Covid-19 and Arbitral Practice: Lessons Learned and Challenges Ahead

• Publication year: 2022

54 Creighton L. Rev. 473. COVID-19 AND ARBITRAL PRACTICE: LESSONS LEARNED AND CHALLENGES AHEAD

COVID-19 AND ARBITRAL PRACTICE: LESSONS LEARNED AND CHALLENGES AHEAD

YLLI DAUTAJ ^[D1]
BRUNO GUSTAFSSON ^[D2]

I. INTRODUCTION

The arbitration community and its consumers have been forced to discuss the need for and use of remote hearings in light of COVID-19's detrimental effect. ^[1] Thus, the "ordinary" arbitral procedure has been forced to utilize the bedrock principle of flexibility in order to accommodate new realities. While doing so, the major obstacle has been to accommodate for remote hearings without undercutting "due process."

This has raised several important questions. ^[2] In this paper we focus on the highly debated topic of whether "a right to a physical hearing [does] exist in international arbitration"? ^[3] Put simply, does a party have the right to a physical hearing, or does the arbitral tribunal have the power to decide to conduct a remote hearing? ^[4]

To answer this question, we can-and will-safely proceed on the presumption that there is no fully uniform answer yet and that a harmonized framework is still in the making. Therefore, any answer that does not have the explicit approval of the court, ^[5] institutional rules, ^[6] or the law, ^[7] is speculative and at best one of de lege ferenda (explaining what the law "should" be) as opposed to de lege lata (explaining what the law actually "is").

Whatever answer the law reaches, the stakeholders of international arbitration must be provided with an answer soon. Parties-no matter what side-have already suffered tremendously in this uncertainty. Arbitral procedures have been cancelled, delayed, or conducted remotely. Where the arbitral procedure in many cases has proceeded remotely at the protest of one of the parties, a challenge upon an adverse award has, in most instances, followed shortly thereafter. The silence in law and rules, on the one hand, and the unexpected consequences of the pandemic, on the other, will carry longterm repercussions vis-A-vis foreseeability, clarity, and legitimacy of the arbitral procedure. The challenges to arbitral awards will play out all over the world for many years to come. ^[8]

However, this paper does not concern award scrutiny but a much narrower topic: Is there, in Sweden or in the United States, a per se rule that a party can request (A) an "oral" hearing, and (B) if so, does an oral hearing equal a "physical" "in-person" hearing? In a third step, one must ask whether (C) an exception to the general rule exists and whether it can come into play when a procedural impediment manifests as a procedural impossibility.

Apart from what arbitrators and courts must consider, there is also an important role for practitioners and academics to play in this legal vacuum. Therefore, in this paper, we embark on this difficult task by: (1) discussing remote hearings as such; (2) examining whether the right to a physical hearing exists in international arbitration; and finally (3) disseminating a short reflection on the path ahead. Firstly, we will discuss the pros and cons of remote hearings based on practical experiences, and the relevance of the practical benefits of remote hearings in the legal assessment of a party's right to a physical hearing. Secondly, we will discuss the fundamental elements of international arbitration that are put to the test in this context, namely, (i) due process, (ii) procedural efficacy, (iii) the concept of equality, and (iv) party autonomy. Ultimately, the arbitrator will navigate these elements, and therefore we will elaborate on arbitrators' powers and duties in this context. We will also discuss the role and standing of a possible doctrine on "procedural impossibility." Following such discussion, we will compare the Swedish and United States jurisdictions on whether a right to a physical hearing exists per se in international arbitration, respectively. Thirdly and finally, we will articulate some major reforms already taking place and reflect on the landscape in 2021 and going forward.

