Introduction

The emergence of Coronavirus Disease of 2019 (the “COVID-19”) back in 2020 has provided significant effects to all sectors of human life, unexceptionally business and law sectors, where at the time, many legal disputes arise out of the COVID-19 pandemic, among others, legal disputes in relation to the non-performance or delay of fulfillment of a party’s one or many contractual obligations due to the pandemic.

There was concern of the parties on how to resolve the legal disputes, particularly, in the event the contract governs that any disputes shall be resolved through an international arbitration institution with the seat of arbitration located overseas, whereas the majority of countries in the world issued lockdown policy forbidding any citizens from overseas travel.1 However, arbitration, compared to litigation, has its own characteristic, that is freedom of contracts principle (in arbitration, widely known as party autonomy principle), where the parties can jointly choose the venue of the hearings as well as tailor the proceedings according to their needs.2 Armed with the party autonomy principle along with the assistance of current technology, a solution has been created to resolve this matter, namely, online arbitration hearings.

A survey from an arbitration institution, the International Chamber of Commerce (“ICC”) of 2020 reported that 36 percent of the parties disputing through ICC had participated in fully online hearings in the first quarter of 2020, and subsequently, that percentage has increased to 71 percent in the final quarter of the same year.3 This is because online arbitration hearings are a key solution to travel restrictions, either intercity or cross-border, imposed by the government all over the world during the COVID-19 pandemic.

In 2020, the National Arbitration Board (Badan Arbitrase Nasional Indonesia/“BANI”) issued Decree No. 20.015/V.SK-BANI/HU on the Rules and Procedures of Electronic Arbitration Hearings (“BANI Decree”) as a response to the urge of alternative legal proceedings mechanism during the COVID-19 pandemic. The BANI Decree, in essence, stipulates the mechanism of online arbitration hearings. Regardless the COVID-19 pandemic that has been deescalated to endemic, BANI issued the BANI Arbitration Rules and Procedures of 2022, entered into force as 1 January 2022 (the “BANI Rules 2022”), which accommodate more complete online arbitration hearing provisions compared to those under the BANI Decree. Thus, a question arises on whether online arbitration hearing saves more on the cost of institutional arbitration compared to that of in-person institutional arbitration hearing? Given that institutional arbitration, in particular, international arbitration proceedings, is deemed as more costly.

This article will further discuss more on online arbitration hearings and answer whether online arbitration hearings may reduce the costs of institutional arbitration, in particular, at BANI.

  1. Institutional Arbitration

    In both theory and practice of arbitration, generally speaking, there are two forms of arbitration, ad hoc and institutional.4 An institutional arbitration is one that is administered by a specialist arbitral institution under its own rules of arbitration.5 Meanwhile, ad hoc arbitration is arranged solely between the arbitrators and the parties; therefore, the parties must envisage and advance the arbitration procedure themselves under the supervision of the tribunal.6

    In general, institutional arbitration offers huge advantages, namely, (i) comprehensive procedural rules, (ii) the institutions are given the authority to appoint arbitrators at the parties’ request or in the event the parties cannot otherwise agree, and (iii) good administration (including case management and communication to the parties).7 On the other hand, one of the drawbacks of  institutional arbitration is that some arbitration institutions charge more costly fees, in particular, administrative fees and case examination fees.8

    Subsequently, ad hoc arbitration offers more flexibility to the parties to tailor the arbitration to their specific needs and arbitration costs seem to be less costly than that of institutional arbitration.9 However, in the event the parties fail to cooperate on the arbitration due to the lack of experience in arbitration, this could be a disaster to the arbitration of the parties.10

    Regardless the disadvantages of institutional arbitration which charges a costly arbitration fees, the parties seem preferring institutional arbitration to ad hoc arbitration, given that, the lack of experience of the parties in arbitration as well as incorrect decisions in ad hoc arbitration instead will result in a more costly fees than the arbitration fees charged by an arbitration institution.11

  2. Online Arbitration Hearings at BANI
    Online Arbitration Hearings Requirements

    The Rules and Procedures for Electronic Arbitration (2022), which is an integral and inseparable part of the BANI Rules 2022, govern that online arbitration hearings may be held based on the grounds below:12

    • disasters emergency (both natural and non-natural disasters)13;
    • special conditions14; or
    • the parties’ own decision.

The performance of online arbitration hearings based on the aforementioned grounds shall satisfy the following requirements:15

  • the parties expressly wish to conduct online arbitration hearings;
  • such will is expressed at the time of submitting a request for arbitration, prior to the commencement of arbitration hearings, or at the time of arbitration hearing is ongoing; and
  • determined by the executive board of BANI or the tribunal examining the cases.

