A group of senior former judges and legal academics has called for an acceleration in the take-up of alternative dispute resolution (ADR) in the face of commercial contract disputes arising from Covid-19.
The group from the British Institute of International and Comparative Law (BIICL) said “new thinking is going to be required if the law is to play its full part in getting international commerce back on its feet”.
In April, the BIICL issued a ‘concept note’ that recommended introducing a “breathing space” so that contractual breaches arising from the coronavirus crisis were conciliated to avoid the courts being overwhelmed with disputes.
This has now been followed up by a more developed concept note that says: “The effects of the pandemic are magnified by supply chains which over the past three decades have become increasingly global.
“This has implications for disputes as well, since the disruption of a single contract can disrupt the entire chain. One dispute can set off a chain reaction of disputes.”
The second note was drafted by Sir William Blair, a former Commercial Court judge; Eva Lein, a law professor at the University of Lausanne, and director of the BIICL’s Centre for Comparative Law; and Louise Gullifer, professor of English law at Cambridge University.
It argued that the best policy approach in the case of many contracts was for the law to support negotiated solutions to make viable contracts blighted by the pandemic work: “The simplest solution will often be a short ‘breathing space’, until it becomes possible to resume performance.”
The law should support “negotiated solutions bringing contracts made unviable by the pandemic to an end in an equitable manner.”
This would not be appropriate for all contracts – particularly those with detailed termination provisions – but the note said the law “should be slow to find that the negotiations have resulted in waiver, or otherwise prejudiced the parties’ contractual rights, since this could have a chilling effect on parties’ willingness to compromise”.
While contractual rights must be evaluated by applying settled legal principles, it said there would “inevitably” be questions as to how existing doctrine should be applied in the circumstances.
“It will take some time for this to be authoritatively settled by the courts. In some cases, applying settled principle, common law courts may be open to finding that a term implied by necessary implication into a commercial contract obliges a party to allow a short ‘breathing space’ until it becomes possible to resume performance.”
If legal proceedings were still brought, the courts should encourage “and where appropriate require” parties to go through ADR.
The note observed that mediation and conciliation have been growing in popularity in international commercial dispute resolution in recent years.
“Because of the depth of the crisis, and the need to reduce obstacles to recovery to the minimum, it is important and probably likely now that this process is supported by the major stakeholders, and accelerated to minimise disruptions to trade and global supply chains.”
Court proceedings, where needed, should be online if they could not be safely carried on in person. “These will have a much more important role in the future even when no longer necessary for health reasons, and will help to avoid a backlog of cases clogging up the system,” the note said.
Much of this applied equally to commercial arbitration, the authors said.
Sir William said: “Faced with an unprecedented crisis, the law must provide a solid, practical and predictable foundation for the resolution of disputes and the confidence necessary for a recovery. New thinking is required, and there is every reason for optimism that we can succeed.”
Relatedly, the Standing International Forum of Commercial Courts has published a memorandum on delivering justice during Covid-19 and the future use of technology, detailing how courts around the world are responding to the pandemic.
Lord Thomas, chair of the forum’s steering group and the former Lord Chief Justice, said: “This memorandum demonstrates the importance of commercial courts working closely through the Standing International Forum to share information and best practice.
“This strengthens the ability of commercial courts worldwide to support national and international trade and business and uphold the rule of law.”