APPLICATION POSSIBILITY OF ONLINE ARBITRATION

(on the example of some former-soviet countries)

The volume of the cross-border commercial transactions in electronic form is growing steadily from year to year. So, in 2016, for the first time, a major foreign transaction was concluded using the "blockchain" technology [2]. Objectively, the parties to such transactions need fast, efficient, cost-effective and high-quality resolution of the disputes arising between them.

Over the past few decades, arbitration has become the leading way to resolve disputes in international trade and other international economic activities. At least 97% of respondents mentioned this during the global international arbitration survey conducted by the School of International Arbitration at Queen Mary University of London and international law firm White & Case in 2018 [3].

In many countries, the current trend is the desire to optimize the dispute resolution procedure, including by providing parties with new technological opportunities to use the latest achievements of electronic document management, which, in turn, significantly affects the practice of world arbitration institutions on the active use of remote communication technologies, namely, the application of all the benefits of e-justice in arbitration.

Online dispute resolution procedures are widespread in the USA, especially in dispute resolution regarding the distribution of domain names. A clear example of such procedures is the Uniform Domain Dispute Resolution Policy (UDRP), developed by the international noncommercial organization Internet Corporation for Assigned Names and Numbers (ICANN). UDRP is a transparent global online dispute resolution process that allows trademark's owners to deal effectively with the registration of the domain names used in bad faith purposes. According to this organization, companies using this technology have been successful in more than 30 thousand disputes over domain names [4]. One of the first among them was "Virtual Magistrate", created with the support of American Arbitration Association. The issue of the award by the "Virtual Magistrate" dated 08 May 1996 after interaction with the parties exclusively through electronic means of communication is considered the first case of the use of online arbitration. In the Russian Federation, an online platform for dispute resolution was offered by the Association for the Promotion of Arbitration (Arbitration Association).

Technology creates benefits: comfort, quality improvement and cost reduction. Today technologies have already being implemented: for example, correspondence between the participants to the arbitration proceedings (parties, arbitrators, secretariat) can be carried out by the e-mail; procedural documents and evidence are filed in electronic form [5]; case management conferences are held by telephone or videoconferencing; minutes of a hearing are often conducted using various systems that allow the participants to see the transcript in real time. In some countries, the disclosure of electronic evidence (e-discovery) is gradually spreading [6].

73% of respondents of the above-mentioned survey, conducted by the Queen Mary University of London, expressed the opinion that they "always" or "frequently" use "hearing room technologies", noting that "more active use of the technology in arbitration means more effective arbitration". Participants of the survey emphasized that one of the most notable advantages of technology, which is already widely used un international arbitration, is the ability of the participants to conduct hearings and meetings via videoconferencing or, as a rule, using any other means of communication that do not require physical presence [7].

So, foreign arbitration institutions begin to introduce and use online platforms for exchanging information and communication between the parties in administering arbitration proceedings: from 1 October 2014 the new arbitration rules of the London Court of International Arbitration (LCIA) provided the possibility to exchange documents in electronic form and using ready-made templates posted on the LCIA website, including requests for arbitration [8]; from 2018 similar electronic systems have been operating at the Vienna International Arbitration Centre (VIAC) [9] and in the Hong Kong International Arbitration Centre (HKIAC) [10]; in September 2019 the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) has launched a communication platform through which all participants in the proceedings can download, view and print case files, as well as follow the procedural timetable.

Modern arbitration is criticized in two main directions – the cost and the duration of the process. In arbitration, both very complex and quite simple disputes can be considered (up to $1 million as generally accepted). For the latter categories of the disputes it will be interesting to resolve disputes through online arbitration. Moreover, online arbitration will be interesting for simple disputes (delivery – non-payment), when there is no need for the hearing and it is possible to resolve the dispute based on the documents only, which will also contribute to the interests of the consumers of arbitration.

The term "online arbitration" has several meanings, however all of them come down to the fact that the concept of "online arbitration" is used to describe arbitration proceedings conducted using remote communication technologies between participants in the process [11]. However, as noted in the legal literature, in order "an online arbitration will be considered as arbitration, it must contain all signs of arbitration proceedings: arbitration agreement, the presence of the arbitrators (arbitrator) appointed by the parties and, most importantly, mandatory, conducted in accordance with the rules of this online place to resolve disputes, to enforce an award, etc. [12].

