Qatar: E-Arbitration As A Response To COVID-19

Article by Omnia Gadallah – Associate and Sherine Mohamed Salah – Junior Associate

The COVID-19 outbreak has introduced global disruptions and instability affecting all aspects of life and business. The impact on commerce has been considerable, which in turn has led to disputes, many of which are settled through arbitration. This article considers whether COVID-19 qualifies as a force majeure event, its impact on arbitral proceedings, and the way in which arbitration as a dispute resolution institution has adapted.

The COVID-19 disease

COVID-19 is a novel coronavirus that was first reported in China¹, in Wuhan district precisely, on December 31, 2019. Given that the WHO defines pandemics as "the worldwide spread of a new disease that affects large numbers of people", on the March 11, 2020 the World Health Organization ("WHO"), officially declared COVID-19 as a pandemic due to its rapid spread.²

The impact of COVID-19 on arbitration and its procedures

COVID-19 has significantly affected international arbitration, with ongoing arbitral hearings and sessions facing serious logistical difficulties under the current troubled circumstances of travel and gathering bans. Consequently, for most international arbitration practitioners, the most serious effect of the COVID-19 outbreak so far has been the postponement or relocation of hearings, especially in the worst affected countries and regions.

Speedy decisions have had to be taken on how to proceed, with arbitrators, counsel and witnesses from less affected countries understandably reluctant to risk contagion through travel. Many arbitration practitioners began to consider how the virus might affect the manner in which arbitral proceedings are carried out, with some predicting that COVID-19 will start a new era of "contactless arbitration".

The fact that the virus originated where it did - China - makes the commercial repercussions particularly severe since so many goods, including electronic devices and machinery parts, are "made in China".
Many companies now are already anticipating being unable to fulfil contractual obligations and are investigating whether they are shielded by the principle of force majeure or related legal principles. The most obvious impact of COVID-19 is that it is likely to create a plethora of new claims arising from the virus, not only relating to the biotech, pharma and healthcare industries (which are playing a direct role in trying to contain it), but also to sectors as diverse as energy, construction, fashion, transport, tourism and technology. This raises the issue of how to deal with such arbitrations.

1. The adjournment of the arbitral hearings

The first solution to the present issue is to postpone the hearings to a more appropriate date when the circumstances stabilize. In fact many arbitral institutions have already postponed the dates of hearings on the basis of health concerns and also for travel ban issues.

However, adjournment is not an ideal solution as many of these arbitrations relate to issues of major commercial value and importance, and most of the parties have resorted to arbitration in the first place to benefit from the speed of its procedures that makes the postponement unattractive. In addition, arbitrations are limited in time, as agreed upon by the parties or by the law, within which the arbitral award shall be issued or else it shall be void. Thus, other solutions have to be brought into consideration to deal with the current situation.

2. Conducting online "electronic" arbitration

Given that the avoidance of gatherings and in person communications is by far the most essential precautionary measure that can be taken against the spreading of COVID-19, many arbitration practitioners are currently showing a tendency to replace the usual arbitration procedure with online "contactless" arbitration procedures (i.e. E-arbitration).

E-arbitration is a major component of online dispute resolution in which parties can solve online any dispute arising out of their contractual relationship. E-arbitration is mainly used for the resolution of Business to Business "B2B" cross-border e-commerce disputes, and partially used for the resolution of traditional cross-border commercial disputes. In these cases, the arbitration agreement and procedures are conducted online.

Resorting to e-arbitration has many advantages over than the traditional arbitration, as follows³:

• Cost effectiveness
• Speed of dispute resolution
• Lower costs as there is no travelling or logistical preparations
• Financing of the online dispute resolution through the business's annual subscription to the certification program.

3. Effectiveness of solutions

The electronic nature of the process and the players' involvement in the electronic market tend to favour proper enforcement of the settlement agreement or the award. Moreover, since the parties do not meet physically in online dispute resolution, it takes the emotion out of the dispute and encourages a rational settlement.⁴

4. Procedures of E-arbitration hearing

E-hearings are different from the traditional usual arbitral hearings. obviously, in the usual arbitral hearings the parties are present in person as well as their paper documents, however, the E-hearings are held completely online via video-conferencing means, an e-file for each dispute is created and administered by the online service provider. This e-file includes all notifications and communications between the parties and the arbitrators, as well as the documents submitted by the parties.

It is worth noting that in traditional arbitrations, the parties can also resort to online hearings if they wish to for any justifiable reasons as far as it is permitted either by national laws or by the rules of the arbitral institution.⁵

5. The E-Award

E-award is rendered online, and notified to the parties whether by being published on the institution site granting access only to the parties for confidentiality considerations or by being sent to the them via digitally signed e-mail with acknowledgement of receipt to the their e-mail addresses or even by sending a hard-copy version of the award by registered mail. A hard-copy version of the award is also necessary to enable the arbitral institutions to keep and archive awards.

Once an e-award is rendered and notified to the parties, the arbitral institution will close the e-file and will ask the parties to comply with the e-award. The losing party must comply with the award voluntarily or seek to set it aside while the winning party may seek to have the award recognized and enforced, same as traditional arbitral award.

