Quantum Leap: Analysing the Transition from Traditional Institutional Arbitration to Online Dispute Resolution due to the COVID-19 outbreak

By-Tamanna Gupta, Student, Rajiv Gandhi National University of Law, Punjab.

Reading Time: 6-8 minutes


The onset of the COVID-19 (Coronavirus Disease) pandemic, which has disrupted economies worldwide, led to severe financial strain, and has led to the imposition of lockdowns worldwide, has left no domain of life unscathed. The Arbitration community has also faced several challenges due to the pandemic. The pandemic has forced several arbitral institutions to alter long-standing modes of functioning, shifting to virtual platforms to perform functions that were traditionally performed at the seat of the dispute concerned. While ad-hoc arbitration proceedings have witnessed considerable changes in lieu of the pandemic, a dramatic transition in institutional arbitration proceedings has been observed due to the pandemic.

A United Front: Joint Statement by International Arbitral Institutions 

In a statement issued by 13 major International Institutional Dispute Resolution Centers, including signatories such as International Court of Arbitration (ICC), Singapore International Arbitration Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC), amongst others, major concerns raised by stakeholder parties & tribunals affiliated to or dealing with the institutes were addressed. The arbitral institutions jointly proclaimed their aim to support the continuation of stability and foreseeability in arbitration proceedings, by way of several measures, including speedier disposal of pending cases, without compromising on the rights of the parties to be heard in a fair and reasonable manner.

The Legality of Online Disputes Resolution

While it can be ascertained that the major institutes of arbitration have rapidly adapted to the change in circumstances, it is important to analyze the legality of the transition to Online Dispute Resolution (ODR) in light of the numerous challenges it raises. Article 2 of the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules states that any notice for arbitration, including any notification, communication or proposal, is deemed to have been received if it is “physically delivered” to the addressee at his or her habitual residence. This clause stands as an exclusionary clause since no addition for electronic transmission of notices has been made. 

However, the United Nations Commission on International Trade Law (UNCITRAL), in its 46th Session (2013), adopted the Rules on Transparency in Treaty Based Investor State Arbitration, wherein Sub-clause (2) states that dissemination of the Rules on Transparency in Treaty Based Investor State Arbitration must be done, both physically and electronically, thus acquiescing to the fact that electronic and online dispute resolution is an emerging trend, which shows no signs of subsiding in the recent future.

 It was stated by the Supreme Court in the case of State of Maharasthra v Dr. Praful B. Desai (2003) that video conferencing is an acceptable method of recording evidence in witness testimonies. Thus, ODR, which is based on video conferencing, is a conducive method for resolving disputes, especially in the COVID-19 context. 

Paradigm Shift: The leap from Institutional Resolution to Online Dispute Resolution 

While Online Dispute Resolution (ODR) as a mechanism for dispute resolution was fairly common in the pre-pandemic scenario, the extent of reliance on the same has increased exponentially. Earlier, only certain circumstances such as the physical impossibility of appearance, or electronic transmission of evidence warranted virtual or video-conferencing, however, in the present stage, virtual proceedings, even at crucial stages of the case have become a “norm” rather than the “exception”. Several institutions have released an organizational response, clearly demarcating an action plan for further disposal of cases. Several remarkable characteristics mark the advent of the Online Dispute Resolution Process initiated by various institutes- 

1. Shutdowns, Timings, and Disposal of Cases

Complete shutdowns marked the Modus Operandi of most of the Institutions, wherein employees from London Court of International Arbitration (LCIA), International Chamber of Commerce (ICC) & Singapore International Arbitration Centre (SIAC), etc. shifted to remote arrangements temporarily. Noting the easing of several restrictions during the subsequent stages of the lockdown, organizations such as Judicial Arbitration & Mediation Services (JAMS) announced a systematic and phased re-opening of offices, by June-July, 2020. However, several precautions have been taken such as installing Plexiglass screens, proper sanitization and cleaning at regular intervals, reduction in the number of cases being resolved daily in order to maintain social distancing, etc.

