DIGITAL AWARDS AND THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION
The COVID-19 pandemic has wreaked havoc on many businesses throughout the globe, including international commercial arbitration.[1]In response to the pandemic's effect, the United Nations Commission on International Trade Law (UNCITRAL) held two round-table meetings in 2020 during its fifty-third session[2]that focused on the use of digital technology to aid the various phases of the processes, including remote hearings, as well as the publication of guidelines to help parties and the arbitral panel.[3]While technology promises a paperless, cost-effective, and quick alternative for some or all stages of international arbitral proceedings, it also poses unique challenges when it comes to the legal recognition of key legal instruments drawn online, such as arbitration agreements and arbitral awards.
The advancement of technology in international arbitration has created serious concerns regarding the compatibility of conventional legal provisions with digital methods of finalising arbitration agreements and issuing arbitral awards.[4]With the advent of technology, it is necessary to consider whether these regulations should change to embrace digital methods or act as impediments to their usage. These issues are especially pertinent since the New York Convention has shown to be too effective to be altered[5], demanding answers within present legislation.
The purpose of this essay is to elaborate upon the difficulties associated with acceptance to digital award. Furthermore, it investigates the issue of whether remote hearings pose due process concerns ultimately jeopardizing the digital award, and the issues with the form requirements applicable to them & delivery to the parties. The essay additionally seeks to throw light upon the technological complexities surrounding digital award signing, and the extent to which digital awards can be accommodated by the UNCITRAL Model Law on International Commercial Arbitration (ICA-ML) , based on its provisions and principles.
DUE PROCESS CONCERN IN REMOTE HEARING JEOPARDIZING DIGITAL AWARDS
The concept of access to justice incorporates not only swift resolution but also equitable resolution of disputes. The fundamental principle of due process applies to all legal proceedings, including digital arbitration. It ensures that each party has an equal chance to be heard, present evidence, and completely participate in the proceedings.[6]However, the increasing use of remote hearings in digital arbitration presents practical challenges that must be evaluated against the cost- and time-saving benefits which may include time zone differences, difficulties in cross-examination, witness counselling, and varying forms of arbitrator participation[7].
To ensure procedural justice, a party must provide its counterpart with appropriate notice of the arbitration's initiation.[8]Article V(1)(b) of the New York Convention stipulates that proper notice, including proper form, is a prerequisite for the recognition and enforcement of foreign arbitral awards.[9]However, the provision's ambiguous language raises the question of whether electronic communication can adequately satisfy the requirement for appropriate notice.[10]
Article 18 of the (ICA-ML) stipulates that the parties must be treated equally[11]wherein parties must have equal opportunity to present their case, which is another essential procedural principle. When the information technology used during the arbitration proceedings cannot be technically accessed or mastered equally by both parties, complications may arise which may lead to "virtual inequality”.[12]Consequently, if a party is unable to completely participate in the proceedings, it could result in an unjust procedure that undermines the validity of any digital award rendered in international commercial arbitration.
