From 28 March to 1 April 2022, UNITRAL Working Group II (Dispute Resolution) held a colloquium on possible future work,  in which China International Economic and Trade Arbitration Commission (CIETAC) was present as an observer. The colloquium discussed the possible future work of Working Group II, which was structured around four main topics: the development of dispute resolution in the digital economy (DRDE), online platforms for dispute resolution, technology-related dispute resolution and adjudication.

The sections on  development of DRDE and technology-related dispute resolution emphasize the inability of traditional dispute resolution in practice to fully meet and adapt to the new characteristics of disputes arising from the new economy represented by the digital economy and high-tech industries and their new needs for dispute resolution. The sections  on online platforms for dispute resolution and the adjudication revolve around the efforts made by national arbitration institutions, courts and other dispute resolution institutions in recent years, especially since the COVID-19 pandemic, to respond to the need for more efficient and convenient dispute resolution, as well as the issues and challenges posed by these new initiatives.

The discussions conducted at this colloquium were divergent and forward-looking, with distinctive issue-oriented features, and also included information and data from different regions and institutions, which was a summary of the forefront of international discussions in related fields. We have extracted the key messages and discussions, and combined them with our own arbitration practices and views, to form this observation report.

The Developments in DRDE

1. Summary of the Discussion

Technological advances brought about by digitalization are not only affecting the economic and trade landscape, but also playing an increasingly important role in dispute resolution, especially after the outbreak of Covid-19 pandemic. Since 2021, these technologies have touched on areas including blockchain case management, automated archiving for document management, cloud storage, artificial intelligence technologies, natural language processing, and visualization tools in the field of arbitration and mediation. According to the ICC survey, of the more than 500 responses received, 93 percent of respondents acknowledged that technology has improved arbitration efficiency and cost-effectiveness, while 83 percent believed that technology is underutilized. The vast majority indicated that, regardless of past practice, they would like to be able to make greater use of the online case management platform to manage all correspondence online.

Driven by the COVID-19 pandemic, the advantages of online hearings in shortening time and reducing costs have been widely recognized by parties, lawyers and arbitral tribunals. According to a survey conducted by Queen Mary University, not only did 60 percent of respondents already frequently or consistently use online hearings, but 89 percent believed they would use video conferencing more often in arbitration. However, as a new way of applying technology, online hearings also bring challenges and legal issues, such as how to meet security and confidentiality standards for video and audio recordings and how to ensure procedural justice.

Equality and Justice

The issues of equality and justice arise from the use of technology in arbitration, mainly due to the different technical use capabilities or  technologygaps of the parties, such as one party being able to use virtual reality technology during an online hearing while the other party can only use traditional PDF or PPT documents. If the arbitral tribunal allows both parties to use high technologies, one party may still be in a weak position because it is not familiar with these high technologies.

Technology can also lead to inequality in cost, a view supported by 26 percent in an ICC survey. However, the cost of using technology still appears to be lower overall than the cost of parties participating in on-site hearings. The cost of additional hardware equipment purchased for online hearings (such as cameras and microphones) can be amortized across multiple cases. In addition, cost parity may be achieved between the parties if they jointly engage the services of technology consultant to set up remote connections, in which case the arbitral tribunal can distribute the technology costs equally between the parties in the final award. These practices have been successfully adopted in court proceedings in Europe during the COVID-19 pandemic.

Conflicts with Traditional Habits

In judicial traditions of some regions, all parties involved are required to be on the same scene, some arbitrators believe that it is important that they are present in person and are even reluctant to have written testimony, because they believe that the only appropriate way to examine testimony is to stare into the eyes of witnesses in order to make their own judgments. If the hearing is online, it is difficult to make that judgment to well identify the various signals that the witness may be sending. Online hearings do not mean that there is no way to do so, but may simply mean that the arbitral tribunal needs to be more actively involved in the proceedings before the hearing, as well as supplementing the limitations of not having  on-sitehearings or no eye contact with other means.

The Financial Technology Industry

The financial technology industry is in a phase of rapid development where industry laws and regulations are difficult to keep up with, and there are legal uncertainties in different countries that make it easy for disputes to arise. Arbitration is very attractive to the financial technology industry. One is for its professionalism. Not all adjudicators understand the financial technology industry, so there is a need for someone who truly understands the industry to adjudicate the case, and the second is that arbitration has the potential to resolve disputes quickly which meets the need for the financial technology industry to quickly achieve dispute resolution. It is worth noting, however, that there are some traditional financial arbitrations that do not solve new types of disputes in financial technology very well.

