International commercial arbitration in the time of covid-19

In summary

The covid-19 pandemic has shaken the world and had a severe impact on all sectors of global society. Arbitration institutions in different countries have been confronted with new challenges and opportunities at the same time. In China, arbitration institutions took active and effective measures to ensure that arbitration cases ran smoothly during the outbreak, including the Shanghai International Arbitration Center (SHIAC), which has explored ways to provide efficient and convenient arbitration services to resolve disputes. In facing booming international commercial disputes, alternative dispute resolution mechanisms will surely undergo significant developments.

Discussion points

• Responses of arbitration institutions to covid-19-related cases
• Responses of judicial authorities to covid-19-related cases
• New technologies applied in arbitration
• Cooperation among Yangtze River Economic Belt arbitration institutions
• The Aviation Aid Arbitration Project
• Challenges and opportunities for international commercial dispute resolution during the pandemic

Referenced in this article

• The FTZ Arbitration Rules
• 1958 New York Convention
• 2018 Singapore Mediation Convention
• 2019 Convention on the Recognition and Enforcement of Foreign Judgments
• 2020 Notice on Strengthening and Standardizing Online Litigation Work
• 2020 Guiding Opinions on Enforcement
• 2020 Notice of Settlement of Disputes in Civil Aviation

China’s efficiency in coping with the pandemic

Responses of arbitration institutions

As the covid-19 pandemic developed, Chinese local governments adopted prevention and control measures to reduce the spread of the virus. Normal social order was suspended for a time. After the Chinese Spring Festival holiday, a number of domestic arbitration institutions, including SHIAC, made announcements on arbitration work arrangements through their official websites. On 28 January 2020, SHIAC released the Notice on Arbitration Work Arrangements during the Epidemic Prevention and Control Period, which cancelled arbitration hearings and hearings of evidence from 31 January to 9 February, encouraging parties to file cases, submit materials and make contact via email and tele­phone, and reminding them to apply for adjournment according to the arbitration rules if they were unable to attend planned hearings because of the pandemic.

The development of the covid-19 pandemic and the prevention and control policies of different countries affected the daily operations of arbitration institutions. The number of foreign arbitrators participating in SHIAC’s arbitration cases decreased compared to 2019: upon parties’ agreement and according to the arbitration rules, SHIAC appointed a total of 22 arbitrators from Hong Kong, Macao, Taiwan and other foreign countries and regions in 2020. Parties intended to choose foreign arbitrators who were based in China, or Chinese arbitrators; however,at the height of the pandemic, parties from regions outside Shanghai could not attend in-person hearings due to travel difficulties across the provinces. Faced with these problems, SHIAC endeavoured to provide efficient and convenient arbitration services by making full use of its alternative dispute resolution (ADR) mechanisms and arbitration rules. For example, it encouraged parties to submit arbitration applications, statements of defence and evidence via email, exchanged views of parties before hearings to allow the tribunal to narrow the key points, suggested that witnesses and experts submit written testimonies instead of attending in person, welcomed online mediation and arranged online hearings for cases in which parties had fewer disputes on the facts.

In March 2020, SHIAC accepted a case of a leasing dispute between an offline education and training organisation and a real estate company. The training organisation was unable to operate during the pandemic and thus refused to pay the rent. To solve the dispute and cut losses for both parties, upon their agreement to mediation according to the China (Shanghai) Pilot Free Trade Zone Arbitration Rules (the FTZ Arbitration Rules), SHIAC appointed a mediator who was experienced in legal issues and mediation to organise the mediation proceedings. The two parties reached an accommodation and withdrew their arbitration claims and counterclaims, respectively. In took less than two months from filing the case to resolving the dispute, and thus proved time efficient for both parties.

