This is the third and final part of my series “Frustrated by Coronavirus?”. It builds on my 26 March 2020 article suggesting that arbitration could be a solution for clients that are frustrated by the inevitable disruption New Zealand courts, and courts elsewhere, are facing. As nations around the world continue to grapple with Covid-19 and successive “lock-downs”, disputes are inevitably affected.
Clients are starting to turn their mind to arbitration and have a number of questions, such as: how do I arbitrate my dispute online? What if my contract does not contain an arbitration clause? What if I have already commenced litigation?
In this article I will cover the contents of a submission agreement and how you can arbitrate online.
(1) Drafting a submission agreement
If the contractual arrangement you are concerned with already contains an arbitration clause, you can skip immediately to the second part of this article “how you can arbitrate online”. However, many clients find themselves in the position that they have not agreed to arbitrate.
Section 2 of the Arbitration Act 1996 defines the minimum requirements of an arbitration agreement. It is “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not”. Unlike other jurisdictions, there is no requirement for the agreement to be in writing (although oral agreements to arbitrate are strongly discouraged for obvious reasons). The agreement can extend to all disputes or be limited to only some. The agreement may refer to existing or future disputes.
Parties can agree to arbitrate at any time, even after litigation has commenced (bearing in mind potential cost consequences that may arise from switching forums). If the contract does not contain an arbitration clause, parties can nevertheless agree to a so-called “submission agreement”. A submission agreement is a contract between the parties that is signed after the primary contract and (usually) refers a particular dispute to arbitration. However, in practice, a submission agreement can be as broad or as narrow in scope as the parties wish. Whatever the scope of the dispute, the submission agreement amends any pre-existing agreement to litigate disputes.
There is no special formula or particular standard form for a submission agreement, However, you should approach it as you would any dispute resolution clause, with caution and with a firm eye on your client’s best interests. As I outlined in my earlier article, you will need to consider a number of factors such as:
The scope of the agreement. This defines the tribunal’s jurisdiction. Where your submission agreement is opting to refer a specific dispute to arbitration, you will need to take care to define it correctly. If you define it too narrowly, you may exclude the tribunal’s jurisdiction over issues that you had not contemplated at the time of the agreement (and thereby undermine the intention to arbitrate). For example, think carefully before anchoring the tribunal’s jurisdiction to any particular contractual provisions. Once you obtain documents from the counter-party, you may discover other breaches of which you were previously unaware. Instead, it may be more prudent to define the dispute by reference to a particular event.
Adoption of arbitration or institutional rules. In the online arbitration context, parties and their lawyers should very consider arbitrating under pre-defined arbitral rules. Although an arbitration under the Arbitration Act 1996 is perfectly acceptable, arbitration rules provide a number of benefits, notably the “rules of the game” for counsel and clients. Rules can help lawyers and their clients by imposing structure and timelines that you have not had to separately negotiate. Some rules, such as the NZDRC Rules, give you the benefit of an institution, the New Zealand Dispute Resolution Centre, and their experienced legal team who can assist parties with queries and ensure that the arbitration runs smoothly.
If your dispute is international (refer Article 1(3) of Schedule 1 of the Arbitration Act 1996), you should consider adopting the NZIAC Rules. If the non-New Zealand counter-party prefers neutrality, there are a range of institutional rules available and many of them offer expedited and fixed-fee arbitrations, such as the ACICA Rules and the SIAC Rules. Each set of rules, whilst broadly similar, do differ in subtle ways so it is recommended to seek specialist advice before incorporating any particular set into your arbitration agreement.
The applicable law(s). Assuming you have a primary contract that you are seeking to amend, that contract will usually a governing law clause, which is the parties’ choice of the law to govern the substance of the dispute. As a general “rule of thumb” it is best practice to keep the number of laws applicable to an arbitration to a minimum. However, you should still consider which law will govern the interpretation of the submission agreement (which can be different from the law governing the primary contract and in any event, should be expressly identified).
(2) How do I arbitrate online?
Arbitration lawyers have been arbitrating remotely for years. Indeed, in large-scale, cross-border and complex international arbitrations, parties may not see each other, or the tribunal, for months if not years. With the will of the parties and the tribunal, the arbitration will proceed efficiently and cost-effectively and result in a final award.
There is no specific formula for arbitrating online. However, there are inevitably challenges in running a fully remote arbitration. It can be frustrating being unable to meet your fact witnesses and experts face-to-face. In technical cases that would normally involve an expert conducting a site inspection or supervising experiments, the inability to do so due to travel or other restrictions can pose a real challenge. That frustration can then be compounded by each side’s legal team, the witnesses and the tribunal being in different locations for a hearing.
Whether or not the parties have agreed to arbitrate under particular rules, for a remote arbitration, the contents of the first procedural order and timetable (as with any arbitration) is vital. It is the opportunity for the parties to outline how they wish the arbitration to be run, despite the tyranny of distance. The parties should turn their minds to what software they will be using for procedural and substantive hearings in the arbitration and how they will manage document production and the submission of witness statements. A detailed agreement over how the substantive hearing will be run can be deferred until the pre-hearing conference.
There is now a vast depository of online resources on how to conduct arbitrations remotely. One of the best resources is that assembled by Delos (an independent arbitral institution), which is available here: https://delosdr.org/index.php/2020/05/12/resources-on-virtual-hearings/. This resource is a consolidated list of presentations, checklists and rules from different jurisdictions.