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Remote Arbitration Hearings in the Asia-Pacific Region by Arthur Tan

03/12/2021 with [186 views] no comments

Remote Arbitration Hearings in the Asia-Pacific Region

by Arthur Tan

 

In the context of COVID-19, various judicial proceedings have necessarily been conducted remotely. Arbitral proceedings are no exception. With the current difficulties surrounding international travel, knowing if virtual hearings are an option and in what circumstances they might be ordered is of some importance to parties considering arbitration. Using data on the Asia-Pacific region, this article will analyze 3 different scenarios: (1) when the parties have expressly agreed to have a remote hearing, (2) when the parties’ agreement is silent on remote hearings, and (3) when there is an express agreement for physical hearings.

In general, the Asia-Pacific region has a uniform approach to the matter. All countries[1] would allow remote hearings in scenario (1) and all countries would find that ordering a remote hearing in scenario (3) would be a ground for setting aside the award or challenging enforcement. For scenario (2), except for Vietnam, the tribunal likely has the discretion to order a remote hearing.

Scenario (1): When parties expressly agree to have a remote hearing

It is uncontroversial across all the countries examined that if parties agree to have a remote hearing, the tribunal must comply with this. In countries like Hong Kong, India, and Singapore, which have adopted legislation similar to Art 19 of the 1985 UNCITRAL Model Law, the parties are given control over matters of procedure.[2] Art 19(1) allows for “parties to agree on the procedure …. in conducting the proceedings”, only subject to any restrictions in the rest of the Model Law. Even in Vietnam, party autonomy takes precedence over any implied right to a physical hearing.[3]

The only relevant restriction is Art 24(1) Model Law which provides a right to “oral hearings”. Yet a hearing does not necessarily mean a physical hearing. As Scherer notes, hearings have two requirements: (1) they must be oral and (2) they must allow for a simultaneous exchange of arguments and evidence.[4] These are requirements that can be satisfied in remote proceedings due to the wonders of modern technology. In other countries like Indonesia, oral hearings are not required, and document-only arbitrations are the default.[5] In such a case, objections to remote hearings are even weaker. If oral hearings can be waived, it is also likely that remote hearings are permissible.

The same result will likely emerge when the arbitration agreement allows the option of a remote hearing. In the civil order filed by Lai Fuguo and Lai Guoyan in the Guangzhou Intermediate People’s Court, the arbitration agreement allowed for a choice of either “physical or remoting hearing”. [6] The tribunal ordered a remote hearing and gave an award based on that hearing. The Guangzhou Intermediate People’s Court then rejected a setting aside application challenging the aforementioned award for having a remote hearing as the parties had clearly left the option open.

In Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2016] FCA 1131, the Federal Court of Australia rejected an application by Sino Dragon to set aside an award on the basis that technical difficulties during a remote hearing resulted in unequal treatment, procedural irregularities, and an inability to present their case.[7] The FCA noted that not only did Sino Dragon agree to video conferencing and select the technology but that the technical difficulties affected the counterparty’s cross-examination more.[8]

More importantly, the FCA noted that video conferencing while less ideal “does not in and of itself produce ‘real unfairness’ or ‘real practical injustice’”.[9] This affirms the idea that once parties agree to a virtual hearing, the virtual hearing is unlikely to be sufficient by itself to bring the arbitration into disrepute. However, if the virtual hearing has serious procedural irregularities, then the award is as always open to challenges to enforcement on the typical grounds of Art V(1)(d) New York Convention or to be set aside under provisions equivalent to Model Law Art 34(2)(a)(iv).

Scenario (2): When the agreement is silent

For countries that have adopted the Model Law, Art 19(2) allows for a broad discretion to decide on matters of procedure. Given that none of the countries have an express right to a physical hearing nor is there any provision in the Model Law against remote hearings, it is arguable that the discretion extends to ordering a remote hearing.[10] This was recently affirmed by the Austrian Supreme Court (Oberster Gerichtshof “OGH”) even though one of the parties objected to the ordering of the remote hearing.[11] No breach of rules of natural justice or duty to treat parties fairly was found by the OGH. The court observed that remote hearings were widely used and fairly common and there is no clear evidence they are problematic. An argument was raised that the time difference was a disadvantage to the respondents, but this was rejected as by providing for the VIAC rules to apply, the parties had accepted the risk of remote hearings and the time difference. Furthermore, it was probably less troublesome than international travel. Finally, the court also rejected the argument that witness tampering would happen in virtual hearings as witness tampering can also occur in physical hearings. The mere risk of the aforementioned tampering is not enough but further evidence would be required.