II. REMOTE HEARINGS: THE NECESSARY DISTINCTION BETWEEN "BEST PRACTICES" AND THE PARTIES' RIGHTS AND OBLIGATIONS

The use of digital means is by no means new in the context of international arbitration. On the contrary, it has for long been generally accepted that most aspects of arbitral procedure can, and in most cases should be, administered through virtual means. This includes, among other things, communications (oral and written) between the parties and the arbitral tribunal, case management conferences and other procedural gatherings. ^[9] The same applies to a notable extent in expedited arbitral proceedings and emergency arbitrations, which are often to a significant extent held by virtual means. ^[10]

The fact that international arbitration, in general, recognizes the utility of technology is not surprising. The reasons for this are simple: technology minimizes physical interaction by reducing travel, organization, and administration, and it can contribute to making arbitration both faster and cheaper. In other words, technology promotes the efficiency of arbitral proceedings. ^[11] The notion that technology promotes efficiency is even more pertinent today than previously in light of rapid technological development in recent years, which allows for virtual transmission of picture and audio with high technical quality. ^[12] Efficiency-based arguments for remote hearings should not be neglected. From a practical viewpoint, such arguments appear particularly strong, especially given that increased costs and lack of speed has been highlighted by parties as one of the most negative aspects of arbitration in its current form. ^[13]

For this reason, discussions on the right to a remote hearing often tend to gravitate towards practically rooted efficiency arguments of the kind discussed in the foregoing paragraph. ^[14] The practical benefits of conducting hearings remotely have naturally become even more pertinent in light of the implications on travel induced by the COVID-19 pandemic. In the midst of the pandemic, there is often no viable alternative to conducting the hearing remotely besides cancelling or postponing it altogether. In light of this, parties arguing for a remote hearing will often be able to assert a strong efficiency-based case in support of why it would be appropriate to conduct the hearing remotely in a given situation.

However, while the importance of such practical considerations should not be neglected, the crux of the issue of whether a right to a physical hearing exists is not what can be deemed most practical or reasonable in any given situation, but rather what procedural decrees the arbitral tribunal can issue without infringing on the parties' rights. In other words, the discussion is, in essence, a matter of the parties' rights and obligations (which are ultimately derived from what the parties have impliedly consented to by submitting their dispute to arbitration) as well as widely accepted general principles of due process.

Thus, the issue of the right to a physical hearing it is not a matter that can be solely based on what is appropriate from a mere practical standpoint, nor can it be answered by inference. ^[15] There is a need to form a distinction between what practitioners think constitutes (or should constitute) "best practices" on the one hand, and the parties' rights and obligations in application and enforcement on the other. Either a right exists per se or it does not, and the answer is rooted in law and in specifically designed arbitration rules (de lege lata). ^[16] Thus, it is important to comparatively study pro-arbitration jurisdictions. It is equally important to propose means to develop law and legal doctrines, e.g., a doctrine on "procedural impossibility."

Notwithstanding any per se right, arbitrators and courts must assess, address, and sometimes redress whether a specific objection to a remote hearing constitutes a material violation, namely, a due process infringement. While conducting this inquiry at the intersection of arbitral discretion and mandatory rules, arbitrators (and judges) must rigorously consider, first, four fundamental elements of international arbitration-that is, (i) due process; (ii) procedural efficacy; (iii) the principle of equality; and (iv) party autonomy-and, secondly, a fifth foundational element of international arbitration, namely, the arbitrators' powers and duties vis-A-vis shaping the procedural order. This will be elaborated upon below.

III. DOES A RIGHT TO A PHYSICAL HEARING EXIST IN INTERNATIONAL ARBITRATION?

A. FUNDAMENTAL ELEMENTS OF INTERNATIONAL ARBITRATION AND ARBITRATOR DISCRETIONARY POWERS

If it was not already hard enough to strike a balance between cost, time, and quality (better known as the "iron triangle" ^[17]), and the arbitrators' powers and duties in this respect on the one hand, and party autonomy, procedural efficacy, equality, and due process on the other, the current pandemic has made the matter even more cumbersome. As a result, many arbitrators and arbitration practitioners have unwillingly found themselves between a rock and a hard place. Arbitrators (and subsequently judges at the set-aside phase) have been forced to navigate rather unchartered territory, having to answer threshold questions and issues such as: What does due process...