Blockchain

Metaverse as an immersive virtual world that incorporates blockchain and cryptocurrency technology is likely to trigger more and more new disputes, which may involve cryptocurrencies, digital products, smart contracts, anonymous parties, anonymous arbitrators, etc. For these disputes involving metaverse, one technology that may be used in the future is  artificial intelligence, and the other is decentralized justice, such as blockchain. For example,  if someone is found to make a video on an online platform, not knowing who the other party is, and both parties sign an agreement anonymously on the chain. When a dispute arises, since it is a small dispute of $500 or $1,000, it is generally not resolved through arbitration, but some “jurors” selected through blockchain technology to review the relevant evidence, contracts, agreements reached and products, and then the “jurors” independently vote to determine whose claims should be supported. Since all of this exists in the blockchain, no one can destroy the evidence or disrupt the “juror” selection process, so that parties can trust the system. For the development of metaverse dispute resolution, relatively simple disputes can be fully automated, as it is more economical to resolve large numbers of small disputes. However, there are also cases, such as those involving different jurisdictions, that cannot be fully resolved  automaticallybecause machines cannot completely replace human beings and may require the intervention of traditional dispute resolution methods.

2. CIETAC Practices and Perspectives

CIETAC began to explore the application of network technologies to arbitration such as online case filing and online hearings before the COVID-19 pandemic, and carried out a large number of relevant practices under the pandemic. In 2021, 870 cases were accepted through online filing, accounting for 21.37%, 434 online hearings were flexibly used, and parties from 19 countries and regions participated in the  online hearing. In CIETAC’s arbitration practice, the arbitral tribunal will consult with both parties before deciding to hold the hearing online. If one party proposes to attend the hearing in person and the other party agrees to hold the hearing online, the arbitral tribunal may consider adopting a “combination of online and offline approach” to give the parties the opportunity to participate in the hearing on-site while providing online participation in the hearing to fully guarantee the procedural rights of the parties. Although  online hearings are gradually becoming a trend, not every case should be held online. The core of arbitration is to adjudicate cases in a fair and efficient manner. Although technology has changed arbitration, it serves this core goal and is a tool rather than an end in itself and the cart should not be put before the horse.

Under the reality of technological imbalance, how to ensure the equality and procedural fairness of the parties, how to identify the types of cases applicable to online dispute resolution, what standards need to be followed for online hearings and witness examination to guarantee  the rights of the parties, and whether there is a need to set uniform minimum procedural requirements for online dispute resolution are all practically important and have significant impact on the development of online dispute resolution. For new dispute resolution needs brought by emerging technologies such as blockchain and metaverse, CIETAC will also keep an open mind to actively explore them.

II. Online Dispute Resolution Platform

1. Summary of the Discussion

Different Types of ODR Platforms

Definitions of ODR (online dispute resolution)  are very diverse, online negotiation, mediation, arbitration, etc. It can be included as long as the dispute resolution is online. There are currently two different types of ODR platforms, one is the ODR platform that specializes in providing dispute resolution services, and the other is the e-commerce platform that uses the ODR mechanism to resolve consumer complaints on the platform.

Sometimes people think of ODR  as  a technology-enhanced version of ADR, that is, using technology to help resolve disputes. Basically, arbitration institutions of all the countries are now using technology to assist in disputes resolution, and the most significant application is  online hearings. But today, ODR goes far beyond a technology-enhanced version of ADR and is only at the early stage of technology helping to resolve disputes. ODR provides a solution or a public platform for parties to resolve disputes electronically, all communication in the ODR procedure should be conducted through the ODR platform, and the different procedures for dispute resolution, including negotiation and mediation, can be fully managed by software so as to achieve the highest cost-effectiveness and efficiency, and participants can participate in these procedures at their most appropriate time.

Platform-based international trade, sharing economy, crowdfunding, and social media are all irreversible trends. These mainstream trends and business models can develop in the digital economy because the organizational structure models are contracts based. This governance model can effectively resist risks, reduce uncertainty, and build trust in the digital economy and there are many popular industry platforms that share this commonality. Through the user agreements, a bilateral agreement relationship is formed between the platform operator and users. User agreements contain internal policy rules and platform codes of conduct to govern user’s behavior and activities on the platform. By adopting this contractual model, users make a commitment to abide by the internal rules and comply with the various regulatory provisions set by the platform, and the platform operator becomes the party that sets the rules and ensures compliance by effectively implementing regulatory mechanisms to oversee users’ compliance with community policies. In addition, another popular model is decentralized regulatory model. Under this model, users have a notification and logging system that helps operators to regulate, and operators can use an outsourcing model to outsource the regulation function to a trusted third party.

