Over the last couple of years, the international arbitration community, like everyone else, has had to embrace technology. During the Covid-19 pandemic, virtual meetings and hearings were practically unavoidable in circumstances where parties were scattered around the world.
Nevertheless, there were parties who, for various reasons, objected to virtual hearings, opting instead to wait until they could participate in a physical hearing in the same room with the tribunal, parties and witnesses.
In those circumstances, tribunals had to decide whether it was appropriate to order a virtual or hybrid hearing.
Consequently, the international arbitration community has been considering whether there is a right to a physical hearing in international arbitration. In September 2020, the International Council for Commercial Arbitration (ICCA) launched a comprehensive study on whether such a right exists.
Following extensive consultation, the ICCA's findings, published in May 2022, are as one might expect – it depends on the jurisdiction. Parties need to pay attention to local arbitration laws, which may affect the validity and enforceability of any award, and consider these when deciding whether to have a virtual or physical hearing.
Below is a summary of some of the ICCA Report's key findings.
Express or inferred right
None of the parties who participated in the survey (spanning 82 New York Convention jurisdictions) confirmed that their jurisdiction's laws contained an express provision granting a party to an arbitration the right to an in-person hearing.
An arbitral tribunal, according to the arbitration laws in the majority of jurisdictions, has the authority to exercise its discretion over hearing logistics, including whether it is a physical, remote or hybrid hearing.
However, in a few jurisdictions, practitioners report the right to a physical hearing can be inferred from the laws governing arbitration proceedings.
In Vietnam, for example, while the Law on Commercial Arbitration does not refer specifically to physical hearings, it does require the arbitral tribunal to decide on the time and location of the hearings. Local lawyers interpret that provision to mean hearings must be physical, unless otherwise agreed by the parties.
In Sweden, the inference that a party has such right is the subject of a Svea Court of Appeal challenge. Despite this challenge, according to the ICCA Report, most Swedish arbitration practitioners consider there is no such right to a physical hearing under Swedish arbitration law. Therefore, at present, the position in Sweden remains unclear.
The positon is even uncertain in some countries that have adopted the UNCITRAL Model Law into their arbitration laws (e.g. Bahrain, Denmark, Germany and Norway). The Model Law provides that an arbitral tribunal should decide whether to hold oral hearings or whether proceedings can be dealt with on documents alone.
In this context, an "oral" hearing has sometimes been interpreted as a "physical" hearing. As a result, practitioners in these jurisdictions advise that hearings should not be imposed on parties who do not agree to them.
Can the decision to hold a remote hearing impact the validity of an award?
It is generally accepted that arbitrators are bound by the parties' agreement to arbitrate. It follows that if the parties have agreed to a physical hearing, the arbitral tribunal should not order a remote hearing, which would contradict such agreement.
An order that contradicts the parties' agreement could lead to the annulment of an award in certain jurisdictions. For example, in the US, the Supreme Court has ruled on several occasions that because arbitration is a contractual matter, an order by a tribunal that contradicts the parties' agreement will invalidate an award.
On the other hand, in Switzerland, an arbitral tribunal would not be bound by the same agreement, because such a decision would be within the tribunal's power to overrule irrespective of whether the parties had previously agreed.
In other jurisdictions, it is the view of those surveyed that a tribunal would only be bound by an agreement to hold an in-person hearing where that agreement was reached before the tribunal was constituted, but not after.
The Report also suggests that a party should object to a tribunal's order to hold a remote hearing at the time that order is issued if it intends to challenge the award in court.
However, in almost all jurisdictions (except in Vietnam), for those seeking to challenge an award, the failure to conduct a physical hearing alone would not constitute a ground for setting aside an award.
It will be a balancing act for the tribunal – they must weigh up the parties' agreement with the tribunal's duty to conduct proceedings expeditiously, taking into consideration the right to due process, the integrity of the arbitral process and equal treatment of the parties.
Can the decision to hold a remote hearing affect enforcement?
In determining whether an award is enforceable following an arbitral tribunal's order for a remote hearing, local courts will often consider whether the jurisdiction's own procedural principles were followed.
In other jurisdictions, local courts may consider whether due process procedures in the law of the seat (as opposed to the law where the award will be enforced) were followed. For example, if an applicant was seeking to enforce an award in Italy, and the seat of that arbitration was Geneva, the Italian court will need to consider whether the procedural laws in Switzerland were adhered to, to determine whether the award is enforceable in Italy.
One further point to consider in certain jurisdictions, such as Nigeria or England and Wales, is that if there has been a violation of a procedural rule of law of the seat, that violation alone would be sufficient for the local courts to refuse to recognise and enforce an award.
In most other jurisdictions surveyed in the Report, the violation of a procedural rule alone was not sufficient to refuse to recognise an award. A party opposing recognition of an award must also show that the violation had a material impact on the case, which caused prejudice to the opposing party.
Based on the ICCA Report's findings, it appears there is no express right to a physical hearing, and the risk that an award will be set aside and/or unenforceable in circumstances where an arbitral tribunal has ordered a remote hearing is low.
However, parties should consider whether:
Such an order overrides the parties' agreement to a physical hearing;
That determination is procedurally unfair; or
It threatens the parties' access to justice.
The pandemic highlighted how effective technology can be in overcoming logistical barriers to tribunals, but it was not without its drawbacks or detractors.
Whether the arbitral community will continue to use it to the same extent post-pandemic remains to be seen, but what looks likely is that technology and arbitral laws will continue to evolve to ensure arbitration remains an attractive and effective route for resolving disputes.
This article was authored by Rebecca McKee, dispute resolution director at Fieldfisher.
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