Arbitration During And Post Covid-19: A Perspective

Manoj K Singh & Adhip Kumar Ray

29 May 2020 3:17 PM GMT

  • Arbitration During And Post Covid-19: A Perspective

    In a short period of a few months, the coronavirus pandemic has spread through the globe, completely disrupting life as we know it. It is a disaster very few people had foreseen, and even fewer had prepared for. The freedom of movement and gathering has been greatly curtailed, and the same has had a very real effect on the functioning of the legal system and the arbitration mechanism in our country. Faced with complete lockdowns and social distancing, the legal system has rapidly adapted to the new reality, with the Supreme Court and High Courts leading the way, by having urgent hearings over video conferencing.

    The situation has hit the system of in-person arbitration hearings hard, and the initial reaction has been to adjourn the matters, at times without even giving any next date. However, as the development of a vaccine is still at least 12-18 months away, the questions that this article seeks to address are – How long must arbitral hearings remain adjourned? And, is there a way out?

    The short answer is, we must recognise that way forward for arbitration is through the use of video-conferencing and virtual hearings. It is true that this will be a complete change from our long-standing and established practice of in-person hearings. Certain lawyers and arbitrators might even have a psychological barrier, and hesitate in adopting this approach; however, it must be recognised, that given the circumstances, this would be our best, most practical solution. The times have changed, and if we don't change with it, the entire arbitration framework will come to a standstill.

    Under the legal framework of the Arbitration and Conciliation Act, 1996 which has been adopted from the UNCITRAL Model Law on International Commercial Arbitration, parties have complete freedom and flexibility in choosing the procedure of the hearings. As there is no bar on virtual hearings, parties can agree on having virtual hearings and a procedural order may be passed by the tribunal, recording the agreement of the parties. If the parties fail to agree, the Arbitral Tribunal can exercise its power under Section 19(3) of the Act, mandating that the hearings would happen over video conferencing.

    There might be a situation that despite the tribunal's order, the objecting party still refuses to cooperate. In such a situation, the matter can proceed ex-parte. It is pertinent to note that Section 25(c) of the Arbitration Act, 1996 clearly states that if a party fails to appear in a hearing or does not produce documentary evidence, the tribunal may proceed to make the award based on the evidence before it. The law pertaining to deliberately not attending arbitral proceedings is no longer Res Integra. Recently in the judgment of Quippo Construction Equipment Limited vs. Janardan Nirman Pvt. Limited (29.04.2020 - SC): MANU/SC/0421/2020, the Hon'ble Supreme Court had held – "…. Considering the facts that the Respondent failed to participate in the proceedings before the Arbitrator and did not raise any submission that the Arbitrator did not have jurisdiction or that he was exceeding the scope of his authority, the Respondent must be deemed to have waived all such objections."

    It is also pertinent to note that in 2018, the Hon'ble Supreme Court of India in the judgment of Radha Chemicals vs. Union of India (UOI) (10.10.2018 - SC): MANU/SC/1630/2018 had ruled that a Court while deciding an application under Section 34 the matter cannot be remanded back to the Arbitrator. Accordingly, it becomes evident that if an ex-parte award is given, against a party deliberately to appear for a hearing, then the non-cooperating party may lose its remedy for good. Therefore, such a stand must be taken by a party at its own peril. To avoid situations like this; however, an approach may be adopted, wherein the arbitration clauses in the commercial contracts would mention that the parties agree to have virtual arbitration proceedings.

    It must be appreciated that while the risk of Covid-19 is still present, the application of technology in a dispute resolution scenario, would be that of minimising the necessity for close contact. While online conferences through video conferring software, were common, this pandemic has forced the introduction of these technologies in the legal sphere, accelerating a techno-legal reform. Historically, virtual hearings were avoided because there was a lack of technologies in the market and a lack of access and necessary expertise to use such technologies. Even at present, not every lawyer will be adept, or even be comfortable with, the idea of carrying out advocacy online. However, as Covid-19 has now added the aspect of human vulnerability to the practice of law, steps must be taken to ensure all practitioners are technology compliant and are able to participate in virtual hearings. To facilitate this practice, induction and training sessions must be organised by Bar Councils regularly. Major institutional arbitration centres like ICA, DIAC, MCIA should offer educational courses to participants. Perhaps, a change may be brought about in law school curriculum, and herein online advocacy and trial may be included as subjects. Only through education, can we bring about the implementation of virtual court and arbitration hearings, which will further strengthen our legal system.

    All across the world, various international arbitration centres of repute have recognised that Covid-19 is here to stay. The International Chamber of Commerce's International Court of Arbitration has come up with the Guidance Note on possible measures aimed at mitigating the effects of the Covid-19 pandemic, the same offer an early set suggested of clauses, protocols and procedural orders and a checklist to assist parties in dealing with online arbitration. SIAC is collaborating with Maxwell Chambers' Virtual ADR to hold virtual hearings and HKIAC (Hong Kong International Arbitration Centre) has reported a significant increase in demand for its e-hearing services. In India too, the Indian Council of Arbitration has issued a notice with respect to the COVID-19 situation, wherein it has stated the intention to make use of information technology and video conferencing tools to conducting arbitration proceedings. With respect to Ad-Hoc arbitrations, the Arbitral Tribunals must play a proactive role in either setting our procedures for virtual hearing or adopting the procedures notified by the reputed arbitral institutions. The entire process of virtual arbitration can be refined through trial and error until virtual hearings become the norm instead of the exception. Concerns regarding security and privacy can be addressed through strict protocols, as well as the implementation of new technologies like blockchain. It must be accepted that in the short and medium-term, this is the most practical approach forward.

    Even in the long term, in a world without COVID-19, the advantages of virtual arbitration over in-person arbitration would make it an attractive option. The first significant advantage would be that virtual arbitrations would save time and make coordination easier. At present, hearings often have to be scheduled months apart, based on available dates of the arbitrators, lawyers and clients. The process is subject to the availability of a venue. In the case of international/outstation hearings, a lot of time is also wasted in travelling and setting up for the hearing. These would become non-issues in the case of virtual hearings.

    Similarly, the cost of hearings would also go down as the only necessary infrastructure would be a virtual device. Parties would be spared the cost of expensive accommodation and venue bookings. A third major advantage would be in terms of benefits to the environment. The elimination of paper filing would preserve lakhs of pages and as there would be no need to travel nationally or internationally, it would significantly reduce carbon footprint.

    To conclude – we must realise that we are in a state of new normal. Under the circumstances, online arbitration hearings offer us the most practical solution, and there has to be a complete shift from offline to online arbitration. The technology for having arbitral hearings online already exists; however, we must remove our mental barriers and openly embrace the same. The shift from in-person to online arbitration has already been achieved by many institutions, such as the SIAC and the HKIAC, and there is no reason why in India, we cannot follow the same pattern. Once the initial experimentation and implementation phase is over, with time, the entire system will become more mature, efficient and widely accepted. Once that happens, whole arbitration matters can take place. As the system picks up popularity, there is no reason why online arbitration cannot become the preferred method of dispute resolution.

    The article is authored by Manoj K Singh, Founding Partner, Singh & Associates, and assisted by Adhip Kumar Ray, Senior Associate, Singh & Associates.

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