Virtual Hearings in Arbitration: A Mistouted Panacea?
Date: 01/03/2021
Author: Neeraja Rajesh
Institute of Author: B.B.A LL.B. (Hons.), JSS Law College, Mysuru
Introduction
Countries across the world are yet again clamping down on physical gatherings and travel in a bid to fight the second wave of the pandemic. Parallelly, the most promising vaccine candidates threaten to be a logistical nightmare to administer, not just by the sheer volume of the exercise, but also due to their ‘sub-zero temperature’ storage requirements. Ultimately, the second wave in most nations strike at a time when vaccines offer little to no refuge, rendering lockdowns a sine qua non and making it abundantly clear that virtual hearings will continue to be an integral part of dispensation of justice for the foreseeable future.
International Arbitration was quick to adapt to the new normal. Several major arbitral institutions were keen on facilitating a smooth transition from in-person hearings to ODR to ensure expeditious and cost- effective resolution of existing and emerging disputes. The Seoul Protocol on Video Conference in International Arbitration promoted by the KCAB and Seoul IDRC led the way with ICC, CIArb, HKIAC and others following suit. This rapid adaptation, undoubtedly made virtual hearings practicable but there still prevails inhibitions as to the sanctity of the proceedings in a virtual space and the enforceability of the final award.
These concerns are compounded in cases where one of the parties raise objections to a virtual hearing, setting the stage to challenge the award on due process grounds. The right to equal treatment of parties is set out under Article 18 of the UNCITRAL Model law. Article V of the New York Convention lays down exhaustive grounds for refusal of enforcement of an award. Art.V(1)(b) and (d) allow for such a challenge where an award debtor was unable to present his case or the arbitral procedure was not in accordance with the arbitration agreement or the law of the seat of arbitration. Hence, outside of ensuring that there is no manifest bar on virtual hearings in an arbitration agreement, the arbitrators need to follow “due process” by meting out equal treatment and by giving each party a fair opportunity to be heard.
Due Process Concerns
Though virtual hearings seem the inevitable answer during the current health emergency, they are plagued by a multitude of apprehensions. The most detrimental of all would be unequal access to technology. The parties to an international commercial dispute may be from any corner of the world. If the objecting party is prejudiced due to lack of internet access and other ancillary amenities, it allows for the challenge of the award based on unequal treatment or inability to present the case under Sec.18 and Sec. 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996 (hereinafter “Arbitration Act”), respectively. The fairness of the arbitral process also comes into question due to the possibility of witness coaching, the difficulty in cross-examination and the impediments when interpreters are needed (especially when the translation is simultaneous instead of consecutive).
The inability to be in the same physical space and the involvement of numerous parties, further complicate the process due to the difference in time zones, intensity of Covid-19 restrictions and legitimate concerns about confidentiality. However, all such trepidations must be juxtaposed and ultimately balanced against the counterparty’s right against undue delay due to an indefinite adjournment, necessitated by the current situation, if an in-person hearing is insisted upon.[1] In fact, most major arbitral institutions have express provisions, empowering the tribunal, to prevent unnecessary delay and expense due to dilatory tactics.[2]
The Path Ahead
Despite evident concerns about the integrity of virtual hearings and final awards emerging therefrom, embracing the new normal and remedying existing lacunas seems to spell the way ahead. It must be noted that the transition to ODR is merely more conspicuous in the present scenario but the foundations to this transition have for long been in subsistence. Rule 32(c) of the AAA Arbitration Rules (2013), Art. 19.2 of LCIA (2014) and Art. 50(3) of the JCAA Commercial Arbitration Rules (2019) expressly provide for the possibility of virtual hearings. Other major arbitral institutions including SIAC Rules, 2016 give tribunals ample discretion in the conduct of proceedings to ensure the fair, expeditious, economical and final resolution of the disputes.[3] In India, the institutional impetus to this shift is evidenced by the 103rd Parliamentary Standing Committee Interim Report on the functioning of virtual courts, the guidance note issued by Delhi High Court to the DIAC and the discretionary powers granted to the tribunal under Sec.19(3) of the Arbitration Act.
