Amid the COVID-19 pandemic, it has often proven difficult, if not impossible, to hold traditional in-person arbitrations and mediations due to ongoing government regulations, travel restrictions, and concerns over personal health and safety. Under this environment, proceeding alternative dispute resolution processes remotely may help resolve disputes expeditiously and cost-effectively. Unfortunately, owing to antiquated drafting styles, concern over the construction of dispute resolution clauses, in particular, when the contract term expressly prohibits holding or a party objects to having remote arbitration hearings or mediation sessions have surfaced over the past year.
Situations which will warrant remote arbitration and mediation as choice of dispute resolution clause
Delay of proceedings due to COVID-19
Demand for remote arbitration and mediation has grown due to the COVID-19 pandemic, which has caused almost every country in the world to impose ever-changing meeting and travel restrictions. If parties insist on proceeding with in-person hearings, it is likely that the proceedings will have to be adjourned. However, it is highly undesirable as it is uncertain just how long the pandemic will last (with lingering effects projected by the years to come). In such circumstances, remote hearing represents a practical and cost-effective choice for parties to resolve their disputes.
While most arbitration tribunals have the discretion to order a remote hearing, a party may object to having a remote hearing or in the case of mediation, a mediation session if, for example, it believes that it would be disadvantaged for proceeding remotely or it attempts to delay the proceedings by refusing to agree. In such circumstance, it may be beneficial to supplement an alternative dispute resolution to facilitate remote proceedings and to prevent parties from using the COVID-19 pandemic and/or any other crises to cause obstruction.
International contracting parties
Alternative dispute resolution clauses that allow remote hearings or mediation sessions may be particularly useful to parties to international agreements who are resident and/or who carry on business in different countries. In particular, such contracting parties may have chosen an arbitration seat and/or a location of arbitration hearings which are different from their home countries.
Parties may also benefit from the costs saved from holding a remote hearing or mediation session. Although setting up the technology for a remote proceeding may incur additional costs, massive accommodation and travelling expenses are saved. Accordingly, the costs of having remote proceedings may be significantly lower than holding in-person proceedings.
In any event, there is always no harm to allow remote dispute resolution when drafting the relevant clause(s) as no one has a crystal ball. Including an alternative dispute resolution clause which permits remote proceedings provides more flexibility to parties and help facilitate dispute resolution.
Sample contract clause
In general, the rules of arbitral institutions provide for remote hearings and parties are free to agree on how mediation sessions should be conducted. However, it is advisable for contracting parties to expressly include supplemental terms in an alternative dispute resolution clause in order to directly set out the procedural arrangements which will apply in the circumstances of a pandemic such as COVID-19 and to avoid confusion and any subsequent dispute.
In this connection, contracting parties should consider including the following five elements when drafting an alternative dispute resolution clause which recognises remote proceedings:
- Condition(s) which trigger(s) remote proceedings, such as the COVID-19 pandemic;
- Recognition of remote proceedings as an acceptable form of dispute resolution procedure;
- Remote dispute resolution procedure shall not constitute grounds for challenging the enforceability and binding effect of the result of the dispute resolution proceedings;
- Postponement of alternative dispute resolution proceedings should participant(s) is/are required to be hospitalized or isolated or quarantined in compliance with any legislation and regulations; and
- Right of the arbitrator(s) or mediator(s) to grant order(s)/make arrangement(s) as they deem appropriate.
The following wording may be adopted in addition to the conventional alternative dispute resolution clause(s) to govern remote alternative dispute resolution:
“Notwithstanding any terms contained in this agreement to the contrary, if the effect of the Prevention and Control of Disease Ordinance (Chapter 599 of the Laws of Hong Kong) (the “Ordinance”) or other similar legislation for the control and prevention of the Infectious Diseases listed in Schedule 1 of the Ordinance (the “Diseases”) prohibits the parties and/or their legal representatives to travel to, or attend any [hearing ordered by the arbitration tribunal/scheduled mediation sessions]:
- any such [hearing/session] shall be held by means of such electronic or other communication facilities as permit all persons participating in the [hearing/session] to communicate with each other simultaneously and instantaneously upon [the order of the arbitration tribunal/agreement between the parties and the mediator];
- the parties agree that no objection shall be taken to the decision, order or award of the [arbitration tribunal/settlement reached after mediation] following any such [hearing/session] on the basis that the [hearing/session] was held by means other than in person;
- if the [hearing/session] herein (whether in person or by other means) could not be held as scheduled owing to the fact that during the period before and inclusive of the scheduled date of the [hearing/session]:-
- either party (or in the case of a corporation all the directors of the corporation or sufficient of them to constitute a quorum at directors’ meeting), their legal representatives and/or the [arbitrator(s)/mediator] is/are required to be hospitalized or isolated or quarantined under Ordinance or other similar legislation for the control and prevention of the Diseases; or
- the office(s) of either party (or in the case of a corporation all the directors of the corporation or sufficient of them to constitute a quorum at directors’ meeting), their legal representatives and/or the [arbitrator(s)/mediator] is/are required to be closed for carrying out disinfecting procedure by reason of the occurrence of the Diseases, the [hearing/session] shall be postponed to on or before the day that is within 7 business days after the party (or in the case of a corporation all the directors of the corporation or sufficient of them to constitute a quorum at directors’ meeting), their legal representatives and/or the [arbitrator(s)/mediator] is/are discharged from the hospital, is/are no longer required to be isolated or quarantined or after the office(s) re-open(s); and
- the [arbitrator(s)/mediator] shall have the discretion [to order that a hearing shall/to have a session] be held in person, but only after full and thorough consideration of the prevailing guidance of the World Health Organisation and any relevant legislation, regulations or guidelines announced by the Hong Kong government and any other government authorities.”
Remote alternative dispute resolution presents opportunities as well as challenges. While its popularity boosted suddenly due to the COVID-19 pandemic, as people are becoming more comfortable with technology, an increasing number of alternative dispute resolution proceedings will take place remotely. While technicalities and logistics of holding remote arbitration hearings or mediation sessions may cause hiccups in the proceedings, remote arbitrations and mediations may facilitate timely dispute resolution in a flexible and costeffective manner.
Since dispute resolution are essentially creatures of contract, parties may agree to proceed remotely even if the dispute resolution clause expressly prohibits holding a remote hearing. To save time and costs, there is always no harm in setting out expressly that remote hearings are allowed at the outset. The sample contract clause suggested in this article may shed some light on issues that parties should consider when drafting a supplemental alternative dispute resolution clause to cover public health emergencies similar to the COVID-19 pandemic in the future.