Published on 9 April 2020 in Client Alerts

Volterra Fietta Client Alert: The impact of COVID-19 on arbitration proceedings and due process

As the COVID-19 pandemic continues to spread, the arbitration community is looking for ways to adjust the way arbitration proceedings are conducted to the new reality of social distancing measures and travel restrictions adopted by governments around the world.  Leading arbitral institutions have taken steps to make electronic filings their default procedure and are encouraging arbitral tribunals to consider the possibility of online hearings through video-conferencing platforms.  While there is a desire to run arbitrations efficiently and minimise disruptions to proceedings, arbitrators and parties should carefully consider the implications of any measures adopted in response to the COVID-19 crisis for the parties’ right to due process, which requires that they be treated fairly and equally and afforded a reasonable opportunity to present their case.

While the COVID-19 will undoubtedly alter the way arbitrations are conducted, not all aspects of arbitration proceedings are equally affected by the pandemic.  Certain stages of the proceedings will continue to proceed in a similar fashion and are less likely to give rise to due process concerns.

This is particularly true for the written stage of arbitration proceedings.  The technology already used by arbitral institutions allows for document production or filings to proceed electronically.  It is, however, likely that tribunals will be receiving a large number of requests for extension of time limits owing to delays as a result of the pandemic.  Tribunals will have to be careful to allow similar extensions to all parties, taking into consideration the state of the pandemic at the respective times, in order to ensure equal and fair treatment.

Due process risks of virtual hearings

The main way in which COVID-19 will impact arbitration proceedings relates to the oral hearings.  In international disputes, arbitration hearings often involve multiple participants – arbitrators, counsel, witnesses, party representatives, translators – based in different countries.  Restrictions on travel and gatherings in confined spaces will make it impossible to hold in-person hearings in the short- to medium-term future.

To avoid postponing arbitration hearings, alternative options will undoubtedly be examined, including the possibility of conducting hearings by video- or telephone-conference.  Some arbitral rules expressly envisage conducting hearings remotely (see for instance, Article 19.2 of the LCIA Arbitration Rules 2014 or Article 24(1) of the ICC Rules 2017 referring to Appendix IV).  Others, while not directly addressing this option, do not exclude the possibility of conducting hearings remotely.  Announcements by leading arbitral institutions have been promoting the use of technological solutions.  For instance, the International Centre for Settlement of Investment Disputes (“ICSID”) has published a guide to online hearings at ICSID and encouraged parties and tribunals in pending cases to consider the use of online hearing services.

Virtual hearings bring challenges that will have to be assessed against procedural fairness considerations.  In particular, the quality of evidence provided by witness testimonies, which can have a decisive impact on the outcome of arbitration proceedings, is likely to be negatively affected by online arrangements.  During cross-examinations, it is key for the members of the tribunal to be able to see and analyse both the answers given by witnesses and their demeanour in order to assess their credibility and hence the strength of the evidence provided.  In addition, conducting hearings remotely will make it significantly harder to ensure that the testifying witness is not secretly being advised or reading from hidden documents without the knowledge of the tribunal or opposing party.  Technical issues that cause delay and disruptions – for instance an inadequate internet connection of either the witness, the translator or the cross-examining counsel – could further undermine the effectiveness of the witness testimony or the ability to cross-examine. Reported issues around security and privacy of video-conferencing applications have raised additional concerns about uninvited participants being able to join, intercept or interfere with virtual hearings.

These issues could affect parties’ rights to equal treatment, to present their case or respond to a case against them.  Arbitral tribunals might also take the described shortcomings of virtual hearings into account when evaluating the evidentiary value of witness testimony, resulting in a disadvantage for the party relying on that witness’s statement.  A further source of inequality might arise in the future, if one party’s witness is able to give evidence in person, while the opposing party’s witness must testify via video-conference as a result of different travel restrictions in place around the world.

Just as it will be impossible to hold in-person hearings, it will be very difficult for tribunals to hold their deliberations in person, in particular, if arbitrators are based in different locations.  A high quality of deliberations is essential in order to ensure due process and to render a fair award.  While arbitrators can technically deliberate over the phone or video-conference, their inability to discuss all aspects of the case and review submissions and evidence in person could negatively impact the decision-making process.

Increased risk of challenges

Parties and tribunals should be alert to the possibility that procedural imbalances resulting from measures adopted in response to COVID-19 might create grounds for the losing party to challenge a rendered award, even if these imbalances were caused by mere technical issues or an inadequate internet connection.   In fact, the losing party could apply to set aside the award under national arbitration statutes (for instance, section 68 of the English Arbitration Act 1996 provides that an award may be set aside on grounds of serious irregularity, which includes due process considerations) or resist its enforcement under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) arguing a violation of due process.  A party to an ICSID arbitration could seek annulment of the award invoking a serious departure from a fundamental rule of procedure (article 52(1)(d) of the ICSID Convention).  It remains to be seen whether authorities deciding on such challenges will adopt a pragmatic approach and take account of the extraordinary circumstances in which proceedings are run and awards rendered during the COVID-19 pandemic.  Whether or not ultimately successful, such challenges would in any event cause delay and increase costs.

Conclusion