The international dispute landscape has undergone significant change in the past year. Being an integral part of the global economy, it is important for Australian business to consider these changes carefully in moving forward. In this article, we take a closer look at the trends that are likely in international dispute resolution in the coming year.
Increased Focus on Mediation
Mediation is not a new concept but a well-recognised one in Australian business. It is a mandatory step in litigation in most state and national courts. An offer to mediate is not seen as a sign of weakness or concession, rather, a court order will be initiated where any party refuses to mediate as part of the litigation process. However, in the matter of mediation, Australia is ahead of its global contemporaries with parties voluntarily agreeing to their mediation obligations and settlement agreements being enforceable as contracts in Australia.
The United Nations Convention on International Settlement Agreements Resulting from Mediation ("Singapore Mediation Convention"), signed by 46 States in August 2019, was designed to complement the existing legal framework on international mediation and contribute to the development of harmonious international economic relations. The Convention enabled the enforcement of international agreements resulting from mediation.
The Singapore Mediation Convention will not affect any agreement which has come into force or is enforceable due to a decision of a court or any arbitral award which was concluded in the course of proceedings.
The Singapore Mediation Convention states that settlement agreements within the scope of the Convention are directly enforceable by the courts of a member state. Any party interested in enforcement of any settlement agreement as a contract does not need to commence litigation or arbitration. The Convention will also operate to stop litigation in a member state court by allowing a party to a mediated settlement agreement to cite that the matter has already been resolved and the settled agreement is a contract.
The Singapore Mediation Convention has not only given mediation the status of being a valid and effective tool for resolving disputes, it has also promoted mediation as the primary option available in international commercial disputes. In cross-border disputes, it is more likely for commercial entities to opt for mediation in place of arbitration or litigation. Even though Australia hasn’t signed the Singapore Mediation Convention, it is under a lot of pressure to do so. Irrespective of when this happens, it is important to understand the Convention because an increased focus is expected on mediation as a mode of resolution of international disputes in the near future.
Introduction of artificial intelligence (AI) in international dispute resolution helps parties resolve various types of disputes, particularly low-value disputes. In complex litigation and arbitration, AI is invoked during the disclosure or discovery phase. Online dispute resolution has moved beyond the trial stage and adoption is moving at an increasingly rapid pace given the COVID-19 crisis. AI will likely help parties choose arbitrators, analyse evidence and draft arbitral awards in future.
A survey conducted by Queen Mary University of London in 2018 suggested that over 50% of respondents never used AI in international arbitration, although 73% of respondents saw value in using AI more. While the use of AI was associated with increased efficiency, it was also related to increased cost. The implementation of AI was seen to have potential to assist courts, however, there is an ongoing debate over the interference of AI in the adjudication process.
It is likely that there will be changes in arbitral rules and dispute resolution clauses to accommodate AI, given the pace at which technology is being developed and adopted in trade and commerce.
International Commercial Courts
Established in 2015, the Singapore International Commercial Court is a division of the Singapore High Court. The Singapore International Commercial Court has judges from the Singapore High Court and international judges from around the world, with its jurisdiction extending to claims which are international and commercial, where the parties have a written agreement to determine the claims under the Singapore International Commercial Court. However, there are limitations on the relief which may be granted. Generally, the Singapore International Commercial Court decides matters that have been transferred from the Singapore High Court.
Several other jurisdictions have introduced international commercial courts, including China, France, the Netherlands, Qatar and the United Arab Emirates. These courts have their own processes and rules and have appointed international judges. It remains unclear whether Australia needs an international commercial court. The high calibre and integrity of Australia’s national and state courts beg the question of whether there is a true need for an international commercial court at this stage.
Australian businesses that are engaged in the global economy on a regular basis generally find the availability of specific international courts to resolve disputes somewhat abstract. Australian businesses already have the option of international commercial arbitration. However, where enforcement of an agreement is not an issue, local domestic courts are the default forum.
Business and Human Rights
The Hague Rules on Business and Human Rights ("Hague Rules") were launched on 12 December 2019 in the Peace Palace in the Hague. The Hague Rules set out procedures for arbitration of disputes related to the impact of business activities on human rights. They are based widely on the adopted UNCITRAL Arbitration Rules.
The Hague Rules have been created to provide remedy for those human rights that have been affected as a result of impacts of business activities. The Hague Rules also promote the establishment of a mechanism in business to address adverse human rights impacts due to business activities.
Specific articles in the Hague Rules recognise that there may be inequality of defences available to parties to an arbitration. Article 18(1) of the Hague Rules provide that, given the human rights importance, the arbitral tribunal can exercise its discretion in conducting proceedings in order to avoid unnecessary delay and expenses and to provide a fair, efficient, culturally appropriate and rights-compatible process for resolving the parties’ dispute(s).
