Moving disputes forward during COVID-19: the arbitration option

April 3, 2020

The COVID-19 pandemic, and the physical (social) distancing measures implemented to help fight it, have meant that courts have had to limit their operations (see our full overview on court access in Canada during the COVID-19 crisis). While some urgent court hearings are proceeding virtually and some courts are taking steps to expand the availability of virtual hearings, many court hearings have been postponed for the time being. Some courts are encouraging counsel and the public to use alternative forms of dispute resolution in order to reduce delays caused by the suspension of court operations and to limit the backlog of cases once the suspension is lifted.1 One option is arbitration.

Arbitration may provide a complete or partial solution where all parties to a dispute currently before the courts wish to move the dispute forward. Arbitration allows the parties to design a dispute resolution process that is tailored to the requirements of their particular dispute, and that complies with physical distancing requirements through the use of virtual hearing technology and document sharing platforms.

Parties who do not wish to arbitrate their entire dispute may also leverage arbitration tools to move their dispute forward in part while the courts’ operations are affected by COVID-19. Arbitration agreements may be tailored to apply to only a portion of the dispute in question, such as discovery-related motions, or the final determination of a threshold issue in the dispute.

In this bulletin we discuss the benefits that arbitration may offer in the current environment, together with moving all or part of a dispute to arbitration as a way of advancing the matter while the courts’ operations are affected by COVID-19.

Benefits that arbitration may offer during the COVID-19 pandemic

Because of its inherent flexibility, arbitration may allow disputes to move forward in a manner that may be more difficult to obtain through court proceedings during the COVID-19 pandemic. The major arbitral institutions and centres have already announced their intention to move disputes already before them forward during the pandemic.

The possible benefits that arbitration may offer in the current situation include:

  • Virtual hearings. Parties may tailor their arbitration to provide that all hearings take place using virtual hearing technology platforms. A number of arbitral institutions and centres have experience administering virtual arbitrations, and are therefore further along the learning curve for this technology than are the courts.
  • Tailored timelines. Through their arbitration agreement or a procedural order from the arbitrator, parties may fix appropriate timelines for all steps involved in resolving their disputes, including a schedule for a hearing and a timeline for the delivery of a final award. This may be an attractive option in the face of uncertainty as to when courts will resume normal operations.
  • Paperless process. The arbitration agreement or procedural order may also specify that all exchange of documents, evidence and written arguments take place electronically, without the need for submitting physical copies to the arbitrator or the other party. The submission of documents electronically is already the standard practice in many commercial arbitrations.
  • Customized remedies. Parties may specify the types of remedies that the arbitrator may grant, including damages, specific performance, injunctions and other equitable remedies.2
  • Flexibility. Parties often choose arbitration because of the limited appeal rights and its confidential nature. However, arbitration is flexible and allows parties to design a process and procedures that are suitable for them and for their dispute. If there are aspects of the court process that parties prefer to retain, they may generally build those aspects into an arbitration agreement. For example, it is possible to retain certain appeal rights in some types of arbitrations, or to specify that the arbitrator must be a former judge.

Moving an entire dispute from court to arbitration

If the courts remain limited in their operations as a result of COVID-19, it may be an option, provided that all parties consent and that the dispute is arbitrable,3 for the parties to enter into an arbitration agreement that provides that the dispute will be resolved by arbitration.

In addition to the usual provisions included in an arbitration agreement (such as the place of arbitration, the applicable rules and the procedure for appointing an arbitrator or arbitral tribunal), the arbitration agreement should: (1) provide for the discontinuance of the court proceeding without costs, (2) specify what use will be made of steps already completed in the court proceeding, (3) set out the procedural steps and timelines that apply to the remaining steps associated with the dispute, and (4) specify that hearings may take place via virtual hearing technology.

Moving part of a dispute to arbitration

Even if the parties wish to ultimately have their dispute determined by a court, arbitration may be an attractive option to move part of a dispute forward while the courts’ operations are affected by COVID-19.

One way to do this is for the parties to agree to arbitrate a specific motion within a court dispute. For example, the parties could agree to arbitrate a motion concerning the scope of documentary discovery that would otherwise have been brought before the court or a motion regarding the appropriateness of a refusal of a question during an examination for discovery. Such motions would ensure that an action can still proceed through the pre-trial phases and not be delayed during these unprecedented times. To do this, the parties would enter into a tailored, discrete arbitration agreement that sets out the arbitrator’s limited mandate and powers, as well as any appeal rights.

Another option is to arbitrate a specific substantive issue within a larger dispute, such as a threshold or discrete issue that can be decided efficiently as a first step, with the remaining dispute to be decided subsequently.

Conclusion

Since court operations have been limited in order to protect court users in the wake of COVID-19, parties should strongly consider whether arbitration is a viable option to move their dispute toward resolution. The flexibility of arbitration may permit parties to meet the challenges associated with the dispute resolution process during the COVID-19 crisis.

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1 On March 31, 2020, the Alberta Court of Queen’s Bench issued a statement encouraging parties to use alternative forms of dispute resolution while court operations are suspended. The Court will also now process consent orders, including those to enforce arbitration awards, by email or fax.

2 See, for example, Ontario’s Arbitration Act, 1991, S.O. 1991, c. 17, s. 31.

3 There are some disputes that cannot be arbitrated. For example, consumer protection disputes cannot be arbitrated pursuant to section 7(2) of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A. See also section 11.1 of the Québec Consumer Protection Act, C.Q.L.R. c P-40.1.

Read all our coronavirus-related updates on our COVID-19 guidance for organizations resource page.