The 2020 European financial services outlook
For all financial services practitioners, 2020 will be a year of dynamic developments.
Online Dispute Resolution (ODR) has become a contemporary legal buzzword. In this article, we discuss how ODR presents a viable opportunity for international arbitration to live up to its early promise of being a cost-effective and efficient means of dispute resolution.
In recent years, arbitration has faced heavy criticism for allegedly failing to live up to its early promise of being a cheap and fast means of resolving disputes. In the face of such criticism, it is easy to forget that arbitration historically has been at the forefront of procedural and technological innovation. For example, arbitration embraced electronic filing and service of documents and implemented party-tailored procedures (including advocating a flexible, proportionate approach to disclosure) well before most courts contemplated such conveniences. However, with courts in many jurisdictions rapidly embracing technology and innovation, arbitration must take steps to ensure it stays ahead of the curve.
Arbitration is inherently an innovative and flexible process and is, as a result, perfectly positioned to lead the way in taking up other new technological and procedural innovations. Indeed, it is incumbent on arbitral institutions, tribunals and practitioners to do so, particularly where innovation drives cost and time efficiencies.
Online Dispute Resolution is an umbrella term which describes dispute resolution processes that are assisted by the use of information technology (IT). Most of us have engaged in some form of ODR, be it by communicating with a tribunal via email or by utilizing electronic disclosure platforms to manage disclosure. However, the focus of this article is to explore a more holistic application of ODR; where IT is intrinsic to the dispute process itself, and where ODR is a stepping stone to virtual dispute resolution.
Many courts have introduced, or are looking at introducing, online court systems of some form or other. China is the latest to unveil a fully online “cyberspace court” based in Hangzhou, the Chinese capital of e-commerce. Proceedings are commenced, court fees are paid, and all documents are submitted via an online portal. Court notifications are delivered electronically. Mediation can be conducted by telephone or video conference. Hearings, including cross-examination of evidence, are conducted online via a live- tream with parties attending remotely and a judge “presiding” over computer monitors. There are no court clerks or transcribers – transcripts are generated electronically by voice identification software. The general public may observe proceedings via a video feed. One of the drivers behind introducing the online court is the significant increase in the number of cases and corresponding burden on the judicial system. This online court is seen as a potential model for other Chinese courts.
An online system could be easily implemented in the international arbitration context, though with arbitration allowing for more flexibility, it could be tailored to meet the parties and arbitrators specific needs.
ODR terminology guide
E-hearing (aka paperless hearing)
A hearing conducted electronically, using various digital technologies, to eliminate the need for hard copy materials. Commonly, the hearing room is set up with computer screens (content screens) to display electronic documents from an electronic hearing bundle. Each member of the tribunal, each witness and each party (and their legal representatives) has at least one screen in front of them. As a document is referred to by counsel or the tribunal, a central operator (present in the hearing room) locates that document on the ORB database and displays it simultaneously on all content screens. Additional content screens may be added, including in remote off-site locations, if required by parties. In conjunction, evidence or submissions may also be given by video-link.
Online review bundle (ORB)
(aka electronic hearing bundle or electronic hearing book) An electronic platform which allows a shared set of documents to be accessed online by the parties, their legal representatives and the arbitral tribunal. The ORB may be managed by a third-party proprietary service provider or by the tribunal itself (more often, an arbitral assistant), and can be organised by issue or category. Some ORB platforms offer in addition private online databases for each party, where documents can be sequestered confidentially from the other parties and the tribunal unless and until they are required to be released (e.g. for cross-examination).
A live transmission of video and audio data between different locations, using computer and internet networks.
A live feed of the hearing transcript, accessible online. Commonly utilised at e-hearings where, in addition to the content screen, a second screen displaying the real time transcript may be set up. Again, additional screens may be added to suit the size of each party’s representation and off-site, if required. Frequently, additional facilities are offered such as the ability for each party to confidentially annotate, highlight or share excerpts of the transcript in real time within their team.
More efficient pre-hearing preparation
Much of ODR’s functionality can be quite basic but in practice the efficiencies offered for pre-hearing preparation can be significant. ODR’s benefits should not be underestimated. An online document management system makes it much easier to manage documents, including when searching for, annotating and/or sharing materials between the client, counsel, experts and witnesses of fact. The convenience of having exhibits hyperlinked within pleadings or witness statements, for example, is an incredibly useful and time saving feature.
More efficient preparation of hearing materials
The cost of producing hard copy bundles can quickly become significant, particularly in document-heavy, multi-party and/or multi-arbitrator proceedings. Hours of intensive labour are often involved in pulling together the hardcopy master, making and then proofing multiple copies and manually updating each copy every time an amendment or addition is made. An ORB significantly reduces the work required to prepare and maintain the arbitration hearing bundle. If the ORB is set up early and documents are uploaded as and when they are served, the hearing bundle will be automatically constructed during the course of the proceedings. Where additions or amendments need to be made, these are done once centrally, avoiding the need to manually update numerous hardcopies. This can save significant time and cost (particularly in multi-party and multi-arbitrator proceedings) and eliminates the risk of inaccuracies between copies of bundles. An ORB also saves on additional transport costs (and avoids associated confidentiality risks) – providing someone access to the hearing bundle is as simple as giving them an access password to the ORB.
More efficient hearings
An electronic hearing can be up to 25 percent to 30 percent quicker than a traditional hearing. This is largely driven by the smoother and more efficient management of documents. Gone is the time-consuming and thumb-numbing process of everyone in the hearing room locating the correct document within volumes of lever-arches, or indeed waiting to locate additional copies of a document if one bundle has a copying error. There are also significant forensic advantages. During cross-examination for example, each document referred to by counsel appears on the screen in front of the witness almost instantaneously, enabling the cross-examiner to launch a peppering assault of questions, free from the distraction, disruption and delay associated with the witness (and tribunal and opposing counsel) locating the document referred to in a hard copy bundle.
