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Digitalization of Arbitration: Successful Future or Problematic Reality?

Digitalization of Arbitration: Successful Future or Problematic Reality?

The outbreak of COVID-19 disease that spread around the world for several months brought challenges to the international community. As a result, the states closed their borders on lockdown to stop the disease’s expansion. This lockdown has relocated all meetings, judicial and arbitral proceedings to the online regime, hence, that is why scholars recalled an idea of arbitration’s digitalization. However, we should analyze all risks of this digitalization process. The list of such risks is quite extensive since it covers the existence of technical problems for the parties, threats to the parties’ confidentiality, violations of human rights, and obstacles in the awards’ enforcement.

Main concerns of the arbitration’s digitalization

The reason for the unwillingness to conduct virtual arbitral proceedings is peoples’ mistrust of new technologies. That is because people have never used complicated computer technologies or do not want to use them because of their unsuccessful experiences. For instance, the 2018 Queen Mary University of London Survey found that 80% of arbitrators have never participated in online hearings with all participants in different countries. Therefore, not all participants will agree on the virtual hearings, which cannot be conducted without their consent.

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Even though parties consented to online hearings, another obstacle is the availability of technology and its cost. The parties should find reliable and complex equipment that will be suitable for online hearings. However, many practitioners fear that technology will not work properly or that camera’s quality will not be sufficient. Furthermore, usage of such high technologies can increase the costs of arbitration several times. These costs are called upon expenses on an online drive for document storage, an online platform for hearings, and training for arbitrators and councils on the usage of these technologies.

Threats to the parties’ confidentiality

Even if procedural problems can be resolved, the substantive concerns require much more attention. One of such is the confidentiality concern that encompasses fields of sensitive documents’ security and privacy during online hearings. As we know, assurance of confidentiality is one of the main arbitration’s advantages. Supporters of digitalization propose the creation of an online platform to maintain all arbitration-related documents and conduct hearings. The operation of this platform requires minimal human input. Hence, all confidential documents may be accessed by unauthorized persons. Moreover, there is no guarantee that documents will not be intercepted or that parties will not record video and audio during an online hearing. As a solution, arbitrators may ask all participants to confirm in writing that they will not record hearings. However, such type of precautions cannot be based only on good faith.

Does digitalization lead to the violation of human rights?

Lots of debates are held concerning the online hearings’ impact on the fundamental right of due process, namely the right of fair trial and equality of the parties. In that perspective, two problems may arise – the rationality of online cross-examination of witnesses and realization of the right to be heard. Supporters of digitalization argue that current technologies facilitate conducting online cross-examination. However, opponents draw attention to the inability to identify a witness’s facial expression, body language, and voice sounds. What is more important, participants of a hearing cannot be sure that a witness does not read a text hidden behind a camera or follow someone’s instructions. Last but not least, the lawyer and witness may have a different Internet connection that will lead to misunderstanding from the lawyer’s and arbitrators’ side. As a result, all these factors complicate the witness questioning stage and undermine the credibility and value of this evidence.

Source: USCIB

Online hearings threaten the right to be heard from different aspects. Firstly, communication errors can deprive a party of the ability to transmit their documents on the online platform. Such errors can be caused by the site’s overloading or interception of the signal by third parties. For instance, hackers placed a vicious code on the Permanent Court of Arbitration’s website that inflicted computers of lawyers and diplomats. Hence, the party can be prevented from filing its submissions in time that leads to the slowdown of arbitral proceedings.

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The second concern relates to the stability of the Internet connection during hearings. Opponents argue that Internet connection may cease to work at the most important moment such as the respondent’s rebuttal of the claimant’s position. It should be expected that persons from the rural environment may not have a high-speed connection that is necessary for proceedings. Bad Internet connection leads to the parties’ frustration, misunderstanding the parties’ positions by arbitrators, and undermining of the confidence in the faithful outcome of a case. As a result, one of the parties may claim the inability to present its position due to the technical errors and set aside an award.

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Thirdly, these hearings require sophisticated technologies that cannot be easily accessible or understandable by the parties. As was mentioned above, such technologies demand a lot of expenses and experience. Therefore, if one of the parties does not have enough technical knowledge, it is simply deprived of the opportunity to defend itself.

The last problem concerns arbitrators’ obligation to manage time for virtual hearings. Since councils of arbitral proceedings usually work from different time zones, arbitrators should find the most convenient time for all participants. Despite the arbitrators’ attempts, some councils may be forced to participate on a nightly basis. Such a situation leads to the violation of the parties’ equality.

The enforcement of awards

The process of digitalization also affects the last stage of proceedings – recognition and enforcement of awards. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”) stipulates that arbitration agreements must be in writing. Thus, awards based on written agreements will be enforceable. Unfortunately, there are no such provisions regarding online awards. Notwithstanding that States can amend provisions of the Convention, parties can easily set aside the enforcement of an award. Particularly, they may claim an inability to present a case due to lengthy technical failures and as a result, violation of the right to be heard.

Conclusion

Summarizing all points, the process of arbitration digitalization can cause unnecessary risks for the parties. That is why legal practitioners and parties to disputes fear the above-mentioned concerns and still prefer a paper-based approach. Parties should consider all pros and cons before starting online arbitral proceedings to avoid the possibility of an unenforceable award. However, the COVID-19 pandemic can become a powerful catalyst for the revision of all digitalization’s problems. In this perspective, it is important to pay maximum attention to the legal regulation of these digitalization processes and create a platform that will be suitable for arbitration participants. In case of successful results, we shall adapt ourselves to the new reality of online proceedings.

Written by Valeriia Yakimova, Kyiv-Mohyla Academy (Ukraine), degree in Law