There are two types of online arbitration:
1) online arbitration in the sphere of electronic commerce;
2) arbitration using online communications.

The subject of this study is the analysis of the possibility of arbitration using online communications. Evaluation of the possibility of online arbitration in the field of electronic commerce is not the subject of this study.

Currently, many online platforms have been created for online dispute resolution. For example, ADR.eu, eCourt, ZipCourt ICANN, http://mylawbc.com/, http://modria.com/, http://www.civilresolutionbc.ca/ and others.

The above indicates that technology has a significant impact and at the time simplifies the arbitration process. Moreover, such innovations make arbitration attractive for both medium and small companies, which often refuse to resolve disputes through arbitration due to its high cost, geographical remoteness and, consequently, transportation costs. Avoiding these circumstances, such companies can safely enter into the resolution of the disputes with international corporations through arbitration.

Despite the obvious presence of the advantages, several disadvantages are still present. So, the question arises of applying the principles of international commercial arbitration to arbitration online. Some believe that traditional methods and principles should not be carried over to the online arbitration procedure [13], others are of the opinion that online arbitration cannot remain effective without traditional principles and requirements, such as, for example, face-to-face meetings [14 ].

Special attention should be paid to the issues of compatibility of software and computer equipment, issues of electronic exchange of documents, protection of the authenticity of electronic documents, issues of maintaining confidentiality.

To be able to use online arbitration, a few questions shall be answered:
· the validity of the arbitration agreement, concluded by correspondence via e-mail (question of the form of arbitration agreement);
· procedural aspects (in particular, notifications of the parties);
· form of the arbitral award made through arbitration online;
· enforceability of awards.

Researches on the topic of online arbitration have been carried out abroad for more than a decade, while in the post-Soviet countries, online arbitration has not been studied much. So, in this study, it is proposed to analyze the possibility of using online arbitration using the example of such former USSR countries as the Republic of Belarus, the Russian Federation, the Republic of Azerbaijan, the Republic of Armenia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Tajikistan, Turkmenistan, Uzbekistan and Ukraine.

Article II (1) of the Convention on Recognition and Enforcement of the foreign arbitral awards 1958 (hereinafter – New York Convention) indicates a written agreement of the parties on the transfer of disputes to the arbitration. Moreover, Article II (2) states, that the term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

As follows from Article 11(2) of the Law of the Republic of Belarus "On International Arbitration Court", the arbitration agreement is considered to be concluded in written form, if it is included into the document, signed by the parties or entered into through notices using the mail or any other communication means providing a written recording of the parties' will. Moreover, new edition of the Civil Code of the Republic of Belarus establishes that a written form is considered to be complied with by sending a document on electronic form (including an electronic document).

The establishment of such legislative regulation has the following purposes: "…the introduction of the electronic document exchange in the state in order to determine additional legal mechanisms for remote interaction among participants of the business process, increase the efficiency and effectiveness of decision-making, remove unnecessary barriers in establishing business relations and thereby create favorable conditions for economic and other activities" [15].

As a result, in the Republic of Belarus, the wording of the written agreement corresponds to the level of the development of communication technologies used in the international trade, and allows the recognition of arbitration agreement, concluded in the written form, even when it was sent through electronic messages.

After arbitration reform in 2016 the forms of fixing of the arbitration agreement that correspond to business trends were captured in Russian Federation at the legislation level. Thus, arbitration agreements can be concluded in electronic form [16].

Section II of Article 7 of the Law of the Republic of Azerbaijan "On International Arbitration" in order to consider and arbitration clause as an arbitration agreement requires that the contract shall be concluded in writing [17]. An arbitration agreement itself is considered to be concluded in writing if it is contained in the document, signed by the parties, or concluded by exchanging letters or by teletype, telegraph, or using other telecommunication means which provide the fixation of such message, and the other party does not object to this.

The Law of the Republic of Armenia "On Commercial Arbitration" allows the conclusion of an agreement only in written form [18].

