Arbitration and Conciliation Act

This article is written by Vanya Verma from O.P. Jindal Global University. This article covers due process paranoia and virtual arbitration that has gained importance recently in the pandemic in light of the Indian perspective.

Introduction

People are increasingly preferring alternative conflict resolution choices to litigation in the modern world in order to obtain a more flexible procedure with faster and less expensive results. Arbitration is one of the most well-known types of alternative dispute settlement. Arbitration’s key advantages are its neutrality of venue, procedural finality, flexibility, confidentiality, party autonomy, cost and time effectiveness, and, lastly, its worldwide recognition. However, tribunals have recently been criticized for continuously extending deadlines, accepting late evidence, permitting several modifications to a party’s written submissions, and agreeing to reschedule hearings by agreeing to last-minute requests. This phenomenon is also known as due process paranoia.

Virtual witness testimonies were prevalent before the COVID-19 pandemic, especially when witnesses couldn’t make it to the venue due to illness. Virtual testimony is permitted solely at the tribunal’s discretion under Article 8.1 of the IBA Rules on Taking of Evidence in International Arbitration. 

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The parties have been forced to adjust to a new normal since the uncertainty of a return to normalcy has forced them to rely only on virtual hearings, including virtual witness testimony. Virtual hearings are being held by arbitral institutions utilising a variety of video-conferencing technology. Virtual witness testimony is anticipated to become increasingly common as parties get more comfortable with technology and get comfortable with the time and cost savings that come with it. To ensure a fair and proper hearing, it is necessary to examine how procedural safeguards such as “due process” would play out in virtual witness testimonies.

What is due process paranoia?

Although the exact definition of “due process” varies from country to country, certain general principles, such as the right to be heard and equitable treatment of all parties, are widely accepted. While the notion of the right to be heard requires that each party be given an equal opportunity to state its argument and defend against the opposition’s case, the concept of equal opportunity requires that no party be treated unfairly. The abuse of due process has led to the phenomena of due process paranoia.

One of the noteworthy conclusions of the third International Arbitration Survey, titled “Improvements and Innovations in International Arbitration,” released by the Queen Mary University of London and White & Case was that some arbitrators are becoming increasingly concerned about what is known as “due process paranoia.”

According to the survey, due process paranoia is “a perceived reluctance by arbitral tribunals to move forcefully in particular cases for fear of the award being challenged on the grounds of a party not having an opportunity to present its case fully.” 

There appears to be a combination of three components at the heart of the concept of due process paranoia. 

  • First, one or more arbitral tribunal case management decisions that appear to be too concerned with due process considerations are frequently taken, but not always, to safeguard the respondent’s interests in the arbitration. 
  • The second component is the tribunal’s assessment that taking such a cautious stance is necessitated by the likelihood of the tribunal’s award being overturned and/or refused enforcement (the “Enforcement Risk”). 
  • Finally, the erroneous character of the tribunal’s view that this level of care is warranted, the erroneous belief that is induced by an inflated sense of the Enforcement Risk – is the third ingredient (without which there would be no paranoia, but merely sensible risk-averseness).

Reasons behind paranoid behaviour of arbitrators

In practice, arbitrators may err on the side of caution when making case management choices for a variety of reasons. 

  • First, unless time is of the essence, arbitrators will frequently determine that a delay or rise in arbitration expenses is preferable to the danger of giving an unenforceable award. This is because putting aside an award, or declaring it unenforceable, would require the parties to re-litigate their dispute (thus incurring considerably longer delays and higher costs). 
  • Secondly, even if the execution of the award is not denied, a tribunal’s tough position may prompt a disappointed party to question the arbitrator’s impartiality. A challenge, whether successful or not, is more likely to cause delays and increase costs than an overly cautious judgement. 
  • Finally, because enforcement / set aside processes are frequently in the public eye, they may have a detrimental impact on the arbitrator’s market reputation, reducing their chances of being appointed in the future.

Issues related to due process paranoia 

The primary issues with due process paranoia are increased expenses and delays. Due process paranoia sometimes leads arbitrators to permit additional time to the parties, accept multiple amendments to the written submission of parties, plan unnecessary long hearings or agree to the late introduction of claims or defences or requests at the last minute to reschedule video witness statements and oral hearings. All this goes against the standards of efficiency enshrined in most of the arbitral rules.

