March 20, 2020
This bulletin discusses the following issues arising from the COVID-19 pandemic:
- The impact of COVID-19 court closures on commercial dispute resolution
- Use of arbitration for current and future disputes, including existing court actions and motions
- Procedural flexibility, confidentiality and other tools offered by arbitration that can facilitate timely and efficient resolution of commercial disputes without in person hearings
In the face of the coronavirus pandemic, courts across the country have significantly restricted their operations, including adjourning non-urgent matters indefinitely. The uncertainty associated with court proceedings in the near and long-term future will have substantial and far-reaching implications for commercial parties and their disputes. Although not all courts have restricted operations to the same extent, and some creative measures are or will be implemented, we are clearly a long way from a return to normalcy. What is also clear is that the backlog that Canadian courts were generally struggling with even before the COVID-19 pandemic will likely only be exacerbated.
In this context, it is useful for business executives, managers and in-house counsel to consider arbitration for not only their future disputes, but also existing disputes already filed in court. Cases already in the court system can be moved to arbitration for final resolution. For cases that parties wish to be ultimately determined in court, consideration should be given to moving some interlocutory motions to arbitration until courts are able to return to their previous operations.
Arbitration is a private consensual method of dispute resolution in which the parties select the individual or individuals who will finally decide the matters in issue following a process agreed upon by the parties. Given the inherent flexibility in arbitration rules and procedures, this form of dispute resolution offers unique and significant advantages over traditional court litigation. Experienced arbitration counsel already use arbitration to conduct virtual hearings that allow commercial disputes to be resolved even under strict social distancing policies.
For many commercial relationships, especially those that involve cross-border or international entities, the dominant trend is for parties to agree in their contracts on arbitration as the primary means of dispute resolution. Parties typically choose arbitration in their commercial agreements because of its potential to offer benefits such as cost and time efficiency, privacy, the ability to select decision-makers, flexibility in rules and procedures, internationally enforceable awards, and finality.
HOW TO BEST UTILIZE ARBITRATION
In order to realize the advantages of arbitration, it is crucial to select experienced arbitration counsel and arbitrators. With the right choices, parties can expect a confidential and efficient process that will typically resolve a business dispute in a much shorter time than in the court system. Given the closures and anticipated follow-on effects resulting from the COVID-19 pandemic, this is likely to be even more true in the current environment in both the short term and foreseeable future.
It is important to understand that while parties often choose arbitration at the outset of a new business relationship or transaction to resolve potential future disputes, parties can agree to arbitrate at any time, including at the time a dispute arises, and even after a court proceeding has been commenced. Arbitration can assist both the parties and the justice system by diverting existing and future commercial disputes into private dispute resolution as well as by advancing disputes that will ultimately be determined by the court. Even for matters where the parties consider that a final determination after a court hearing is necessary or important, there may be interlocutory issues or motions that could benefit from timely determination now by an arbitrator rather than before the court.
In contrast to court proceedings, case conferences, motions and applications in the arbitration context are routinely dealt with in writing or by way of teleconference or videoconference, with the parties, counsel and adjudicators participating from different locations. Oral examinations for discovery are rare, and direct evidence from witnesses is typically submitted in writing. Depending on the nature of the case, and so long as the parties agree, a final hearing equivalent to a court trial can also be conducted in writing or by way of teleconference or videoconference.
Moreover, parties and counsel can easily and directly reach the arbitral tribunal at any time. Arbitrators are actively involved in case management throughout the process and generally respond promptly to all inquiries from parties or their counsel. They typically make themselves available to hear and determine any urgent or important substantial or procedural issues that may arise, even on short notice. They are generally also willing to accommodate parties’ timing requirements, including by sitting late in the evenings and on weekends, if necessary.
In addition to the significant advantages discussed above, parties typically agree that their arbitration will be private and confidential. To the extent there are reputational issues or other business considerations as a result of which a private forum for dispute resolution is more attractive than a public process in the current environment, arbitration can effectively meet that objective as well.
While the current environment presents many challenges and has imposed a “new normal” on many fronts, inability to resolve commercial disputes efficiently and effectively does not have to be one of them. With the right choice of arbitration counsel and arbitrators, parties can develop appropriate arbitration agreements that are tailored to their needs and circumstances and can expect their dispute to be resolved efficiently, even in difficult times like the present.
For further information, please reach out to a member of our Arbitration group or your usual Blakes contact at any time.