• Team Sapphire and Sage

Technology in Arbitration: Impact of COVID-19

The onset of the COVID-19 has been extremely disruptive for the practice of international arbitration. The use of information technology tools has become imperative in order to continue to have hearings and render awards virtually. In this article, we will discuss the adoption of such technologies, the laws that support such adoption and whether the same can continue in a post-COVID world.

Application of Technology: White and Case and Queen Mary University of London conducted their annual survey on International Arbitration in 2021 wherein they found that that 63% of the respondents have ‘always’ or ‘frequently’ used videoconferencing and other ‘hearing room technologies’ such as multimedia presentations and real-time electronic transcripts.[1] This, however, is not significantly higher than the 2018 survey figures where 89% had expressed the view that they would use virtual tools more in the future. This shows that while tools such as videoconferencing and hearing room technologies remain widely used, the adoption of AI, including data analytics and automated document review mechanisms, are still behind other forms of IT as only 17% of respondents claimed to have used the same in their arbitration processes. The effect of the pandemic, however, can truly be gauged not by videoconferencing tools which were used previously for logistical reasons for certain aspects of the arbitration, but by the increase in use of virtual hearing rooms. This pervasiveness of technology in the practise of arbitration can also be understood from the survey wherein it concludes that 79% of respondents, in the survey, chose to proceed with virtual hearings if in-person hearings were not possible, 16% chose to postpone the hearing till an in-person hearing would be possible and 4% proceeded with a documents only award.[2]

Documents-only Arbitration: Arbitration has recognised that certain disputes, especially commodity and trade disputes, are well suited for documents-only arbitration, However, this has not translated for commercial arbitration cases where the parties prefer a hearing, as they require evaluation of evidence in detail. In terms of the applicable arbitration rules, LCIA provides that any party has a right to hearing before the tribunal unless they have agreed in writing upon a documents only arbitration.[3] ICC empowers the tribunal with the sole discretion to decide on whether a documents-only arbitration can be conducted unless a party specifically asks for a hearing.[4] In India, the process of documents only arbitration is contemplated with the 2015 amendments to the Arbitration and Conciliation Act, 2015. Section 29B provided for fast track arbitration, if parties consent to such an expedited process. Under this mechanism, the parties can request for oral hearings which will be permitted if the tribunal considers it necessary, or else the tribunal will proceed to hear the case based on written pleadings, documents and submissions that have been made between the parties. However, given that the submission of the dispute to such fast-track arbitration is entirely based on consent of the parties and therefore, hasn’t seen much practical application.

Videoconferencing: Therefore, given that there isn’t must scope for documents-only arbitration in certain types of disputes, the use of videoconferencing methods have become an imperative for several parties that have opted for International Arbitration. In this repsect, several institutions gave made specific provisions for the same. ICC allows the tribunal to conduct the arbitration through videoconference, even if there is no agreement between the parties.[5] LCIA in Article 19.2 of its Rules provides the tribunal with the “fullest authority to establish the conduct of a hearing, including its date, form, content, procedure, time-limits and geographical place. As to form, a hearing may take place by video or telephone conference or in person (or a combination of all three”. To this effect, institutions such as ICC have provided licensed access to tolls such as Microsoft Teams, Skype, VideoCloud.[6] Zoom and Cisco TelePresence are also widely used to facilitate virtual hearings.[7]

An important advancement in this respect is the guidance provided under the Seoul Protocol for Video Conferencing in International Arbitration (“Seoul Protocol”). It provides for principles dealing with examination of witnesses, imposing a requirement on parties to see that the technological requirements are met,[8] and empowering the tribunal to terminate videoconference if it is unfair to either party in order to maintain the principle of equality for the parties.[9] It also lays down certain standards for conducing arbitrations virtually such as the necessary technical requirements[10] and test conferencing and audio backup.[11] Common law jurisdictions, which have been historically hesitant to adopt technology for the barriers to arbitral processes such as cross-examination of witness, have showed a pro-virtual arbitration approach as well. The English courts in the case of in Re One Blackfriars Ltd, Hyde v. Nygate,[12] held that the hurdles for conducing virtual hearings was not ground enough for there to be a adjournment of the proceedings all together. The court emphasised on the need for a robust system and party co-operation for conducting the hearings virtually.

In India, the Arbitration and Conciliation Act, 1996 is silent on the use of remote hearings. However, Section 19(2) of the Act gives the parties the freedom to mutually decide on the procedure for conducting the arbitration, which the parties can opt to be conducted virtually. The Tribunal has been empowered to use its discretion to determine the manner of conducting the arbitration process[13] including determining an appropriate place to meet[14], in the absence of any agreement between the parties. In the absence of an agreement between the parties, Section 24 of the Arbitration Act also grants the power to the arbitral tribunal to direct for electronic discovery of documents and limit the scope of discovery to strictly what is necessary. Therefore, these wide discretionary provisions can be used to conduct a virtual hearing by the tribunal.