ISSUES CONCERNING FORM REQUIREMENT APPLICABLE TO DIGITAL AWARDS & THEIR DELIVERY
Article 31(1) of the ICA-ML, which serves as a harmonized arbitration statute stipulates that all arbitrators must sign the written award.[13]Parties may choose the format for arbitral awards in line with various arbitration legislation. As long as they follow the relevant guidelines specified by the parties, digital awards are acceptable if the parties specify in their agreement.[14]However, if the parties do not expressly include digital awards in their agreement, arbitration procedures encounter the same interpretation issues as conventional laws. [15]The requirement that the decision be in writing and have the signatures of at least one party is included in almost all arbitration legislation. Whether a digital award satisfies these conditions is an important issue.[16]Some countries provide a positive response to this query, either explicitly in their arbitration statute or in the context of their general rules on form.[17]For instance, each arbitrator must sign or otherwise authenticate the award in accordance with the U.S. Uniform Arbitration Act 2000. [18]The German rule on award delivery was amended in 2005 to include electronic award transmission, indicating that awards may also be delivered as electronic documents so long as they are signed with a recognized electronic signature.[19]
Compared to fulfilling form requirements, providing digital awards to recipients is a relatively minor obstacle. If the lex arbitri permits digital awards, it is still possible to deliver them to the parties. The language of the majority of delivery provisions permits digital transmission via email or data carrier. Article 31(4) ICA-ML, for instance, mandates that the signed award be "delivered to each party," which can be readily accomplished digitally.[20]This move was recognized by the German legislature who amended section 1054(4) of the German Code of Civil Procedure in 2005 to replace the word "transmit" with "transfer," thereby permitting digital transmission.[21]
LEGAL COMPLEXITY SURROUNDING SIGNING OF DIGITAL AWARD
Under most jurisdictions, an electronically signed arbitral award can provide the same level of credibility as an award signed in ink with regards to its authenticity and integrity.[22]An e-signature refers to data in an electronic form that is logically associated with a data message and is used "to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message”.[23]Under most jurisdictions, including pursuant to Article 31(1) of the UNCITRAL Model Law on International Commercial Arbitration, arbitral awards must be rendered in writing and bear the signatures of the arbitrators. [24]
The enforceability risks of authenticating an arbitral award with an electronic signature will depend on the applicable law at the place of enforcement or by the laws of the arbitral seat. In principle, most jurisdictions should allow the use of e-signatures in signing arbitral awards. For example, authorities have held that "the advanced electronic signature of any arbitrator on an electronic award will be treated as being equivalent to a handwritten signature in Germany", as long as it complies with the requirements set out in the EU Regulation No. 910/2014.[25]However, in an international context, other factors must be carefully considered concerning e-signatures, such as the specific type of electronic signature used, the process by which the signature is generated, and the applicable domestic and international e-signature regulations.
ACCOMMODATING DIGITAL AWARDS UNDER THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION
The UNCITRAL Model Law on International Commercial Arbitration is largely supportive of digital arbitration and digital award enforcement. The rules and concepts of the legislation are sufficiently adaptable to allow for the use of electronic signatures, digital certification or authentication procedures, and digital award dissemination. According to the amended draft of UNCITRAL Model Law, Article 7(2), "writing" may encompass any form that offers a physical record of the agreement or is available as a data message. [26]This term encompasses arbitration agreements reached via email exchanges. Furthermore, Article 19(1) permits parties to agree on the approach to be followed by the arbitral tribunal in conducting the procedures, which may allow for the utilization of AI technologies in decision-making and the granting of digital awards.[27]Conclusively, Article 7(4) states that an arbitration agreement in a digital environment is considered "in writing" if the information contained therein is accessible and usable for subsequent reference via data messages such as electronic mail, telegrams, telex, and other forms of electronic communication. [28]
CONCLUSION CUM RECOMMENDATIONS
In principle, the ICA-ML is adaptable to digital arbitration and the execution of digital awards. However, greater information about the exact execution of the law's provisions is required. It is recommended to -
- Develop digital arbitration guidelines that define best practises and processes for conducting digital arbitration that should be established in collaboration with stakeholders in the digital arbitration community considering specific problems and possibilities that digital arbitration presents.
- Establish a digital arbitration registry to provide a centralised database of digital awards issued under ICA-ML would help parties gain greater visibility into the use of digital awards and provide a useful resource for parties considering digital arbitration.
Equip arbitrators and other stakeholders with the knowledge and skills needed to navigate the digital arbitration landscape such as using AI tools in decision-making, electronic signatures, etc should be covered in digital arbitration training programmes.
[1] Kim M Rooney, The Global Impact of the Covid-19 Pandemic on Commercial Dispute Resolution in the First Year, International Bar Association (2021), https://www.ibanet.org/global-impact-covid-19-pandemic-dispute-resolution (last visited May 06, 2023).
[2] Crisis Impact on International Trade Law: COVID-19 and Beyond | United Nations Commission On International Trade Law, Un.org (2022), https://uncitral.un.org/en/covid-impact-website (last visited May 03, 2023).
[3] Ibid.