2. General Case Administration, Meetings & Hearings 

Most institutions have allowed the filing of notice for institution of arbitration proceedings via email/online modes of communication in light of the pandemic, while a few institutions such as Deutsche Institution Germany (DIS) depart from the status quo, continuing to accept hard-copies of requisite documentation, utilizing postal and courier services. The dissemination of information regarding changes instituted by various institution varies from case to case, with some institutions updating their website regarding the same.

3. Guidance, Hearing Service Providers & Helplines

In order to safeguard the various interests involved during the entirety of the arbitration process, steps have to be taken in order to ensure that maximum security is maintained. In order to serve the dual objectives of privacy & security during proceedings, several arbitral institutions have released “Guidance Notes”, which lays down measures for compliance in order to maximize security and minimize risks during the proceedings. 

International Chamber of Commerce (ICC) has released a Guidance Note, specifically taking into consideration conditions created due to the COVID-19 pandemic, also stating suggested clauses to inculcate in case cyber-security is involved. Furthermore, even language services are being provided in order to maximize the output of arbitration proceedings during the pandemic. 

4. Conduction of Events & Conferences

Due to the onset of the pandemic, several major arbitral events stood cancelled in light of the restrictions imposed due to lockdowns, etc. Other events were postponed to the year 2021, contingent to change in circumstances. Many institutes took to conducting their annual events and seminars relating to arbitration online, specifically discussing methodologies of adaptation in the COVID-19 context. Some examples of such enterprising arbitral institutions include Hong Kong International Arbitration Centre (HKIAC) that conducted a webinar series, Stockholm Chambers of Commerce (SCC) conducted Online Seminars, Conflict Prevention & Resolution (CPR) conducted a webinar on Alternative Dispute Resolution in the COVID-19 context etc. 

 Probable Way Forward & Concluding Remarks

“Justice Delayed is Justice Denied”

It is imperative that the COVID-19 pandemic is increasingly pressurizing the arbitration community to step up to the plate, regarding which the top-tier institutions of arbitral excellence have responded well. The arbitral community has systematically & swiftly adopted technologies for facilitating ODR, or virtual hearings. Three leading arbitration bodies, the Arbitration Place, Maxwell Chambers & International Disputes Resolution Centre (IDRC) have already formulated an alliance to facilitate hearings in conformity with COVID-19 guidelines. Many steps are being taken by other institutes swiftly, in order to dispose off the pending cases swiftly, and ensure no harm ensues to the parties due to the onset of the pandemic.

The current crisis has opened the doors of ODR for various stakeholders & arbitral institutions on a global scale. While ODR practices were prevalent even before the advent of COVID-19, the onset of the pandemic has speeded up the popularity of ODR as a mode of dispute resolution. While several concerns regarding ODR arise, such as cyber-security, data privacy, confidentiality, etc., major stakeholders are formulating guidance notes & rules to counter the same. In order to ensure minimum loss of time, technology has to be incorporated in the dispute resolution process on a large scale. Concerned stakeholders, such as arbitrators, judges, counsels, & parties must rapidly adapt to the advent of ODR, which will prevail even in the times to come, marking the future of dispute resolution.

Author: Tamanna Gupta, Student, Rajiv Gandhi National University of Law, Punjab.


The South China Sea Arbitration

Reading time: 8-10 minutes.

The South China Sea, has emerged as a region of immense global interest and contention, especially in the contemporary times, owing to its vast economic and geostrategic significance.  1/3rd of the worlds maritime shipping passes through the sea carrying over USD $3 trillion in trade each year, making it the 2nd most used sea line in the world. The water body also has 1/3rd of entire world’s marine biodiversity and contains lucrative fisheries for providing food security to the South East Asian Nations. An estimated 160 trillion cubic feet of natural gas and 12 billion barrels of oil lie beneath the South China Sea, which remained untapped to this day. Several countries bordering the sea including Vietnam, Malaysia, Brunei, China, Philippines, Indonesia, have raised conflicting claims of sovereignty over the waters and use resources of the South China Sea. One such dispute was decided by the arbitral tribunal in July, 2016, in a case brought People’s Republic of Philippines against People’s Republic of China.

The Dispute

In January 2013, Philippines initiated a case against China concerning the status of certain marine features in the South China Sea, which involved the interpretation and application of the provisions of the UNCLOS, and the latter’s alleged unlawful activities in the Sea. On 21st June, an arbitral tribunal of 5 arbitrators of the Permanent Court of Arbitration was established to settle the disputes in pursuance with the compulsory settlement procedure set out in Annex 7 of Part XV of the UNCLOS.

