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The new norm: virtual arbitration

  • Market Insight 23 July 2021 23 July 2021
  • Asia Pacific

  • Coronavirus

Partners Benjamin Knowles and Milena Szuniewicz-Wenzel, together with Yuan Xing (Partner) and Cynthia Xiao (Consultant) from Beijing Huanzhong & Partners, answered some of the most asked questions about virtual arbitration, which gained substantial popularity since the beginning of Covid-19 pandemic.

The new norm: virtual arbitration

Ben and Milena have attended a number of virtual hearings in the last two years and they have also got involved in the creation of a website, virtual, which contains a great amount of up-to-date news, information and guidance about virtual arbitration. Similarly, Yuan and Cynthia also have some experience in virtual arbitration mainly after the pandemic, and as authors of Huanzhong WeChat official account, Huanzhong Commercial Arbitration, have been focusing on changes brought up by virtual hearings long before.

Here is a summary of the questions being asked and answered. 

Prior to the pandemic, have you ever attended a virtual hearing? 

Benjamin: “In my 28 years of practice, I have never seen a fully virtual hearing until the pandemic whereas I have been involved in many hearings where witnesses have given evidence by video conference. This latter practice, however, was often limited to certain circumstances, where, for instance, witnesses either could not travel due to their unavailability or health reasons or simply it would be more sensible for relatively insignificant witnesses to join hearings virtually to bring the costs down.”

Yuan: “Neither have we experienced a fully virtual hearing before the pandemic, but in fact Chinese laws always allow witnesses to testify virtually in certain circumstances. If a witness has difficulties in testifying in person (for example, if due to illness, inconvenient traffic, and some force majeure events), he/she can apply for testifying by written statement, or giving testimony via audio-visual transmission technology or audio-visual materials. However, as Chinese courts tend to place greater value on documentary evidence, there are relatively fewer witnesses attending hearings in civil courts. If there are witnesses involved, we will usually try to ask them to attend court and give oral evidence in person. 

So before the pandemic, we’ve never had witness testified online in domestic litigation or arbitration proceedings, but we did encounter some international arbitration cases where the tribunals held directions hearings via telephone or video conferences and witnesses might also apply to attend virtually due to health issues. Nevertheless, virtual hearings were rare before the pandemic.”

Could you describe how the attitude of arbitral institutions, tribunals, and counsels was towards virtual hearings in the pre-pandemic world?

Milena: “Looking at the different stages of arbitral proceedings: it was already common to see the directions hearings being held remotely by tele-conferencing even before the pandemic. Now, I expect that this type of hearings will be more commonly held using video conferencing given the familiarity of the legal profession with such technologies. On the other hand, with regards to merits hearings at which evidence needs to be given, I do not recall having been involved in a fully virtual hearing before the pandemic. In fact, even in partially virtual hearings where only some of the evidence had to be given remotely, the default position for the opposing counsels had been to initially object to any request for witnesses to give evidence using video conferencing. As such when tribunals allowed evidence to be given remotely, this has often been subject to certain conditions. For example, that a representative from the opposing side would be present where the witness gave evidence, or that the witness was required to give evidence in a local arbitration centre.”

Yuan: “In international arbitration, we saw the same picture before the Covid-19. In some ICC and UNCITRAL cases we advocated before, when the parties were in different countries, the tribunal would usually hold a directions hearing via teleconference. While as for substantive matters, an in person hearing is the norm. However, tribunals in China usually communicate procedural matters with parties in written form, and secretaries may call the counsels separately to make the arrangements. Tribunals rarely hold hearings solely about procedures. Even so, Chinese arbitral institutions have tried this novelty since decades before. Since 2001, CIETAC adopted Online Dispute Resolution to resolve domain name disputes. On May 1, 2009, CIETAC implemented the Online Arbitration Rules, extending the scope to e-commerce disputes. On November 20, 2019, Nansha International Arbitration Center, co-founded by Guangzhou Arbitration Commission, for the first time used the technology of virtual hearing allowing party in Cambodia to participate in the hearing via video conferences.

We also agree with Milena that it is necessary to supervise witnesses to testify remotely to ensure that the witness is not improperly interfered. In a CIETAC case we represented in 2020, there was a similar situation. The case was held in Beijing, and the witness was cross-examined in Hong Kong, accompanied and supervised by the lawyer on behalf of the other party.”

What changes have you observed in the sector since the beginning of the Covid-19 pandemic last year?

