Online hearings: A new challenge for China arbitration

By Yang Furong, Dentons
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With the development of internet technology and economy, online hearings have become a new trend in arbitration circles in recent years. In 2019, the Ministry of Justice gave strong support for online arbitration, and other “internet + legal services” at the Public Legal Service Conference in Guangzhou. Since the outbreak of covid-19 the online hearing has been discussed more frequently in domestic and international arbitration circles.

Yang Furong, Consultant, Dentons
Yang Furong
Consultant
Dentons

The advantages

An online hearing is usually applied to two types of disputes: The traditional civil and commercial dispute case; and the novel civil and commercial dispute case formed on the internet, such as internet financial disputes, e-commerce disputes, and disputes arising from online social platforms.

The online hearing meets epidemic prevention requirements during and after the pandemic, and is conducive to the safe and timely settlement of disputes. It strengthens the characteristics of flexibility, high efficiency and convenience of arbitration procedure, and saves arbitration costs for all parties. In particular, the number of novel internet cases represented by internet financial disputes is increasing in China. The disputes are generated online, so the online hearing will be more convenient and normative.

The challenges

The standardization of procedure and the enforceability of award. In 2019, the number of arbitration cases nationwide was 486,955, of which 205,544 were internet arbitration cases, accounting for 42.21% of the total; in the same year, more than 2,000 internet arbitration awards were not enforced by courts.

Among them, a procedural defect was one of the common reasons why such cases were ruled not to be enforced, including failure to protect the basic procedural rights of the parties concerned, stipulated in the Arbitration Law, failure to provide effective service basis, and violation of legal procedures for the composition of the arbitration tribunal. Due process is very important for the enforcement of the award in online arbitration cases.

As the basic principle of arbitration is voluntary, the parties concerned have the right to choose the form of online hearing to make the arbitration procedure more flexible. Meanwhile, arbitration also features high efficiency and convenience. On the whole, the trial term of arbitration is shorter than that of litigation.

Because of the nature of arbitration, the application of an online hearing is faced with important problems in practice, one of which is when some parties concerned object to it, and the offline hearing cannot be realised on time, in order to ensure the efficient promotion of the arbitration procedure does the arbitration tribunal have the right to decide on an online hearing? In this case, does the online hearing constitute a procedural defect, and may it lead to the failure of enforcement of the award?

In China’s current Arbitration Law and relevant judicial interpretations, there is no established standard for the application of online hearings of arbitration. However, the Supreme People’s Court issued the Notice on Strengthening and Standardising the Online Litigation During the Period of Covid-19 Prevention and Control, which has clarified the application circumstances for online litigation in advance.

It emphasizes that if the parties concerned do not agree, the online litigation shall not be applied compulsorily. Since then, China’s major arbitral bodies have successively issued documents on guidelines for online hearings, which also express this view. In relevant documents and arbitration practice, an online hearing is still based on the consensus of all parties. If there is a party who objects, the arbitration tribunal tends to postpone the offline hearing, rather than force the parties to enter an online hearing procedure.

In order to balance the voluntary principle and due process of arbitration, and synchronously promote an efficient trial, the solution of the above-mentioned problems still depends on the relevant policy guideline, the amendment to the Arbitration Law and other high-level laws, and the improvement of arbitration rules.

Confidentiality and information security assurance of arbitration. Arbitration is confidential, while the evidence and information of an online hearing are inevitably processed and recorded by electronic carriers. Therefore, the information security of online hearings must be effectively guaranteed, a fact that is inseparable from rule guidance and technical optimization.

First of all, the arbitration rules can specify the process in detail so that all parties can follow the operation steps, to avoid information leakage caused by manual operation errors. For example, it can be stipulated to check the hearing venue before the court trial, to ensure that there is no unauthorised third party on the scene; the authority for handling background information should also be strictly set.

Second, the technical means should be adequate to make the confidentiality of the online hearing equal to, or higher than, that of an offline hearing, and should be continually optimised. From pre-hearing identity verification and multi-window operations in the court hearing to evidence storage and the end of court hearing, there should be a safe and stable technical guarantee.

Prior technical testing and guidance are also necessary measures to avoid leakage due to technical problems. Institutions with limited technology capability can make up for their deficiencies with the co-operation mode, such as renting court hearing venues or support services with standardised management.

In particular, for evidence storage, we can learn from the practical experience of the Internet Court, build or co-operate with the blockchain electronic evidence platform, timely save the evidence, and verify the security and authenticity of the evidence through background technology. At present, Guangzhou Arbitration Commission and other arbitral bodies have tried to issue awards based on “blockchain + evidence storage”, bringing great convenience to the application of online arbitration.

As an important opportunity and challenge for arbitration circles in a post-pandemic era, online hearings will undoubtedly become a long-term development trend. In future arbitration practice, we should continue to pay attention to the improvement of online hearing systems, and cope with the development of a diversified dispute settlement mechanism.


Yang Furong is a consultant at Dentons. She can be contacted on +86 10 5759 0554 or by email at furong.yang@dentons.cn