Covid-19 has affected our lives in many ways. It is quite fair to say that this is the age of ‘onlinezation’ of everything! Dispute Resolution is not an exception. With travel restrictions in place and social distancing, the idea of online/virtual hearings has become more and more perceptible.
The due process standard is undisputed and shall be met in both face to face hearings and online/virtual hearings - not only in arbitration, but also in any contentious proceeding. Simply put, due process acts as a shield against unfairness in any dispute resolution method. The right to due process is well documented in the UNCITRAL Model Law on International Commercial Arbitration (hereinafter Model Law) and other international instruments. In article 18 of the Model Law, under the title of equal treatment, it is stated that, 'each party shall be given a full opportunity of presenting his case'. Article V(2)(b) of the New York Convention ensures that arbitral awards produced without observing due process are not recognised or enforced on public policy grounds.
In this post I aim to shed light on the question raised, when the worlds of due process and online proceedings collide: can due process be properly observed in online proceedings?
Can a tribunal force a party to attend a virtual hearing?
To address the possibility of a mandatory online hearing, the first thing to be considered is the parties’ agreement. If the parties, prior to the arbitration proceedings, agreed to have a virtual hearing, then any amendment to such arrangement shall be made by the mutual agreement of the parties. Otherwise, the parties are bound to their initial arrangement and, therefore, shall be bound to attend an online hearing.
If there is no agreement as to the virtual hearing, the applicable law on arbitration shall be taken into consideration. In case where the applicable law expressly requires an in-person hearing, it would be difficult for the arbitrator to require any party to attend a virtual hearing. If the parties’ consent is not obtained, and the tribunal forces the virtual hearing, the enforcement of the awards may face some uncertainties.
In the case where there is no direct or indirect arrangement by the parties and legal provisions are silent, still forcing any party to attend a virtual hearing might be risky. Once constituted, the arbitral tribunal will have a broad discretion to decide upon the procedure of the arbitration, including holding an online hearing. It is crystal clear that when one of the parties has not agreed for a virtual hearing, this discretion is limited.
The refusing party may argue that a physical hearing is necessary for them to fully present their case. This is the defence called, 'due process complaint'. Due process, under many sets of laws, including the Model Law, constitutes a strong ground for challenging an award. An arbitrator faced with the objection to have an online hearing may have two choices:
- Rejecting such objection based on the reasoning that even in a virtual hearing the parties are assured to have enough opportunities to present their case; or
- Accept the due process defence and postpone any hearing to a more appropriate time and place.
In the latter choice, if the opposing party can establish that such defence is merely an excuse and will result in damages, the arbitrator has the power to award the compensation of the opposing party’s damages. This is only limited to the cases where the aggrieved party can prove the essential elements required for establishing the liability, i.e., (i) the causal relationship between refusal and damages and (ii) quantification of damages, etc.
It goes without saying that the arbitrator in their decision as to the costs of the arbitration (unless arbitrator is prohibited to do so), may take into account the extent to which each party has conducted the arbitration in an expeditious and cost-effective manner. In this regard, the arbitrator may decide that due to the inefficiencies of the refusing, the respective party shall bear all the costs of the arbitration.
Due process complaints in arbitration
Due process complaints are the primary grounds to challenge an arbitral award. In many cases, these complaints are not based on real factual bases as they are merely an abuse of this right. This idea is thoroughly examined by Lucy Reed [1] in her article ‘Ab(use) of due process: sword vs shield’, in which she gives an account of the many ways due process is being used tactically to challenge the arbitral award. Therefore, it is not uncommon that the counsel of the unsuccessful party might initiate court proceedings requesting an annulment or prevention of recognition and enforcement of the award (as the case might be), based on the potential defaults of the ordinary process which does not necessarily mean due process.
Regardless of the unsubstantiated due process complaints, which should be studied case by case, the possibility of waiver of such rights is received with scepticism. As a way of example, Article V(2)(b) of the New York Convention:
'Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
…
(b) The recognition or enforcement of the award would be contrary to the public policy of that country'.
The meaning of this article is that even if none of the parties to the arbitration recourse to the grounds which contradict with public policy, the competent national authority shall pay regard to such issues. It is widely accepted that due process has a public policy nature, therefore, it cannot be derogated even by the agreement of the parties. In other words, the effectiveness of waivers of due process is limited.
Let’s go back to virtual hearing, where due process complaints arise even more frequently than usual, since the party or parties may request a face to face hearing or cross-examination of the witnesses. In a virtual hearing, there might be some serious problems such as using technical issues (disconnection from internet etc.) as a trick to escape from the pressure that is put on witnesses. On the other hand, there might be real technical problems that can prevent a party to present its case and defences. In this situation, the arbitration process may face even more due-process labelled complaints.
The parties may agree to have virtual/online hearings (as per the arbitration agreement, the Terms of Reference, or during any stage of the proceedings). When the parties agree on having the process virtually, the chances of recourse on due process breaches are minimum. Unless the parties were barred from their right to present their case, the possibility of accepting due process challenges is small. In contrast, if the virtual/online hearing violates the due process, the said waiver shall be considered unenforceable, and the competent court shall examine the compliance with the due process requirement.
My experience with the examination of witnesses
It would not be wrong to say that a witness hearing is the most interesting part of arbitration proceedings. During witness examination, the counsels try to encourage the witness to reveal something against his/her own testimony to decrease his/her credibility. Both of these tactics cannot be achieved if the witness can escape from the pressure.
As a young international construction arbitration lawyer, I had several experiences with the cross-examination of witnesses in international arbitration. Remarkably, during proceedings which took place shortly before the Covid-19 pandemic, the involvement of an expert witness (of the opposing side), who attended the hearing remotely, caused many problems because of his unstable internet connection. Particularly, during the course of the cross-examination by our team, there were several times that the connection was lost; ‘surprisingly’, after some critical questions were raised! There were also several times where one could easily tell that the witness was directed by the opposing counsel’s team. To make a long story short, because the above occurred during the hearing, the parties agreed, eventually, for the removal of his expert testimony from the proceedings (including any remarks made during the examination and cross examination stages). This was at the expense of the parties’ energy, time and money.
Considering the above experience, I strongly doubt that a virtual witness examination is even comparable, or an alternative to physical hearings. If the witness is not in the same room with the counsel, he/she can employ weak-connection excuses to disconnect himself/herself from the hearing to avoid the pressure of the continuous questioning.
Any connection interruption may cause testimonies, questions, and/or instructions to be lost. This could be guaranteed if all participants in an online hearing, including counsels, fact witnesses, expert witnesses as well as translators, could have access to proper high-speed internet, a webcam, a microphone, and a private location free of disconnection. At present, when considering the inequality of access to technology worldwide, such guarantee does not exist.
Last thoughts
To sum up, although it seems that with the proper tools of communication, a virtual hearing will not undermine the parties right to be heard, the importance of due process is at such a level that it is not worth the risk of an unenforceable award. In the author’s view, arbitrators should suspend online hearings until physical hearings become the viable means of addressing disputes again. In this case, the opposing party may establish a proper argument as to the compensation of damages. The arbitrator, on the other hand, may decide that all the costs of the arbitration shall be borne by the refusing party. This, in my opinion, might be a solution that not only puts the award on the safe side but also may, at some point, prevent parties from abusing due process complaints
[1] Lucy Reed, 'Ab(use) of due process: sword vs shield', (2017) 33 Arbitration International 361-377