Coronavirus – what is the practical impact upon arbitration?
As this is a fast moving topic, please note that this article is current as at 20/03/20. For further information, please contact Katherine Proctor.
These are extraordinary times. Boris Johnson called it the ‘worst public crisis for a generation’. What we are witnessing is how local trading can lead to world chaos, with supply chains failing, billions being wiped off the stock markets and companies collapsing. But as businesses struggle with trading, they also struggle with managing their disputes. And as if the existing workload was not enough, there are likely to be many more disputes on the horizon as a result of the COVID-19 disruption. Thankfully, arbitration is one of the most flexible forms of dispute resolution that may be well equipped to assist, although it will still need to be managed carefully.
Arbitration and government advice
The critical advice of governments is to reduce social contact and to self-isolate where necessary. How does this impact upon arbitration? Well, for the most part, arbitrations can proceed without in-person contact. The drafting of correspondence, pleadings, statements, submissions, applications and the work on discovery and hearing bundles are all document only tasks. Such tasks can proceed electronically. COVID-19 could actually assist in the adoption of paperless working.
Witness interviews, expert discussions, reporting and obtaining instructions can proceed via telephone, video-link or online. In fact, there is little that we, as participants of the legal process, cannot do while working from home.
The situations where in-person contact may be necessary predominantly relate to hearings. Most procedural hearings are already arranged via telephone, video-link or online to save cost, given the often international location of both the tribunal members and the parties.
It is the final hearing that may prove more difficult since it is very often an in-person hearing involving multiple participants - the tribunal, counsel, witnesses, experts, party representatives and technical support teams (such as translators, transcribers etc.).
The immediate practical difficulty is the travel to such hearings. Most governments have applied some form of travel restriction, whether that be a complete travel ban, self-isolation or quarantine upon arrival, border closures, visa suspension or inter-country confinement rules. Travel restrictions are changing on an almost daily basis so advice should be taken from governments and arbitral institutions.
To ease the burden, tribunals/parties may consider agreeing an alternative seat or place of an arbitration (although a change in seat does impact the procedural law of the arbitration and must be considered carefully).
With the pressure increasing and the most important consideration being the health and welfare of all involved, careful consideration should be given to the alternative options available.
- Documents only decisions. Where possible, parties should consider whether a case can appropriately be determined on the documents alone. This avoids in-person contact altogether and can save the significant time and expense of a final hearing. Having appointed an experienced tribunal specialised in the field of dispute (a well-known advantage of arbitration), there should be some trust in the tribunal to do their jobs effectively and produce the right result.
- Telephone/video/online hearings. These can be arranged, but they are more difficult in multi-party arbitrations or if there are differing time zones between participants. It is up to the parties and the tribunals to be creative and flexible in the use of these arrangements. Parties will have to accept that such arrangements may impact upon the quality of the oral evidence of witnesses and experts. There may also be technical difficulties, which cause delay and disruption.
- Adjournment. Where in-person hearings are considered necessary, parties may consider adjourning a final hearing, or certain evidence to be given in it, until a later date. This is happening already, but it can have significant time and cost consequences, particularly when tribunal diaries are booked out many months in advance. Parties should also carefully consider what would be an appropriate period of adjournment given the uncertain duration of the COVID-19 disruption.
- Settlement. This should always be in consideration, but may become particularly poignant where disruption is likely to be more severe and/or costly.
Whether parties engage in in-person or remote final hearings, COVID-19 will focus parties’ attention upon how they can limit the duration of such hearings, and the number of lawyers, representatives, witnesses and experts present. One potential positive amid the COVID-19 chaos is that parties should benefit from significant cost savings.
Concerns beyond the dispute itself
On a less positive note, however, with the scale of potential infection of the population (the UK government envisaging a worst case scenario of up to 80% of the population), one should be mindful of the situation where the parties, their counsel and/or the tribunal contract the virus.
In most cases, there will be little impact as the virus appears to be relatively short-lived and most successfully recover from it. Even in the more serious cases, parties and counsel tend to work in teams and should be able to cover absence, and three-member tribunals can proceed in the absence of one or two of their number with the parties’ agreement. Of greater concern, however, is where a tribunal member dies from the virus. Ad hoc and institutional rules generally cater for this outcome, so guidance must be taken from the applicable law/institutional rules on how to deal with this. Those whose contracts provide for LCIA arbitration may find the benefit in Article 9C, which provides for the expedited appointment of a replacement arbitrator.
In the COVID-19 chaos, arbitration can for the most part proceed without much interruption and is well placed to creatively and flexibly handle the practical difficulties arising as we enter into a new world of remote working.
Half the battle is won, however, by the parties working together to manage any disruption. While some may seek to use COVID-19 as a delaying tactic, the majority will hopefully respond by embracing a greater degree of cooperation.