [4] ICC Rules of Arbitration 2017, 31(2) (2017), 2021 Arbitration Rules - ICC - International Chamber of Commerce (iccwbo.org) (last visited Dec 20, 2021)
[5] Id. at 31 [6] DIS Arbitration Rules 2018, 27.6 (2018). [7] The Rules of Arbitration of International Commercial Disputes, 30(6) (2017), [8] ICC Netcase: A Secure Online Environment for ICC Arbitration, (2005) https://iccwbo.org/content/uploads/sites/3/2016/11/NetCase-Pamphlet-English.pdf, (last visited Dec 16, 2021) [9] Operating Standards for the Use of IT in International Arbitration, (2004), ICC Digital Library https://library.iccwbo.org/content/dr/COMMISSION_REPORTS/CR_0029.htm?l1=Commission%20Reports&l%202= (last visited Dec 19, 2021) [10] Prashant Daga, Seat, Venue or Place Of Arbitration: Analysis Of Hardy Exploration And Production (India) Inc, Mondaq (2018), https://www.mondaq.com/india/trials-appeals-compensation/750704/seat-venue-or-place- of-arbitration-analysis-of-hardy-exploration-and-production-india-inc (last visited Dec. 19, 2021) [11] The Arbitration and Conciliation Act, 31(1) (1996) [12] Id. at 31(4). [13] United Nations Convention on the Use of Electronic Communication in International Contracts, 9(2) (2013) [14] New York Convention 1958, Microsoft Word - New York Convention EN.doc (euro-arbitration.org) (last visited Dec. 19, 2021) [15] Sulphide Corporation v. New Way Vyapaar Pvt. Ltd., ICOMAOA No. 2 of 2020 [16] SBI Cards & Payments Services Pvt. Ltd. v. Rohidas Jadhav, 2018 S.C.C. Online Bom. 1262
BIBLIOGRAPHY
Articles:
Raid Abu-Manneh, Impact of Covid-19 in International Arbitration, Mayer Brown (2020)
Aishwarya Iyer, Coronavirus: Indian Arbitration Forum urges Arbitral Tribunals to view requests to adjourn proceedings leniently to minimise health risks, Bar and bench (2020)
Asmita Singh, Impact of Coronavirus on International Arbitration, The Arbitration Workshop (2020)
ICC Netcase: A Secure Online Environment for ICC Arbitration, (2005)
Operating Standards for the Use of IT in International Arbitration, ICC Digital Library (2004)
Prashant Daga, Seat, Venue or Place Of Arbitration: Analysis Of Hardy Exploration And Production (India) Inc, Mondaq (2018)
Statutes and Conventions:
United Nations Convention on the Use of Electronic Communication in International Contracts, (2013)
New York Convention 1958
The Arbitration and Conciliation Act, 1996
The Rules of Arbitration of International Commercial Disputes, 2017
DIS Arbitration Rules 2018
Case Laws:
Sulphide Corporation v. New Way Vyapaar Pvt. Ltd., ICOMAOA No. 2 of 2020
SBI Cards & Payments Services Pvt. Ltd. v. Rohidas Jadhav, 2018 S.C.C. Online Bom. 1262