The Evolution of Arbitration with Virtual Hearings
As jurisdiction after jurisdiction was impacted by the pandemic, travel arrangements started to crumble, and remote working arrangements were put into the spotlight. As a result, the international arbitration community was obliged to adapt and innovate to survive.
I. Introduction
As COVID-19 swept around the world, upsetting socio-economic institutions on an elemental basis, a business based on the settlement of cross-border disputes involving attorneys from a global community found itself unexpectedly and profoundly hampered. As jurisdiction after jurisdiction was impacted by the pandemic, travel arrangements started to crumble, and remote working arrangements were put into the spotlight. As a result, the international arbitration community was obliged to adapt and innovate to survive.
During this time period, institutions such as Hong Kong International Arbitration Centre (HKIAC) were required to react to the abrupt shift in the arbitral landscape swiftly. Faced with considerable potential disruptions in the management, administration, and facilitation of physical arbitration proceedings, HKIAC immediately recognised that the adaptation and modernisation of the arbitral process was no longer a prospective project for the future but a present problem. Since then, virtual hearings have become an integral part of HKIAC's service offerings and a crucial innovation for the organisation's continued development and success. Accordingly, understanding the nature of virtual hearings and their role in the future arbitral environment is essential for determining whether they are a temporary fix or a permanent fixture of international arbitration.
II. What is a Virtual Hearing?
Typically, there are three components to a comprehensive virtual hearing product (a detailed discussion on this subject can be found here). They are: (1) videoconferencing, either through IP-based videoconferencing systems (like those found at significant hearing centres and law firms) or cloud-based videoconferencing platforms (e.g. Zoom, Webex, MS Teams); (2) electronic bundling services and the use of Electronic Presentation of Evidence (EPE) systems, allowing hearing participants to view specific exhibits and bundles simultaneously, regardless of their geographical location; and (3) real time remote transcription, i.e., the use of a remote transcription service to transcribe the Also available are accommodations for sequential or simultaneous interpretation.
The arbitral institution may manage virtual hearing services. Still, in the majority of instances, the supply or administration of these services will be done by an external service provider. HKIAC collaborated with several industry-leading service providers, including Epiq and Opus 2, and thus gained prominence in managing cases with these services.
Typically, remote hearing services will also need the services of a hearing manager, typically an IT expert who will supervise the virtual hearing and monitor the usage of protected hearing rooms. In circumstances where an EPE system is used, the hearing manager will often also control the system and display papers on screen as required by the parties or arbitral panel. The majority of hearing service providers also provide consulting and testing services and an appropriate backup solution in the case of an unforeseen system or connection failure.
III. The Experience of HKIAC with Virtual Hearings
Collectively, the worldwide arbitration community, including HKIAC, has experienced an overnight transition to virtual hearing services. In the previous nine months, HKIAC has amassed a lot of expertise in administering and facilitating virtual hearings under the HKIAC Administered Arbitration Rules 2018 (the Rules or 2018 Rules), the UNCITRAL Arbitration Rules 2010 (the UNCITRAL Rules), and ad hoc arbitrations in general. The involved figures are tough to refute. In 2021, HKIAC had 138 hearings. Out of these, 101 were partly virtual, with one or more parties present at the Center and witnesses or lawyers participating remotely. In addition, the HKIAC has had five virtual hearings in which none of the parties, attorneys, witnesses, or arbitrators set foot in the Centre. These totally virtual proceedings were managed by HKIAC and support staff from the appropriate service provider; nonetheless, all attorneys, witnesses, and arbitrators participated from their own distant locations. In sum, about 73% percent of all HKIAC hearings in 2021 were either partly or entirely virtual in some capacity. In addition, this pattern does not seem to be confined to the first few months of 2021.
