It’s no secret that Asia is emerging as a top choice for arbitration and dispute resolution, and with such developments come opportunities and access for Asia-based businesses to world-class dispute resolution mechanisms, and plenty of work for lawyers in the region. But the pandemic has had a significant impact on the way disputes across Asia are carried out. In order to get the best out of dispute resolution mechanisms, digital transformation is key, say lawyers.
As the global COVID-19 pandemic continues to drag, disputes work in Asia is far from quiet. Not only are there plenty of lawsuits, but the types of disputes that clients bring are evolving.
Alfred Wu, a partner at Norton Rose Fulbright in Hong Kong who specialises in dispute resolution, says increasingly COVID-19-related disputes are being heard, including insolvency or contract-related disputes in hard-hit industries.
“At times of economic distress, we have seen an increasing trend of parties being unable to honour their contractual obligations. Such contractual disputes may not stem immediately as the effect of COVID has not materialised. For long-term contracts, it is possible that parties are also seeking to vary the contract terms in order to avoid breach of contract. Lawyers may be involved in the process and are asked to provide forward-looking advice in view of such challenges,” Wu says.
Additionally, the pandemic and periods of lockdown has triggered cost-cutting from businesses — sometimes by terminating contracts of staff through redundancy or restructuring, and these can lead to disputes further down the line.
“A surge of wrongful termination claims by employees can be seen as a result and it is possible that they will remain for a certain period of time in the near future,” Wu says.
James Noble, a partner at offshore law firm Carey Olsen and the firm’s head of the litigation, insolvency and restructuring department in Asia, tells ALB the firm are seeing “a good flow of the usual minority oppression/unfair prejudice claims, partnership disputes, fraud-related cases and insolvency and restructuring matters” at present.
“However, many of the disputes over the past one to two years appear to be fuelled by liquidity concerns related to the COVID-19 pandemic,” Noble adds, explaining this is due to the poor performance of investments, general loss of confidence, many shareholders and/or investors are seeking to exit businesses and/or recover their investments.
While there is no shortage of disputes at present, the processes and approaches taken to handling these are changing.
“Parties are looking for more efficient ways apart from resorting to traditional lawsuits to handle disputes,” Wu says, noting the development of COVID-19 has “further encouraged parties to pursue such option as the advantages of arbitration are more clearly seen. This is especially relevant as most courts in the world were in lock-down for at least a certain period, parties face difficulties in appearing in courts, and witnesses may not be able to fly from foreign places to provide testimony in some circumstances.”
On the other hand, arbitration rules are “more well-equipped for situations like this to enable parties to conduct remote hearings, and these mechanisms have long been in place even before the COVID-crisis. Compared to traditional lawsuits in courts, arbitral tribunals can also provide greater flexibility and more efficient resolution to parties. In times of economic distress, parties are also seeking faster dispute resolution methods in order to lower legal costs,” Wu says.
Echoing global trends, clients in Asia are also examining how to best keep costs low as they pursue disputes.
In response, lawyers say digital tools are enabling clients to do this, but they warn that these come with their own challenges, and require extensive preparation.
Adrian Tan, a partner at TSMP Law Corporation who sits on the Board of Directors of Maxwell Chambers says the pandemic has shaken up the once well-established disputes processes, and lawyers skilled in this remit, have had to work hard to adapt in order to assist their clients.
“Disputes lawyers have spent decades refining the skills needed for a physical hearing. They practise their voices, their postures, even the way they look at the tribunal. Their cross-examination technique is the result of years of trial and error. And the pandemic has made all that obsolete. With virtual hearings, all disputes lawyers are back to square one. They will have to start from scratch and figure out how the most effective means of virtual advocacy,” he says.
Tan adds, however, that while “virtual hearings are a financial boon for clients,” – as they will enable clients to save on travel expenses - “they will pay an intangible cost. The virtual tribunal will find it harder to connect with parties, literally and figuratively.”
A NEW CROP OF CHALLENGES
Noble tells Asian Legal Business that as virtual hearings become adopted more widely by lawyers during the pandemic, lawyers require careful planning in order to get the best out of these.
“One key challenge is adapting to the examination of witnesses over video link which is a very different format and setting. Counsel has to give careful thought to the method and style of cross-examination in a virtual environment, where she/he would not be able to observe any non-verbal cues or body language of a witness (or the opposing legal team),” Noble says.
Katherine Yap, chief executive at Maxwell Chambers, agrees that disputes conducted virtually may provoke challenges for lawyers, particularly in the case where clients are not familiar with the necessary technological requirements.
