The latest changes regarding dispute resolution within the Covid-19 pandemic – observations from the Asia Pacific Region
King & Wood and Mallesons, Shenzhen, Guangdong, China
King & Wood and Mallesons, Shenzhen, Guangdong, China
The Covid-19 pandemic has been an ongoing disruption for more than a year. As of September 2021, it continues to pose enormous health and socio-economic challenges for the world. The Covid-19 pandemic has been an ongoing disruption for more than a year. As of September 2021, the pandemic continues to pose enormous health and socio-economic challenges for the world. However, the pandemic has also presented a tremendous opportunity to restructure things to fit people’s visions. Judiciaries and arbitral institutions have been made great efforts to embrace these changes - as Winston Churchill once stated during the Second World War, ‘never let a good crisis go to waste’.
This article will discuss the impact of the pandemic on commercial dispute resolution, focusing on how courts and tribunals in Asia have responded to this changing landscape.
Covid-19’s impact on commercial dispute resolution
It is witnessed that under pandemic, commercial dispute resolution has faced two challenges: the increase of caseloads and the increase in complexity.
First, statistics show that there is an increased volume in cases. The Singapore International Arbitration Centre's (SIAC) 2020 annual report shows SIAC’s commercial arbitration case filing has increased by 125 per cent from the number filed in 2019.
Singapore International Arbitration Centre (SIAC)1
Hong Kong International Arbitration Centre (HKIAC)2
International Chamber of Commerce (ICC)3
China International Economic and Trade Arbitration Commission (CIETAC)4
Further, figures show types of disputes in almost every major arbitral institution, with increases in international trade; supply agreements; shareholder; license agreements; financing agreements; and intellectual property disputes, among others.
Second, it is observed that disputes filed have become significantly more complex. There used to be a term dubbed ‘triangle debts’ which indicated interactive tangled contractual relationships among different stakeholders, under different agreements, in the same business chain. Now the term may have to be changed to ‘polygon debts’ as it is often not a single issue, or even several issues, under one contract, but a group of contracts with multi-parties involved.
For instance, a company had 19 senior managerial staff asking for early termination of their employment agreements. The company believed that this was a breach of employment agreements and had to consider arbitration against each employee, as per the employment agreement within the People’s Republic of China (PRC) law. At the same time, it also had to consider the application of injunctions to prevent the key employees from joining its competitors and disclosing commercial secrets, alongside the potential to sue its competitors for unfair competition. Nevertheless, lawyers can commence legal actions on various fronts, but legal remedies may come too late to save businesses.
Substantive law adjustment by the PRC's Supreme People's Court (SPC)
On 16 April 2020, 15 May 2020, and 8 June 2020, the Supreme People's Court (SPC) of the PRC has promulgated the ‘Guiding Opinions (I), (II) and (III) on Several Issues concerning the Proper Trial of Civil Cases Related to the Novel Coronavirus Pneumonia (Covid-19) Epidemic According to the Law’ (‘the Opinions’).
In essence, the Opinions are a summary and an explanation of relevant existing statutory stipulations dealing with situations, such as the current Covid-19 epidemic and, especially, force majeure related clauses.
It shall be noted that, with regard to the handling of Covid-19 related civil cases, the Opinions expressly promote the use of alternative dispute resolution (ADR) by stating that courts at all levels shall put ADR mechanisms ‘at the forefront’ and will prioritise mediation. The court is requested to guide the parties involved in disputes to negotiate settlements, share risks and amicably overcome difficulties.
This is, to some extent, in line with the already existing Articles 9 and 122 of the PRC Civil Procedure law which also states that court shall encourage dispute resolution by mediation where appropriate in order to try to reach an amicable solution before rendering a judgment.
Mediation regains its glory
Further, it is also noted that well-advised negotiation to settle disputes has regained its glory. Having all stakeholders together at the table to find common ground means that settlement negotiation once again has become the desired ‘quick cure’ to some disputes, particularly for complicated matters with different dispute resolution mechanisms. There is no doubt that it is one of few avenues that provide an effective resolution of disputes to reduce financial impact on businesses. Preferences for speedy resolutions are likely to grow and may become mainstream in the near future.
In addition, the option to combine mediation with litigation or arbitration is also positive. SIAC and the Singapore International Mediation Centre (SIMC) have formalised their SIAC-SIMC Arb-Med-Arb Protocol (the ‘AMA Protocol’), a process where mediation is attempted in the course of arbitral proceedings. If the dispute is settled through mediation, the mediated settlement agreement may be recorded as a consent award under the New York Convention. Only if mediation fails may it continue with the arbitration proceedings. A similar ADR method has now been actively considered by the legal community to achieve their client's goals.
The PRC's courts are in line with the mediation renaissance. According to the ‘Opinions of the SPC on Deepening the Reform of the Separation, Mediation, Expedited Procedure and Speedy Trial Mechanism’, the court is required to actively direct parties to resolute disputes by mediation, arbitration administrative reconsideration, administrative adjudication, and other means.