Interesting norm contains in Georgian arbitration legislation, according to which a written form is considered complied with if an arbitration agreement is concluded by e-mail, if the information provided in such email is available for further use [19].

Arbitration legislation of Kazakhstan [20] requires compliance with the form of the arbitration agreement. The Law of the Republic of Kazakhstan "On Arbitration" did not fully accept 2006 UNCITRAL Model Law on International Commercial Arbitration's recommended wording. The Law "On Arbitration" considers the written form of the arbitration agreement to be complied with if there is an arbitration clause in the document signed by the parties, or when exchanging letters, telegrams, telephonograms, faxes, electronic documents or other documents, or other documents defining the subjects and the content of their will (Article 9(1)).

As for the form of the arbitration agreement in accordance with the Law of the Kyrgyz Republic "On Arbitration Courts in the Kyrgyz Republic" [21], the legislation of the Kyrgyz Republic in this part is subject to the provisions of Article II of the New York Convention.

Interestingly, the Latvian Law "On Arbitration Courts" of 1 January 2015 introduced stringent conditions regarding the written form of the arbitration agreement. So, Article 12(2) of the above Law stipulates that "an agreement concluded by exchanging postal items or using electronic means of communication is also considered a written contract, ensuring that the parties' will to transfer existing or possible civil disputes to arbitration courts is recorded with a reliable electronic signature." [22]. Therefore, if the parties enter into an agreement with an arbitration clause in electronic form, it shall be confirmed by electronic signature.

In the Republic of Lithuania the main requirement for form of arbitration agreement is written execution. Thus, the arbitration agreement is considered valid if it meets the requirements of Art. II of the New York Convention, including concluded with the help of electronic communication devices, if the integrity and authenticity of the transmitted information is ensured and if the information contained in it is available for further use [23].

The Law of the Republic of Moldova "On International Commercial Arbitration" [24] (hereinafter – the Law of Moldova on ICA) indicates the mandatory written form of the arbitration agreement. Explaining the meaning of the "written form", the Law of Moldova on ICA broadens the interpretation of this concept. So, if the New York Convention is limited to the explanation that "the term "written agreement" "includes an arbitration clause in an agreement or arbitration agreement, signed by the parties or contained in the exchange of letters or telegrams", the Law of Moldova on ICA indicates: in order for an arbitration agreement to be considered concluded in writing, it must be established in any form, regardless of whether the arbitration agreement or agreement is concluded orally, by convincing actions or by other means.

The arbitration law of Tajikistan and Turkmenistan establishes that an arbitration agreement is deemed concluded, if it is concluded by exchanging letters, messages by teletype, telegraph, or using other telecommunication means to record such an agreement, or by exchanging a statement of claim and statement of defence, in which one of the parties states to have an agreement, and the other does not object to this [25].

In the Republic of Uzbekistan Article 12 of the Law "On Arbitration Courts" provides that the arbitration agreement must be concluded in writing, in the form of an integral part of the contract or a separate agreement. Also, the exchange of letters or messages using electronic and other communication means is equated to the arbitration agreement of the parties.

In Ukraine during the complex procedural reform of 2017 the provisions of Article 7 of the Law of Ukraine "On International Commercial Arbitration" [26], on compliance with the written form of the arbitration agreement were expanded and now include the exchange of electronic messages.

Thus, in spite of the fact that the written form of the arbitration agreement today is still regarded as a kind of procedural guarantee, namely, providing a reliable fixation of the will of the parties to submit the dispute to arbitration, the national legislation of many post-Soviet countries in this part meet the global trend of recognition of the validity of contracts (and, accordingly, arbitration agreements) concluded in electronic form.

One of the grounds for further refusal of the recognition and enforcement of the foreign arbitral award according to Article V(1)(b) of the New York Convention is improper notice of the appointment of the arbitrator or of the arbitration proceedings.

For example, a potential respondent at the stage of the enforcement of the award may claim that it did not know about the arbitration proceedings and as a result had no opportunity to present its explanations. Even within the framework of traditional arbitration, when mail or courier services are used for notification, the difficulties in proving the fact of the proper notice of the party arise. Therefore, in the framework of online arbitration one should expect even greater difficulties [27]. So far, this question remains open.