[4] Sara Koleilat-Aranjo & Sergejs Dilevka, Use of modern technology in arbitration: evolution through necessity, Lexology (2020), https://www.lexology.com/library/detail.aspx?g=8869fc87-e787-419c-ab6a-23e33905a366 (last visited May 03, 2023).
[5] Reinmar Wolff, E-Arbitration Agreements and E-Awards – Arbitration Agreements Concluded in an Electronic Environment and Digital Arbitral Awards, SSRN.com (2017), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2922550 (last visited May 03, 2023).
[6] Fortese, Fabricio and Hemmi, Lotta, Procedural Fairness and Efficiency in International Arbitration, Groningen Journal of International Law, Vol. 3, No. 1, (2015).
[7] Maxi Scherer, Remote Hearings in International Arbitration: An Analytical Framework, 37 Journal of International Arbitration 407 (2020).
[8] Prof Maxi Scherer, Remote Hearings in International Arbitration: An Analytical Framework, Ssrn.com (2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3599814 (last visited May 07, 2023).
[9] Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. V(1)(b), June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3.
[10] Lars Markert & Jan Burghardt, Navigating the Digital Maze - Pertinent Issues in E-Arbitration, 27 J. ARB. Stud. 3 (2017).
[11] UNCITRAL Model Law on International Commercial Arbitration, art. 18, U.N. Doc. A/40/17, U.N. Sales No. E.86.V.3 (1985).
[12] Amy J. Schmitz, Drive-Thru Arbitration in the Digital Age: Empowering Consumers through Binding ODR, 62 BAYLOR L. REV. 178 (2010).
[13] UNCITRAL Model Law on International Commercial Arbitration art. 31(1)(a), U.N. Doc. A/40/17, U.N. Sales No. E.86.V.3 (1985).
[14] Amro, I., Online Arbitration in Theory and in Practice: A Comparative Study of Cross-Border Commercial Transactions in Common Law and Civil Law Countries, United Kingdom, Cambridge Scholars Publishing (2019).
[15] Ibid.
[16] Arbitration in the Digital Age: The Brave New World of Arbitration, India: Cambridge University Press (2018).
[17] Ionela-Diana Patrasc-Balan, Recognition and Enforcement of Digital Arbitral Awards, 2020 EUROQUOD 18 (2020)
[18] Uniform Arbitration Act § 19(a)(1), 7 U.L.A. 495 (2005).
[19] Government bill, BT-Drucks. 15/4067, p. 36.
[20] UNCITRAL Model Law on International Commercial Arbitration art. 31(4), U.N. Doc. A/40/17, U.N. Sales No. E.86.V.3 (1985).
[21] Government bill, BT-Drucks. 15/4067, p. 36.
[22] Felipe Volio Soley, Signing the Arbitral Award in Wet Ink: Resistance to Technological Change or A Reasonable Precaution? - Kluwer Arbitration Blog, Kluwer Arbitration Blog (2020), https://arbitrationblog.kluwerarbitration.com/2020/11/06/signing-the-arbitral-award-in-wet-ink-resistance-to-technological-change-or-a-reasonable-precaution/ (last visited May 07, 2023).
[23] UNCITRAL Model Law on Electronic Signatures with Guide to Enactment art. 2(a), U.N. Doc. A/RES/56/80 (Jan. 19, 2002).
[24] UNCITRAL Model Law on International Commercial Arbitration art. 31(1), U.N. Doc. A/40/17, U.N. Sales No. E.86.V.3 (1985).
[25] REGULATION (EU) No 910/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL, art. 14, 2014 O.J. (L 257) 73.
[26] UNCITRAL Model Law on International Commercial Arbitration art. 7(2), U.N. Doc. A/40/17, U.N. Sales No. E.86.V.3 (1985).
[27] UNCITRAL Model Law on International Commercial Arbitration art. 19(1), U.N. Doc. A/40/17, U.N. Sales No. E.86.V.3 (1985).
[28] UNCITRAL Model Law on International Commercial Arbitration art. 7(4), U.N. Doc. A/40/17, U.N. Sales No. E.86.V.3 (1985).