Another benefit is that everyone in the hearing room is presented with the same material simultaneously and the material on content screens cannot be “browsed” by an individual user. This focusses the attention of entire hearing room on the document or documents being discussed. Swifter resolution of disputes can not only benefit parties but also arbitrators who are often highly sought-after and time-poor individuals.
A more efficient hearing is not only faster, and often therefore less costly, but also affords parties greater opportunity to present their cases in the limited timeframe available. The same technology that allows ORBs can facilitate easier and novel ways of presenting evidence and submissions. It is far easier to navigate a large, complex spreadsheet electronically. Complex data can also be collated and presented electronically in clearer, even interactive, ways. Technologically-savvy counsel are already utilizing such methods.
Case Study: Recent ICC Mega-Arbitration
Norton Rose Fulbright recently acted in an ICC arbitration with the disputed quantum reaching ten figures. A decision was made by the parties shortly before the hearing that the hearing would be conducted electronically. The public ORB in that arbitration had over 110,000 documents. Those documents were at the instant disposal of the Tribunal and both parties. Over a six-week, stopclock hearing, more than forty lay and expert witnesses presented evidence (several by video link), and over 22,000 exhibits (including witness statements and documents) were referred to. Despite the significant logistic and document management challenges that one might expect from a dispute of that complexity, each party fully presented its case within the allotted time.
Mobility and global reach
In an increasingly global market place, commercial disputes are frequently cross-border. As a result, parties, counsel, witnesses, experts and/or the tribunal could be located in multiple locations. E-hearings are an especially attractive solution in those situations, and can reduce or eliminate the additional cost and inconvenience of unnecessary travel. Documents on an ORB can be accessed remotely by any authorized user at any time, no matter their location. Factual or expert evidence can be taken from almost anywhere using video link in conjunction with an ORB – all that is required is for the witness to have access to a secure location where a content screen can be set up and some form of video-link technology (now widely and cheaply available). ORB’s also eliminate the common complaint, made particularly by experts, counsel and arbitrators who often travel frequently for business, of having to carry arbitration bundles or risk not having to hand the right documents when needed. With an ORB, at most they would need to carry their laptop or iPad, alternatively, to have access to a secure computer.
Critical success factors
ODR has the potential to streamline the dispute resolution process, saving time and costs and ultimately improving the quality of the process. Given international arbitration’s promise of being a costeffective and efficient means of dispute resolution and the mobility, accessibility and flexibility of ODR, it seems like the two are a perfect match. So why hasn’t ODR been more popular in arbitration? There are always multiple, varying reasons for resistance to new technology. Perhaps the better question is what has changed such that ODR is now a viable alternative? Technological advances mean that fast, secure and effective internet and video facilities are now widely available, and correspondingly, the costs of ODR have decreased. ODR is no longer viewed as an expensive “Rolls Royce” process. Most modern arbitral institutions or venues offer technologically sophisticated hearing rooms. Technology is also more user-friendly. Add to that, lawyers and arbitrators are themselves increasingly technologically-savvy (whether by choice or necessity). There is less fear of the technology involved, or of lacking the technological aptitude to run an e-hearing well enough to extract forensic benefit. Where concerns remain, those can be addressed by engaging an experienced ODR service provider. Many will offer not only their product but also their (human) services, including guidance along the way and a central operator to locate documents during the hearing.
With greater exposure, familiarity and uptake, we expect to see ODR becoming a commonly chosen, if not the default option, in arbitration. Momentum for the use of ODR is growing in litigation too, and competition will naturally drive change. As long as this growth trend continues, ODR will revolutionize modern dispute resolution practices.
ODR is a possible gateway to entirely virtual arbitration. The obvious next step on from evidence being given by video-link is for counsel’s submissions to be given by video-link. The tribunal panel need not be physically present in the same room as the witnesses, parties, nor indeed each other. Lawyers and clients could also participate actively in the hearing in real time by video link. This decentralization would arguably deepen the pool of experience and expertise of the arbitration community, and can accommodate the schedules of otherwise busy lawyers, arbitrators and experts. With the advances in virtual reality technology, it is foreseeable that in the near future participants could all come together in a virtual hearing room.
It is now generally accepted amongst the arbitration community that parties rarely choose arbitration because they perceive it as being the fastest or cheapest means of dispute resolution – the drivers are instead its global enforcement regime and confidentiality. Indeed, in most recent surveys, in-house counsel state that they choose arbitration despite the perception that arbitration can be as slow and costly as litigation. Most arbitral institutions are looking at ways to respond to the demand for greater cost and time efficiencies in arbitration. But the arbitration community also holds the tools for positive change. Parties, counsel and tribunals should be seeking out and embracing technological and procedural innovation. The tangible benefits of ODR, including its efficiency and mobility, go hand in glove with the innovative, flexible and international nature of arbitration. There is no “right way” to utilize ODR – it is a suite of tools from which arbitrators and the parties can jointly select the most suitable combination for their circumstances. With the rapid development of technology, ODR both now and in the future is exciting and should be embraced by the international arbitration community.
For all financial services practitioners, 2020 will be a year of dynamic developments.
In the 1990s and 2000s, as everything from banking to buying books moved online, “brick and mortar” businesses were suddenly required to have an online presence and to design new business processes to accommodate the new online world.