Issues: Some of the challenges faced by virtual arbitration in practise are as follows:

a. Virtual Witness Examinations: The biggest concern quoted about virtual proceedings is the feasibility of virtual witness examinations. Concerns regarding the inability to assess the body language and demeanour of the witness in videoconferencing is a major reason that strikes at the core of the credibility of the witness in an arbitral proceeding. However, the SC and several High Courts in India have used virtual witness examinations to determine the dispute in the past.[15]

b. Threat to equality of parties: Section 18 of the Indian Arbitration and Conciliation Act, 1996 states that parties should be treated equally. Equality of parties is a cornerstone of international arbitration and one of the reasons for the popularity of arbitration as a means of dispute resolution. The lack of technological means of a party to participate in a virtual proceeding is one such example of threat to this principle. Issues regarding restrictions on travel for parties located in different geographical locations can also mean that certain parties can be disadvantaged in a virtual setting. This important for the tribunal to take into cognizance when ordering a virtual hearing.

c. Data Protection and Confidentiality: Threat to cybersecurity is not new to international arbitration. In 2015, the Permanent Court of Arbitration, Philippines Department of Justice as well as the law firm that represented Philippines was hacked over the course of the arbitration between China and Philippines over the South China Sea Dispute.[16] In this respect the Seoul Protocol has several measures such as the requirement for cross border transactions to be safeguarded to prevent unlawful interceptions[17] and by virtue of applying limits to the number of observers allowed in the videoconference to only those who are necessary personnel and furthermore, requiring the tribunal to validate their identity.[18] The Protocol also mandates that no recording will take place of the virtual session.[19] These protect confidentiality, which is another tenet of international arbitration and is even mandated under the Arbitration and Conciliation Act, 1996 under Section 42A. A violation of confidentiality can have effect of annulment of award under Section 34(2)(a)(v) as such obligation for confidentiality is a non-derogable provision of law. Data Protection is a major concern in context of arbitral proceedings which emphasises the need for robust legislation such as the EU General Data Protection Regulation. The Personal Data Protection Bill, 2019 will have significant implication on the process and conduct of virtual arbitration proceedings in India as has been stated in Justice B.N. Krishna Report on Data Protection.[20] Lastly, one may also consider the adoption of the 2020 ICCA-NYC Bar-CPR Cybersecurity Protocol for International Arbitration which provides a framework for application of cybersecurity measures in context of International arbitrations. The framework requires an assessment of the risk profile of the arbitration based on prescribed factors, existing information security practices and infrastructure, and proportionality of any measures relative to the size, value and risk profile of the dispute.[21] Therefore, providing an adaptive mechanism of cybersecurity for each dispute determined on a case-to-case basis. The application of the aforementioned laws can have wide application and impact for international arbitrations seated in India or even abroad.

Conclusion: The White and Case survey cited in the beginning of the study, interestingly reflects that more than 50% of the respondents would prefer a virtual or a mix of in-person and virtual mode of arbitration in a post-COVID world.[22] Procedural hearings were reflected to have 92% preference towards virtual or mix of in-person and virtual hearings.[23] This shows that in spite of certain challenges, the outlook of the industry is that virtual hearings are here to stay in some capacity or another in a post-pandemic world. However, in order to gain the benefits of cost-efficiency, lesser carbon footprint etc. which are inherent in virtual arbitrations there has to be an emphasis on making the technological framework more robust and efficient. In India, the need for legislation on data protection will also benefit and emphasise the need for virtual arbitrations.

[1] White and Case, QMUL School of International Arbitration, “2021 International Arbitration Survey: Adapting arbitration to a changing world”, available at http://www.arbitration.qmul.ac.uk/media/arbitration/docs/LON0320037-QMUL-International-Arbitration-Survey-2021_19_WEB.pdf

[2] Ibid.

[3] Article 19.1, LCIA Arbitration Rules, 2014.

[4] Article 25.6, ICC Arbitration Rules, 2017.

[5] Article 24.4, ICC Arbitration Rules, 2017.

[6] ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic (9 April 2020).

[7] IBA, Technology Resources for Arbitration Practitioners Audio and Videoconferencing.

[8] Article 1.1, Seoul Protocol.

[9] Article 1.7, Seoul Protocol.

[10] Article 5, Seoul Protocol.

[11] Article 6, Seoul Protocol.

[12] [2020] EWHC 845 (Ch).

[13] Section 19(3), Arbitration and Conciliation Act, 1996.

[14] Section 20(3), Arbitration and Conciliation Act, 1996.

[15] State of Maharashtra v. Praful B. Desai, (2003) 4 SCC 601; IPFF v. Madhu Bala Nath, AIR 2016 Del 71.

[16] Thomson Reuters, Practical Law Arbitration Blog, “Addressing Emerging Cyber Risks: Reflections on the ICCA Cybersecurity Protocol for International Arbitration”, available at http://arbitrationblog.practhttp://arbitrationblog.practicallaw.com/addressing-emerging-cyber-risks-reflections-on-the-icca-cybersecurity-protocol-for-international-arbitration/.

[17] Article 2.1 (c), Seoul Protocol.

[18] Article 3.1, Seoul Protocol.

[19] Article 8.1, Seoul Protocol.

[20] Committee of Experts under the Chairmanship of Justice B.N. Srikrishna, Committee Report on Draft Data Protection Bill, 2018, Annexure C, para-E.

[21] Principle 6, Cybersecurity Protocol for International Arbitration.

[22] Supra 1, at 25.

[23] Ibid.

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