The coronavirus, which first appeared in China in December 2019 and caused the disease COVID-19, has spread to almost all countries in the world as of April 2020, and the world is currently in a state of global pandemic, as announced by WHO. In this context, although countries take measures to minimize the effect on legal activities, arbitration procedures, like any other procedure, are also adversely affected by the pandemic. It is clear that the pandemic brought life to a standstill in many cities, especially in global arbitration centers, and therefore has had negative effects on all legal processes.
I. The Effects of the Covid-19 Pandemic on Arbitration Procedures
Although the pandemic has spread to all countries, arbitration mechanisms such as governments, companies, and factories are also taking measures to prevent the increase in the number of infected people. Travel restrictions and quarantines already imposed by almost all governments have made it impossible to physically participate in the current arbitration procedures. In this context, many ongoing hearings have been canceled or postponed and the international arbitration mechanisms were not indifferent to these inevitable results and have had to make decisions regarding the periods and procedures one after another. For example, ICC has postponed or canceled the hearings planned to be held in Paris; ICC and LCIA have taken measures to work remotely as of 19.03.2020; ISTAC has postponed almost all its activities; AAA / ICDR has postponed all the hearings to a later date until 01.06.2020 even though they have decided to remain in operation, while ISTAC has decided to conduct all the hearings in the digital environment by taking measures to work remotely. In this context, the parties to the arbitration, by mutual agreement, sometimes extend the period they are subject to for an indefinite period of time, conduct hearings electronically, or postpone hearings even if a country has not declared quarantine. The fact that arbitration provides a wide range of action to the parties compared to the “lawsuit” processes in terms of what they can freely decide allows the ongoing arbitration procedures to be least affected by the pandemic.
Although the trials have been canceled or postponed due to COVID-19 pandemic, especially ad-hoc arbitration processes can continue with the use of artificial intelligence in the electronic environment as stated above by mutual agreement of the parties. In this context, it is possible to say that the COVID-19 outbreak has brought the concept of arbitration into a process of renewal, and has led those who have disagreements to seek alternative solutions, and therefore has actually increased the demand for arbitration. In addition, the fact that document submission, document review, and transferring documents to the parties in the digital environment is much easier than the normal lawsuit process in the arbitration procedure, is an important factor increasing this demand and directing the parties to the arbitration.
Since the COVID-19 outbreak seems to lead to a leap in commercial arbitration, some institutional arbitration centers have attempted to turn the adversities experienced during the outbreak into an advantage. In this context, SCC started to create secure digital platforms, and the ICC has made statements that it is seeking a similar platform.
II. Force Majeure and International Arbitration
When it comes to international arbitration, it is not possible to talk about a single legal order or a single common principle. Therefore, the scope of force majeure and its effects should be examined separately according to each legal system.
It is an undeniable fact that the COVID-19 outbreak will lead to many disputes and termination of contracts, and although the legal world has not yet fully predicted and revealed the effects of this outbreak, it is expected that disputes based on force majeure will increase in the following years. Therefore, it is clear that the force majeure clauses in the contracts signed before the pandemic will be on the agenda and if the force majeure clauses are not present in the contracts, the parties will choose the adaptation. Later on, the force majeure will be discussed in the arbitration hearings, but the course of the processes will not change. Again, as in the case of a lawsuit, the predictability of the force majeure, the contract terms, the applicable law, admissibility of the non-performance state based on the force majeure, the concepts of good faith, responsibility and powers of the arbitrators will be discussed. Successful completion of the arbitration process for lawyers will also be through the best defense of these concepts.
As of yet, it is not possible to predict the effects of the pandemic on the legal processes in the upcoming days. However, the digital tools used in the arbitration processes and the factors that the parties can freely decide on are quite comprehensive compared to the lawsuit process, and the outbreak is thought to lead to a leap in the preference for the arbitration. In addition, it should be noted in this context that although institutional arbitration centers have taken decisions like postponing the hearings, etc., these decisions serve only as a proposal to the parties. As stated above, commercial arbitration provides a wide range of action to the parties, both nationally and internationally. Therefore, it is not possible to mention essentially and definitely that the periods in the arbitration processes have come to a halt, as this will be determined by the will of the parties.
Although the parties will prefer the way of arbitration because of the pandemic considering the difficult access to judicial bodies and the arbitration procedures will continue, the current “force majeure” situation will be discussed also in the arbitration process in terms of claims, defenses, and issues to be discussed in general. However, as with any dispute, the parties are advised to prefer negotiation, to ensure the continuation of their contracts, and in cases where negotiation is not possible or the continuation of the contract will not benefit even after the outbreak, arbitration should be preferred.
For further information and inquiries please contact:
Av. Z. Deniz SEZER ([email protected])
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