At the same time, to resolve it, we believe that if at the stage of the conclusion the email addresses are clearly indicated in the contract, then sending to/from which correspondence will be equated to the official notification of the parties. Therefore, if the contract provides an email address that is official for the party(ies), then most of the difficulties associated with notifying the parties are automatically removed.

Thus, the Rules of the Permanent Arbitration Institution at the Chamber of Commerce and Industry of the Republic of Armenia with regard to notification allow documents and correspondence to be submitted by downloading it to a computer program or by sending them to an email address [28]. According to the above mentioned Rules, after the Computer program will be entered into force, documentation, notifications and other messages are also considered received by the Secretariat and the parties, the day after it was downloaded to the Computer program, if until then the Secretariat has not provided the parties with a login and password that provide access to the Computer program, to the case file and the placement of the documents, the next day after providing all parties with a login and a password. The launch date of the Computer program is the first business day following the day the launch information is published on the website www.arbitrage.am [29].

At the same time the Rules of the International Arbitration Court at the BelCCI state that, statement of claims, statement of defence, notifications, awards and other tribunal's orders are sent by registered mail together with return receipt or with acknowledge of receipt [30].

The Rules of 2018 on Arbitration and Mediation of the International Arbitration Centre of the International Financial Centre establish that any written message can be delivered in person or by any other means (including any electronic method), that ensures delivery of a written message [31].

In our opinion, in order to avoid further grounds for non-recognition and non-enforcement of the foreign arbitral award, it is mandatory to send a notice of arbitration though registered mail with return receipt.

The purpose of any arbitration process is the final resolution of the dispute and the adjudgment of the arbitral award. Thus, Article IV of the New York Convention provides: "To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply: (a) The duly authenticated original award or a duly certified copy thereof; (b) The original agreement referred to in article II or a duly certified copy thereof…"

If in the framework of arbitration online the award is rendered also in electronic form then its recognition and enforcement may be difficult. Moreover, if the arbitral award exists exclusively in electronic form, the risk of the free changes of its content by the interested party remains [33].

As noted by I.M. Chupakhin, electronic arbitration award can be equate with the written one only after clear rules for the interaction of the parties and the composition of the tribunal, ensuring compliance with their rights, as well as mechanisms for guaranteeing the invariability of the arbitral award in the framework of the online arbitration proceedings will be developed [34].

Accordingly, in our opinion, after rendering an award online, arbitrators shall send to the parties the hard copies of the signed award in order to ensure the possibility of its recognition and enforcement in the future.

At the same time, if under national legislation of the state where recognition and enforcement is sought the electronic form of the arbitral award will be regarded as a written equivalent, then any reasons for non-recognition or non-enforcement under the New York Convention 1958 are absent.

[1] Colin Rule, Technology and the Future of Dispute Resolution in Dispute Resolution Magazine, Winter 2015 p. 4.

[2] https://www.vedomosti.ru/finance/news/2016/09/08/656254-pervaya-blockchain

[3] http://www.arbitration.qmul.ac.uk/media/arbitration/docs/2018-International-Arbitration-Survey---The-Evolution-of-International-Arbitration-(2).PDF

[4] https://www.icann.org/resources/pages/help/dndr/udrp-en

[5] Article 3(2) of the ICC Rules 2017, Article 4.1. LCIA Arbitration Rules 2014.

[6] Article 3(3)(a)(ii) of the IBA Rules of the Taking Evidence in International Arbitration 2010; Article 4.7. Rules of the Efficient Conduct of Proceedings in International Arbitration (Prague Rules).

[7] http://www.arbitration.qmul.ac.uk/media/arbitration/docs/2018-International-Arbitration-Survey---The-Evolution-of-International-Arbitration-(2).PDF, p. 32.

[8] Articles 1.2, 1.3, 2.3 LCIA Arbitration Rules.

[9] VIAC Rules of Arbitration and Mediation 2018, among other innovations, provide for the administration of arbitration cases in electronic form (Articles 7, 12 and 36).