The Major Issues to be decided, in a nutshell were as follows:

  1. Whether China had ‘Historic Rights’ within its so-called 9 dash line?
  2. Whether certain maritime features as claimed by both the nations characterize as Island, rocks, low tide elevations or submerged banks under the convention?
  3. Whether certain activities of China in the South China Sea had violated the provisions of UNCLOS by interfering with sovereign rights of the Philippines?
  4. Whether certain actions undertaken by China in the Sea, since the commencement of the arbitration, had further aggravated the dispute between the parties?

In February 2013, China announced that it would not participate in the said proceedings, nor accept its award, asserting that the tribunal had no jurisdiction to determine the said dispute.  The same stance was further elaborated in the “White Paper” published by the State in 2014. Back in 2006, China made a written declaration, that the State would not accept any compulsory settlement procedures under the convention on issues of territorial sovereignty and maritime delimitation over the South China Sea by invoking Article 298 of UNCLOS which gives the States the right to opt out of Compulsory Settlement procedures laid out in Section 2 of Part XV.

China also relied on the “Declaration on the Conduct of the Parties in the South China Sea” (hereinafter referred to as “DOC”) adopted in 2002 by the ‘Association of South Asian Nations’(hereinafter referred to as “ASEAN”) to settle the relevant dispute concerning the South China Sea, through negotiations and conciliation, to assert its claim that the tribunal lacked jurisdiction. The DOC stipulated that the parties would undertake to resolve their territorial and jurisdictional claims through peaceful means, without resorting to use of threat or force in accordance with the recognized principles of International Law.

Throughout the proceeding, China abstained from appearing in any hearing before the Permanent Court of Arbitration. It rejected and returned correspondences from the tribunal and neither officially provided clarifications or comments on any specific questions of substance or procedure, nor advanced any cost for the proceedings, reiterating its original stance that the arbitration initiated was flawed and hence void. But this did not impede the tribunal from conducting its proceeding according to Article 9, which stipulates that when one of the parties to the proceeding does not appear before the court or defends its claims, the tribunal shall continue the proceedings. Absence of the parties to defend its case or appear before the Court shall not bar the proceedings.

In October, 2015, the tribunal conducted a separate hearing on the issues of jurisdiction and admissibility of the case according to Article 288 of the convention, which provides for the determination of claims arising out of questions of jurisdiction of the tribunal or Court. After close interpretation of China’s Statement of 2006, the tribunal concluded under Article 298 of UNCLOS that the scope of the present matter was to determine maritime entitlements and the nature of the actions of China in the sea, and not maritime delimitations, and therefore China’s Statement did not deprive the Tribunal from deciding the case on merits. The tribunal also observed that entitlement to “maritime zones” is distinct from delimitation of those zones, in areas where they overlap. The tribunal found that the DOC adopted by the parties was a bilateral political instrument with no legally binding effect. And even if the treaties were binding, it would not obstruct the parties to choose an alternative dispute resolution mechanism. Additionally, the tribunal also clarified that it would honour China’s Declaration of 2006 and would not delve into the issued of maritime delimitations and sovereignty.

The nine-dash line, was originally an eleven-dash line, which had first been shown on the Map released by the Chinese Government in 1947. This line was later submitted to the UN in 2009, to justify its “Historic Rights” over the South China Sea. The U-shaped dotted line covers more than 90% of the South China Sea and extends much beyond the permitted EEZ of 200 nautical miles from the baseline. China’s Government has never officially explained the meaning of the line, nor provided any concrete legal evidence in favour of its claims. The line remains undefined as it does not have any specific geographic coordinates and provides no clarifications on how it was connected if it were a continuous line.  

The essential jurisdictional question concerning the 9-dash line and the historic rights therein was whether such a claim was encapsulated within the meaning of disputes…historic titles and bays” under Section 298(a)(1)(i) of the UNCLOS, and thus, the tribunal would be acting beyond its jurisdiction in deciding this issue, in accordance with China’s Declaration of 2006.

