YCAP: New World, New Rules
By Jiayi Zhang
On the fourth day of CanArbWeek 2021, YCAP organized a panel discussion on recent developments at arbitral institutions. Three knowledgeable panelists, Patricia Snell, James Plotkin, and Tamryn Jacobson, shared their insights into new and amended rules relating to transparency, procedural efficiencies, and evidence taking. They also discussed some broader trends and developments in Canadian arbitration law and practice. Sarah Firestone moderated.
- Developments in transparency
Snell began by summarizing developments in transparency, focusing on both commercial and investor-state arbitration. In the commercial context, one of the major developments was the new ICC Rules, which came into force on January 1, 2021. The new ICC Rules explicitly refer to third-party funding in Article 11(7), Imposing an obligation for parties to disclose the existence of any third-party funding arrangements. This rule is intended to avoid conflicts of interest arising from relationships between funders and arbitrators, and enhance transparency more generally. The changes also benefit the parties by supporting enforceability of the awards that otherwise might be unenforceable if such relationships only come to light later in the proceedings. In a few jurisdictions, most notably Hong Kong and Singapore, the legislation now imposes mandatory disclosure obligations relating to funding arrangements, and the amended rules of HKIAC and SIAC also reflect these mandatory obligations.
Snell further argued that ICC has been at the forefront of commercial arbitration regarding transparency and publication of awards. As stated in a Note to Parties released earlier this year, ICC now provides the parties with the names of administrative secretaries, and the names of firms representing the parties in the case will also be published. Most significantly, ICC now publishes awards and orders based on the “opt-out” principle, which means publication is the default option unless the parties opt out. However, this development raises a concern about conflicts between greater transparency and preserving confidentiality and privacy in the arbitration process.
In the investor-state context, express provisions relating to third-party funding are being incorporated into recently-concluded treaties. For instance, CETA contains such provisions, which require disclosure of the existence of a third-party funding arrangement and the identity of the funder. In addition, UNCITRAL Working Group III has published an initial draft provision on third-party funding, which includes some interesting proposals on matters such as whether the investors should be prohibited or restricted on funding arrangements, and the scope of disclosure obligations.
Next, Jacobson discussed an unfortunate effect of arbitral confidentiality: a lack of access to procedural precedents. She pointed out that, aside from subscription-only services like the ICC Bulletins, certain general descriptions, and textbooks, it is hard to find published procedural orders and other decisions on matters of arbitration procedure. In Canada, one of the consequences of this lack of access is that many litigators, as occasional arbitrators, do not fully appreciate the procedural norms in arbitration. Hence, they tend to ask for substantial indemnity costs, broad categories of documents, and evidentiary orders that are not appropriate in arbitration.
Snell and Plotkin raised the issue of overlapping and inconsistent ethical obligations. The first potential problem is one of inequality. Counsel qualified in different jurisdictions may have different ethical obligations, which may give one an advantage in a hard-fought proceeding. On the other hand, being qualified in more than one jurisdiction may result in conflicting obligations. Although the IBA Guidelines and LCIA Rules have attempted to address conduct by parties’ legal representatives, tensions between different ethical obligations still exist.
Plotkin thinks there are two questions. First, what the arbitral tribunal expects counsel to do or not do. Second, from a regulatory perspective, what the law society expects counsel to do or not do. Hence, the question becomes whether ethical rules of counsel’s home jurisdiction or host jurisdiction apply. An Ontario licensed lawyer acting in an arbitration outside of Ontario, Plotkin would still be bound by the LSO’s rules of professional conduct. However, according to LSO Bylaw Number Four, foreign licensees are not required to be licensed in Ontario if they are counsel in an international arbitration.
- Rule changes related to procedural efficiencies and creative mechanisms for taking evidence
The panelists discussed four institutional rule changes relating to procedural efficiencies and evidence-taking: 1) summary judgement provisions, 2) joinder and consolidation; 3) cybersecurity and data protection, and 4) virtual hearings and the acceptance of electronic evidence.
