LegalNovember 19, 2020

Crisis Creates Change How COVID-19 Has Impacted International Arbitration

COVID-19 stampeded across the globe in 2020, impacting literally every industry and profession in its wake. International arbitration was no different. Like every other field, it too scrambled to adjust to the (suddenly) ‘new normal’ that changed the way arbitration professionals worked and proceedings were conducted. So, how exactly has COVID-19 impacted the international arbitration field, both procedurally and substantively? How does it continue to shape the way in which arbitration is conducted? And what might the longer-term implications and consequences of the pandemic be for the profession?
The pandemic has changed people’s lives and taken [arbitration professionals] out of their comfort zones.
Niuscha Bassiri, co-author of International Arbitration and the COVID-19 Revolution

An exciting new book, International Arbitration and the COVID-19 Revolution, available on the Kluwer Arbitration database since September 30th 2020, and the print edition of which will be released in November 2020, sought to answer these and other compelling questions.  This article will explore some of the key aspects and issues broached by the book in the words of its editors and three of its co-authors, Maxi SchererNiuscha Bassiri and Mohamed S. Abdel Wahab, courtesy of an interview we conducted with them.

Why This Book?

The simple answer: COVID-19. The longer answer is that these three eminent arbitration scholars and professionals wanted to delve into the myriad impacts of the pandemic on the profession, in an effort to provide a multi-faceted and comprehensive practical guide that makes sense of what is the epitome of a global force majeure event.
Maxi Scherer explained how the idea for the book arose during one of her brainstorming sessions with Vincent Verschoor of Wolters Kluwer, given her role as General Editor of the Kluwer Journal of International Arbitration. The idea of exploring COVID-19’s impact on international arbitration started out as a special issue of the journal but it soon became clear that a full-length book was needed.

It was then that Maxi thought, “Who would be the best fellows to have in this crazy project?” And so she approached Niuscha Bassiri and Mohamed S. Abdel Wahab, both of whom were eager to get on board with what they all knew would be an interesting research project for a fast-track publication. Their goal: to assess the impact of COVID-19 on international arbitration, both generally and specifically. It was more than that, though. Maxi outlined how, although COVID-19 has undoubtedly been a terrible thing for the world, it has nevertheless provided an opportunity to assess arbitration in a new light. It could even, she opines, be a catalyst for possible, positive change.

Maxi stated how, “We wanted to get this done quickly, to be first in the market. It was a very ambitious time-line from the beginning”. Niuscha concurred, saying how “we wanted to set the conduct [of remote hearings] on the right path and become a best practice model”. Maxi further explained how the book holistically touches upon both procedural aspects (for example, the logistics of undertaking a remote arbitration during the pandemic), and substantive aspects (for example, how COVID-19 has affected multiple industries and sectors in different ways).

Mohamed further added that it was evident that the pandemic was going to “consume the whole year,” and also knew that Maxi and Niuscha were the perfect team to work with and emphasized the transformative impact of COVID-19 on the practice of international arbitration across all business sectors. Importantly, the trio noted how they wanted this book to be a model for future pandemics/crises as well because, in the words of Mohamed, “this will of course not be the last pandemic the world sees”.

COVID-19 As Crisis Management

Mohamed authored the book’s first chapter, titled Dispute Prevention, Management and Resolution in Times of Crisis Between Tradition and Innovation: The COVID-19 Catalytic Crisis. He was inspired by the idea that if the pandemic was about a crisis (which indeed it was), then there should be some insight into crisis management per se, in the context of its practical and legal implications in arbitration. Mohamed analysed existing crisis management plans (CMPs) in the industry, although there were few in place across different jurisdictions, and especially not for a pandemic. He was even astounded to find that corporate entities in countries that had experienced extreme crises such as war and wide-scale riots had hardly any crisis risk management measures in place.
Mohamed’s chapter addresses crisis management from the perspective of management studies and from a legal standpoint. He sheds light on what corporations and organizations should have in place in anticipation and in response to crises, and how best to manage them. Contractual equilibrium, early objective assessment and how best to communicate during a crisis were some of the issues that were also addressed, as well as authority to negotiate and settle in times of crisis. This focus on crisis management is an excellent and apropos starting point on a book predicated on the biggest crisis the world has experienced in many decades.

Remote Hearings & Procedural Considerations

Niuscha provided interesting insight into the procedural aspects of what the pandemic has meant for the arbitration world. These aspects are covered throughout the book, namely in chapters 2 to 6 and 8 to 10, with Niuscha herself authoring Chapter 5, titled Conducting Remote Hearings: Issues of Planning, Preparation and Sample Procedural Orders. Niuscha explained how procedural matters pertaining to remote (virtual) hearings necessitated by COVID-19 have undoubtedly caused challenges for arbitration specialists. However, in her opinion, arbitration institutions have handled the pandemic “quite admirably and quickly”. She cites the way in which arbitration institutions allowed virtual hearings to be legally viable.

Niuscha was also excited about the possibility that arbitration appointments would need to become more diverse, since tech-savvy arbitrators would be more in demand and appreciated going forward, thus opening up the potential pool of arbitrators. She also provided insight into Chapter 4, which was authored by Maxi, titled The Legal Framework of Remote Hearings, and which provided the most comprehensive overview of the legal framework for conducting hearings remotely. What are the possibilities to do so? Can a remote hearing actually be conducted against the will of a party? What does legislation and what do the rules say about such hearings? Technical reasons were also problematic at times, especially for countries with slow or otherwise compromised bandwidth, of course.