6. Application of E-arbitration under COVID-19

It is established now that memorials, briefs, witness statements and letters can continue to be prepared, with drafts exchanged over email for review and comment, as well as preliminary conferences with arbitrators and interviews with witnesses which can take place by phone or video-conference. Moreover, arbitrators can deliberate over the phone, video-conference and email. However, the challenging question herein, remains regarding the "hearings" and the manner in which such hearings will be held, some actually wonder; Could COVID-19 mark a tipping point when use of video technology and e-documents and submissions becomes the norm?⁶

In fact, all major arbitral institutions are currently closed and working remotely, a clear example is the Cairo Regional Center for International Commercial Arbitration ("CRCICA")⁷ according Article 28.4 of its rules which states: "The arbitral tribunal may direct that witnesses, including expert witnesses, be examined through means of telecommunication that do not require their physical presence at the hearing (such as video conference)".

In addition to The AAA, The ICDR, The ICC, The LCIA, The SIAC , JAMS, The CPR, besides China's leading centers in Beijing, Shanghai and Shenzhen, the Hong Kong International Arbitration Centre⁸ and the Korea Commercial Arbitration Board which are encouraging users, to postpone the hearings and sessions or to conduct them remotely.

However, arbitration practitioners are concerned that such online manner will not be suitable for all cases where the arbitration is related to major commercial contracts or treaties.⁹

7. Principles that should govern the E-arbitration but are often hard to achieve

Nevertheless, the E-arbitration raises a number of concerns regarding the application of some main principles that shall govern the arbitration process, as well as regarding the efficacy of the e-arbitration process as a whole.

Two main principles mainly shall govern the arbitration process; Principle of Contradiction and Principle of Confidentiality.¹⁰

A. Principle of contradiction:

This principle expresses the ability of the parties of a dispute to be in a position to present their arguments on equal terms. However, electronic arbitration threatens this equal treatment of the parties at various stages of the proceedings. This implies that the parties must have equal access to documents. Electronic documents sent by one of the parties to the arbitrator should therefore be sent to the other party, either directly or via the arbitral institution.

Moreover, written statements must be exchanged within a strict framework so as to respect the equality of the parties. Regarding the hearings, if videoconferencing is the solution, various problems are raised, as the parties must have exactly the same technical capabilities and the same quality of connection. If the quality of communications is poorer for one of the parties, that party is disadvantaged in the presentation of his arguments during the e-hearing.

B. Principle of Confidentiality:

Confidentiality constitutes a decisive factor in opting for arbitration as an alternative method of dispute resolution in preference to State justice. Such obligation lies upon both, the parties and the arbitral institution. It mainly covers the information and documents shared by the parties throughout the electronic procedures which shall not be disclosed to third parties. The deliberations of the tribunal shall also be confidential and shall not be disclosed to the parties or the secretariat. The award also shall be confidential; however, the institution may publish it under the consent of the parties. However, at each stage of the arbitral proceedings, electronic communications make the confidentiality less guaranteed, since electronic data are more vulnerable than paper records.

8. Concerns regarding the efficacy of the e-arbitration solution

There are many concerns regarding the efficacy of the e-arbitration as per two aspects:
firstly, the determination of the place of arbitration, which is relevant to the applicable law and the state courts' ratification of the award. Such place can be hardly located because all the parties of the arbitration and the arbitrator(s) themselves are carrying out the process remotely each in a different country. Thus, such issue shall be settled and agreed upon by the parties beforehand.

Secondly, the ratification and binding force of the e-award, and to which extent it can be binding and ratified in a manner similar to the traditional award. A practitioner concerned about the international efficacy of an award would therefore be well advised to obtain a hard-copy original as well, signed by the arbitrators
In a nutshell, we can conclude from all of the above mentioned in the previous paragraphs that e-arbitration may be a pretty much appealing solution to deal with the current situation. However, practical issues may arise regarding the aforementioned concerns.

9. Seoul Protocol on Video Conference in International Arbitration¹¹

In an attempt to regulate and smooth the process of electronic arbitration through video-conferencing means, on the 18th of March 2020, The Seoul Protocol was released by the KCAB¹² to serve as a guide for planning, testing and conducting video conferences in international arbitration. The protocol consists of nine articles regulating all important matters related to video-conferencing: witnesses examinations, the requirements for the video conferencing venue¹³ as well as the remote venue¹⁴, the observers of the process, the e-documents, besides a long list of detailed technical requirements in Article 5, a requirement of testing conferencing equipment prior to the e-hearing as well as providing an audio backup in case the video-conferencing fails, ensuring that interpretation services are made available to the Witness, hearings recordings are also regulated according to Article 8, finally Article 9 states the required preparatory arrangements before the e-hearing is conducted. Various detailed technical specifications are enshrined in the annex of the protocol to ensure the quality of the process.

