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Covid-19 outbreak has raised disputes over various matters relying on the fact that the challenges faced during this period are unprecedented. As might be expected, these disputes involve litigation and international arbitration proceedings. Since the outbreak is spreading rapidly, key measures are being put and pursued by preeminent arbitration institutions globally seeking to alleviate the future impacts and safeguard the health of people engaged in arbitral proceedings.
In brief, the precautionary measures taken by such arbitral institutions consist of online hearings, video conferences and other technology platforms in order to conduct hearings. Admittedly, these measures have paved the way for heated discussions by many claiming that they may disrupt the ordinary course of the arbitral proceedings and require special attention from both parties and arbitrators. Nevertheless, there can be other obstacles to so-called online hearings since it is uncertain that arbitrators, lawyers and parties to the dispute are advisable to be clustered at the same time in the same platform which particularly requires the coordination of different connections.
Within a rigorous approach, on March 17, 2020 the ICC International Court of Arbitration and ICC International Centre for Alternative Dispute Resolution (“ADR”) issued an urgent communication declaring that the all offices of the Secretariat of the ICC Court of Arbitration and the ICC ADR Centre are operational and staff members are working remotely via mobile posts . The ICC has also set up a Covid-19 response group and encourage all members to communicate via designated e-mail addresses. Therefore, parties who are willing to initiate new arbitration proceedings, ADR proceedings, and request for an emergency arbitrator before the ICC shall notify the Secretariat through such e-mail addresses. All hearings scheduled until the end of June in Paris or an affected area have been postponed or changed to the virtual meetings. In furtherance of the requests from the parties under pending proceedings, the ICC has stated that any correspondence comprising of the awards and ADR decisions may be sent by courier or post provided that the ICC case management team ahead of dispatch is promptly informed.
In addition, the ICSID which is devoted to international investment dispute settlements published a message on March 11, 2020 regarding the Covid-19 outbreak. Briefly in the message, ICSID has reflected its approach on the matter and shown that it is eager to coordinate closely with the members of the tribunals and parties on precautionary measures to be taken. Subsequent to the message, ICSID published a brief guide to online hearings on March 24, 2020 stating that ICSID has seen a steady uptick in its number of online hearings year on year and two hundred (“200”) hearings and sessions by video conferences had been organized by ICSID. Addressing the guide published, special hardware or software for the connection to an online hearing is not required, online services are free of charge, virtual platform offers many such as ability to share audio, video and content, virtual chat amongst each party and with the entire group.
Sighted measures taken by the international arbitral institutions may result with a sea change in the way of conducting international arbitration. In fact, it is asserted by many that this may be the turning point in bringing online dispute resolution and arbitration proceedings to the world of international arbitration. Since the outbreak impinges the way of collecting the evidence, people involved in arbitration are getting to rely more on digital documentation and searches instead of paper contracts and documents sent through the courier to avoid spreading virus. It is also discussed in the world of international arbitration that this way of online documentation and submissions may eventually lead to the adoption of digital solutions and implementation of artificial intelligence and other new technologies.
Possible Threats Re Arbitral Claims
On the other hand, due to Covid-19 pandemic, an upcoming dispute is likely to be the devastated situation of foreign investors’ projects and Bilateral Investment Treaties (“BITs”) in effect due to the quarantine and social distancing measures taken by the states. Since the future is still not foreseeable, standard protection clauses provided under BITs are likely to be violated and future claims to be risen by foreign investors. Foreign investment mostly requires travel from state to state and therefore, restrictions and bans over travelling may affect obligations deriving from BITs and standard protection clauses such as non-discrimination may be violated. Again, states may use premises that are endowed to foreign investment projects seeking to provide medical services as Spain’s action in taking control of private hospitals, clinics and investors in the healthcare industry. This may also result with a violation of expropriation clauses under BITs provided that the deprivation and taking control was involuntary. After the end of the outbreak, if states do not return the control or states’ control leaves permanent harm to the investment at stake, investors may also claim compensation and eventually international investment disputes are likely to arise and new arbitral cases to be filed. However, in either case, states may invoke force majeure and distress to justify their actions, as faced in previous crises economic in nature. It is still discussed whether these defenses will succeed considering the fact that states have rarely been successful when invoking such defenses in the past.
Additionally, restrictions-imposed subject to Covid-19 have had a magnitude impact on all parties involved in commercial contracts in particular contracts regarding on-site construction, not to mention severe financial consequences. Apparent impact of the so-called pandemic on commercial contracts is the delay and disruption of the project activities and other obligations stipulated under the contracts, which will likely to lead the contractors to claim additional time and costs. The remedies available to satisfy parties’ claims and to mitigate their losses depend on the terms of their respective contracts and therefore, as such contracts mostly invoke alternative dispute resolution and arbitration proceedings for the settlement of contractual disputes, it is argued by many that international arbitration will inevitably be busy with the claims of Covid-19 sufferers.
Author: Ezgi Ceren Aydoğmuş