Niuscha also discussed the challenges of remote advocacy and the issue of witnesses, including interviewing them, resulting in multiple factors that all lend themselves to demanding a flexible dispute resolution process. Simply, the pandemic forced issues regarding time and cost factors to be considered once again, something that the arbitration world had been somewhat lax in doing until now. Other practical matters discussed in these procedurally-focused chapters included arbitral awards and how they can now be notified electronically, as well as the all-important issue regarding the recognition and viable security of digital signatures.

Another salient point regarding remote hearings is this: what about the due process rights of the parties to the dispute? There might be a distinction between ordinary due process rights versus how a tribunal manages these rights during a remote hearing, which, after all, was not normative for arbitration until the crisis hit.

Some Interesting Statistics

COVID-19 has already provided some fascinating statistics regarding remote arbitration hearings. Maxi delved into some of the empirical evidence provided by a survey undertaken by the authors of Chapter 7 in the book.

The authors of the chapter received over 200 respondents from 43 different jurisdictions across 6 different continents to their survey. It was the first-ever empirical study regarding views by arbitration professionals on remote hearings due to the pandemic and other data. For example, 38% of hearings went ahead when the pandemic first went global in March, with the postponement of 41% of hearings scheduled for that month, 15% postponed with no new dates set at all and, finally, 6% settled, to some extent due to the arising crisis.

Lawyers and arbitrators were asked in the survey to assess remote hearings, and almost 60% considered them as good as or even better than physical hearings (with 45% saying they were as good as physical hearings and 14% feeling they were better). 41% of respondents believed that remote hearings were less preferable overall compared to physical hearings. Mohamed was of the opinion that remote hearings have actually been convenient for arbitrators but that some arbitration attorneys may have been inconvenienced by the remote set-up, especially with regard to the cross-examination process.

Mohamed made the further interesting observation that parties and counsel are apparently more efficient and make better use of time during remote hearings, with possible reduced sitting time due to time zones differences and constant fear of technology failing, especially in jurisdictions with shaky technology. Essentially, all three editors agree that hearings have become ‘leaner and more focused due to technology.

Specific Industries and COVID-19

A very interesting angle offered in this book is that of industry-specific analyses. Chapters 12 to 17 provide specific insights into how the construction, energy, aviation, technology, media and telecommunication, finance and insurance industries have been affected by COVID-19 in the context of arbitration. Why these six industry sectors? Mohamed explained how each industry was specifically chosen. For example, it’s well-known that aviation was one of the economically worst-hit industries of all due to the pandemic. The finance and insurance industries were also badly shaken by the domino effects of a global economy teetering on the edge.

Conversely, telecommunications, media and technology all fared particularly well during the crisis, given that so many people were under lockdown and beholden to working remotely. Also, the tech industry naturally lent itself to remote hearings. And then there are construction and energy, the two industries that anyway normally comprise almost half of arbitration cases globally. The editors agreed that those two industries simply had to be included in the analysis.

Aviation was an especially interesting case in point, given that it’s an industry rarely tackled in arbitration literature, as Mohamed noted. An analysis is provided about the possible future, post-pandemic performance of the industry, including jet fuel costs and aircraft leases and purchase agreements. Construction also suffered a dramatic slow-down, with different claims in the industry explored, including force majeure hardship.

The energy sector saw project development affected across the entire global supply chain, with analysis too in its chapter regarding investor state disputes. The telecom, media and technology sectors have seen significant growth in arbitration, even as competitors are working together to spur innovation due to the pandemic. The financial sector has witnessed exacerbating government responses re government subsidies, so it is predicted that disputes will continue to rise. Blockchain finance too will see a rise in disputes. And the international insurance industry, which is primarily predicated on English common law, was abuzz regarding the landmark September 2020 English High Court case of The Financial Conduct Authority v Arch and Others, which found largely in favour of policy holders impacted by COVID-related business interruption losses.

The Future of Arbitration?

Chapter 11 of this book explores how arbitration could be made more efficient thanks to the pandemic. It notes how crises have altered arbitration in the past. It is believed that this new crisis will do the same in a way that is structural and permanent. The changes will surely outlast the pandemic. So, will COVID-19 have fundamentally altered arbitration, as opposed to a return to ‘business as usual?’ Absolutely, all three of our interviewees believe. The change has already happened due to the pandemic – and continues to do so. All three stressed how the changes brought about by COVID-19 must be seen positively, with a greater emphasis on remote hearings and the electronic management of documentation.

Niuscha makes the interesting point that, “This pandemic has triggered changes that were anyway on their way, but which were perhaps a decade away”. She continues, “[The pandemic] has changed people’s lives and taken [arbitration professionals] out of their comfort zones”. Mohamed added with “What is definite is that there is a change”. The emphasis also appears to be on efficiency, i.e. how to make not only remote hearings more effective and efficient, but hopefully physical hearings too. What is required is a more flexible approach to arbitration, including, as stated before, a more flexible approach to arbitrator appointments, among other factors.

Final Thoughts…

Mohamed believes that the takeaway of this book is nothing less than “a tour de force on the impact of COVID-19 on international arbitration”. It provides much-needed context regarding the most important legal and practical considerations for arbitration proceedings during the crisis and beyond.

This incredibly timely and practical book provides arbitration practitioners and scholars with up-to-date analyses by top arbitration professionals into some of the key industry-specific challenges brought about by COVID-19. Focusing on six key sectors ensures invaluable insight into not only those sectors but into the arbitration field generally, especially when considering the implications of remote hearings.

Bottom line: There is practical, multi-disciplinary guidance to be had with this book. Those working in, or affected by, arbitration can only benefit from such guidance in these tumultuous, unique times.
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During a series of podcasts we will bring you insightful analysis, commentary and discussion from thought leaders and experts on current topics in the field of International Arbitration, IP Law, International Tax Law, Competition Law and other international legal fields.