Mediation by mediators is an innovative mechanism under the FTZ Arbitration Rules. The experience of dealing with international commercial disputes indicates that parties are often interested in mediation before the arbitration hearing. Before the tribunal is constituted, if parties concluded written agreements for mediation, SHIAC will appoint a mediator from the mediator panel (a SHIAC arbitrator can also be appointed as the mediator) to organise the mediation proceeding. The mediation will not influence the ongoing arbitration proceedings. Unless agreed by both parties, the mediator will not be appointed as the arbitrator in the same case to ensure the impartiality of the proceedings. The mechanism of mediation by mediators has played an important role in effectively resolving disputes during the pandemic.

Responses of judicial authorities

In 2020, the Supreme People’s Court (SPC) of China issued a number of notices to ensure that litigation could continue during the pandemic, which provided a uniform approach to the situation. On 18 February 2020, the SPC announced the Notice on Strengthening and Standardising Online Litigation Work,^[1] which provides guidelines on online litigation, enhances information systems construction and promotes one-stop ADR mechanism and litigation services. In the months following, the SPC released relevant documents, including three sets of guidelines on handling civil cases related to the pandemic and the Guiding Opinions on Enforcement,^[2] which provide guidelines for substantial and procedural problems of litigation and enforcement in cases that are affected by the pandemic. In practice, the lower courts referred to the documents and typical cases issued by the SPC to promote the litigation of disputes that are related to the pandemic, which has provided a strong judicial safeguard to protect parties’ interests and the stable development of society.

Institutional explorations of SHIAC

New technologies in arbitration and regional cooperation

Owing to travel restrictions caused by the pandemic, online hearings and services became increasingly normal for arbitration institutions. However, this is not the first time that modern technological measures have been used in dispute resolution. Along with the development of information technologies, all sectors of society have undergone a digital transformation. Technologies including big data, blockchain and AI require special legal services and the outbreak of the pandemic adjusted the focus of dispute resolution on the opportunities and challenges brought by those new technologies.

On 24 April 2020, a webinar on new technologies in dispute resolution and the revolution of arbitration hearings was co-hosted by SHIAC and the Institute of Law of the Chinese Academy of Social Sciences. In practice, many domestic arbitration institutions and courts specialising in handling internet-related disputes have accepted cases that are related to fictitious assets, cryptocurrency and internet finance, and as part of this have used electronic signatures and digital evidence during legal proceedings. Representatives from SHIAC and the International Chamber of Commerce indicated that, currently, the arbitration procedure could not depend fully on existing technologies as there may still be procedural risks. Therefore, against the backdrop of digital transformation as part of wider society, the traditional mode of commercial arbitration shall, on the one hand, explore new technologies in arbitration procedures to cope with parties’ needs, and on the other, modestly deal with the risks posed by the technologies on the basis of due process.

In response to the demand for integrating new technologies with arbitration services, and to further promote online hearings, after releasing the webinar, SHIAC initiated and sponsored the Declaration of Online Hearings Cooperation among Yangtze River Economic Belt Arbitration Institutions. The Declaration integrated the resources of 31 arbitration institutions from the Yangtze River Economic Belt to provide a green channel for online arbitration hearings among these institutions. The institutions also agreed to:

• strongly promote online arbitration services, and to allow the parties and arbitrators in different locations to access online hearings and other services more conveniently by using the hardware and software of these institutions;
• discuss with cooperative institutions the types of cases that are fit for online hearings;
• jointly determine the specific operation details, the arbitration rules and the contents of hearings with cooperative institutions; and
• where institutions are willing and qualified to do so, facilitate further cooperation beyond the scope of this Declaration.

The platform built by the Declaration manifests the spirit of the Yangtze River Economic Belt, which encompasses openness, cooperation, inclusivity and sharing. It is also an innovative platform in the field of international commercial arbitration services.

Arbitration Aids Aviation Project

Aviation arbitration cases have always been a critical focus of SHIAC. In June 2014, SHIAC established the Shanghai International Aviation Court of Arbitration. At the same time, it concluded a cooperation agreement with the International Air Transport Association (IATA) and the China Air Transport Association (CATA). By establishing an expert committee and recommending aviation legal experts to the panel, among other things, the three parties cooperated to promote the development of international aviation arbitration.