Some arbitrators may contribute to the high expenses and duration of arbitration proceedings by not being strong enough for fear of having an award overturned or refused enforcement. And it’s fair to say that exorbitant expenses and delays in arbitration are well-documented complaints among system users. This, in turn, may add to some users of arbitration’s sentiments of frustration. 

In other words, the concern is that whenever a tribunal chooses caution over procedural economy/efficiency in situations where the tribunal could afford to be robust (because the Enforcement Risk is lower than the arbitrators believe), the tribunal makes a ‘wasteful’, ‘uneconomical’ decision. That is where the crux of the due process paranoia problem rests. It is concerning those decisions that are “needlessly” cautious; those decisions that are “sub-optimal” in terms of procedural efficiency.

Due process paranoia does not jeopardise arbitration as a fair and final method of resolving disputes but as it grants unreasonable procedural requests and prolongs the proceedings unnecessarily, it neither benefits the parties nor the attractiveness of international arbitration as a dispute resolution mechanism.

Solution to due process paranoia

First and foremost, an effective way to prevent due process paranoia must be determined, one of the main causes of paranoia is an unjustifiable perception of the circumstances. First, arbitrators should take a practical and correct approach to the enforcement risks, with a focus on improving information access. It means that arbitrators should investigate matters, including their enforceability and recognition, and manage them accordingly. Studying each jurisdiction, legislation, and policy about the enforcement procedure is difficult and nearly impossible, but having greater information leads to more successful results.

Better access to information is thus the cure to the due process paranoia. To put it in another way, the solution lies in a more precise and realistic evaluation of the Enforcement Risk in each situation. This necessitates a thorough examination of the real influence of sound case management decisions on arbitral award enforceability.

Despite the unifying effect of the New York Convention or the UNCITRAL Model Law, the situation varies greatly from one jurisdiction to the next, with some being more liberal than others. When a tribunal seated in, say, England considers whether a case management judgement will be perceived as overly robust in the future, it must analyse the situation not just under English law (the law of the seat), but also in the likely enforcement location(s). However, it would be naive to believe that a tribunal will always have the time and resources to conduct a thorough investigation into the law of all jurisdictions where the award may be enforced. As a result, in an ideal world, trustworthy data (on the real Enforcement Risk of case management decisions) would be freely available for any jurisdiction. 

Prevalent due-process challenges to virtual arbitration

Witnesses may be instructed through concealed channels of communication during virtual witness testimony, which is a common due process problem. Furthermore, the legitimacy of virtual testimony has been questioned, particularly in cross-examinations, because the process requires analysing the witness’s body language and nonverbal indicators, such as eye motions, gesticulation, and expressions, which is impossible during virtual hearings.

These fears have been alleviated, thanks to current technology and logistical best practices. Face expressions and body gestures are vividly visible while using HD video quality. Video-conferencing, as opposed to an in-person hearing, gives for a closer view of the witness and enables video replays (if a recording is allowed) for body language analysis. Parties/tribunals can monitor the witness and guarantee that they are not accessing other devices or people to be coached by installing rotating or 360-degree view cameras. Separately, software applications/extensions can be used to prohibit other websites from being utilised for communication while the hearing is taking place.

The Seoul Protocol on Video Conferencing in International Arbitration (“Protocol”), which combines technological solutions with logistical best practices, addresses the majority of these difficulties. The Protocol stipulates that a reasonable portion of the (witness) room’s interior be visible, as well as giving testimony on an empty desk, which would further reduce the potential of witness coaching. The option to opt-out of the videoconference if the tribunal finds it to be unjust to either party ensures a secure backup.

