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Relieving the trial backlog: Arbitration to the rescue?

Joe Tirado, partner and Co-Head of International Arbitration and ADR at Garrigues.

In view of the current overload of judicial bodies as a result of the COVID-19 standstill, arbitration can take a step forward and come to the rescue of the parties in dispute who want their conflicts to be resolved quickly.

The on-going global COVID-19 pandemic has had an enormous impact on all aspects of our lives. One important area that has been badly hit is the administration of justice. While the civil courts in some jurisdictions, such as England & Wales, have continued to function and adapt to social distancing and move efficiently to holding remote hearings and even trials by telephone or video, many courts across the world have had to endure a prolonged period of lockdown due to COVID-19.

Even where the transition to the new “normal” has been relatively successful, the capacity of the court system is under significant and growing pressure. The availability of judges and other key personnel is susceptible to the need to self-isolate whether as a result of their own illness or that of a family member. Running cases remotely may also cause additional delay as time estimates are overrun or extended. Logjams are beginning to build up that may take months or even years in some cases to overcome.

Given the advantages of arbitration that we have discussed in a previous edition of the newsletter and the success and flexibility with which the arbitration community has adapted to the challenges of resolving disputes in the current climate, also discussed in another newsletter, it is possible for arbitration to step up and rescue parties to litigation who want their trial-ready disputes to be resolved promptly but whose hearings are being squeezed out of the court lists by the impact of COVID-19. Such a “conversion” of an impending trial to an arbitral hearing would allow the parties to use the pleadings and evidence already assembled for the litigation and to adopt a procedure with which parties more familiar with litigation than arbitration feel comfortable. The parties would be able to retain their existing legal teams and avoid wasting the huge resources sunk into the pre-trial process.

The parties should consider entering into an arbitration agreement or a protocol[1] that provides for the rapid appointment of a tribunal with availability to prepare and hold a trial in short order; prescribes the applicable procedural rules; and makes agreed provision for the costs of the litigation to date – perhaps the most obvious choice being to empower the tribunal to deal with the costs of the preceding litigation as part of the recoverable party costs of the arbitration, while respecting any orders for costs made in the proceedings to date (such as “in any event” orders and reserved costs).

Consideration should be given to the appointment of an arbitral institution to administer the case. This may relieve some of the burden on the tribunal which will have its work cut out to prepare a hearing at breakneck pace. The parties could agree to provide for the selected institution’s standard rules and procedures to be applied in a way suited to the parties’ needs and the requirements of the dispute.

Any advantages of the arbitration process will need to be assessed in the light of the limitations to, or the perceived disadvantages of, the arbitral process –discussed in the newsletter previously referred–. For example, depending on the seat or place of arbitration there may be a limited or no right of appeal. Other factors include, more limited powers of the arbitral tribunal to compel witnesses or to take other compulsory steps involving non-parties. Also, whether the subject-matter of the dispute is capable of being arbitrated (this relates to the concept of “arbitrability” that we have written on before) and whether there are any formalities or impediments to producing a valid and enforceable award will all need to be carefully considered.

Arbitration may also have some additional cost implications that may not be present in proceedings before a court. Most noticeably, the cost of the arbitral tribunal (normally consisting of three members in high-value cases) itself and the venue will need to be paid for by the parties. In many cases it may be possible to mitigate such costs. For example, the parties may agree to appoint a sole arbitrator rather than a tribunal made up of three members where the matter is not particularly complicated notwithstanding the amount in dispute. In any event, the general rule is that, subject to the discretion of the tribunal, the winning party in an arbitration may recover its reasonable legal costs and expenses from the losing party.

The need for confidentiality of the proceedings should be considered by the parties. While most court judgments may be available as a matter of public record, confidentiality of the award is still the norm in arbitral proceedings.

Finally, given the consensual nature of arbitration, any move to convert court proceedings before a court to an arbitration is only likely to be attractive in cases where both sides have a common interest in having their dispute resolved swiftly. The reality is that it in most pending cases before the court, only one side will have a real interest to move the dispute along without delay.

 




[1] See, Clearing the COVID-19 logjam: can arbitration rescue stalled trials? by Gordon Nardell QC and Angharad Parry, https://twentyessex.com/clearing-the-covid-19-logjam-can-arbitration-rescue-stalled-trials/