Milena: “The short answer to your question is that there has been a clear change in the attitude of tribunals and parties to hearings being held virtually. Whereas the initial reaction of tribunals and parties to the pandemic was to postpone the upcoming hearings, we now observe that they are ready to go ahead with hearings, whether in-person or not. In my experience, this change was initially reflected in smaller cases, where the legal profession could much more quickly adapt to the changes. As such, the initial emphasis was on keeping smaller cases on track, which often involved cases where an interim hearing was to be held or where an oral hearing was not very important. However, within six months after this initial stage, it became clear that tribunals and parties were more open to the idea of fully virtual hearings. This was particularly prompted by the lockdowns, which were being unexpectedly eased and tightened throughout the pandemic as a result of which travel and in-person meetings, became almost impossible to plan.”

Cynthia: “The Covid-19 outbreak took place at the end of January 2020, almost all scheduled hearings were cancelled, but as the pandemic in China was under control in about August, the domestic situation was different. In February 2020, many Chinese courts released online hearing systems, and many cases were heard online thereafter. By the end of 2020, there were 856,000 online hearings, among which 40% were held in Beijing. Since August 2020, as the pandemic was under control, the courts had gradually resumed on-site hearings. However, for parties’ convenience, some courts would still organise online hearings for parties from different regions.

Since the pandemic, Chinese arbitration institutions have actively promoted virtual arbitration and issued their own guidelines and rules for virtual hearings, such as CIETAC, BIAC, HKIAC and CMAC. Virtual hearings for domestic cases are mainly held during the period from March to August 2020. There were usually parties’ consent to have the cases virtually heard, and the cases themselves were not complicated focusing on written evidence. After August 2020, on-site hearings were gradually resumed. However, for some cases involving participants in other regions, a combination of ‘online + offline’ hearings may still be adopted, that is, people in mainland China attend in person, while others participate remotely. So the pandemic did change the way the courts and tribunals hear cases.”

Could you tell us about your experiences with the use of different technologies in virtual arbitration hearings?

Milena: “In our experience, the key to a successful virtual hearing is both having the right equipment and being prepared for all eventualities. First, you need to have a good broadband connection to ensure the smooth running of the chosen platform where the hearing will be held. Having said that, it is important to have pre-agreed protocols in place so that parties know what to do if things go wrong as it is common to have connection problems. Second, the chosen platform, which not only needs to be trustworthy, but also must be operational in the country from where the parties are attending. There are many platforms, which are either not supported in certain countries or prohibitively expensive to access. Third, you need the right device set-up, which should make your life easier. I would recommend having at least three devices, if not more: one with a camera for the video link, one for reviewing your documents and one for the internal communication with your team. Besides these, if simultaneous translation is being used during a virtual hearing, it is also important to have the right tech-support given the translation technology can be quite tricky.”

Cynthia: “As Milena said, virtual hearing requires a high level of technical arrangements of the attendees, such as equipment and software. Currently, we think technology will not be a problem for holding virtual hearings as long as participants get well-prepared in advance. In terms of platforms, some arbitral institutions use third-party software to conduct hearings, while others may start to develop and use their own systems for confidentiality purpose (for example, around April 2020, CIETAC launched its own intelligent hearing platform). In the case mentioned just now, a combination of “online + offline” hearing was applied with equipment provided by the arbitration institution. While the equipment debugging was conducted by the institution, lawyers cooperated to take tests before the hearing. It is also noted that many institutions require that their staffs (secretaries) should assist pre-hearing tests and instruct participants to use the software and platforms. Such tests have gradually become an essential part of pre-hearing preparation. In terms of devices, sometimes the signal may not be stable, and the audio reception may be not clear in virtual hearings, so participants tend to have a separate monitor for hearing transcript. On the one hand, it is convenient to follow up the hearing at any time. On the other hand, it can help to correct the mistakes in the transcript in time.”

Do you think the virtual nature of such hearings require the adoption of a different style addressing the tribunal or questioning witnesses/experts?

Ben: “Style is certainly important as you need to find an appropriate way to present your case in a virtual environment. An aggressive approach will not be very effective given it is not easy to listen to someone speaking loudly and aggressively on a screen for a prolonged period of time.  However, it does not end there. One must also be mindful of the fact that those visual cues are not present on a virtual hearing. An advocate can no longer impose their physical presence in the room. As such, it is even more important to think carefully about what you need to say and how you say. Instead of your physical presence, you need to be able to use your voice, eyes, and mimics to communicate.”

Yuan: “We agree that virtual hearing does require a high level of lawyers’ advocate skills, especially in some cases involving examination on witnesses. Compared with in-person hearing, as lawyers are separated from the cross-examined witness and the arbitrator, tempo of the lawyer’s questioning is occasionally affected by issues such as audio reception and telecommunication. Lawyers may also lack of necessary eye contacts, so they need to speak more clearly with a powerful voice, and ask questions more patiently. Sometimes lawyers may also need to explain their questions to witnesses in detail.”