Carefully reading the protocol, it is clear that it sets ground rules and requirements for the video-conferencing as an indispensable method – in the current COVID-19 situation – for carrying out the ongoing arbitrations. Nevertheless, it is to be noted that, although the detailed high requirements stated in the protocol guarantee a secure, efficient, transparent arbitration process with no prejudice to any party, however, not all states possess such high standard technological resources and capabilities, especially the developing countries, hence this might be the only practical drawback regarding the issued protocol.

From all of the above-mentioned, it is clear that the arbitration field is one of the major affected fields by the coronavirus COVID-19 outbreak, such major effect has to be contained rapidly as to save the ongoing arbitrations as well as to be able to carry on the new upcoming arbitrations which will inevitably arise from the current troubled situation. thus, speedy decisions shall be taken to save both; arbitrations and individuals' health i.e. arbitrators and parties.

Footnotes

1. The World Health Organization defined the Coronaviruses as "in general can be defined as a large family of viruses that can infect humans as well as various species of animals such as cats, camels and bats. Such family includes the SARS-COV, the MERS-COV and now the new virus SARS-COV-2". https://www.who.int/.

2. https://www.who.int/ last checked on 03/04/2020.

3. UNCTAD. https://unctad.org/en/Docs/edmmisc232add20_en.pdf.

4. UNCTAD. https://unctad.org/en/Docs/edmmisc232add20_en.pdf.

5. For instance, the 2017 Rules of the International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation "ICAC" provide under Article 30/6 that either party has the right to request to participate in the hearing by means of videoconferencing, i.e. e-hearing. The arbitral tribunal will bear in mind the circumstances of the case, the parties' position, and its technical feasibility when ruling such request.

6. According GAR, Jonathan Choo, partner at Bird & Bird in Singapore, states "a potentially positive consequence of the outbreak is that the arbitration community may be compelled to reduce the frequency of in-person meetings, simultaneously reducing costs and environmental impact while improving efficiency of proceedings."⁶ Even before the outbreak of the virus, Choo notes there was a trend of tribunals directing that cases should be conducted "in a paperless manner". There was also much debate in the arbitration community about the responsibility of arbitrators and counsel to reduce their international travel to fight climate change. He says COVID-19 may lead to those ideas actually being implemented.

7. The CRCICA latest update: "In light of the current international situation, the measures and lockdown implemented by the Host state, CRCICA is taking the following precautionary measures starting from 31 March 2020: 1. CRCICA premises will remain closed until Saturday 11 April 2020.

2. Case Management services are fully operational, CRCICA staff is working remotely.
3. Exceptionally, the Centre premises will be open on Wednesday 1st April 2020 and Wednesday 8 April 2020 from 9:00 am to 4:00 pm, with a very limited number of employees, to receive written submissions impossible to be delivered by electronic means of communication and arbitral awards.

The following measures still apply:

1. Use email to file notices of arbitration, written submissions and exhibits. If this is impossible, written submissions with exhibits shall be submitted on USB Flash-drive, on the dates where CRCICA premises will be open to receive submissions and awards.
2. Conduct meetings amongst the members of the tribunal and/or the Parties, procedural hearings or deliberations virtually.
3. In application of their authority to decide on the appropriate manner to conduct the arbitral proceedings provided for in Articles 17.1 and 17.2 of CRCICA's Arbitration Rules (the "Rules"), arbitral tribunals are also strongly encouraged to direct the Parties to use electronic means of communications for their communication with the tribunal and/or Parties and for the filing of any written submissions".
   https://crcica.org/NewsDetails.aspx?ID=120 .

8. For example, if the hearings, must be held, the HKIAC, along with the Korea Commercial Arbitration Board, is protected by a system of mandatory temperature-scanning for all visitors and delivery personnel who enter its building. Entry will be denied to anyone with a temperature higher than 37.8 degrees Celsius and to those who show signs of respiratory illness such as coughing or labored breathing.

9. According to GAR. Gary Benton, founder and chairman of the Silicon Valley Arbitration and Mediation Centre in Palo Alto, California, agrees that arbitration proceedings will be very different during and after the crisis, noting that participants should "expect fewer handshakes, more elbow bumps and bows", he as well adds that "Reliance on paper contracts and documents sent through the mail or courier is likely to be curtailed and the hard copy evidentiary bundle is likely to fall by the wayside as arbitrators show more willingness to operate digitally," he says. "Evidentiary hearings may be conducted either entirely online or with a degree of remote participation."

10. UNCTAD. https://unctad.org/en/Docs/edmmisc232add20_en.pdf.

11.http://www.kcabinternational.or.kr/user/Board/comm_notice_view.do?BBS_NO=548&BD_NO=169&CURRENT_MENU_CODE=MENU0025&TOP_MENU_CODE=MENU0024 .

12. "The Korean Commercial Arbitration Board" which is the sole arbitral institution in Korea that is statutorily authorized to settle disputes under the Korean Arbitration Act, under the auspices of the Ministry of Justice.

13. "The site of the hearing, being the site of the requesting authority, typically where the majority of the participants are located".

14. "The site where the remote Witness is located to provide his/her evidence (i.e. not the Hearing Venue), typically where a minority of the participants are located".

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