Leaps and Bounds: Arbitration Evolving – A Conference Report
Aditya Singh Chauhan, Aryan Yashpal & Bhavyakirti Singh (Indian Journal of Arbitration Law)
The Centre for Advanced Research and Training in Arbitration Law (CARTAL) and the Indian Journal of Arbitration Law (IJAL) organised the 6th CARTAL Conference on International Arbitration (‘Conference’) virtually on April 1–3, 2022, titled “Leaps and Bounds: Arbitration Evolving.” It comprised three panel discussions on contemporary issues significant to the arbitration community, viz. Blockchain Technology and Arbitration, Disclosure of Third-Party Funding in Commercial Arbitration, and Expedited Arbitration and Due Process. The important contributions from the Conference are discussed below in this blog.
Blockchain Technology and Arbitration
The first panel, moderated by Mr. Santiago Rodriguez (Associate, Uría Menéndez Abogados, S.L.P., Madrid), discussed the impact of the interface between blockchain technology and arbitration. To commence the discussion, Ms. Shilpa Mankar Ahluwalia (Partner, Shardul Amarchand Mangaldas & Co., New Delhi) introduced blockchain and described some of its key features, viz. decentralised system, creation of immutable ledgers, unanimous/majority decision-making framework and better security, irreversibility and anonymity. She listed some of the use cases of blockchain and went on to comment on the interface of blockchain technology and arbitration. This involved addressing on-chain disputes (arising between parties interacting on the blockchain, triggered by a smart contract) and off-chain disputes (linked to the behaviour of parties in the real world), both of which require dispute resolution frameworks.
Following this, Ms. Ila Kapoor (Partner, Shardul Amarchand Mangaldas & Co., New Delhi) elaborated further on the interface between blockchain technology and arbitration. She noted that blockchain can either be used to aid the traditional dispute resolution mechanisms (for example, for timely filings or data storage), or as a means where the blockchain ecosystem itself provides for the resolution of disputes. She pointed out that the former is compatible with the current institutional rules/norms, and that this is not typically the case for the latter.
Dr. Sara Hourani (Senior Lecturer, School of Law, Middlesex University London) furthered the discussion by considering the mechanics of blockchain-based ODR platforms such as Kleros and Aragon. She noted that these platforms make use of a global network of users, who serve as jurors for crypto-based economic incentives, to decentralise arbitration. The issue of ethics of these jurors, and whether they can act as independent decision-makers, was also addressed. She noted the positive reception of awards rendered in such proceedings by the national courts and discussed case law where a Mexican court enforced a Kleros arbitral award. Separately, on the aspect of the trend toward automation, she also provided the example of the UKJT Digital Dispute Resolution Rules, which are designed to facilitate the resolution of disputes involving digital technology such as cryptocurrency and smart contracts.
The discussion then moved to the use of smart contacts and arbitration. Ms. Ahluwalia emphasised the difficulties in practice that arise from the introduction of technology, such as the self-executing nature of smart contracts that cannot account for external stimuli appearing later in the course of a transaction or dispute. Ms. Kapoor then elaborated on the problems in enforcing blockchain awards, unsuitability of the current laws to accommodate such technological advancements and other unresolved issues within the Indian jurisdiction.
Mr. Calvin Koo (Principal, Kobre & Kim LLP, Hong Kong) deliberated upon the types of disputes in this area. With the help of illustrations, he noted that there may be (traditional) disputes that are blockchain-related in relation to the underlying subject matter, which will be more common in the short term and easier to deal with. There also may be disputes that are on-chain. A third type may be blockchain-based disputes, which would include problems arising due to the regulatory framework of a country and also enforcement issues with cryptocurrency-based awards. He also pointed out the difference in the treatment of blockchain technology in commercial and investment arbitrations, as the latter is underpinned by sovereign agreements and reflects policy decisions. This policy influence adds another layer of complications.
Ms. Ahluwalia then brought the attention to the lack of regulation of crypto-assets in India and presented regulatory alternatives in anticipation of legislative measures. Finally, the Panel contemplated the likelihood and feasibility of uniform supranational rules that may be used by national courts. It was also considered whether institutional rules can contemporaneously evolve for resolving the issues related to the blockchain technology and arbitration.
The second panel, moderated by Ms. Ananya Mitra (Associate, Derchert LLP, Singapore), deliberated upon the practices regarding the disclosure of third-party funding arrangements in international commercial arbitrations. At the outset, Prof. Dr. Catherine Rogers (Founder and CEO, Arbitrator Intelligence) described third-party funding in arbitration and provided a brief overview regarding the significance of such disclosures to ensure independence and impartiality, and prevent any conflicts of interest. She noted that presence and identity of a third-party funder in an arbitration should be disclosed. In response to popular concerns regarding such disclosures, she found that given the purely monetary interests of third-party funders, disclosures would not impact any adversarial strategies employed by the parties. Further, where interests extend beyond monetary incentives, disclosures ensure equity and level the playing field. Ms. Katie Chung (Partner, Norton Rose Fulbright (Asia) LLP, Singapore) added to these observations by highlighting that disclosures also assist counsel in assessing potential conflicts of interest or removing doubts regarding the independence and impartiality of arbitrators.
Disclosure of Third-Party Funding in Commercial Arbitration
Mr. Anish Wadia, C.Arb (Chartered Arbitrator, Accredited Mediator & Governing Council Member, Hyderabad Arbitration Centre, India) followed this by presenting an arbitrator’s perspective and attempted to examine the acceptable degree of due diligence that can be expected from an arbitrator as regards its independence and impartiality. He noted that the parties should disclose third-party funding, but it should not be mandated. This is because such disclosure would prevent potential enforcement issues and would typically not lead to the arbitrators forming preconceived views about the case. Given the emphasis on party autonomy, he suggested that increased responsibility and mindfulness by parties whilst appointing arbitrators would ensure that no doubts arise in the course of the arbitral proceedings.