How has the document handling been affected by the pandemic?

Ben: “Document handling has already been changing before the pandemic as there has been a gradual move away from hard copy documents. Yet, this change has not always been welcomed and it was not a complete transformation given not all parties, tribunals and witnesses had the equal familiarity with the technologies used for electronic viewing and storage of documents. Against this backdrop, the pandemic acted as a catalyst to accelerate this transformation that has been already happening. With the tribunals and parties becoming more flexible to be able to conduct hearings during the pandemic, they had to make peace with the new technologies. As such, over the last year the legal profession gained a great familiarity with using and sharing documents electronically. In our hearings we have now seen an increased number of documents sharing platforms being used, which includes both third party and in-house platforms. Having said that, we have also witnessed to the use of more traditional and old-fashioned technologies like USB sticks.”

Cynthia: “In recent years, people have increasingly used electronic means to present evidence and materials in on-site hearings, but there are some technical difficulties in virtual hearings. Previously in a virtual hearing, we have also tried to remotely present documents to arbitrators and witness via screen sharing, but the platform provided by the institution did not have such function itself, so a third-party platform had to be used to share files online. Considering the confidentiality of arbitration, we finally chose to present the documents to the arbitral tribunal in hard copies. As for the witness, a separate electronic hearing bundle was prepared after negotiation between the parties. The hearing bundle was numbered with labels, so the witness could easily locate the evidence during the hearing.”

How have you dealt with witnesses requiring translation during the virtual hearings?

Milena: “Before the pandemic, it was already common for witnesses to give evidence in their mother-tongue and tribunals would often require simultaneous interpretation to enable this. However, when hearings were virtualised, simultaneous translation has proven to be difficult due to the intricacies of the translation technology. Consequently, tribunals had to become more flexible to accommodate consecutive translations, despite them being slower. This aside, a major problem with virtual hearings is the distance between the various individuals. You may no longer be in the same room with the witnesses and interpreters. As such, Counsel need to be short and precise when raising questions and need to ensure that all parties have access to the documents being used. This also means that before the hearing Counsel need to prepare the witnesses, who may not have any assistance during the hearing. The witnesses will need to know how to (i) find and read documents and (ii) ask questions if there is anything they do not understand during the hearing.”

Cynthia: “Regarding the issue of interpretation, in the cases we participated before the pandemic, we mainly used consecutive interpretation. Although it is slower, consecutive interpretation is relatively clearer and more accurate. We had not involved translation issues since the pandemic, but we did encounter an online transcription recording. In that hearing, the reporter said that it was difficult for him to promptly identify who was speaking through the video, and asked all parties to introduce the main speakers before the hearing. Each person may also need to repeat his or her name before speaking for accuracy of the transcription.”

Having covered some of the fundamental elements of virtual hearings, do you think there are any other remaining issues, which may affect the quality of virtual hearings?

Ben: “There are still many legal and practical issues, which certainly have an influence on virtual arbitrations. Whereas virtual hearings are not allowed in some countries, there is also some legal uncertainty around the enforcement of an arbitral award where no in-person hearing was held. Nevertheless, the important thing is to realise that virtual arbitration is relatively new, and these issues have not yet been tested at the enforcement stage. From a more practical perspective, one difficulty faced in virtual hearings is that parties may attend from different time zones, making synchronisation substantially more difficult. As such, we may come across new ways to deal with such synchronisation problems going forward. Asynchronous hearings, where parties from different time zones record their submissions prior to the tribunal’s screening, are yet to be tested. Similarly, where written submissions could partially replace certain parts of the oral hearings such as openings and closings, we may replace oral hearings with written submissions.”

Yuan: “First, we agree with Ben that lawyers need to be more cautious about how to present their cases in virtual hearings, about which can be presented orally and which should be put into written opinions. In this regard, we would like to add that it is very important to have complete, systematic and accurate written submissions, whether the hearing is held online or in person. 

Second, regarding the legality issue, one of the hottest topics is whether a virtual hearing requires consensus of the parties. Arbitration rules of some institutions give the tribunal broad discretion, like the CIETAC Arbitration Rules and the ICC Arbitration Rules. However, some rules on virtual hearings (such as the BIAC and the CMAC) expressly stipulate that consensus of the parties is prerequisite for virtual hearings. Besides, the issue of enforcing awards for such cases, especially in foreign-related cases arises. The UNCITRAL Model Law provides that the arbitral tribunal should give parties the opportunity to fully present their cases; otherwise it will constitute grounds for setting aside the arbitral award. In practice, we have not yet learned a case where one party applied for setting aside an arbitral award on the ground that the tribunal holds a virtual hearing without its consent. In jurisdictions where the Model Law is applied (such as Singapore, China Hong Kong, Germany, Japan, etc.), scholars generally believe that if a party requests the court to set aside the arbitration award merely on the ground that the virtual hearing was conducted without its consent, such request is unlikely to be upheld. The applicant also needs to prove that the arbitral tribunal treat parties unequally during the hearing, and that such unequal treatment has a substantial impact on making the award.”