However, there are still some flaws in the virtual testimonies that must be rectified. These are as follows:

  • In circumstances where voluminous documents are required to perform cross-examination, virtual hearings may take longer. 
  • There are concerns about technology’s unreliability. The right to be heard, for example, may be harmed if a connection is lost during a cross-examination, resulting in a loss of momentum and allowing the witness to re-evaluate their responses in the extra time. If there are audio/video abnormalities, visual freezing, or time gaps, virtual cross-examination may be ineffective.
  • In a virtual setting, issues such as translations and interpreters provide extra obstacles. Reliable connectivity and transmission speed will be crucial if a witness requires interpretation to participate in the proceedings. An interpreter may impose his interpretation of ambiguous language or mistranslate testimony during in-person proceedings, and this danger is considerably increased when simultaneous (rather than successive) translation is used.
  • A close-up view of the parties can lead to an exaggeration of visible gestures or activities. For example, a brief pause while answering a question or the appearance of sweat on the face may be misinterpreted. 
  • Members of the tribunal, for example, may not have the same ability to analyse the replies and body language of witnesses or experts during cross-examination as they do during in-person testimony. A witness who is unfamiliar with online meeting platforms may find it difficult to stare straight at a questioner (via a computer camera), thus generating credibility concerns where none exist. In a virtual context, there’s also a prospect of a witness being advised off-camera or reading papers without the tribunal or opposing party’s awareness.
  • Parties from all four corners of the globe participate in international arbitration processes. The technology standard, like many other aspects of arbitral procedure, should be agreed upon by the parties before the hearing.
  • Virtual hearings raise additional security and confidentiality concerns. Arbitration is preferred because of its numerous benefits, primarily the confidentiality of the procedures. When several parties, witnesses, and experts use their home networks to attend virtual procedural or evidentiary hearings where there may be no protection against hackers intruding, the risk of security breaches increases. Hackers may use zoom-bombing to bring the proceedings to a halt, or the arbitral institution’s website or electronic hearing bundle could be compromised. The Permanent Court of Arbitration was hacked in the middle of an ongoing maritime border dispute between China and the Philippines in July 2015, well before the trend of moving procedures digitally. The PCA’s website was hacked with malware, which infected users’ PCs and exposed them to data theft.
  • Other seemingly insignificant difficulties, such as various time zones, could have far-reaching consequences for the proceedings. Arbitrations sometimes involve parties from numerous jurisdictions, as well as witnesses and experts from other places. It may be possible to manage the time difference by calling witnesses in a sequence that permits each witness to give evidence during normal business hours where they are based, but finding a time that is convenient for everyone during a time when travel is restricted would be difficult.

In the face of these difficulties, it can be observed that protecting the right to due process should be a joint responsibility of the parties to the arbitration (parties, arbitrators, institutions) and the courts implementing the verdict. Parties should use logistical/technological best practices, such as rotating cameras and communication blocking software, to avoid issues of unreliability/misuse of technology (to the extent it can be funded). If a clinching testimony, i.e. one that would alter the award, is required, counsel should make a judgement call. Where connectivity issues persist, tribunals may opt that videoconferences be cancelled.

If parties, on the other hand, fail to address due process violations internally, courts must ensure that grounds for challenging or resisting enforcement are dynamically interpreted to address due process violations caused by unreliability or misuse of technology.

India’s stand on virtual hearing

While the legislation is silent on video-conferencing, the Indian Supreme Court has allowed the recording of witness testimony by video-conferencing in cases when the presence of the witness is essential but the witness cannot appear without undue delay, expense, or hardship. (State of Maharashtra v. Dr Praful Desai, (2003)). As a result, video conferences have been used in cases when witnesses were in bad health, had financial hardship, were elderly, or lived abroad. [See State of Maharashtra v. Chandrabhan Sudam Sanap (2018); Zaishu Xie & Another v. The Oriental Insurance Company Ltd. & Others (2013); Amitabh Bagchi v. Ena Bagchi (2004)].

The Delhi High Court issued a guidance note for video conferencing arbitration procedures and asked the Delhi International Arbitration Centre to follow these guidelines starting June 8, 2020. Cases must be filed electronically, hearings and witness examinations must be conducted using a video conferencing platform such as Cisco Webex, and arbitral awards and orders must be digitally signed and shared among the parties via email. Parties must also provide written submissions, along with copies of pertinent documents and judgements, as well as video footage of their oral arguments, according to the requirements. These initiatives have been taken to make virtual hearings via video-conferencing more efficient and to eliminate video-conferencing hearings in cases where the parties are satisfied with the written submissions and video clips.

