The Impact of COVID-19 on Arbitration

COVID-19 has already impacted almost every industry. Many in-person communications are moving online via teleconferencing and videos. The economic markets in nearly every country are being enormously affected, supply chains have been halted, and many employees can no longer go to work to manufacture products. These major changes to the world economy will no doubt bring a variety of international arbitration claims in the near future. How will arbitration adapt to the current restrictions on operations, and how will these inevitable claims proceed? 

Fortunately, arbitration is an industry that can adapt to a pandemic with relatively minor adjustments. In the face of a WHO-declared pandemic, many, but not all, arbitrators continue their work with online sessions. Due to COVID-19, many arbitration hearings are indeed being delayed. There will be no hearings in the AAA-ICDR until June 1, 2020, and all offices of the AAA are temporarily closed. According to Reuters, “53 proceedings that were supposed to take place in AAA offices between March 16 and April 30” have been adjourned. Hearings in the ICC in Paris have been canceled until April 13, 2020. FINRA has postponed all in-person arbitrations until May 31, 2020. Even where arbitration institutions support and embrace technological substitutions, legitimate complications persist. Taking venue, as an example, AAA General Counsel Eric Tuchmann says that “he doubts that anyone had a global pandemic in mind when venue clauses were being drafted.”

Given the continued uncertainty regarding a timeline for operations returning to normal, many arbitration proceedings have nevertheless opted to continue using remote technology to the extent possible. This has caused the field of arbitration to take a more forward-looking approach in terms of handling the case load. Rather than postpone arbitration sessions, the current practice is to hold online conferences through telecommunications and video-conferencing platforms. For example, a case from the China International Economic and Trade Arbitration Commission conducted arbitration online that was contracted to be held in Wuhan.  The American Arbitration Association stated that “[o]nline video, teleconferencing, internet communication and means other than in-person can facilitate a full and equal opportunity for all parties to present evidence in a hearing.” However, this may not be true. Online videos lead to a lack of knowledge of body language, a hesitancy to speak, and a lag in time if technology falters.

The field can also anticipate a surge in arbitration claims arising from suspended contractual performance and force majeure clauses. Firms are increasingly advising their clients regarding suspending contractual performance and force majeure provisions. This leads to breaches of contract and triggers arbitration. How can people use them in a time of a global pandemic? According to Paul Weiss, even if the pandemic can invoke the clause, the parties still have to prove it was unforeseeable and that they attempted to mitigate losses. However, Paul Weiss also surmised that “governmental regulations intended to contain the COVID-19 outbreak may similarly make it easier to invoke a force majeure clause not previously triggered by the virus.” From the transactional perspective, many contract drafters are now rethinking contractual terms that could be impacted by the current and any future pandemics, including provisions as to arbitral seats, choice of law, institutions, and procedures. Law firms are taking provisions to protect their workers and clients by advising parties to refrain scheduling from in-person conferences and hearings. Flexibility is at the heart of handling this situation, and the field of arbitration is certainly able to adapt.

Rekha Rangachari, Executive Director of the New York International Arbitration Center (NYIAC), opined on how the field of arbitration has been altered by the pandemic. She reiterated the concern about flattening the curve by working remotely. “Arbitration sessions have increasingly moved online where possible, taking into consideration the number of stakeholders involved in the dispute,” she reflects. Lawyers have been taking advantage of digital workspaces. Ms. Rangachari notes that her team has been innovating home offices with multi-screens as business moves virtual in her mediations, arbitral hearings, meetings, and programs. In terms of long-term solutions, Ms. Rangachari recognizes that it is tough to assess the future without knowing the reign of COVID-19. She finds that the best way to keep abreast of arbitration practices is to develop “aptitude to navigate online hearings with virtual breakout rooms and document sharing.” She shares that “parties should consider protocols to run effective witness and expert examinations, on access to documents, witness isolation, translation, and security, amongst other topics.” Overall Ms. Rangachari commented that the adjustment seems smooth, as long as parties test the online platforms before arbitration sessions. In fact, Ms. Rangachari observed that, “teams have commented on the efficiency of proceedings, without lag time for extended breaks. Admittedly, there are less hours one can sit in front of multiple screens in online hearing mode versus being in in-person hearings!” Moreover, it seems that the world of arbitration is carrying on and the digital space is accommodating while the world waits for COVID-19 to run its course.

There is no doubt that COVID-19 will change the landscape of everyday life. In turn, it will affect how business is conducted worldwide, including arbitration hearings. The capability of virtual arbitration hearings will only improve with time but will allow for a reasonable alternative to in-person hearings in the future. However, many will still likely prefer in person procedures moving past the COVID-19 pandemic for many reasons including the ability to read body language, understand and interpret language within seconds instead of lagging through a screen, and the ability to react within a room instead of relying on technology.

Still, adjournment should be the last resort as various other industries have made a seamless transition to online work. The arbitration community has already had some experience using online platforms and innovative technology, and this makes this field uniquely capable of handling such a crisis.

By Alexandria Bowles and Amanda Feldman, Junior Staffers

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