Instead, the predominant approach is to focus on if a remote hearing would result in fair proceedings to both parties. This can be seen in Australia where the Courts have focused on if remote proceedings resulted in procedural unfairness, unequal treatment, or a lack of opportunity to present their case rather than ruling that remote proceedings by themselves were an issue.[12] Similarly, in Pakistan, albeit not in a remote hearing context, the Courts have reiterated the tribunal’s broad discretion over the procedure of the arbitration in the absence of the parties’ agreement but have set a limit of conformity to natural justice and fairness.[13] Thus, remote hearings by themselves cannot be objected to if the arbitration agreement is silent on the issue.

In contrast, there is an implied right to in-person hearings in Vietnam. Art 54(1) of the LCA provides that “the arbitration tribunal shall make decisions on the time and location for holding dispute resolution sessions”. This can lead to an inference that “as these provisions require the arbitral tribunal to determine both the time and the location of hearings ….. the arbitral tribunal must always conduct physical hearings”.[14] This is affirmed by Art 56(3) of the LCA which limits document-only arbitrations to situations where the parties have requested for it. The implication is that “under Vietnamese law, the hearings shall always be oral unless otherwise agreed by the parties”.[15] Thus, the authors of the report argue that remote hearings are unlikely to be allowed in Vietnam unless there is an express agreement for it.  

As such, in the majority of countries, if only one party insists on a physical hearing, the tribunal likely has the power to order a remote hearing, provided there are no issues of procedural unfairness that might arise.

Scenario (3): Ordering remote hearings when there is an agreement for physical hearings

In such circumstances, all countries would likely set aside the award but on different grounds. An interesting argument that might be run is: given the requirements of fairness, the tribunal could order a remote hearing “if faced by an unreasonable demand by one of the parties to hold a physical hearing based on an earlier agreement in circumstances where a physical hearing is no longer possible”.[16] However, there is no case law in support of this and the circumstances would need to be such that expediency outweighs the considerations of party autonomy, something that is likely a high bar. The predominant approach would be to treat such an act as a ground for setting aside the award.

The first common ground would be to treat the tribunal as in violation of Art V(1)(d) of the New York Convention.[17]  Most countries continue to give primacy to the autonomy of the parties. Combined with the control given to parties over procedure, the tribunal ordering a remote hearing when there was an agreement for a physical hearing would clearly be an example of when the arbitral procedure is not in accordance with the agreement of the parties.[18] In other countries where there is legislation based on the Model Law, the award would be set aside under the equivalent Model Law ground of Art 34(2)(a)(iv).[19] China has a similar approach but terms it a “violation of statutory procedure”.[20]

The second common ground would be excess of authority. The basis of this ground is that arbitral tribunals have broad discretion over the arbitral procedure, but this is subject to the agreement of the parties. By ignoring the agreement of the parties, the tribunal is then in excess of authority. Australia and Bangladesh take this approach.[21]

Seeing as remote hearings have only grown in prominence recently, the case law on this area is sparse in some countries and it remains to be seen how such challenges play out. For example, Indonesia does not set out the consequences of non-compliance with the arbitration agreement and there are no obviously applicable grounds for setting aside the award.[22]

Conclusion

As the COVID pandemic continues to drag out, the implementation of legislation or the development of jurisprudence on remote hearings will continue to grow. The generally permissive attitude towards remote hearings taken by countries in the Asia Pacific region is encouraging and will be an important consideration in the future. While Vietnam appears to take a more restrictive view, the thinking in this area may not be set in stone. The requirements of an “oral hearing” does not necessitate a physical hearing as Scherer notes and the need to specify a time and location can be accommodated to encompass a virtual “location”. Such a change would likely make Vietnam a more attractive forum as the Asia-Pacific region grows as a destination for international dispute resolution.