In addition to such recognition of virtual proceedings, arbitral institutions across the world have released protocols and guidance notes to ensure that a robust institutional framework is in place to support the transition. The International Institute for Conflict Prevention & Resolution provides an annotated Model Procedural Order for Remote Video Arbitration Proceedings, covering various facets of virtual hearings. The ICC Guidance Note encourages increased reliance on documents in resolution, and the replacement of “live testimony” of witnesses or experts with written question and answers, wherever possible, to tackle access related issues.
Other suggestions in tackling impediments include: the use of screen sharing, 360° cameras and hot-tubbing in ensuring the integrity of witness and expert testimony; management of time difference by commencing hearing at different hours; early dismissal of claims or defences that are manifestly without merit;[4] making provisions to accommodate technical interruptions by ensuring flexibility in the hearing schedule; and agreement on the use of electronic hearing bundles, VPN and other encryption methods, and recording or transcribing the hearing.
The Courts on Enforceability
The Contracting States under the New York Convention, overwhelmingly adopt a pro-enforcement approach to arbitral awards. Most notably, the Austrian Supreme Court pronounced a landmark decision[5] holding that the conduct of virtual hearings despite one party’s objection, lies within the discretionary power of the arbitrator. The Court clearly held that fair and equal treatment did not mean that the involvement of one party must be on par with the other in the arbitral process. The only requirement was that both parties had a fair opportunity to do so. The Court concluded by noting that virtual hearings in arbitration were in consonance with the principles of a fair trial and seamlessly balanced both the right to be heard and the right to legal redress. The continuation of such hearings was found to be integral in preventing a cessation of administration of justice.[6]
In India, the judgement in Vijay Karia[7] by the apex court espouses the tenet in Soh Beng Tee[8] that “courts should not without good reason interfere with the arbitral process” and an award must be “given a reading which is likely to uphold it rather than destroy it”. The judiciary has also laid down pronouncements in support of video conferencing in the dispensation of justice. In P.C. Singh,[9] the Supreme Court held that the examination of a witness by video conferencing was within the purview of Sec. 3 of Evidence Act and Sec. 273 of Cr. P.C. The court in this case noted that cross-examination of the witnesses through video conferencing is equally if not more effective as such testimony is recorded and that such a set up would cause no prejudice to the parties even in the case of a criminal trial. Recently, the Madras High Court encouraged parties to complete arbitration proceedings through video conferencing to expeditiously settle the dispute at hand by cutting cost as well as time.[10] Similarly, the Delhi High Court[11] urged parties to continue arbitral proceedings during the lockdown, through video conferencing, if found feasible.[12]
In Singapore, the Court of Appeal in Jaguar Energy[13] noted that the full opportunity to present one’s case under Art. 18 of the Model Law was not unlimited. In determining if the proceedings were fair, the court will look into the tribunal’s action in balancing competing interests and determine if such conduct was “reasonable and fair- minded”. Similarly, the US Courts have also held that virtual arbitration hearings in no manner prejudice the parties or deny them fair treatment.[14] The English and Canadian Courts seem to echo the same sentiments with regard to the sanctity of virtual hearings. The Courts have dismissed arguments that are tantamount to hybrid hearings being manifestly unfair[15] and cross-examination over video- conferencing being detrimental to the interest of the party.[16]
Interestingly, the Supreme Court of British Columbia, in Singh v. Chad[17], while considering the permissibility of video conferencing in obtaining witness testimony, in a pre-pandemic world, went so far as to say that compelling the witnesses who were ‘busy professionals’ in India to testify in- person despite the availability of video conferencing would be ‘contrary to the principles of justice’.
Conclusion
Virtual hearings are not without their fair share of drawbacks. But even the most recalcitrant of parties will agree that in this world of uncertainty, these hearings are essential to keep the wheels of justice turning. Arbitral institutions across the world are trying to ensure that the transition of arbitration from the physical space to the virtual space is as seamless as possible. The due process concerns that are predictable are (and those that will emerge seem) remediable if parties to the arbitration meet each other halfway in good faith.
The benefits of such willingness to adapt are undeniable. If parties successfully embrace ODR in place of conventional dispute resolution, arbitration promises to be significantly cost and time efficient. The initial hiccups in adaptation are negligible when considering the fact that such a shift can mean increased access to this mode of dispute resolution and decreased reliance on litigation in case of purely commercial disputes. The elimination of the travel requirement is not just a cost-cutting instrument. In a time of climate emergency, this transition could help significantly reduce our carbon footprints.