Australia’s Human Rights Commission has noted that the concept of businesses and human rights being interrelated has recently evolved significantly and presently there is a global recognition that businesses can be used as a means for the promotion and realisation of human rights. On this, the Commonwealth Modern Slavery Act 2018 (Modern Slavery Act) came into force in 2018. The Act imposes on businesses with an annual consolidated revenue of more than A$100 million and operating in Australia to report annually on risks of modern slavery in their operations and supply chains.
It is expected that more importance will be given to the aspects of business and human rights in the context of international commercial disputes. The introduction of human and business rights claims may add complexities to many commercial disputes, given the different jurisdictions covering supply chains, legal incompatibilities and cultural diversities associated with businesses.
Climate Change and Environmental Issues
Climate change and environmental issues are expected to have two related, but very different, impacts on international dispute resolution. Firstly, practitioners, arbitrators and parties are already identifying ways to increase sustainability and limit environmental impact in the process of arbitration. The primary problem faced is the use of large volumes of paper in legal procedure by lawyers despite technological advancement. Additionally, extensive and extended travel is required in international disputes because members of the tribunals, arbitrators and parties to a dispute, all belong to different countries in an international dispute.
Australian Courts are promoting electronic files and electronic courtrooms so that hearings are conducted in the form of video or involving the presentation of video evidence. Court books in superior courts around Australia are almost entirely electronic and are well equipped to accommodate new technologies. It is difficult to regulate disputes that include different jurisdictions. Implementation of electronic courtrooms and using technology to limit travel has been one of the main agendas recently. Lawyers and their clients are consciously making choices to reduce their impact on the environment. The use of AI has also helped in effectively managing data and reducing paper usage.
Secondly, there is an increasing emergence of disputes stemming from climate change and global warming. The International Chamber of Commerce Commission released a report in 2018 on Resolving Climate Change Related Disputes through Arbitration and ADR. The scope of the report included climate change related disputes, including any dispute arising out of or in relation to the effect of climate change and climate change policy, the United Nation’s Framework Convention on Climate Change (UNFCCC) and the Paris Agreement. This report demonstrated focus of the international commercial arbitration community on the increase of climate change disputes and the need for an effective process to resolve them.
International businesses are increasingly vulnerable to cyber-attacks and the risks increase with each interface having a third-party system. Confidentiality is one of the key advantages of international commercial arbitration. Breach of data security during an arbitration proceeding can have serious impacts on the business of a party to the dispute. Accordingly, it is very important to protect information during arbitration process to ensure continued user confidence.
The ICCA-NYC Bar – CPR Protocol on Cybersecurity in International Arbitration (2020 Edition) ("Protocol") was launched during New York Arbitration Week in November 2019. It outlines reasonable security measures for an individual in arbitration matters. It is important to note here that the Protocol has been offered as a comprehensive guide for practitioners, users and arbitrators and not as a replacement for arbitration rules or other obligations of confidentiality. Based on around 14 principles, the Protocol covers topics such as:
- available procedural measures to address information security issues;
- factors that determine whether any measure employed in a matter is reasonable or not; and
- authority of the arbitral tribunal in determining information security measures.
The Protocol, amongst other things, suggests language to be incorporated into arbitration agreements. It also provides a framework to record obligation of parties to take reasonable measures in order to mitigate risks of cyber-attack.
The arbitration community has been questioning the position of London as an arbitral seat after Brexit. Brexit might result in European parties moving to a European seat but there might be challenges in enforcing the national court judgements in England as a result of this. This will increase arbitration for cross-border transactions and a corresponding increase in enforcement proceedings in the English courts.
The spread of COVID-19 in China and across the world has resulted in witness depositions, scheduled conferences, meetings and court proceedings being cancelled or adjourned and it is unlikely that arbitrators or international lawyers will be flying to conduct business for the foreseeable future. COVID-19 will not only impact international disputes, but also affect the way in which international business is carried out until such time as a vaccine is publicly available. There will be an increase in the use of technology, including video conferencing, with arbitrators, lawyers and their clients working around travel bans. The pandemic will also significantly contribute to the implementation of AI.
Being multi-dimensional, international dispute resolution and the processes involved are not fixed. Litigation and arbitration are changing to keep pace with international business, offering increased transparency and efficiency in addition to broader and faster dissemination of best practice.
The developments of the past twelve months and the predicted changes in the next equivalent period will bring challenges and opportunities for businesses engaging in cross-border transactions. It is important for companies to accommodate these challenges and flex in the new world in which we now live. Businesses must properly consider the dispute resolution clause in their transaction documents and contracts (both prior to signing and during the relationship) and understand the options available to them (and the likely consequences) for most effective resolution of disputes.
At Burke Lawyers, we, together with our partners, assist in Australian, US and international commercial dispute resolution. To discuss or for any further information, please contact Meghan Warren, Principal, or Rosy Roberts Principal, on firstname.lastname@example.org, email@example.com or respectively, or by calling +61 3 9822 8588.