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<xTITLE>Competing for Law of Seats or Technology of Seats? China’s COVID-19 Dispute Resolution Lessons</xTITLE>

Competing for Law of Seats or Technology of Seats? China’s COVID-19 Dispute Resolution Lessons

by Carrie Shu Shang, Xiaoxiao Ma
July 2020

Travel restrictions and social distancing needs during the COVID-19 pandemic have made virtual hearings and other types of technology assisted Online Dispute Resolution (“ODR”) the “new normal” of international commercial dispute resolution. Accompanied by Asia-Pacific users’ strong interests in arbitration, various arbitral seats in China have entered into a new round of competition based on adaptation to user friendly technologies.

Rule Changes Driven by Virtual Hearings

China’s economies seemed to recover faster than the rest of the world from the hit of the pandemic. Most arbitral institution’s caseloads seem to not have been impacted badly. For example, the Beijing Arbitration Commission/Beijing International Arbitration Center(“BAC/BIAC”) reports that despite a slight decrease in numbers of cases compared to the same period in 2019, the Center still has a steady caseload. Until the end of June, 2,084 requests for arbitration were filed, representing a 34.44% decrease compared to the same period last year. However, the number of international cases increased by 6.02%. At the same time, the sum in dispute stayed approximately the same on a year-on-year basis. This is not surprising given that arbitration clauses have usually long been embedded in contracts, and the pandemic has potentially led to more breaches.

To accommodate the stay-at-home needs of parties, many organizations in the area are moving to “e-arbitrations” based on more intensive uses of internet-based video-conferencing techniques. The Hong Kong International Arbitration Centre (“HKIAC”) instituted a COVID-19 response plan at the beginning of February and precautionary measures for visitors to the Centre. According to the center staff, HKIAC was able to quickly transition to administering virtual and remote hearings and administered around 40 virtual hearings since the pandemic. HKIAC’s virtual hearing procedures have been reflected under the 2018 HKIAC Administered Arbitration Rules to encourage greater use of technology (Art. 13.1), that physical hearings are not required (Art. 14.2), and that notification can be made by uploading to a secured online repository (Art. 3.1(e)). Subject to arbitrators’ and parties’ final agreements, HKIAC allows either IP-based encrypted video conferencing or cloud-based video conferencing compatible with most platforms such as Zoom, Webex, Microsoft Teams and Bluejeans. In Beijing, the BAC/BIAC also adopted numerous ways to expedite the case filing process and to ensure the high efficiency of the commercial arbitration, parties can choose to file online, by post or onsite. Meanwhile, BAC/BIAC released a detailed Checklist for the Application for Arbitration needed for case filing so that it greatly improves the efficiency and the arbitration experience of parties. Since the pandemic, BAC/BIAC has administered over 60 virtual hearings. Based on the practice, BAC/BIAC also released the Working Guidelines on Online Hearings in May 2020. The Guidelines gave specified solutions of some problems caused by the online hearings, including confidentiality, record signing, identity verification and other issues.

The Online Dispute Resolution (ODR) Boom   

Apart from arbitration, the pandemic has also caused various forms of ODR to continue to develop. In Mainland China, privately owned and operated online mediation organizations attracted more users. The surge in demand for online mediation called for more participation of private service providers, market-based online mediation organizations were quickly being established in Shanghai, Xiamen, Hangzhou and other places in China.  As a private-sector leader of ODR service platforms, Beiming Software Co., Ltd. launched its "Dispute Resolution Cloud" online mediation platform. In April 2020, the Hong Kong Government announced its new COVID-19 Online Dispute Resolution scheme aimed at providing parties with a way to resolve their legal disputes without the need to meet face to face. The new ODR scheme is meant to cover COVID-19 related disputes where the amount claimed is HK$500,000 or less, ensuring that the program benefits Hong Kong’s micro, small and medium-sized-enterprises (“MSMEs”) that may be adversely affected or hard hit by the pandemic. Although details of this platform are yet to be released, in the preliminary design the process looks like a multi-tier dispute resolution mechanism following an escalated “negotiation-mediation-arbitration” steps, conducted via Hong Kong’s ambitious technology enabled ODR platform - the eBRAM. These programs allow a wide variety of ways of resolving disputes online assisted by technologies, such as large-scale computerized text analysis, blockchain-enabled authentication, and machine learning.

Vying for Technology-Based Popularity

Over the last decade the arbitration industry experienced unprecedented growth in the Greater China Region. This has caused competition for the so-called new Asia-Pacific Dispute Resolution hub, particularly between Hong Kong and newly arising arbitral centers in Mainland China’s more economically developed cities, such as Shanghai, Beijing and Shenzhen. Previously an arbitral seat’s popularity almost always depends on more on factors such as friendliness of arbitration law, supportiveness of local courts (e.g., willingness to support interim measures, easiness of enforcing arbitral awards, etc.), and abundant supply of competent international arbitration professionals. Under the pandemic brought “new normal”, technology adaptiveness and creative approaches that can dramatically reduce delays and arbitration costs have become equally if not more important. Cravenness for digitalization has gradually changed people’s perception of arbitration and will remain crucial long term, regardless of when the pandemic goes away. Therefore, some previously more challenged seats for legal system related reasons may generate new popularity because their dispute resolution providers are better funded and/or equipped with more advanced technologies. At the same time, geo-political changes in some regions may also significantly impact shift in arbitral seat popularity. Together, these factors will reshape the competition for leading arbitral seats in the Greater China Region, and the pandemic has only accelerated the rate of change.

(The authors would like to thank Dr. Ling Yang of the Hong Kong International Arbitration Centre in supplying case statistics).
 

Biography



Carrie Shu Shang is an Assistant Professor of Business Law at California State Polytechnic University, Pomona. She obtained her J.D. from University of Southern California School of Law, and her B.A./B.S. (with High Honors) from University of California, Berkeley. Prior to joining the academia, she was the Chief Representative of Hong Kong International Arbitration Centre’s PRC Office (2017-18). She is admitted to the New York (2013) and California Bar (2019), and is qualified to practice law in the People’s Republic of China. She is a practicing mediator and an UDRP panelist of several ICANN accredited providers. She’s also on the Membership Committee of the Silicon Valley Arbitration and Mediation Center (SVAMC).


Xiaoxiao Ma is a senior counsel of Beijing Arbitration Commission/Beijing International Arbitration Center and has plenty of experience on international commercial arbitration. She graduated from Wuhan university with a specialization in Private International Law. She also has a graduate degree from Fu Jen Catholic University law school. Before becoming a senior counsel, she was a case manager of Beijing Arbitration Commission/Beijing International Arbitration Center and has managed over 600 case. She co-authored, The Art Law. Research on arbitrability and Legislative Thinking of Anti-monopoly dispute, A Comparative Study on Consolidated Arbitration published in law journals.