Simultaneously, the courts have issued guidelines for conducting a videoconferencing examination, which includes:

  • Proper identification of the witness;
  • The appointment of a technical coordinator;
  • Ensuring that witnesses have access to documents;
  • The presence of an officer to ensure that witnesses are not coached. 

The Court has further stipulated that the cross-examinations must be completed in one sitting, with no adjournments. Although, in the case of numerous records, High Courts have acknowledged the inadequacy of virtual cross-examination. (R Sridharan v. R Sukanya, (2011)).

Similarly, in arbitrations, the courts have been mainly favourable to video testimonies. A witness in Russia was ordered to appear for cross-examination via videoconference by the Calcutta High Court. (Saraf Agencies Private Limited v. Federal Agencies for State Property Management (2018). The Madras High Court went even farther, encouraging parties from all around the country to conduct the full arbitration over video conferences. (Axis Bank v. M/s Nicco UCO Alliance Credit Limited, 2017). More recently, the Delhi High Court, in the case of Rategain Travel Technologies Private Limited v. Ujjwal Suri, High Court Of Delhi (2020), recognizing the possibility of conducting virtual arbitral proceedings, stated, “the arbitral tribunal may consider conducting the hearings and recording of evidence by video-conferencing if considered feasible”.

In light of these judicial precedents, it may be reasonable to conclude that the Indian courts may continue taking a positive view towards video testimonies in arbitration. Taking inspiration from the above-cited decisions, to further eliminate risks of witness coaching, either the representative of an institution or the counterparty may be present in the same room as witnesses. Moreover, parties should be encouraged to keep the virtual cross-examinations brief and conduct them in one session.

Arbitral awards enforcements in India

A party may dispute or fight the implementation of an award for reasons of due processes, such as incapacity to submit one’s case or the tribunal’s failure to follow the procedure outlined in the agreement.

When no chance is given to a party to deal with an argument that goes to the heart of the matter, an award may be successfully contested or opposed based on incapacity to state one’s case. (Vijay Karia and Others v. Prysmian Cavi E Sistemi SRL and Others (2020), Ssangyong Engineering and Construction Company Limited v. NHAI (2019)). The Supreme Court in the Vijay Karia case propounded that the test to determine if a party has been unable to present its case is, “whether factors outside the party’s control have combined to deny the party a fair hearing.”

Furthermore, courts may sua sponte use the ground of “public policy” violation to set aside or resist enforcement. The Indian judiciary, on the other hand, has taken a pro-enforcement stance by narrowly defining the scope of public policy.

Given the Indian judiciary’s pro-enforcement stance, domestic/foreign awards are unlikely to be set aside/resisted unless there has been an “apparent” due process violation during virtual testimony. As a result, an enforcement challenge to an award based on virtual witness testimonies would be effective if the award’s fairness had been impacted visibly and not when the grounds alleged were overly technical. Such a high bar tries to strike a compromise between fairness and preventing parties from engaging in speculative litigation. Due process paranoia, defined as “a perceived reluctance by arbitral tribunals to move decisively in particular instances for fear of the arbitral judgement being challenged based on a party not having had a full opportunity to present its case,” would be reduced by the norm.

Conclusion

Concerns about due process in virtual testimonies are yet to be fully addressed. Until such a resolution is reached, the choice to take virtual testimonies should be carefully considered, the technological capabilities of participants, as well as the value of the witness, are important factors to consider. Furthermore, if virtual testimonies are used, technological/logistical solutions, as well as judicial attention, are required to avoid due process concerns.

To make arbitral processes more cost-effective and timely, arbitrators must: take a realistic and thorough approach to enforcement risks; have better access to information; have sharp and clear powers by the tribunal; use hybrid methods of dispute resolution, such as Med-Arb and Arb-Med; and take a proper approach to the arbitral process by parties and their counsels; impose monetary sanctions in case of necessity; use efficiently modern technologies in the conduct of arbitral processes; make an arbitration-friendly law environment; increase legal awareness and legal culture of people.

References

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