Much has been published since January 2020 on the flexibility of the arbitration process and its value during the current coronavirus (COVID-19) pandemic. The commentary focuses particularly on the use of technology to conduct hearings across multiple jurisdictions, and is augmented by reports on recent uptake on use of technology in the courts in response to social distancing requirements.

Remote hearings are not new to international arbitration practitioners and arbitrators. A significant proportion of case management hearings already proceed via audio or audio-visual media, as do hearings of interlocutory applications and this has been the case for over a decade.

Evidentiary hearings, however, have largely continued as face-to-face hearings. This makes sense, particularly where there are lay and expert witnesses and where the hearing is likely to run for several days; testing not only the 'facts' but credibility. The evidentiary hearing usually (although not always) occurs in the place of arbitration chosen by the parties and where there is direct access to the courts should it be required in aid of the arbitration.

Is a hearing actually required?

This article moves beyond the question of how a hearing should proceed and encourages parties, their counsel and tribunals to instead ask whether a hearing is required - a particularly pertinent question during the COVID-19 pandemic.

Arbitration 'on the papers' has been around for many years. It has worked particularly well, for example, for small value disputes and for disputes over domain names. It has not, however, been seriously contemplated in commercial disputes which have high monetary or strategic value.

Procedural order number 1 almost always contemplates an evidentiary hearing and the procedural timetable works around the availability of the parties, their counsel and the tribunal to attend that hearing in person. This works effectively where travel is largely unrestricted and, in the limited circumstances where travel might be unwise or unsafe, tribunals are empowered to hold hearings in places other than the seat of the arbitration.

However, where we face mandatory travel restrictions and are operating in what is consistently described as 'unprecedented times', there is good reason to question the usual practice.

The parties' agreement

In our experience, it is rare that a party entering into an arbitration agreement gives any thought at all to the mechanics of, or need for, an evidentiary hearing (except to the extent that they choose a place of arbitration). There are, however, some arbitration agreements which expressly empower the tribunal to make its decision 'on the papers'. This power can be limited to specific disputes or of more general application.

Where parties agree to conduct their arbitration pursuant to rules of an arbitral institution, those rules might also provide for a determination without an oral hearing. By way of example1:

  • The ACICA Arbitration Rules 2016 provide that the tribunal "shall hold hearings for the presentation of evidence by witnesses, including expert witnesses, or for oral argument" if either party requests this. Rule 21.4 provides further that "[i]n the absence of such a request, the Arbitral Tribunal shall decide whether to hold such hearings or whether the proceedings shall be conducted on the basis of documents and other materials".
  • The ICC Arbitration Rules 2017 do not specifically rule out the determination of issues 'on the papers', but at the same time do not assume that a hearing will be required. Article 26(1) provides that "[w]hen a hearing is to be held, the arbitral tribunal, giving reasonable notice, shall summon the parties to appear before it on the day and at the place fixed by it" (emphasis added). The Expedited Procedure under the ICC Rules expressly empowers the tribunal, after consulting the parties, to "decide the dispute solely on the basis of the documents submitted by the parties, with no hearing and no examination of witnesses of experts".
  • Under the SIAC Rules 2016, where a dispute is to be determined under the expedited procedure in Article 5, "the Tribunal may, in consultation with the parties, decide if the dispute is to be decided on the basis of documentary evidence only [...]". More generally, Article 24.1 provides that "[u]nless the parties have agreed on a documents-only arbitration or as otherwise provided in these Rules, the Tribunal shall, if either party so requests or the Tribunal so decides, hold a hearing for the presentation of evidence and/or for oral submissions on the merits of the dispute, including any issue as to jurisdiction".
  • The AIAC Arbitration Rules expressly provide in Article 17.3 that absent a request from a party for a hearing for the presentation of evidence by witnesses, "the arbitral tribunal shall decide whether to hold such hearings or whether the proceedings shall be conducted on the basis of documents and other materials".
  • Under Article 19.1 of the LCIA Arbitration Rules, "[a]ny party has the right to a hearing before the Arbitral Tribunal on the parties' dispute at any appropriate stage of the arbitration (as decided by the Arbitral Tribunal), unless the parties have agreed in writing upon a documents-only arbitration.
  • The HKIAC Administered Arbitration Rules 2018 in Article 22.4 provide that the "arbitral tribunal shall decide whether to hold hearings for presenting evidence or for oral arguments, or whether the arbitration shall be conducted solely on the basis of documents and other materials"
  • Similarly to the SIAC Arbitration Rules, the MIAC Arbitration Rules enable the parties to apply to have their dispute determined under expedited procedures. However, pursuant to those procedures, "unless the parties agree or the Tribunal determines that the dispute shall be decided on the basis of documentary evidence only, the Tribunal shall hold a hearing for the examination of all witnesses and expert witnesses as well as for any argument" (Article 12.3). Where the expedited procedures do not apply, then "[u]nless the parties have agreed on a documents-only arbitration or as provided in these Rules, the Tribunal shall, if either party to requests or the Tribunal so decides, hold a hearing for the presentation of evidence and/or for oral pleadings on the merits of the dispute, including, without limitation, any issues as to jurisdiction" (Article 26.1).