The tribunal approached this issue by observing that China’s claim was not one involving “Titles”, but rather “Rights” over the living and non-living resources in the marine area. It stated that the meaning of “Historic title” in Article 298 was “claims to sovereignty over maritime areas derived from historical circumstances” It also clarified that the word “title” did not cover the questions of “rights” within its ambit, and accordingly, since China’s claim was limited to its rights in the area, with no explicit claims of territorial sovereignty, the tribunal had jurisdiction to decide the claim.

The tribunal ruled in favour of Philippines, stating that China’s claim of “Historic Rights” over the area covered by the nine-dash line which virtually covers the entire South China Sea, was ambiguous and without any factual or legal evidence and hence incompatible with the provisions of UNCLOS. Although, Chinese fishermen and navigators, as well as those of foreign states, have made use of the resources and waters historically, there is no evidence that China historically exercised exclusive control over the waters or considered them as a part of its internal waters or territorial sea.

The tribunal accepted that in order to determine the extent of Philippines EEZ it was pertinent to examine all the relevant high tide features in the Spratly Islands. Unlike previous arbitral tribunals that have accepted certain features as rocks and islands without explicitly applying Article 121 of the UNCLOS, this tribunal interpreted the provision in detail. The tribunal concluded that if a maritime feature cannot sustain human habitation and economic life on the basis of its natural capacity, it does not meet the requirements of an island within the definition of UNCLOS. It placed significant emphasis on the natural conditions of a feature, without any external interventions, to support human life, to determine it as an island. Immediately, prior to the declaration of the award, China had heavily modified and enhanced the features of these islands. Applying, this conception, the tribunal found that though the relevant high tide features in the Spratlys and Scarbourgh Shoal were capable of inhabiting small groups of people, there was no substantial evidence of a stable human community ever occupying the place. The Tribunal also clarified that human intervention does not change the status of the feature. Hence, the tribunal classified all those features including the Scarborough Shoal as rocks within Article 121(3). which could not generate maritime entitlement to an EEZ or continental shelf.

The tribunal found that the Mischief Reef was a low tide feature that essentially forms a part of Philippines EEZ and by constructing artificial islands and installations in the area, without the authorisation of Philippines, China had breached Article 60 and 80 of the UNCLOS. China has also prevented Philippines from exploiting the natural resources within its own country’s continental shelf. The tribunal found China guilty of obstructing the operations of a Philippine survey ship around the area of the reed bank, thus infringing Philippines’ sovereign rights over the living and non-living resources of the continental shelf in the area of the Reed bank. In May, 2012, A Philippine navy surveillance aircraft detected 8 Chinese fishing vessels near the Scarborough Shoal. Further, China not only prevented Philippines’ fishermen from fishing within their own territorial waters, but also took no steps to curtail Chinese fishermen from fishing illegally within the Philippines’ EEZ.

In 2013, China began large land reclamation projects for constructing artificial islands in the areas of the Spratlys and the Paracel islands. Satellite images of the East of the Mischief Reef show that these islands are equipped with runways, aircraft hangers, bunkers and even radar sites. The Tribunal found that these activities of China were incompatible with the obligations on a State during a dispute resolution process, as such activities have caused severe harm and damage to the marine ecosystem and even destroyed evidence of the natural conditions of the features in the South China Sea that form a part of this dispute.

The tribunal overwhelmingly ruled in favour of Philippines on virtually every issue. It examined in detail the scope of Part XV of the UNCLOS with regard to Article 281. The ruling in the dispute is going to go a long way in emphasising the importance of settling highly contested and politically charged disputes between parties of unequal strength through arbitration. However, it also highlights the limitations of an arbitral tribunal based on its jurisdiction. Several scholars have criticised the composition of the tribunal and its detangling of the issue of sovereignty with maritime entitlements, without much justification.  After the award was declared in favour of the Philippines, China openly condemned the award and called it “null and void”. Though the award is legally binding on both the parties, there is no enforcement mechanism present in the convention to implement the award, giving one of the parties a sweet escape route from complying with the tribunal’s findings.

Author: Yashvi Maru, BLS LLB from Government Law College, Mumbai.

Editor: Astha Garg, Junior Editor, Lexlife India.