HKIAC has seen the virtualisation of cases that transcend well beyond conventional case management conferences and procedural calls. HKIAC has overseen several virtual hearings, notably for corporate, commercial, intellectual property, and construction issues. Using virtual hearing services, hearings have varied from one-day case management hearings to construction hearings lasting more than 40 days. Using virtual hearing technology, anything from emergency arbitrations to full-blown merits hearings with questioning factual and expert witnesses in several locations and time zones has been handled effectively. HKIAC has also aided in the facilitation of judicial processes in Singapore and Canada, in addition to Hong Kong.
As with every new technological application, some concerns and challenges must be resolved. Several writers and authorities have thoroughly explored the legal concerns that might possibly impact virtual hearings. Concerns typically encountered by arbitral tribunals and parties seeking a virtual hearing fall into one of three categories: (1) the ability of a tribunal to order a virtual hearing when a party objects, (2) the security and confidentiality of proceedings, and (3) the integrity of witness testimony delivered via videoconference.
Parties often object to the tribunal's ability to order virtual hearings on the grounds that they are entitled to an oral hearing, which requires a physical hearing, or that a virtual hearing would violate the principle of fair and equal treatment. Some parties may also use parts of relevant institutional rules, noting that these rules either do not expressly reference the tribunal's authority to order a virtual hearing or construe provisions requiring an in-person hearing as requiring a physical in-person hearing.
Notably, HKIAC is unaware of any 2018 Rules instances in which a party has challenged to the tribunal's authority to conduct a virtual hearing. This is largely attributable to article 13 of the Rules, which directly instructs courts to develop appropriate procedures for the conduct of arbitration, including "the efficient use of technology." Moreover, while the HKIAC has faced situations under the UNCITRAL Rules in which a party has protested to the tribunal's authority to hold virtual hearings, it has observed that all of these arguments were ultimately rejected by the tribunal.
Security and privacy are also often cited as issues. In this context, both arbitral institutions and service providers lay a significant focus on maintaining the integrity and security of proceedings. In these circumstances, security is layered, with various safeguards in place to give backup choices in the event that one tier is compromised. A virtual hearing videoconference, for instance, may contain not just a secret meeting ID and password, but also a "whitelist" of participants whose identities must be validated by the hearing manager before they are permitted to join the videoconference. Transcripts and EPE are similarly protected by additional levels of security.
Thirdly, with connection to witness evidence, there has been much debate by other writers and publications over whether or not the integrity of witness testimony can be maintained in an online context. Concerns around witness coaching and unauthorised witness communications are the most prevalent. While such concerns may exist, HKIAC's experience has shown that witness testimony has not been adversely affected by the switch to virtual hearings; in fact, several advocates have noted that virtual witness cross-examination has its own unique advantages, such as the ability to see better the witnesses' faces and reactions, and the ability to zoom in on a witness. Regardless, if such worries persist, the parties may take mitigation steps, such as arranging for hearing invigilators to sit with witnesses or installing 360-degree cameras to guarantee a comprehensive view of the room and environs. The tribunal may also adopt its own steps, such as reminding the witness of his or her commitment to tell the truth and delivering an oath, declaration, affirmation, or other formality.
IV. Integration of Virtual Hearings in Arbitration
Despite all the talk about the "new normal," virtual hearings are not a new phenomenon. The underlying technology has existed for years, and one of the primary reasons organisations like HKIAC have been able to adapt so fast is because viable solutions from certified service providers were already on the market. Even restricted forms of virtual hearing services, such as the use of video and teleconferencing, have been used for certain topics, such as case management conferences.
Therefore, it would be misleading to argue that virtual hearing services constitute a "revolution" in the arbitration process. In actuality, there is no 'revolutionary' innovation within the virtual hearing package of services. The fast acceptance of virtual hearing services is an evolutionary development, not a revolution.
