Introduction
Arbitration is seen as a go-to mechanism for resolving disputes as arbitration inter-alia facilitates party autonomy, lack of procedural rigidity and a world-wide enforcement mechanism. In the year of 2020, an unprecedented pandemic brought the world to a halt as we know it, however arbitrators, lawyers, and witnesses were quick to adapt to the global shutdown and proceeded to resume arbitral proceedings through virtual conferencing.
Given the nature of arbitration, wherein parties to a dispute could be residing in different jurisdictions, virtual proceedings provide convenience and ease. Lawyers for parties on the other hand resisted virtual hearings and insisted on physical hearings instead. Whether the push for physical hearings or in-person hearings was for want of integrity of procedure or strategic delay, that is a question left unanswered. However, this concern of lawyers raised debate on whether the right to a physical hearing in arbitration exists?
This blog piece aims to understand whether such a right is prevalent in arbitration, and more specifically whether such right is present in India, and further assess the ramifications on whether the acknowledgment or non-acknowledgment of the right to physical hearing has any bearing on a fair hearing and enforceability of award.
Push for Virtual hearing in popular arbitration hubs
The UNCITRAL Model on International Commercial Arbitration (basis which a vast majority of countries have framed their domestic arbitration law on) provides for a right of oral hearing. As per Article 24(1) of the Model Law, unless parties decide against a hearing, the arbitral tribunal shall conduct a hearing at an appropriate stage, however, Article 24(1) of the model law does not specify whether such an oral hearing is to be virtual or physical. Nonetheless it is clear that a right to hearing itself is present.
Arbitral institutions have majorly adapted to virtual hearings as the new normal and amended their rules or issued guidance notes with respect to virtual arbitral hearings. Certain arbitral institutions provided for opting for virtual hearing even before the pandemic.
The 2020 International Bar Association Rules on the Taking of evidence in International Arbitration provides for evidentiary hearing to be conducted virtually, as per article 8 of the rules, the arbitral panel may after request from parties or on its motion after consultation with parties order the evidentiary hearing to be conducted virtually. This is important as this article vests the power to conduct a virtual hearing with the arbitral panel itself, certainly, the panel can only order virtual evidentiary hearing after ‘consultation’ with the parties, implying concurrence of the parties, however it assumes the power with the arbitral panel to initiate the start of virtual hearings.
Further as per rule 14.6(iii) of the 2020 London Court of International Arbitration (LCIA) Rules, the arbitral tribunal is empowered to employ technology to enhance efficiency and expeditious conduct of the arbitration which includes any hearing. Similar to the 2020 International Bar Association Rules, the 2020 LCIA Rules envisages the power to conduct virtual hearings with the arbitral tribunal itself.
Further, contrary to instance on physical hearing, rules of arbitral institutions in Japan [Article 50(30], New Zealand [Rule 24.4] provided for virtual hearing even before the pandemic started. The SIAC, HKAIC CIETAC, ACICA have issued guidance notes with respect to virtual conferencing of arbitral proceedings.
Therefore, a sentiment which emerges from the international institutional arbitration community herein is a push for virtual hearings, as opposed to recognizing a right to physical hearing. While providing a robust mechanism for virtual hearings is a welcome move to the realm of arbitration, it can be argued that the rules and guidance notes of the certain arbitral intuitions ignore pertinent issues such as parties access to technology, and technological infrastructure requirements to conduct seamless virtual hearings etc.
In 2022, a comprehensive study was released across 78 signatories to the New York Convention by the International Council for Commercial Arbitration (“ICCA”) to examine whether a right to physical hearing in arbitration proceedings exists. The report revealed that none of the 78 nations surveyed have an express right to physical hearing in their respective lex arbitri, including India.
The findings of the ICCA report paints two pictures, first that arbitral institutions around the world are leaning towards adopting virtual hearings, be it for ease of parties, cost-effectiveness, and avoidance of delay. However, the second picture which develops is that of concern; what happens if one of the parties resides in an area where there is poor internet connection, or what is the validity of an award if one of the parties is ill-equipped with technology and is not able to present their case to the best of their capabilities through virtual conferencing?
Concerns of Due Process, Enforceability and Confidentiality
Since it has been established that a right to physical hearing is not recognized in the lex arbitri in none of surveyed nations as per the ICCA report, various pertinent concerns arise such as compliance with due process, validity of an award, and possibility of breach of confidentiality during virtual hearings.
One such concern which arises is that of due process. Article 18 of the UNCITRAL Model Law says that every party shall be treated equally, and each party shall be given a full opportunity of presenting their case. Hence it should ideally be inferred from Article 18 of the UNCITRAL Model Law that if a party so desires to present their case physically, they should be permitted to do so, however it becomes difficult to infer the same as there is no express right to a physical hearing enshrined in the model law or the lex arbitri of nations. On the other hand, the International Court of Arbitration checklist for protocol on virtual hearings addresses due process concerns and provides for consultation between the tribunal and parties on practices to be followed to safeguard the rights of parties.
Interestingly however, courts around the world have dispelled murmurs of non-compliance of due process, and rejected due process concerns, for instance, a British court in Re Smith Technologies(Unreported)rejected an argument of a parties’ counsel that they were not well-versed with virtual conferencing of arbitral proceedings and thus would not be able to participate fully and fairly. Additionally, the Austrian Supreme Court rejected concerns of time-zone difference and witness tampering during the arbitral proceedings.