Mr. Apoorva Patel (Vice President, Burford Capital, Washington) provided a funder’s perspective on this issue, noting that funders are typically amenable to disclosures. This is because their economic interests would only come to fruition in the absence of challenges or objections on conflict of interest that could jeopardise the enforcement of the award. However, he also cautioned that disclosure at times may go too far (i.e., beyond the existence of funding and identity of the funder). This may provide unwarranted advantages to the opposite parties or give them the opportunity to engage in improper tactics to seek confidential information or derail the arbitral proceedings. He suggested that a balance must be struck between confidentiality and other interests of transparency and avoiding conflicts of interest.
On a more legislative angle, Ms. Chung apprised the rules in Asian jurisdictions on this issue and noted that only a few jurisdictions mandate the disclosure of third-party funding. For instance, under the Singapore Legal Profession (Professional Conduct) Rules, the legal practitioners are mandated to disclose the existence of funding agreement and identity of the funder. This is a unique feature of this jurisdiction as most other instruments place the burden of disclosure on the funded parties, for example, under the Hong Kong Arbitration Ordinance. She also noted that it is becoming increasingly incentivised for parties to disclose the existence of funding, as tribunals have begun to award funding costs to successful parties.
Ms. Chung then stated that disclosure of third-party funding (on arbitrators and funded parties) are generally addressed by institutional rules. She provided the examples of the SIAC Practice Note, ICC Arbitration Rules and HKIAC Administered Arbitration Rules and also addressed the importance of such disclosures for the recovery of third-party funding costs.
The Panel was in complete accord as regards their support in favour of disclosures to ensure arbitrator independence and impartiality. It was also uniformly opined that a balance must be struck by tribunals between the conflicting principles of confidentiality in third-party funding arrangements and prevention of conflicts of interest in the arbitral proceedings.
Expedited Arbitration and Due Process
The third panel, moderated by Mr. Maanas Jain (Senior Associate, Three Crowns LLP, London), discussed the procedure under expedited arbitration and its impact on the parties’ right to due process. Mr. Peter Morton (Partner, K&L Gates, London) commenced with retracing the 2008 Stanford Super Series case, where given the paucity of time, the parties agreed to proceed with an ad hoc fast-track arbitration, and a decision was rendered by the sole arbitrator within a period of four weeks. Today, economy of time in arbitration is appreciated even more, as is indicated by the increase in instruments such as expedited arbitration rules or reports on controlling time and costs as well as practices by arbitrators such as forthright disclosures of availability by arbitrators at the nomination stage. Mr. Morton opined that the interests of the parties would be best served where proceedings are not extended unreasonably while ensuring that the right to be heard is adequately secured.
Ms. Shwetha Bidhuri (Head (South Asia), Singapore International Arbitration Centre) noted that expedited procedures innovated by institutions such as the SIAC serve as response to recent criticisms of international arbitration such as its increasingly time consuming nature. The SIAC Rules in particular intend to have parties in court within six months of the constitution of the tribunal. Further, these rules take precedence over the arbitration agreement to ensure that the President has the power to make determinations regarding the complexity of the case, its jurisdiction or choosing a sole arbitrator. Due process concerns are also addressed subsequently, and the question of the application of expedited procedure is not determined ex-parte.
Mr. Akhil Chowdary Unnam (Deputy Counsel, International Chamber of Commerce) provides insight into practical experience from the field in noting that in arbitrations administered by the International Chamber of Commerce, a vast majority of parties do agree to undergo expedited procedures and rarely object to the conduct of the same. Ms. Bhiduri also stated that it has been found that under the SIAC Rules, 60% of the requests for expedited hearings have been accepted, and the median time for the same remains less than 12 months.
In furtherance of this, Dr. Hamish Lal (Akin Gump Strauss Hauer & Feld LLP, London) observes that SIAC Rules are opt-in, whereas under the ICC 2021 Rules, parties must actively opt-out. Under the latter, the tribunal would be tasked with the decision of whether to conduct hearings, including evidentiary hearings. However, doubts remain as regards situations where one or both parties request hearings, especially in consideration of other factors such as the law of the seat, public policy considerations and the constitutional and procedural law of the jurisdiction. Thus, due process concerns may arise, and a balance has to be created between natural justice and the case management powers of a tribunal.
Another issue of concern discussed was the status and form of an award rendered. The summary nature of the award may raise due process concerns, which must be mitigated by the tribunal in its administration of the case. Mr. Morton also stressed on the question of whether or not to conduct a hearing, but found that given the move towards virtual hearings, it may be easier to accommodate such requested under expedited procedures. Dr. Lal further found that as regards complex subject matters such as construction, the bulk of documents and expert evidence makes an expedited hearing difficult.
In conclusion of the discussions, Ms. Bidhuri noted that expedited procedures have been successfully conducted and are efficient in administration. However, the onus still remains on the specific tribunals and parties to ensure that concerns of due process do not arise and this alternate route is being effectively utilised.
The closing remarks for the Conference were delivered by Dr. Nidhi Gupta (Associate Professor, National Law University, Jodhpur).
The authors acknowledge the assistance and efforts of Shivam Jain, Rajiv Yadav, Mythri Murali, Fatema Kinkhabwala and Raunak Rai Maini (Indian Journal of Arbitration Law) in the preparation of this report.