Having identified some of the important issues affecting virtual hearings, how do you think one could improve the overall virtual arbitration experience? 

Ben: “To improve the experience of virtual arbitration, one needs to be prepared for all possibilities which may materialise in a virtual settling. Many law firms and institutions have already issued protocols, aiming to regulate the virtual hearing process. In essence, these protocols were created with an intention to form a part of the agreement between parties as to the arbitration, perhaps already at the Terms of Reference stage. The use of such protocols is certainly recommended. However, even more drastically, by providing for virtual hearing in the arbitration agreements, parties could maximise the efficiency of virtual arbitration. As such, since the beginning of the pandemic, all major arbitral institutions have either updated their arbitration rules (e.g.  ICC and LCIA) or issued guidelines to address virtual arbitrations (e.g. CIETAC, HKIAC and ICC). There is a shift towards the acceptance of virtual arbitration as a permanent component of international arbitration and incorporating this into arbitration agreements could certainly render such agreements more reliable against the uncertainties.”

Cynthia: “Exactly. As mentioned just now, arbitral institutions have been playing an essential role in leading a wave of virtual arbitration. Some virtual hearing guidelines, such as the ICC and CIArb rules also provide checklists, which recommend the parties to incorporate procedural arrangements into a cyber-protocol in advance, or the arbitral tribunals to direct such arrangements by issuing procedural orders for virtual hearings. We believe that such guidance lists are very pragmatic, and no matter which form the parties choose, by a cyber-protocol or by terms of reference, or the arbitral tribunal may issue a procedural order, they could all refer to such list. The key is to clarify and settle the procedural and technical arrangements at the earliest stage, so that people involved in the hearing can effectively arrange their work, ensuring that the parties enjoy equal rights in terms of procedures, technology and network security. Nevertheless, it is fundamental to know how to communicate and cooperate with lawyers from the other party. Even though the lawyers represent the opponent parties, they need to work together on carrying out the arbitral procedures, especially when more complicated and detailed arrangements are involved. In this context, the cooperation between lawyers from both parties is particularly significant for promoting virtual hearings.”

What do you think the future holds for virtual arbitrations?

Milena: “Virtual arbitration has become the new norm and it is here to stay. It is logical and consistent with business practice. The biggest advantage of it is that organising hearings is no longer as complicated and expensive as it used to be. Given the nature of such hearings, there is no longer the need to spend substantial amounts of money and time to bring witnesses from the other side of the world for just a few hours to give evidence. Similarly, it has also eliminated the difficulty of finding a hearing date that would fit in with the schedules of all the parties and the tribunal, which often leads to delays in proceedings. “

Ben: “Even when the travel restrictions are lifted, the benefits of virtual arbitration will continue. Virtual hearing is likely to be used where either party is in relatively inaccessible parts of the world or the cost of travel renders physical hearing difficult. Full virtual hearings aside, it can be said with certainty that more and more evidence will be given remotely.”

Yuan: “Overall, we are relatively optimistic about the prospects of virtual arbitration in China. Chinese arbitral institutions have always been devoted to the development of Internet arbitration. For these institutions, the pandemic is also an opportunity for real changes. For parties, virtual arbitration can save time and costs. Although it still has some shortcomings, with the development of science and technology, we believe that virtual arbitration will gradually be accepted by more and more people. Originally, how to choose the arbitration procedure depends on the parties’ autonomy. Retaining the virtual arbitration procedure will provide the parties with a new option to resolve disputes.”

Cynthia: “After today’s discussion, we deeply feel that virtual arbitration seems to be gradually taking shape. Although this new form has not emerged until the pandemic, it indeed provides a more convenient and efficient way for dispute resolution. With evolution of rules and technologies, many cases in international arbitration may wholly or in part move on to the ‘cloud’. We look forward to further innovation and progress, and also need to prepare ourselves for such novelty. Just as Judge Cardoso said, ‘the law, like the traveler, must be ready for the morrow.’ As legal practitioners, we also need to become travellers and get ready for new changes in this profession.”

Read in Mandarin-Chinese here


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