Where the parties have chosen ad hoc arbitration, but have also agreed to the UNCITRAL Arbitration Rules, those Rules provide for an evidentiary hearing at the request of any party and, pursuant to Article 17.3, "in the absence of such a request, the arbitral tribunal shall decide whether to hold such hearings or whether the proceedings shall be conducted on the basis of documents and other materials".

It is clear from the above snapshot, that international arbitral tribunals, and very particularly, tribunals conducting arbitration pursuant to institutional rules, are equipped to determine disputes without the need for an evidentiary hearing.

Where the parties have chosen ad hoc arbitration without reference to UNCITRAL Arbitration Rules or any other set of procedural rules, the tribunal may still determine a dispute 'on the papers' if it does so with the parties' consent or where the tribunal considers it appropriate, having regard to the terms of the arbitration agreement.

Strategic considerations for parties and their counsel

COVID-19 and the associated travel restrictions and social distancing requirements are impacting on timelines for international arbitration. Evidentiary hearings scheduled in 2020 are at risk of adjournment. The natural response to this is for parties, counsel and the tribunal to put in place arrangements for a remote hearing but this may not always be the best option.

First, the evidentiary hearing was most likely scheduled shortly after the filing of the notice of arbitration and response. At that stage, the full scope and parameters of the dispute were still to be determined. Unless one of the parties, or the tribunal itself, raised the question of whether an evidentiary hearing was necessary, hearing dates would have been identified as a matter of course.

After the exchange of memorials or pleadings, disclosure of documents and preparation of witness statements, the issues in dispute between the parties often become clearer. Issues which are the subject of expert reports are often narrowed. It is possible, where many of the steps in the procedural timetable have been completed in preparation for a hearing, that a full evidentiary hearing no longer serves the purpose of the parties.

Secondly, during the interlocutory processes each party will have formed a view on the risks and opportunities available through cross examination at an evidentiary hearing. Where cross examination of a party's own witness poses risks, these risks usually need to be acknowledged and factored into any advice on prospects. The availability of adverse inferences, where a witness is not made available for cross examination, limits mitigation of the risks. However, these risks can be largely avoided if the dispute is determined on the documents.

Thirdly, even where a hearing has been scheduled and the dispute is well suited to an evidentiary hearing, a determination on the papers without a full hearing might fast track an award. This may be of considerable advantage in uncertain economic times.

There may of course be other considerations unique to each case which require an evaluation of the benefits and/or disadvantages of an evidentiary hearing.

COVID-19 provides a legitimate basis on which to vary the procedural timetable and to challenge the assumption that an evidentiary hearing is required.

The role of the tribunal

The tribunal's mandate arises from the arbitration agreement. As discussed above, this mandate often includes power to determine disputes without a hearing for evidence and submissions.

From the tribunal's perspective, one of the reasons why a conventional timetable includes an evidentiary hearing is to ensure that each of the parties is afforded procedural fairness. A failure by the tribunal to respect a party's right to procedural fairness may provide a basis on which an arbitral award is set aside or its recognition and enforcement challenged in a State court.

In general terms, a tribunal asked to determine a dispute on the papers must not do so unless expressly authorised in the arbitration agreement pursuant to which they are appointed or the parties expressly consent during the arbitral process. Where this authorisation exists or the parties have consented, there are three considerations for a prudent tribunal.

First, whether it has jurisdiction; secondly, whether the proposed course will adhere to natural justice principles; and, thirdly, whether there are safeguards which can be put in place to protect the integrity of the award. These safeguards might include:

  • the scheduling of a hearing via technology to hear directly from each of the parties before directions are given in relation to any decision to proceed without an evidentiary hearing;
  • a direction to each party to file written submissions on whether a hearing is necessary; or
  • a direction that the parties deliver an agreed list of issues/questions to be determined by the tribunal in advance of the tribunal's deliberations, or where the parties are unable to agree, separate lists of issues/questions to be addressed in the award.

Observations

For many businesses already involved in an international arbitration, where the proceeding commenced before any sign of COVID-19, an electronic or remote hearing will provide a practical and sensible way in which to bring the proceeding to a close. There will, however, be some proceedings where an advantage might be secured by evaluating the need and desirability of an evidentiary hearing.

The current restrictions provide a perfect environment in which to raise questions which might result in a quicker resolution of a commercial dispute or a determination by the tribunal without exposure to risks which are inherent in cross examination.

For those disputes, there is value in businesses acting now to identify the issues which need to be determined, discussing the procedural options with their counsel and, if appropriate and consistent with the arbitration agreement, making a timely approach to the tribunal and other parties to explore an alternate procedure.

Footnote

1In the interests of brevity, the examples provided do not include separate provisions for emergency arbitrators.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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