[1] The countries examined were Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Thailand, and Vietnam. The data used was taken from ICCA Project: Does A Right to a Physical Hearing Exist in International Arbitration? (ICCA 2021) co-edited by Giacomo Rojas Elgueta, James Hosking & Yasmine Lahlou. Available here.  
[2] Other countries that have adopted provisions materially similar to Art 19 include Australia, the Philippines, and India.
[3] Article 11(2) of the LCA states that: “Unless otherwise agreed by the parties, the arbitration tribunal may conduct hearing sessions at a location which it deems appropriate for mutual consultation between the members of the tribunal, for taking statements from witnesses, for seeking advice from experts, or for conducting evaluations of goods, assets or other materials” (emphasis added). The other provisions from which a right to a physical hearing can be implied also have similar drafting which allows for party autonomy. See Art 54(1) and 56(3) as discussed below.
[4] Maxi Scherer, “Remote Hearings in International Arbitration: An Analytical Framework”, 37 J. Int’l. Arb. (2020) at p. 417.
[5] Article 36 of Law 30/1999 of Indonesia. See also Art 39 of the Arbitration Law of China Amendment 2017 and s30(1) of the Bangladesh Arbitration Act which also allows for document-only arbitrations.
[6] (2018) 粤 01 民特 420 号, 15 August 2018.
[7] Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2016] FCA 1131, [5]-[6].
[8]
Ibid, [149].
[9] Ibid, [154].
[10] See the reports for Singapore, Indonesia, and Australia.
[11] Docket no. 18 ONc 3/20s, 23 July 2020. The decision is available only in German. See a summary of the decision here.
[12] Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2016] FCA 1131
[13] Managing Director, Karachi Fish Harbour Authority vs. Messrs Hussain (Private) Limited (reported as 2014 CLC 1519 ; Haji Tayyab and others vs. Eastern Textile Mills Limited, Chittagong and others (reported as PLD 1970 Karachi 357.
[14] Hew R. Dundas, Nguyễn Thị Thu Trang & Nguyễn Thị Mai Anh, “Vietnam National Report”, in James Hosking et al., (eds), ICCA Project: Does a Right to a Physical Hearing Exist in International Arbitration? (ICCA 2021), p. 2.
[15] Ibid.
[16] James Rogers & Annie Birch, “Hong Kong National Report”, in James Hosking et al., (eds), ICCA Project: Does a Right to a Physical Hearing Exist in International Arbitration? (ICCA 2021), p. 8.
[17] Byron Perez & Maria Luisa Dominique D. Maurico, “Philippines National Report”, in James Hosking et al., (eds), ICCA Project: Does a Right to a Physical Hearing Exist in International Arbitration? (ICCA 2021), p. 13.
[18] Art V(1)(d) is incorporated in s48(1)(d) of the Arbitration Act; Kingshuk Banerjee and Ritvik Julkarni, “India National Report”, in James Hosking et al., (eds), ICCA Project: Does a Right to a Physical Hearing Exist in International Arbitration? (ICCA 2021), p. 20; Yoshimi Ohara, Mai Umezawa & Annia Hsu, “Japan National Report”, in James Hosking et al., (eds), ICCA Project: Does a Right to a Physical Hearing Exist in International Arbitration? (ICCA 2021), p. 12.
[19] Eg: Singapore, New Zealand, Australia, Korea.
[20] Arbitration Law of China Amendment 2017, Article 58, paragraph 1.3.
[21] Australia’s IAA, s 8(5)(d); s19 Arbitration Act (Bangladesh). It must be noted that Bangladesh would also treat this as an issue of jurisdiction under s20.
[22] Daniel Pakpahan, “Indonesia National Report”, in James Hosking et al., (eds), ICCA Project: Does a Right to a Physical Hearing Exist in International Arbitration? (ICCA 2021), p.11; See in particular Art 66 and Art 70 of Law 30/1999.