Identifying the ‘Seat’ of Arbitration in the age of Virtual Hearings and COVID-19: Answering the Conundrum

Shantanu Lakhotia[1]

As we conceptualize international arbitration in a globalized era, we must also be cognizant of the synergistic opportunities available for international arbitration through utilization of disruptive technologies.[2]

– Justice Sharad Arvind Bobde
(Chief Justice of India)

Introduction

The outbreak of the COVID-19 pandemic has pushed the world into utter chaos. Considering the highly contagious nature of the virus, umpteen governments across the world have promulgated lockdown-type measures wherein certain travel restrictions have been imposed, both domestic and international. Owing to the traditional in-person requisite of dispute resolution processes in India, travel restrictions have directly frozen the justice delivery mechanism of the country. Fortuitously, as Oscar Wilde had remarked – “behind every exquisite thing that existed, there was something tragic”, the Courts, in the background of the pandemic have now been ushered into an age of digitalization of its proceedings.

Fortunately, unlike the Courts of India, the flexible nature of arbitration and its susceptibility to change has allowed it to tide over the present situation, by substituting in-person arbitration with the method of video-conferencing or virtual hearing with much alacrity. Nonetheless, the rapid adoption of the method of virtual hearing to conduct arbitration will lead to a new set of challenges. In particular, one that has plagued the field of arbitration till date i.e. determining the ‘seat’ of arbitration. The present article will try to address the above-mentioned conundrum in the backdrop of the travel restrictions imposed by the Government, necessitating the parties and arbitrators to conduct arbitration proceedings vide the method of virtual hearing from their particular location.  

Will virtual hearing lead to a shift in the ‘seat’ of arbitration?

Determining the ‘seat’ of arbitration is of utmost importance in arbitration law, as it will lead to the particular jurisdictional court to obtain exclusive jurisdiction. By using the method of virtual hearing, the complexity arises in the scenario wherein each party, as well as the arbitrator, belongs to a different state in the context of domestic arbitration and different countries in the context of international commercial arbitration and logs into their system in different locations to conduct the arbitration proceedings. Hence, the question that arises is when the arbitration proceeding takes place at a ‘venue’ different than the agreed-upon jurisdictional ‘seat’, in such a scenario does it lead to the shifting of the jurisdictional ‘seat’ as well?

Redfern and Hunter notes that it is by no means unusual for an arbitral tribunal to hold meetings, or even hearings, in a place other the designated ‘seat’ of arbitration, either for its own convenience or for the convenience of the parties or their witnesses. In such a scenario, each move of the arbitral tribunal does not lead to the ‘seat’ of the arbitration moving with the arbitral tribunal. The ‘seat’ of the arbitration remains the place initially agreed by or on behalf of the parties.

In the matter of Videocon Industries Ltd. v. Union of India, the Supreme Court  analyzed the above-mentioned question in a situation akin to the one currently being faced by the world. The arbitration agreement, as had been agreed by the parties provided for the ‘venue’ of arbitration to be Kuala Lumpur, Malaysia. However, due to outbreak of the SARS epidemic in Kuala Lumpur, the arbitral tribunal had to shift the location to conduct the arbitration proceedings initially to Amsterdam and thereafter to London. The question arose as to whether the jurisdiction to challenge the award will lie with the London Court or the Malaysian Court. Since the parties had chosen English law as the lex arbitri, the Supreme Court perused Section 3 and 53 of the English Arbitration Act, 1996 as well as the above-mentioned passage from Redfern and Hunter, and held that the “mere change in the physical venue of the hearing from Kuala Lumpur to Amsterdam and London did not amount to change in the juridical seat of arbitration”.

It is important to highlight that even though the Videocon judgment was passed in a pre-Bharat Aluminum Company Ltd. v. Kaiser Aluminium Technical Services (“BALCO”) era, the dictum of the judgment still holds water.

BALCO, in its judgment had itself relied upon the passage from Redfern and Hunter as well as the dictum laid by the Court of Appeal in England in the matter of Naviera Amazonica Peruana S.A. v. Compania International de Seguros del Peru andhad come to the same conclusion that even if an arbitration proceeding is not taking place at the ‘seat’ of arbitration, but at different ‘venues’, it would not tantamount to a shift in the ‘seat’ of arbitration.

The way forward:

The problem currently plaguing arbitration in India is not the uncertainty in law with regards to shifting of the ‘seat’, but the availability as well as the acceptability of the technology of virtual hearing as a suitable mode to conduct arbitration hearings.

The Chief Justice of India, Justice S.A. Bobde had stated that “arbitration is not meant to mimic litigation”. These words need to act as an inspiration for arbitral institutes in India, as well as fuel the motivation of the Government in making India a global hub of arbitration. Currently in India, only a handful of arbitral institutes allow for virtual hearings – most of which under only certain circumstances as well as limitations. For example, the Indian Council for Arbitration (“ICA”) provides for arbitration proceedings to be conducted by video-conference only in the context of international commercial arbitration. However, for inexplicable reasons it does not provide for the same in the context of domestic commercial arbitration. ICA should consider extending the salutary technique of conducting video-conferences to arbitration proceedings occurring in a domestic setup as well. The Indian Institute of Arbitration and Mediation as well as India Arbitration Forum, provide for virtual hearing only in certain cases. The former allows virtual hearing only for examining witnesses and the latter allows it for case management conferences and witness examinations, if only in exceptional circumstances. Both these institutions should consider amending their articles to allow for videoconferencing to permeate through all stages of the arbitration proceedings.

Section 24 of the Act deals with ‘Hearing and written proceedings’ but is silent on whether arbitration proceedings can occur by means of virtual hearing or not. The Government of India should bring about an amendment in the Section to categorically allow virtual hearings as an acceptable mode for conduction of arbitration proceedings. Nevertheless, in the meantime, the parties should take advantage of the inherently flexible nature of arbitration proceedings as well as the pedestal at which party autonomy is placed in arbitration and should push for conducting oral hearings by means of virtual hearings.

The Arbitration Council of India, established by the Arbitration and Conciliations (Amendment) Act, 2019 for the purpose of grading arbitral institutions, should consider the ability to conduct virtual hearings as an important criterion to secure a top-grade. Furthermore, it is expected that the Government of India, in keeping in mind the purpose for which it had passed the New Delhi International Arbitration Centre Act, 2019, should consider ensuring that the Rules of the Arbitration Centre allow for arbitration proceedings to take place through means of virtual hearing.


[1] Advocate practicing in New Delhi, B.A. LL.B. (Hons.) JGLS (2019). The author can be reached at via his LinkedIn profile here, or at adv.shantanulakhotia@gmail.com.

[2] Speech of Hon’ble Mr. Justice S.A.Bobde, Chief Justice of India on the occasion of 3 rd edition of International Conference on Arbitration in the Era of Globalisation, accessible at https://www.livelaw.in/pdf_upload/pdf_upload-369996.pdf.


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