As a result of the global spread of the covid-19 pandemic, the aviation industry has been severely affected. A significant drop in the number of flights, reductions to the workforce, logistical challenges and increases in rent for airport premises and storage facilities in 2020 caused problems for upstream and downstream aviation enterprises. Large numbers of aviation disputes needed to be resolved urgently. To help aviation companies resume their normal business as soon as possible and to reduce the costs of dispute resolution for these companies, under the guidance of the Department of Policies and Laws of the Civil Aviation Administration of China (CAAC) and CATA, on 12 May 2020 SHIAC launched the Arbitration Aids Aviation Project and established a special panel of mediators. The Shanghai International Aviation Court of Arbitration, which is the dispute resolution platform for this project, accepted aviation-related mediation and arbitration cases that were submitted from the date of the announcement of the project until 31 December 2020. To reduce the burden on parties to these disputes, the registration fee for mediation cases accepted under this project was only 1,000 yuan, without any additional fees. The arbitration fees under this project were also partially reduced. The Shanghai International Aviation Court of Arbitration accepted two mediation cases as part of this project.

The Arbitration Aids Aviation Project was a helpful resource provided by SHIAC at the height of the pandemic in 2020. It is also the social responsibility of SHIAC to resolve disputes properly and protect parties’ interests. During the implementation of the project, CATA issued the Notice of Settlement of Disputes in Civil Aviation^[3] to its members. On 21 May 2020, the Department of Policies and Regulations of CAAC forwarded this Notice to the transportation airlines (general aviation), service guarantee companies, airports and bureau-affiliated companies, and encouraged and supported these bodies to select relevant arbitration institutions such as the Shanghai International Aviation Court of Arbitration to resolve conflicts and disputes so that business could be resumed in a timely manner.

Challenges and opportunities of international commercial dispute resolution during the pandemic

Despite the situation improving with regard to the pandemic, the global economy has suffered and there are still reasons to be cautious. The normalisation of the situation brought about by the pandemic presents new challenges for international commercial dispute resolution and also introduces some development opportunities for ADR.

Currently, the main problems facing international commercial dispute resolution mechanisms are:

• reduced international travel, which has affected hearings, attendance of dispute resolution experts and the enforcement of foreign judgments and arbitral awards;
• a lack of international legal experts who are familiar with international rules, which has caused discrepancies in the application of cross-border dispute resolution services;
• the use of new technologies for obtaining evidence, in cross-border cases and in hearings, which has led to inefficiencies and, in some cases, weakened security; and
• the need for signature countries to the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters^[4] and the Singapore Mediation Convention^[5] to ensure the recognition and enforcement of judgments and mediation agreements.

Arbitration has the important characteristics of party autonomy, expert arbitrators, flexible and confidential proceedings, and enforceability of arbitral awards. In a world that has adapted to covid-19, these characteristics are likely to be the biggest motive for parties to choose arbitration as their method of dispute resolution. In addition, with the development of new technologies and increased cooperation among regional ADR institutions, problems that have arisen over the past year, such as those outlined above, may become a thing of the past, and the new, more flexible approach adopted by these institutions will facilitate impartial, effective, convenient and low-cost services for international commercial dispute resolution.

Notes

^[1] 2020 Notice on Strengthening and Standardising Online Litigation Work during the Period of Coronavirus Pandemic Prevention and Control.

^[2] 2020 Guiding Opinions on Several Issues concerning the Lawful and Proper Enforcement of Cases Related to the Coronavirus Pandemic.

^[3] 2020 Notice of Efficient Settlement of Commercial Disputes in Civil Aviation to Resume Business.

^[4] 2019 Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters.

^[5] 2018 United Nations Convention on International Settlement Agreements Resulting from Mediation.