SmallDisputes

In cross-border disputes of small- and medium-sized enterprises (SMEs), a study found that 58% of SMEs chose not to trade across borders because of the lack of economical and efficient dispute resolution mechanisms. This phenomenon already accounts for 70% in emerging economies, and the situation would be better in the EU, but also 35% of cross-border disputes involving SMEs have not been resolved. Considering small disputes and the lifecycle of small and micro enterprises, the flexible and efficient nature of ODR  is of great significance for the effective resolution of small disputes.

2. CIETAC Practices and Perspectives

In today’s world where both national legislation and practice are actively exploring online dispute resolution mechanisms, it is undoubtedly of great significance to guide and regulate the development of online dispute resolution mechanisms if a certain international consensus and universal standards can be formed on the basis of  thorough research and discussion, summary of advanced practices of various countries and consideration of technical feasibility. On the other hand, with the development of online dispute resolution mechanisms, there are more and more specialized online dispute resolution platforms, and it is necessary to further clarify and standardize the relevant standards regarding the platforms.

CIETAC is actively exploring the construction of an online dispute resolution platform, which will provide online dispute resolution services for small cross-border trade of SMEs. CIETAC will also take this as an opportunity to actively explore the experience of online cross-border dispute resolution, and give full play to the professional and international advantages to promote the development of cross-border trade and dispute resolution in the digital economy.

III. Technology-related dispute resolution

1. Summary of the Discussion

Time Frames

Many emerging technology companies have a strong need for efficiency in  arbitration cases involving high technology, and they believe that the original arbitration arrangement cannot meet their flexible business model, so they avoid traditional arbitration as much as possible. According to many high-tech companies and experts, expedited arbitration proceedings, even if they only take as little as six or nine months, are sometimes too long for the nature of the technology industry and may cause projects obstacles. In such cases, it is important to ensure that arbitrators have relevant technical background and technical qualifications and avoid applying expedited arbitration procedures to high-tech arbitration cases rigidly allowing for no flexibility. So how to determine the time frame for a particular case? As a matter of principle, the choice should be left to the parties who know the details of the case best, and if the parties have decided on a time frame, that time frame should apply to the arbitration case, but if the parties have not made arrangements, the time frame should be set in accordance with the applicable rules. There was also a view to set the goal of a short period of 20 or 40 days, allowing arbitrators to put some pressure on the parties to act quickly. At the same time, there were opposing views on strictly limiting the time frame, arguing that the need for flexibility should be emphasized.

Arbitrator’s Technical Background

If the arbitral tribunal is a multi-arbitrators tribunal, it may compose of arbitrators with a technical background and legal background respectively. In the case of sole arbitrator tribunal, most of them would have a legal background and then engage experts to deal with technical disputes. Taking into account the priority of efficiency, the default should be a sole arbitrator unless otherwise agreed by the parties, and then engage technical experts to provide technical advice and assistance to the arbitrator. An important factor in technology-related disputes is that the parties are in the best position to explain the technology. They know the technology best, and in some cases it is possible that no one else has, or even that only one of the parties has full knowledge of that particular technology. There can be risks here, particularly in some emerging areas of technology, where their opinions are influenced by their positions because the interpreters of the technology are themselves. In some specific areas of technology, however, it may not be practical to exclude parties form  providing technical advice.

Confidentiality

High-technology-related disputes often concern great technical and scientific information that are sensitive to confidentiality and from which tech companies derive significant economic  interest. The duty to maintain confidentiality has two facets, one relates to “ ourward confidentiality” in the sense of non-disclosure to third parties. Another relates to “ inward confidentiality” regarding protection of information from the other party before it is produced or disclosed within the proceedings. The former is of no controversy, and the  latter is often missing in ordinary arbitration rules and laws. Unless authorized by the parties, the arbitral tribunal does not have the right to decide on confidentiality at the substantive level. Technology-related disputes involving industry secrets or material trade secrets, the absence of special protective measures has the potential to cause serious harm to the parties  requiring confidentiality. The view was expressed that the arbitral tribunal should determine whether the information is to be classified as confidential and decide on the basis of the principle of competitive interests. The plea of confidentiality can be raised by parties providing the information in the arbitration, not only by  the party introducing the information into the proceedings but also by the party affected by the confidential information. A reasonable solution is to decide in consultation between the parties and the arbitral tribunal early in the arbitral proceedings, to reach a confidentiality agreement or to operate in accordance with the confidentiality procedures prescribed by the arbitral tribunal. If the parties can agree on a confidentiality mechanism, some confidentiality arrangements may be adopted, such as blacking out key information on some documents or limiting attendance at hearings. It is proposed to develop a guide or technical guideline on the confidentiality in arbitration.

