This is the fourth of my series “Frustrated by Coronavirus?”. It builds on my earlier articles suggesting that arbitration can be an excellent solution for clients frustrated by the inevitable disruption the New Zealand courts, together with courts elsewhere, are facing. The 2021 International Arbitration Survey by the Queen Mary University of London, “Adapting arbitration to a changing world” (the Survey),was undertaken during the pandemic. Just under half of all respondents to the Survey operate principally in the Asia-Pacific region, making this survey particularly relevant to New Zealand. This article considers some of the key findings of the Survey and how they might relate to New Zealand arbitration practitioners.
Key findings of the Survey
This survey took place in the middle of the Covid pandemic, between October and December 2020. 1218 responses were received from a pool of different stakeholders, including arbitrators, in-house counsel, counsel in law firms and arbitral institution staff. The responses were truly global with 43% of the respondents principally operating in the Asia-Pacific. By contrast, 24% and 9% of respondents operated in Europe and North America respectively (see Survey, p 25). The Survey provides a number of insightful findings, including how arbitration can continue to improve and adapt to parties’ needs.
Arbitration still preferred for cross-border disputes. In this “post-pandemic” world, 90% of respondents preferred arbitration for resolving cross-border disputes and 59% would opt for arbitration in combination with ADR, defined as adjudication, dispute boards, expert determination, mediation and negotiation. This will not surprise our mediator colleagues, given the number of cross-border disputes that are now being referred to mediation, including a rise in investment treaty mediations.
Arbitration has embraced remote hearings, with some caveats. Whilst technology continues to be ubiquitous in arbitration, the survey confirmed that the pandemic has hastened an increased use of virtual hearing rooms. 79%of respondents would opt for a virtual hearing rather than postponing it until it could be in person. 87% of arbitrator respondents preferred to hold the hearing virtually than postpone it. 61% identified the time and cost savings that virtual hearings provide relative to in-person hearings as the primary reason for choosing a virtual hearing post pandemic.
Respondents were not, however, full converts to remote arbitrations. There is a preference to resume in-person substantive hearings once this is possible. Moreover, respondents identified a number of virtual hearing pitfalls including difficulties with (i)time zones (40%); (ii) counsel conferring with clients during the hearing(40%); (iii) controlling witnesses and assessing credibility (38%); and (iv)technical glitches and screen fatigue (35%) (Survey, p. 24).
The northern and southern hemispheres compete equally for international arbitrations. Respondents identified over 90 seats, which “shows that although the most popular seats enjoyed the lion’s share of the votes, there is still significant scope for seats outside the top ranks to attract users” (Survey, p. 10). Just as Hong Kong and Singapore have effectively competed with London, Paris and Geneva for a large share of the international arbitration pie, there remains real potential for New Zealand to attract more users of international arbitration. This is the first time that Singapore has been ranked first equal with London as the most preferred seat (54%), closely followed by Hong Kong (50%) and Paris (35%). The trend of a shift away from traditional seats such as London, Paris and Geneva continues.
Improvements to arbitration. In order to make arbitration faster and cheaper, 61% of respondents would be happy to limit the length of written submissions and 38% would be willing to forego oral hearings on procedural issues. 27% would sacrifice document production and a surprising 25% were willing to forfeit an in-person hearing (perhaps contradictory of the view that in-person substantive hearings are still preferred) (Survey, p. 13). Some respondents suggested during interviews that arbitration was becoming overly formalistic in the sense of an “excessive tendency to ‘mimic court processes’” (Survey, p. 14).
Diversity in international arbitration is still lacking. Only 31% of interviewees agreed that “recent progress has been made in relation to ethnic diversity” (Survey, p. 16). Respondents were asked to choose three initiatives that would be the most effective in encouraging diversity. The top two solutions were (i) appointing authorities and institutions “adopting an express policy of suggesting and appointing diverse candidates as arbitrators” (59%); and (ii) counsel proposing a diverse list of arbitrators to clients (46%).
The Survey and Aotearoa New Zealand
What can we learn from these findings? Although the Survey was undertaken with cross-border disputes in mind, there are at least three areas that have wider application to domestic arbitrations.
The agility of arbitration. Arbitration practitioners, including arbitrators, should heed the warning that arbitration can be too expensive and cumbersome, particularly if it mimics court proceedings. Anecdotally, there is a strong tendency for domestic arbitrations in New Zealand to opt for a default “private litigation” route, rather than choose to tackle head on the breadth of flexibility that the Arbitration Act can offer clients. For arbitration counsel, consider:
- whether your client would be better served by foregoing High Court Rules Schedule 9 checklists and tailored discovery orders for more targeted “Redfern style” requests for documents (or forego document production altogether).
- shedding the need for written formal objections to evidence and focusing instead of the relevance, weight and materiality of the evidence before the arbitrator.
- opting for a procedure that identifies the number of experts and the areas on which they will provide expert evidence in advance, as opposed to an endless list of experts.
- arbitral rules that give your client certainty as to when an award will be issued (the NZDRC EA45 Rules aim for an arbitral award within 45 working days of the date on which the NZDRC issued a notice of appointment to the parties).
- embracing virtual hearings (or giving serious thought to a decision on the papers).
- whether you should modify the procedure to ensure it is more sensitive to the cultural needs of the parties.
Virtual hearings. The top two concerns identified with virtual hearings were logistical in nature: accommodating time zones and difficulties of inter-party communications during a hearing. Due process concerns were at the bottom of the list, with only 8% of Respondents identifying this as a disadvantage (see further A Kirk and L Lindsay “Arbitration” New Zealand Law Review 639, 671-674). The Arbitration Act is silent on whether hearings can be conducted virtually. As has been observed elsewhere, the Arbitration Act grants arbitrators broad powers to determine procedure when parties are unable to agree themselves. As such, an arbitrator does have the power to compel a virtual hearing in the absence of the parties’ agreement (see further A Kirk and L Lindsay “Arbitration” New Zealand Law Review 639, 674-676). As New Zealand currently faces an extended period of Alert Level 3 and uncertainty around potential regional lockdowns(where, for example, free travel between the North and South Islands is limited), virtual hearings are likely to become more common in New Zealand. In the author’s view, virtual hearings should be considered (although not necessarily adopted) as a matter of course given the significant time and cost savings to be made. To that end, there is a wealth of information available on how to effectively manage a virtual hearing, including checklists and template protocols. Delos has conveniently pulled all available resources into a consolidated list.
We all have a role to play in increasing diversity. The Survey’s findings regarding diversity dovetail into a wider conversation that has been ongoing in the New Zealand legal profession. It is widely accepted that there is a lack of ethnic diversity in most law firms, in-house counsel roles and barristers’ chambers in New Zealand. When it comes to appointing arbitrators, anecdotally it can be suggested (hopefully without any controversy) that the vast majority of arbitrators appointed for domestic arbitrations are Pakeha men. Arbitration practitioners should commit to ensuring their “arbitrator lists” are as diverse as possible.