Hearings’ Code of Conduct and Technical

Online arbitration hearings shall be held, should the parties so agree. The agreement of the parties shall be made in writing and comprise the following statements:16

  • the willingness of the parties to conduct online arbitration hearings;
  • the warranty of the parties that during the hearings, neither party beyond the parties thereto is entitled or competent to enter or join the hearings.17
  • the willingness of the parties to consistently comply with the code of conduct of online arbitration hearings of BANI, including confidentiality terms and conditions.

In the event a hearing participant (i) does not possess clear identity, (ii) participates the hearing without turning on their video-camera from their device, (iii) does not provide sufficient and clear explanation on their identity when they are requested to do so, and/or (iv) causes disturbances on the hearings, the chairman of the tribunal/sole arbitrator is entitled to dismiss the relevant hearing participant from the virtual room.18

The performance of online arbitration hearings is deemed as performed at BANI Jakarta or BANI region where the request for arbitration is registered.19

Online arbitration hearings are conducted by using online-based telecommunication media (e.g. teleconference, videoconference, and/or virtual conference) and digital platform designated by BANI.20

Evidence, Documents, Witnesses, Experts and Award

Evidence and/or documents to be submitted by the parties can be filed via email in portable document format (pdf) or provided physically. In terms of the verification of such documents, the chairman of the tribunal/sole arbitrator may determine whether verification shall be conducted physically or online.21

In relation to the factual witnesses and/or experts. the statements or reports thereof in electronic form shall be preceded by taking an oath according to their respective beliefs.22

Subsequently, arbitral awards in online arbitration hearings may be electronically pronounced by the arbitral tribunal/sole arbitrator. The pronounced arbitral awards are not only made in electronic form, but can be made in hard copy executed by the arbitral tribunal.23

Other Hearing Provisions

Other provisions related to the proceedings procedure, including but not limited to the procedure for appointing arbitrators, the deadline for submitting claims and others, will be subject to the provisions of the BANI Rules 2022, unless otherwise set out under the Rules and Procedures for Electronic Arbitration (2022).24

Arbitration Cost

Arbitration cost, under the BANI Rules 2022, is set out under a separated list and such a list is an inseparable part of the BANI Rules 2022, where such a list can be revised or modified if it is deemed necessary by BANI.

Arbitration cost which shall be paid by the parties prior to the commencement of hearings comprises administration fees, examination fees, and arbitrator fees (the “BANI Arbitration Cost”). The BANI Arbitration Cost is set out pursuant to the percentage rate of the amount of the dispute/claim which is filed by a party, whether it is in convention or counterclaim as well as subject to the applicable value added tax (VAT) provisions.25

The BANI Arbitration Cost does not cover (i) summon fees, transportation fees, and honorarium of witnesses and/or experts, (ii) transportation and accommodation fees for the arbitrator having domicile outside the seat of arbitration, (iii) fees for any hearings conducted at a place other than the one provided by BANI, (iv) site examination fees, (v) award registration fees in district courts.26

Thus, a question arisen on whether the BANI Arbitration Cost through online arbitration hearings is the same as the BANI Arbitration Cost through in-person hearings.

Provided that the Rules and Procedures for Electronic Arbitration (2022) is an inseparable part of the BANI Rules 2022 and the provisions on cost are only stipulated under the BANI Rules 2022, there is no discrepancies in the BANI Arbitration Cost of online arbitration hearings and that of conventional arbitration hearings, since the BANI Arbitration Cost is determined by BANI based on the amount of the dispute. This has been confirmed by the author through an informal discussion with the official at BANI.

  1. Items the Parties Shall Consider on Costs in Online Arbitration Hearings

As explained in the previous section, arbitration costs at BANI are determined proportionally based on the amount of the dispute, not based on the method or format of the hearings chosen by the parties. Thus, the BANI Arbitration Cost for in-person and online arbitration hearings are the same.

However, there are other items shall be taken into consideration of the parties on fees in online arbitration hearings, as follows:

  • Travel and accommodation costs of the parties, arbitrator(s), witness(es), and expert(s). Online arbitration hearings are considered to reduce travel and accommodation costs, in particular, in international arbitration, where the parties, arbitrator(s), witness(es), and expert(s) are required to perform long-distance travel to reach the venue of the hearing.27
  • Fees for platform services used to conduct online arbitration hearings, either videoconference, teleconference, and any other electronic communication platform services.
  • Other supporting costs, namely, interpreter and translator fees.