2. CIETAC Practices and Perspectives

In high-tech related disputes, there may be a mismatch between the adjudicator’s own knowledge base and the highly specialized and technical nature of the case. The professional requirements for such cases are so high that if the arbitral tribunal does not have a technical background, there may be a situation where expert opinions dominates the arbitral tribunal. How to select the appropriate arbitrator in such cases and how to properly play the role of the parties in interpreting the technology and the professional opinion of technical experts deserve special attention and study. The confidentiality requirements involved in such cases is also something that needs to be taken seriously and properly addressed. It is suggested that the arbitral tribunal guide the parties to reach an agreement on confidentiality issues or make the necessary guidance and arrangements on confidentiality issues early in proceedings to address the parties’ concerns about confidentiality.

Adjudication

1. Summary of the Discussion

In the colloquium,  adjudication was generally recognized as a fast and convenient method of dispute resolution,  especially for domestic disputes in some nations, mainly in construction industry, where speedy solution is preferred over accurate solutions, and the adjudication was approved by the majority of the parties. In these jurisdictions where adjudication is applied, the number of disputes in the relevant fields  decreased , resulting in demand for adjudication. Adjudication is now successful applied not only in common law jurisdictions, but also in some civil law jurisdictions, to  achieve relatively quick and safe payments and quick dispute resolutions. It was suggested by the experts that the work on adjudication should be based on the needs of users,  industries and enterprises. Adjudication is a tool and mechanism that can efficiently resolve long-term contractual disputes, but in many countries, adjudication is limited to domestic cases and mainly targets disputes in construction industry. Exploratory work should be made on the international application of adjudication and its application in different industries, such as high-tech industries. Most agreed that adjudication could be combined with technical dispute resolution.

2. CIETAC Practices and Perspectives

The expert review mechanism introduced by CIETAC for the dispute resolution in construction industry is in fact an exploration and practice of adjudication. In 2021, the first case of application of the Construction Dispute Review Rules was successfully resolved, involving a dispute over the progress payment for a PPP project with a total investment of over ten billion yuan. The parties reached a consensus to resolve the dispute by means of dispute review agreed in the contract, and jointly plead to apply Construction Dispute Review Rules. Both parties appointed members from the CIETAC List of Experts for Construction Dispute Review to form a review board. It only took 28 days from the time the parties applied for CIETAC to provide assistance services to the time the review board finally issued the review opinion , which was well received by both parties. At the beginning of this year, the Model Text for International Engineering Subcontract released by the China International Contractors Association also included dispute review into the dispute resolution framework, designating CIETAC as the dispute resolution institution, which is conducive to promoting the application of the adjudication in foreign-related projects in China.

The role of adjudication in construction dispute resolution is generally recognized. As to whether expand the scope of application to other commercial disputes, based on existing practical experience, it appears that adjudication may be applied, in addition to construction industry, to other types of disputes that have long performance period and need to be resolved quickly to advance the project or cooperation progress, such as long-term cooperative projects, long-term supply agreements for bulk commodities such as natural gas or coal, etc..

The effectiveness of adjudication is far from uniform internationally. Some Countries have adopted legislation on determining the effectiveness of adjudication, but there is no relevant legislation in China. At present, only the  rules of arbitration institutions are in place, such as Construction Dispute Review Rules issued by CIETAC, which stipulates that the default is that the review opinion is  binding only if not challenged by the parties within the specified period of time, allowing the parties to agree on the  effectivenessof the review opinion, and the review opinion is binding on the parties on the basis of the agreement. The  effectiveness of adjudication has a significant impact on the application and development of this dispute resolution mechanism.

Epologue

The  Colloquiumof UNITRAL Working Group II discussed the development direction and priorities of dispute resolution in the new economy represented by the digital economy and high-tech industries, which is of great practical significance and foresight. As the world’s major permanent arbitration institution, CIETAC should continue to actively explore the transformation and upgrading way of dispute resolution, so as to better adapt to and promote the development of the new economy and contribute Chinese strength to global dispute resolution.