This difference is significant. In contrast to revolutionary breakthroughs, which may not always establish the required footing to successfully disrupt an industry, evolutionary innovations occur after the initial product has been polished to the point where it becomes an effective and in-demand solution. When the first vehicle was produced, for instance, the technology was groundbreaking but in dire need of refining, resulting in cumbersome, expensive, and ineffectual alternatives for the horse-drawn carriage. Only when Ford invented the assembly line and the Model T, did automobiles become cost-effective and accessible to everybody. The carriage perished, not due to breakthrough technology but due to the development of existing products.
Current virtual hearing service options demonstrate the progression and refining of earlier solutions. This transformation would have happened inexorably, although gradually, regardless of the present pandemic. However, the introduction of COVID-19 has accelerated the innovation and usage of technology, including virtual hearings. As will be explained in more detail below, the nature of international arbitration and the international arbitration community have given the ideal setting for this speedy growth.
V. Arbitration as an Innovation Incubator
The present pandemic has proved that, despite some critiques of international arbitration, the inherent flexibility of the contemporary arbitral procedure continues to be a crucial asset, allowing parties to have their cases heard despite substantial interruptions. The adaptability of arbitral procedures enables a more rapid and effective response to disruptive events, innovations, and technology. Rapid deployment of solutions, fast feedback, the capacity to react effectively with minimum constraints, and the modification of solutions within an institutional environment allow for the rapid and expedited creation of techniques, tools, and solutions.
There is an immediate parallel with domestic court processes. In domestic courts, the adoption of virtual hearing technology has been somewhat slower, with virtual hearings first permitted for just a tiny portion of particular cases. The inherent limits and procedural requirements of court litigation create an atmosphere that is unfavourable to fast change and development, notwithstanding the gradual increase in acceptance as more sorts of disputes become eligible for virtual hearings. In Cyberworks Audio Video Technology Ltd (in Compulsory Liquidation) v. Mei Ah (HK) Co Ltd, Coleman J. issued a 54-paragraph judgement determining that a case management conference could be conducted by teleconference in accordance with the provisions of the High Court Rules (Cap 4A) and the High Court Ordinance (Cap 4). While Coleman J's decision was well-received and was quickly cited by other judges during the General Adjournment Period, the fact that it wasn't until 2020 that a High Court judge ruled that a case management conference could be conducted via telephone exemplifies the challenges that technological innovation in litigation faces.
It should not come as a surprise that international arbitration stimulates innovation. When one considers the non-technical innovations that have led to increased efficiencies in arbitration (such as the use of Scott and Redfern schedules or witness conferencing), it becomes clear that the arbitration community has focused on procedural innovations from the beginning, and that the evolution, refinement, and standardization of these innovations have been uncontroversial. Virtual hearings are another of these procedural improvements that should be examined.
As global travel limitations loosen in the future, the arbitral environment may gradually resume some of the characteristics that characterized it before the outbreak. Some of the more serious circumstances that have necessitated virtual hearings may improve. However, the exposure of parties and counsel to virtual hearings will likely result in a paradigm shift in which tribunals will be much more likely to order at least partly virtual hearings to save money and time. Once a footing has been established, the cycle of progress may begin.This kind of consolidation to the middle will signal the development and standardization of virtual hearings as the default arbitral procedure. In the same way as the use of online document repositories, data rooms, and email have become mandatory parts in international arbitration, the use of virtual hearings is anticipated to become a standard component of the dispute resolution process.
VI. Conclusion
It may be true that necessity is the mother of innovation, but it also leads to adaptation, survival, and development. While much has been made about the novelty and unpredictability of virtual hearings, the majority of this discourse has been on the viability of such technology. When COVID-19's cloud lifts, the question generally addressed is whether virtual hearings are here to stay. However, the debate may not be centred on the relevant topics or have the correct understanding of how virtual hearings fit into the arbitral procedure as a whole.
When virtual hearings are viewed as an evolutionary change rather than a revolutionary one, it becomes clear that the question should not be whether virtual hearings are here to stay, but rather how parties, arbitral tribunals, and arbitral institutions should adapt to using them in order to promote the expansion of the arbitration industry.