“Though there has been increased usage of video-conferencing platforms (e.g. Zoom, BlueJeans, WebEx) and tools used in virtual hearings, many still come unprepared, and we have seen an increase in demand for video-conferencing concierge/hearing service providers,” Yap says. At the firm, the team carry out a test run for parties prior to the start of the virtual hearing and also dedicate a virtual hearing manager “so that parties are at ease and can focus on the case proceedings rather to fuss over small details that may impact the outcome of their presentation, arguments or the case itself.”
With clients having increasingly high expectations around keeping costs low, lawyers working in disputes across the board are finding themselves under pressure to foresee potential challenges and issues in order to mitigate risks for clients.
“Lawyers are now expected to be able to predict how things are to be played out and provide forward-looking solutions to better protect clients’ interests. The focus has shifted to avoiding occurrences of disputes rather than dealing with disputes when they occur,” Wu says.
The pandemic has also influenced the way clients use litigation, and weigh the financial risks involved.
“With COVID-19, the pandemic has also changed the litigation landscape as clients are now pursuing a more efficient dispute resolution mechanism where parties can manage disputes and expenses effectively without protracted litigation,” Wu notes.
For clients, a hybrid model of dispute resolution is growing increasingly prominent.
“Virtual hearings are not always fully virtual. Very often there will be a combination of various means of virtual and physical presentation. The overarching objective is to enable equality between the parties as much as possible. Every case is different and it is impossible to identify all of the various permutations of approaches involved. What is important is that institutions and Tribunals have be prepared to be adaptive and creative in coming up with solutions that will afford as much equality between the parties as possible,” Wu says.
“The general consensus is the ability of parties being able to group together physically to tackle situations that may arise during hearings – in an in-person meeting, they are able to work on solutions faster rather than having to breakout into individual virtual rooms to discuss. It is a more conducive way to work especially when presenting their case to tribunal. I think virtual spaces will never be able to replace physical presence – period.”
— Katherine Yap, Maxwell Chambers
Yap has also noticed a steady stream of bookings for hybrid hearings. “I guess the general consensus is the ability of parties being able to group together physically to tackle situations that may arise during hearings – in an in-person meeting, they are able to work on solutions faster rather than having to breakout into individual virtual rooms to discuss. It is a more conducive way to work especially when presenting their case to tribunal. I think virtual spaces will never be able to replace physical presence – period,” she says.
While virtual spaces may not be able to completely replace the physicality of the in-person disputes process, a hybrid trend is more likely to remain in place.
Wu says “most definitely” this will be the trend in the future.
“Many cases now will involve some elements of virtual communications, this could range from hearings to conferences with clients. Some form of hybrid operation is therefore inevitable,” Wu notes.
And clients view this as an attractive outcome, Noble says, noting the feedback has been largely positive.
“Clients have generally reacted positively as it provides them with flexibility and costs savings without having to travel to the offshore jurisdictions for physical hearings,” he says.
“However, due to time differences, clients who are often witnesses at the hearings would have to be advised of the procedure/schedule of the virtual hearing in advance and some have had to make adjustments to their daily schedule to make sure they are alert during the BVI court times, especially for clients/witnesses based in Asia where hearings often start in their late evening,” Noble adds.
Examining the disputes market, and likely work ahead for lawyers, Noble predicts the disputes market will continue to evolve in the coming months and years. He suggests the emergence of three main trends, which will drive demand for disputes work he explains.
“The first is an increase in share-holder appraisal litigation with the prevalence of low stock prices, availability of cheap deals, and an increased likelihood of statutory mergers which minority shareholders may be unhappy about. The second is increased litigation due to the availability of third party funding for claims and/or contingency fees,” he says.
While the third trend that can be expected by lawyers is “increased queries and/or litigation in the insolvency and restructuring space as COVID-19 related government support and legislative protections are withdrawn,” Noble adds.
Taking a look at the broader picture, Shae Teo, deputy chief executive at Maxwell Chambers, says there is little doubt that the way disputes are conducted will be deeply changed.
“The global pandemic has fundamentally changed the mode and means by which ADR hearings are conducted,” Teo says.
“Travel restrictions put an abrupt stop to international fly-in-fly-out arbitral proceedings as most in-person hearings are postponed or cancelled. The international arbitration community adapted by moving to remote technology to continue hearings and adopting best practices to ensure procedural fairness. Virtual and hybrid hearings are now the new norm,” she says.
While reliance on technology has doubtlessly grown as a result of the pandemic, and lawyers in Asia have adapted smoothly, as a result of a robust and skilled industry, geographic reputations may be somewhat undermined by the emphasis on borderless work.
“The risk to lawyers is this: we will no longer be able to ‘corner’ any geographic markets,” Tan of Maxwell Chambers says.
“If the world moves towards virtual hearings as the norm, then the customer will no longer need to be limited to choosing counsel from any particular part of the world. The customer will be free to choose any counsel who is available and effective. That’s because that counsel will be just a mouse click away,” he says.
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