A commercial case brought before the court shall undergo ‘separation between mediation and adjudication’ at the litigation service centre, unless mediation is not suitable - based on the nature of the dispute - or mediation fails to produce a mediation agreement. With the consent of the parties, appointed mediation may be carried out by a mediation exercise before the case is filed to court. If a mediation agreement is reached, the parties shall be encouraged and directed to perform voluntarily. Only if parties do not consent to mediation, or mediation fails, the case may be filed to court.5 Due to the aforementioned efforts, it is noted that the PRC court has experienced a decreased caseload since 2020 as more than 4.24 million civil and commercial cases were successfully settled by mediation before litigation in the same year.6
Dispute resolution goes digital
Over the last 18 months, online dispute resolution in both judiciaries and arbitral institutions have become the norm.
Taking China as an example, after the Covid-19 outbreak, on 3 March 2020, the PRC’s Ministry of Justice issued a Guideline calling for the accelerated development of China’s ‘internet arbitration systems’.7 Correspondingly, arbitral institutions took action to enhance their digital arbitration ability. For example, the Shenzhen Court of International Arbitration actively optimised three platforms: a cloud arbitration platform (for online case filing), video hearing platform, and an evidence exchange storage platform (for evidence repository and exchange).8
Additionally, on 30 July 2021, the PRC Ministry of Justice issued the amendment draft bill for the PRC Arbitration law, which specifically provides that ‘arbitration may be conducted online’.
For judiciaries, this digitalisation is even more profound. On 4 December 2019, the SPC of the PRC issued ‘Chinese Court and Internet Judiciary’, outlining the government’s strategy to develop the ‘internet judiciary’. It included measures to improve the court’s online mediation platform, which has resolved over one million disputes since launching in 2016. In the last three years, China has set up ‘internet courts’ with the capability to handle entire proceedings online in the major cities of Hangzhou, Beijing and Guangzhou.
On 17 June 2021, the SPC released Rules of Online Litigation of the People’s Court of China (‘the Rules’). The Rules are judicial interpretations formulated by the SPC binding on courts in Mainland China and which came into effect on 1 August 2021. The Rules explain the basic principles, the applicable scope and conditions of online litigation, and provide guidance on various procedures including online case filing, hearings, announcement of judgments and enforcement. The Rules help establish nationally unified standards for the conduct of litigation online, and it is hoped that they will enhance convenience and efficiency in litigation, and increase certainty in the PRC. Digitisation of judicial practice is snowballing and the new Rules are likely to act as a lynchpin in the continued rise of online litigation in the post-pandemic era.
From online court hearings, arbitration hearings, case filings, exchange of documents, storage of documents to services, e-judgments and e-awards, a whole process will be, and has been, changed. So far, the PRC courts have conducted live broadcasts of court hearings for 11.59 million cases.
It seems clear that the overall trend is towards digitisating the entire judicial systems in the region. In future, it can be envisaged that each arbitral institution will set up an online platform for stakeholders including parties, parties’ representatives, tribunal members and institutional staff to access case documents online, including filing, exchange and storage for use of further research, etc. Tribunal members will no longer have the headache of when and how to dispose of a large volume of paper documents. The traditional hard copy files might be limited to a trial bundle or core trial bundles only, or they may even be eliminated.
Hearings may still be preferred to be conducted in person but to a large extent, a hybrid type of hearing will become common practice.
When e-filing is housed by institutions, the next step could be the application of artificial intelligence technology to commercial arbitration proceedings. For example, imaging AI technology may be used to produce the first cut of procedural history of an arbitral award or to assist checking footnotes of such an award.
In short, the authors' believe that that ADR, settlement negotiation and mediation, the digitalisation of the judicial systems, and a mix of online and in-person hearings appears to be the new directions for the future of dispute resolution.
1 See SIAC’s 2020 annual report: www.siac.org.sg/69-siac-news/699-siac-sets-a-new-record-in-2020. Accessed 09 November 2021.
2 See HKIAC’s 2020 statistics: www.hkiac.org/about-us/statistics. Accessed 09 November 2021.
3 See ICC Dispute Resolution Statistics 2020: https://iccwbo.org/publication/icc-dispute-resolution-statistics-2020. Accessed 09 November 2021.
4 See CIETAC 2020 work report: www.acerislaw.com/wp-content/uploads/2021/05/cietac.org-CIETAC-2020-Work-Report-and-2021-Work-Plan-Work-Report-China-International-Economic-and-Trade-Arbitra.pdf. Accessed 09 November 2021.
5 See ‘Notice by the Supreme People's Court of Issuing the Principles of Q&A on the Pilot Program of the Reform of Separation between Complicated Cases and Simple Ones in Civil Procedure (I), 15 April 2020’: www.lawinfochina.com/display.aspx?id=32830&lib=law. Accessed 09 November 2021.
6 See ww.court.gov.cn/zixun-xiangqing-287411.html. Accessed 09 November 2021.
7 See ‘Guidelines for Public Legal Services for Epidemic Prevention and Control and the Resumption of Work and Production of Enterprises’: www.gov.cn/xinwen/2020-03/03/content_5486463.htm. Accessed 09 November 2021.
8 See ‘Shenzhen International Arbitration Court conducts non-contact arbitration’: www.moj.gov.cn/Department/content/2020-03/03/612_3243121.html. Accessed 09 November 2021.