When discussing changes to cybersecurity and data protection rules, Snell focused on how to promote efficiency while maintaining confidentiality. Arbitration lawyers need to consider data protection obligations in the jurisdiction where they work, where their clients or stakeholders are based, and even where a third-party vendor is hosting documents. Issues of political sensitivity or national security may involve additional regulatory and legislative obligations.
The 2020 IBA Rules on the Taking of Evidence introduced a few changes relevant to cybersecurity. The Rules now expressly provide that the tribunal must consult the parties on evidentiary issues. The 2020 LCIA Arbitration Rules contain a similar provision: the tribunal shall consider whether it is appropriate to adopt any specific security measures to protect any physical and electronic information shared. Although these issues are getting more and more attention, their future development is still unclear. If evidence was obtained illegally by hacking or cyber attack, a party could request it be excluded. However, further issues can arise from that exclusion, such as a party’s claim that it was denied an opportunity to present its case. Snell suggested that a tribunal could consider the materiality of the evidence and the degree of illegality. There have been some recent developments from the IBA Cybersecurity Task Force, the IBA Task Force on Data Protection, and an ICC-NY Bar Joint Protocol on Cybersecurity, where one can find recommendations for best practices.
When discussing changes related to virtual hearings and the acceptance of electronic evidence, Jacobson pointed out that lawyers are as a general matter not good at embracing new technologies. However, the pandemic has changed that situation. Some salutary developments emerged, including Ontario Courts’ online filing system. Simultaneous polling results showed that most of the audience believes virtual or hybrid hearings will continue.
Snell also mentioned her role as a member of the Steering Committee of the Campaign for Greener Arbitrations, which released a series of protocols specific to reducing arbitrations’ carbon footprint. Some institutions, like the Stockholm Chamber of Commerce, also provide guidance to arbitrators on how they can recover the cost of the carbon offsetting of their flights for attending in-person hearings.
- Developments in Canada related to the rules and generally in the international and domestic arbitration community.
When discussing trends and developments specific to Canada, the panelists mainly focused on two issues, med-arb and the possibility of merging domestic and international arbitration legislation in Ontario.
Jacobson described med-arb as a growing and evolving area. A singular med-arb proceeding by one mediator/arbitrator can be quicker, cheaper, and less acrimonious than arbitration. Although both Ontario’s domestic Arbitration Act and British Columbia’s new domestic Act stipulate that parties can agree to med-arb, the relatively older Ontario Act shows the impact of skepticism about med-arb, while the new BC Act actively embraces med-arb as an option.
Jacobson further discussed the new ADRIC Med-Arb Rules, which went live last year and are the first in the world. She focused on sections 5.2 and 6.5, which aim to prevent challenges to eventual arbitral awards based on a reasonable apprehension of bias, as well as section 6.6, which prohibits the use in an arbitration phase of information disclosed in the mediation phase in. She also expressed her concerns about med-arb, the biggest of which is that parties may hold back in the mediation stage so as not to undermine arguments they may want to make arbitration stage, making it less likely that they will reach a mutually satisfying settlement. After all, mediator/arbitrators cannot be expected to erase from their minds everything learned during the mediation.
When discussing the Toronto Commercial Arbitration Society’s Arbitration Act Reform Report, which proposed the merger of domestic and international arbitration legislation in Ontario based on the UNCITRAL Model Law, Jacobson expressed a concern. The proposed merger might face some challenges since the domestic act tends to cover a wider range of issues, such as those relevant in family law disputes and insurance arbitrations. But in the end, the advantages will outweigh the disadvantages. The merger will help avoid the perpetual confusion among practitioners and judges between the domestic and international acts, which will also benefit drafters of arbitration agreements.
The panelists went on to discuss some ongoing problems with arbitration practice in Canada, including ad hoc arbitration proceedings that are too similar to litigation and a lack of diversity among arbitrators. The event closed with a brief Q&A and virtual networking session.