These visible benefits aside, the existing jurisprudence and institutional framework, largely dispel concerns as to enforceability. The high threshold to refuse recognition of an award under Art.V of the New York Convention means there must be a manifest breach of party autonomy or ‘due process’ to allow an award to be set aside. The integrity of a virtual hearing is not affected by the objections of a party alone as most national legislations and institutional rules give the tribunal wide discretionary powers in the conduct of proceedings and in turn insist that disputes be resolved in an expeditious and cost-effective manner. Similarly, judicial pronouncements across jurisdictions allay fears as to enforceability by expressly allowing for video- conferencing in proceedings, expounding what satisfies the fair opportunity criteria, dismissing claims undermining the sanctity of the final award and adopting a strong pro-enforcement approach. Ultimately, the success of virtual hearings and robust development of the sphere of arbitration depends greatly on the willingness of arbitrators, attorneys and parties to adapt to the new normal.
References
[1] Mak, Y., Sucharitkul, V., Tingwei, L. and Zhihe, X., 2020. Do Virtual Hearings Without Parties’ Agreement Contravene Due Process? The View From Singapore – Kluwer Arbitration Blog. [online] Kluwer Arbitration Blog. [Accessed 1 December 2020, 8:37 pm].Available at: <http://arbitrationblog.kluwerarbitration.com/2020/06/20/do-virtual-hearings-without-parties-agreement-contravene-due-process-the-view-from-singapore/>
[2] Article 14.4, LCIA Rules (2014); Article 22, ICC Rules (2017); Rule 19.3 of the SIAC Rules (2016)
[3] Rule 19.1, SIAC Rules (2016).
[4] Rule 29.3, SIAC Rules 2016
[5] Case No. 18 ONc 3/20s
[6] Maxi Scherer and Franz Schwarz, Helmut Ortner, J. Ole Jensen, ‘In a ‘First’ Worldwide, Austrian Supreme Court Confirms Arbitral Tribunal’s Power to Hold Remote Hearings Over One Party’s Objection and Rejects Due Process Concerns’, Kluwer Arbitration Blog, October 24 2020 . [Accessed 4 December 2020, 10:16 pm]. Available at: <http://arbitrationblog.kluwerarbitration.com/2020/10/24/in-a-first-worldwide-austrian-supreme-court-confirms-arbitral-tribunals-power-to-hold-remote-hearings-over-one-partys-objection-and-rejects-due-process-concerns/>
[7] Vijay Karia and Ors. vs. Prysmian Cavi E Sistemi Srl and Ors., MANU/SC/0171/2020.
[8] Soh Beng Tee & Co. v. Fairmount Development Pte. Ltd., (2007) SGCA 28.
[9] The State of Maharashtra and P.C. Singh v. Praful B. Desai and Ors., Appeal (crl.) 476 of 2003 & Appeal (crl.) 477 of 2003.
[10] Axis Bank v. M/s Nicco UCO Alliance Credit Limited, 2017 SCC OnLine Mad 33928.
[11] Rategain Travel Technologies Private Limited v. Ujjwal Suri, High Court Of Delhi, O.M.P (MISC) 14/2020, May 11, 2020.
[12] Mirani, S., Gaver, C. and (Editor), C., 2020. Due Process Concerns In Virtual Witness Testimonies: An Indian Perspective – Kluwer Arbitration Blog. [online] Kluwer Arbitration Blog. [Accessed 5 December 2020, 3:00 pm].Available at: <http://arbitrationblog.kluwerarbitration.com/2020/11/17/due-process-concerns-in-virtual-witness-testimonies-an-indian-perspective/>
[13] China Machine New Energy Corp v. Jaguar Energy Guatemala LLC and another, [2020] SGCA 12
[14] Eaton Partners, LLC v. Azimuth Capital Mgmt. IV, Ltd., 2019 WL 5294934, at *4 (S.D.N.Y. Oct. 18, 2019)
[15] C (Children: Covid-19: Representation), [2020] EWCA Civ 734
[16] Ian McGlinn v. Waltham Contractors Ltd & Ors., [2006] EWHC 2322 (TCC).
[17] Singh v. Chad, 2018 BCSC 1860.