[10] So, according to Article 3.1. (е) of 2018 HKIAC Administered Arbitration Rules, parties may agree to submit documents through a secure online platform, - an innovation provided by 2018 HKIAC Administered Arbitration Rules.

[11] Panov A.A., Online arbitration: problems, decisions, perspectives // New Horizons of International Arbitration, Vo. 2. / Ed. by A.V. Asoskova, A.I. Muranova, R.M. Khodykina. M., 2014. pp. 111-153.

[12] Narinyan V.V. Procedural issue and other problems on the international commercial arbitration.

[13] de Sylva, M.O., Effective Means of Resolving Distance Selling Disputes, 2001, 67 Arbitration, pp. 230-239.

[14] Berger, K.P., Lex Mercatoria Online: The CENTRAL Transnational Law Database at www.tldb.de, 2002, Arbitration International, No. 1, pp. 83–94.

[15] Article 1(1.2.(3)) of the Decision of Constitutional Court dated 10.07.2019 No. Р-1140/2018.

[16] Article 7(4) of the Law of the Russian Federation "On International Commercial Arbitration" dated 07.07.1993 No. 5338-1.

[17] Article 7 of the Law of the Republic of Azerbaijan "On International Arbitration".

[18] Article 7 of the Law of the Republic of Armenia "On Commercial Arbitration", adopted 25 December 2006.

[19] Article 8.5. of the Law of the Republic of Georgia "On Arbitration" of 2009. "This rule does not apply to the for of the arbitration agreement, one party to which is an administrative body or an individual. In this case a physical document, signed by parties is required (Article 8.8.)".

[20] The Law of the Republic of Kazakhstan "On Arbitration" dated 08 April 2016 No. 488-V ЗРК (with amendments dated 10 March 2017 and 03 February 2019).

[21] The Law of the Kyrgyz Republic "On Arbitration Courts in the Kyrgyz Republic" dated 30 July 2002.

[22] Articles 10 and 11 of the Latvian Law "On Arbitration Courts" dated 01 January 2015.

[23] Article 10(2) of the Law of the Republic of Lithuania "On Commercial Arbitration" dated 02 April 1996 No. I-1274.

[24] Article 7 of the Law "On International Commercial Arbitration" dated 22 February 2008 No. 24-XVI // Мониторул Офичиал ал Республичий Молдова. – 20 May 2008. – No. 88-89.

[25] Article 11 of the Law of the Republic of Tajikistan "On International Commercial Arbitration" dated 18 March 2015 No. 1183.

[26] Article 7(1) of the Law of Turkmenistan "On International Commercial Arbitration" dated 16 August 2014 No. 101-V // Neutral Turkmenistan. – 23 August 2014. – No. 229-230.

[27] Law of Ukraine "On International Commercial Arbitration" dated 24 February 1994 No. 4002-XII.

[28] Panov A.A., Online arbitration: problems, decisions, perspectives // New Horizons of International Arbitration, Vo. 2. / Ed. by A.V. Asoskova, A.I. Muranova, R.M. Khodykina. M., 2014. – pp. 111 – 153.

[29] Articles 3.1, 3.3 of the Rules of the Permanent Arbitration Institution at the Chamber of Commerce and Industry of the Republic of Armenia (23.03.2019).

[30] Article 3.7 of the Rules of the Permanent Arbitration Institution at the Chamber of Commerce and Industry of the Republic of Armenia (23.03.2019).

[31] Article 20(1) of the Rules of the International Arbitration Court at the BelCCI.

[32] Article 3.6 of the Rules of 2018 on Arbitration and Mediation of the International Arbitration Centre of the International Financial Centre.

[33] Article 21 of the Rules of the Riga International Commercial Arbitration Court http://www.ricac.org/ru/assets/uploads/reglament/RICAC_reglaments_RU_1.4.pdf

[34] Chupakhin I. M. Online arbitration: features of decisions-enforcement // Arbitration and civil process. - 2012. - No. 11.

^* This article was prepared for Arbitration.ru as of December 17, 2019.

^** The article provides general information and should not be considered as legal consultation.