Conclusion

The COVID-19 pandemic has changed the way humans live including to the extent of arbitration hearings. Online arbitration hearings have been introduced as a solution to the pandemic situation. A few years after the pandemic, BANI has attempted to accommodate rules and procedures on online arbitration hearings through the BANI Rules 2022 including the arbitration costs. Although there are no differences in arbitration costs between online and in-person, online arbitration hearings might be a solution for both parties to reduce their expenses, in particular, of travel expenses to the seat of arbitration.

Dodi Roikardi

Sources

  1. Aram Aghababyan and others, “Global Impact of the Pandemic on Arbitration: Enforcement and Other Implications”, Kluwer Arbitration, 19 August 2020, available at https://arbitrationblog.kluwerarbitration.com/2020/08/19/global-impact-of-the-pandemic-on-arbitration-enforcement-and-other-implications/, accessed on 5 February 2024.
  2. Russell Thirgood, “Remote Hearings: Storm Clouds and Silver Linings”, International Bar Association (IBA), 27 September 2022, available at https://www.ibanet.org/clint-september-2022-feature-5, accessed on 5 February 2024.
  3. Ibid.
  4. Ulrich G. Schroeter, “Ad Hoc or Institutional Arbitration – A Clear-Cut Distinction? A Closer Look at Borderline Cases”, Contemporary Asia Arbitration Journal (2017), page 143.
  5. Zisha Rizvi, “The Shift Towards Institutional Arbitration: Critically Examining the Arbitration (Amendment) Act 2019”, 1 March 2020, page 9.
  6. Hong Kong International Arbitration Centre (HKIAC), https://www.hkiac.org/arbitration/what-is-arbitration, accessed on 5 February 2024.
  7. William Hartnett, QC and Michael Schafler, “Ad Hoc v. Institutional Arbitration – Advantages and Disadvantages”, ADR Institute of Canada, September 2017, available at https://adric.ca/wp-content/uploads/2017/09/Hartnett-and-Shafler.pdf, accessed on 2 February 2024.
  8. Ibid.
  9. Ibid.
  10. Ibid.
  11. Namrata Shah and Niyati Gandhi, “Arbitration: One Size Does Not Fit All: Necessity of Developing Institutional Arbitration in Developing Countries”, Journal of International Commercial Law and Technology Vol. 6, Issue 4 (2011), page 236.
  12. Article 1 paragraph (5) of the Rules and Procedures for Electronic Arbitration (2022).
  13. Article 1 paragraph (8) of the Rules and Procedures for Electronic Arbitration (2022) further provides illustrations of disasters emergency, namely, epidemic, pandemic, floods, national emergency, riot, rebellion, state of combat, war, sabotage or demonstration whose existence is declared by an authorized institution.
  14. Article 1 paragraph (10) of the Rules and Procedures for Electronic Arbitration (2022) further explains the special circumstance including but not limited to illness, prohibition from health workers including doctors or authorized officials from travelling, and/or other circumstances which do not allow a party to travel.
  15. Article 1 paragraph (6) of the Rules and Procedures for Electronic Arbitration (2022).
  16. Article 2 paragraph (3) of the Rules and Procedures for Electronic Arbitration (2022).
  17. Article 5 of the Rules and Procedures for Electronic Arbitration (2022) provides that a party participating in online arbitration hearings shall be principal and/or its proxies and/or a third-party under BANI Rules 2022 and the applicable laws and regulations. In the event the arbitrator, the parties and/or the witnesses wish to use third party assistance such as technician or operator to support the hearings, such a relevant party shall provide a power of attorney or letter of assignment to such a third party as well as a statement of such a third party that they will subject to the code of ethics during the hearings. The aforementioned two requirements shall be provided to the chairman of the arbitral tribunal in writing through the hearing secretary prior to the commencement of the hearings.
  18. Article 7 paragraph (4) of the Rules and Procedures for Electronic Arbitration (2022).
  19. Article 1 paragraph (12) of the Rules and Procedures for Electronic Arbitration (2022).
  20. Article 4 paragraph (1) of the Rules and Procedures for Electronic Arbitration (2022).
  21. Article 8 of the Rules and Procedures for Electronic Arbitration (2022).
  22. Article 9 paragraph (1) of the Rules and Procedures for Electronic Arbitration (2022).
  23. Article 10 of the Rules and Procedures for Electronic Arbitration (2022).
  24. Article 11 paragraph (1) of the Rules and Procedures for Electronic Arbitration (2022).
  25. BANI, https://baniarbitration.org/fees, diakses pada 23 Januari 2024.
  26. Ibid.
  27. Joseph R Profaizer and others, “Costs”, The Guide to Damages in International Arbitration – Fifth Edition, 19 December 2022, available at https://globalarbitrationreview.com/guide/the-guide-damages-in-international-arbitration/5th-edition/article/costs, accessed on 6 February 2024.
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