The author believes that the court in Re Smith Technologies has erred in its reasoning with respect to a party’s lawyers reluctance appearing virtually, the court reasoned that the lawyer’s argument on not being well versed with virtual conferencing is not good enough, and it is not difficult technology (referring to use of virtual conferencing). While the circumstances under which the lawyers in Re Smith Technologies were reluctant for physical hearing is not fully clear, it can be argued that there are various facets of virtual conferencing which pose challenges such as availability of stable internet, client’s concerns of privacy and confidentiality, and technologically preparedness of lawyers. Courts and arbitral tribunals should endeavor to entertain the request of lawyers for physical hearings in cases when it is apparent that the request of the lawyer warrants a physical hearing with genuine reasons.
Further in India, it is said to be unlikely that an award be set aside on hyper technical grounds such as due process violation during virtual testimony unless there is an apparent due process violation. Therefore, basis the rulings as mentioned above, it is unlikely that an arbitral award be set aside solely on grounds of due process with respect to virtual hearings.
Amongst concerns of due process and enforceability, parties have also been concerned about confidentiality during virtual arbitration proceedings. Certain rules of arbitral institutions have recognized the importance of confidentiality during virtual hearings. The ICC checklist provides for prohibition of recording of proceedings unless permitted by the tribunal and further a minimum encryption standard which needs to be followed. The HKIAC guidance note provides for password protected proceedings and an IT specialist to monitor proceedings.
While absolute confidentiality cannot be guaranteed even in a physical setting, it is interesting to see arbitral institutions recognizing the need for confidentiality safeguards during virtual arbitral proceedings.
The Right to Physical Hearing in India
Recent judicial trends in India suggest a pro-enforcement stance of Indian courts with respect to foreign arbitral awards. It is also important to note that in the India report released as a part of the ICCA findings on the right to a physical hearing, it was held that there is no recognition of the right to a physical hearing in India’s lex arbitri.
Section 24 of the Arbitration and Conciliation Act, 1996 grants the right of oral hearing to parties, in Sukhbir Singh v. Hindustan Petroleum Corp, the Delhi High Court expounded on section 24 and held in Sukhbir Singh that the determination of procedural matters such as length and time of hearing is left to the discretion of the arbitrator/arbitral tribunal [¶28]. The court also held that ‘a parties right do not extend to determining procedural issues such as the length or timing of oral hearing. These matters remain squarely in the domain of the arbitral tribunal.’ [¶46]
Therefore, it becomes clear the arbitral tribunal assumes the power to decide on procedural matters such as length and timing of hearing, since procedural issues are left to be decided by the arbitral tribunal, it can be assumed that mode of hearing can also be determined by the arbitral tribunal. Hence it is left to the wisdom of the arbitral tribunal to decide upon the mode of hearing depending on the facts and circumstances of the case.
In Rakesh Kumar v. State of Himachal Pradesh , the Himachal Pradesh High Court set aside an award on the ground that the arbitral tribunal did not give the right of oral hearing to one of the parties [¶9]. Therefore, if one of the parties requests an oral hearing, and the same is denied by the arbitral tribunal, then the award passed can be set aside. Reiterating as mentioned above, the conundrum persists as to whether ‘oral’ hearing to be read as ‘physical’ hearing.
Recently the Indian Supreme Court passed a directive that none of the High Courts across states shall deny video conferencing facilities to parties which indicates a strong commitment to strengthening access to justice across the country.
Interestingly, arbitral institutions such as the MCIA, NPAC, do not expressly provide for rules relating to virtual hearing. However, the MCIA rules do permit an emergency arbitration to be conducted virtually [Rule 14.5] and the NPAC rules provide for an emergency arbitration to be conducted by telephone conference [Rule 20(A)v].
Therefore, given that the decision of the Delhi High Court in Sukhbir Singh vests the power to decide procedural issues with the arbitral tribunal and further with the fact Indian Courts are encouraging the use of virtual conferencing for proceeding coupled with the further fact that the lex arbitri of India does not recognize the right to physical hearing, it is unlikely that Indian Courts will set aside an award basis being denied the right to physical hearing. Although the decision in Rakesh Kumar provides for setting aside an award on the basis that a request for oral hearing was denied, it is still not yet clear whether an oral hearing can be construed to mean physical hearing.
Lastly, when it comes to issues of confidentiality and privacy, it is important to note that the Indian Parliament recently passed the Digital Personal Data Protection Act, 2023 (“DPDPA”), which seeks to regulate personal data. Although the DPDPA exempts courts, tribunals, and arbitral tribunals, where processing of data is necessary for carrying out the function of a data fiduciary, fundamental obligations such as providing reasonable safeguards to prevent breaches of personal data still applies. Therefore, when it comes to virtual hearings of arbitral proceedings in India, the DPDPA will play a pivotal role insomuch as confidentiality and privacy of parties and witnesses are concerned.
Conclusion
It can therefore be deduced that a physical hearing in arbitration proceedings is not a matter of right and courts have dispelled notions that there could be a violation of due process if not granted to present one’s case physically. Additionally certain arbitral institutions have envisaged adequate safeguards with respect to due process and confidentiality of proceedings during virtual hearings.
Further it can be said it is unlikely that an Indian Court will set aside an award if one of parties’ request for physical hearing is turned down, as is the case in most jurisdictions since there is no express right to physical hearings in these jurisdictions.
The author believes that virtual hearings and physical hearings should not be pitted against each other, instead courts and arbitrators should assess whether a particular situation demands a physical hearing on a case-to-case basis. Lawyers play a key role in the arbitral process; certain lawyers may lack the technology to appear virtually, or certain lawyers may simply lack the technological know-how to appear and lead evidence virtually.
Therefore, when it comes to the decision of whether a hearing should be conducted virtually or physically, courts and arbitrators should take a reasonable approach to deciding the same and most importantly such decision should not cause prejudice to either party during the proceedings.
Author(s)
Prithvi Kapoor
Student at MIT WPU, School of Law, Pune