ARBITRATION: NEW STAGE?

There is no doubt that the health crisis caused by coronavirus (COVID-19) has led to drastic decisions being taken across the globe and that the world of arbitration has been impacted by it, as have many other areas.

1. Impact of COVID-19

Although it is true that arbitration has a natural flexibility that would allow it to avoid certain restrictions and prevent a deadlock in open cases without harming the health of the people involved, the fact is that, initially, the plurality of countries where the parties can have their residences and the measures implemented in each of them made the first scenario complex.

Already from the beginning of the pandemic, arbitration cases in Asia suffered from mobility restrictions, making it practically impossible to attend concerted hearings, which had to be suspended or rescheduled and set in safer locations. In most cases, the suspension of proceedings was the norm.

Lawyers, witnesses, parties involved, arbitrators, experts... we have all suffered the consequences of mobility restrictions both at international and national level. Each of us has had to review the measures taken by each of the arbitral institutions to find out the status of the proceedings.

The arbitration institutions in Spain took measures, in parallel with the Public Administrations, implemented on a one-to-one basis the measures established by Royal Decree 463/2020 of 14 March declaring the State of Alarm for the management of the health crisis situation caused by the COVID-19.

Thus, as our closest court, the Court of Arbitration and Mediation of Valencia attached the general suspension of the deadlines to the aforementioned Royal Decree and its raising to the end of the state of alarm. A simple solution but, in our opinion, insufficient.

Several arbitration institutions in Spain have declared that they expect to continue to operate. The most common and obvious measure taken in relation to workers has been to adopt distance working. Naturally there is a necessary period of adjustment on all fronts. However, it is likely that there will be a backlog of investigations related to pending cases and more than evident delays in communications.

From an international perspective, the International Court of Arbitration of the International Chamber of Commerce or the London Court of International Arbitration have left it to the arbitrators and parties to decide whether or not to suspend proceedings and even to use new technologies to make progress. This can and should be the way forward.

2. Open opportunities

For some time now, the needs for technological progress in the world of arbitration have been discussed in various forums, and these are an essential tool for arbitration processes to be used in preference to ordinary jurisdiction.

Arbitration must always be one step ahead in order not to lose its competitive advantage.

Abroad and in leading arbitration centres, we have seen an innovative approach that encourages us to envisage solutions, not only to overcome the current health crisis but also to improve the tempo of dispute resolution, to lighten the eventual costs of the processes and to take advantage of new technologies.

The scenario left to us by the covid-19 is a disaster of epic magnitude in human and economic terms, but it also implies per se possibilities of innovation that otherwise would not have arrived.

It is clear that regardless of whether the new technologies are incorporated in the procedural rules of the arbitration courts, by agreement between the parties and the arbitrator, their use can be agreed upon.

Therefore, it is not unusual to envisage an immediate future where hearings are more or less widely held at a distance. There is no doubt that, today, the de-escalation phases contemplated by the Spanish Government and the asymmetry of these phases will generate uncertainty in the displacements that we must overcome with creativity.

The use of these virtual hearings could reduce time and costs, particularly those related to travel and accommodation. It is already quite common for witnesses in the proceedings to give their testimony via video conference. This could potentially be extended to allow all parties involved in a case to be present virtually at a hearing.

All of these issues will need to be taken into account in new arbitration proceedings.

3. New scenario: act now

In our opinion, there will be an obvious scenario of an increase, in the medium term, in contractual disputes arising from the Covid-19 crisis. Force majeure and rebus sic stantibus will be invoked within the argument to claim the impossibility of compliance with obligations.

However, in times of economic and financial stress, companies will first of all direct their efforts towards their ability to continue operating, and will seek to resort to dispute resolution at a later date, in the medium term.

It may be more prudent for firms to consider their arbitration options sooner rather than later, especially given the commitment of some institutions to continue to operate normally during these times.

This will, of course, depend on economic capacities, but the loss of economic capacities that the other party might suffer should not be disregarded. Urgent action is needed.

On the other hand, the massive and almost inevitable increase of cases in the medium term, as a result of the events during the outbreak, makes it advisable to start as soon as the non-fulfillment and the possibility of action have been delimited.

Updated on 11.05.2020