COVID-19: preliminary arbitration trends in transport sector

Introduction
Greater appetite to renegotiate and share pain
Arrest proceedings and injunctions
Insolvencies and restructurings
Comment

Introduction

The COVID-19 pandemic has severely curtailed court access in many jurisdictions. Certain jurisdictions are permitting urgent matters to proceed, often by way of phone or videoconference. However, many matters have been delayed or postponed. By virtue of its flexibility, arbitration has been offered up as a solution to commercial parties which nevertheless wish to progress the resolution of their dispute. This raises the question of whether more parties in the transport sector are turning to arbitration due to COVID-19. In addition, where contractual arrangements already provide for arbitration, how has COVID-19 affected the behaviour of parties for whom difficulties or disputes have arisen? This article explores trends in the transport and logistics sectors worldwide.

Greater appetite to renegotiate and share pain

In contrast to certain trends seen in 2009 during the previous financial crisis, there appears to be a greater appetite to renegotiate and share the pain of the current difficulties. In long-term charterparties and contracts of affreightment, rather than insisting on their contractual rights and triggering the arbitration clauses, parties appear to be seeking to cooperate in order to weather the storm. This is also the case in the offshore context. At this juncture, the global situation and the resulting impacts continue to evolve.

Even if a party has a claim, it is a challenge to begin to quantify it while the extent of loss and the duration of the current situation cannot be predicted. This has resulted in a flurry of commercial discussions rather than entrenched positions. Consequently, for the volume of disputes and difficulties being seen, comparatively fewer arbitration proceedings have been commenced in the transport sector than might have been anticipated.

Arrest proceedings and injunctions

This is not to say that it is all peace and harmony; there is certainly a segment of the market that is charging ahead. New London Maritime Arbitrators Association proceedings are regularly being commenced and although there have been some delays due to COVID-19, many such proceedings are business as usual. While the courts' systems have been affected by COVID-19, arrest proceedings and injunctions in support of arbitration remain available in many jurisdictions, such as Canada, England, the United States, Singapore and South Africa.

Insolvencies and restructurings

In the grand scheme of things, it is still early days for the COVID-19 crisis. It is anticipated that the insolvencies and restructurings to come will affect the number of arbitrations being commenced. If a contractual counterparty is teetering on the edge of insolvency, careful consideration must be given to whether it is worthwhile incurring the time and cost of commencing arbitral proceedings only to have them stayed later (for further details please see "Spotlight on investor-state arbitration and insolvency").

Comment

International arbitration remains a flexible way to resolve disputes during the COVID-19 crisis. Both institutional and ad hoc arbitrations have been accommodating in terms of virtual hearings and electronic documentation. Arguably, the increased appetite for resolving matters commercially has less to do with the dispute resolution process itself and more to do with seeking to ensure that co-contracting parties stay afloat – and that money is not spent on proceedings that could well be pyrrhic victories at the end of the day.

For further information on this topic please contact Philip Roche at Norton Rose Fulbright's London office by telephone (+44 20 7283 6000) or email (philip.roche@nortonrosefulbright.com). Alternatively, contact Vanessa Rochester at Norton Rose Fulbright's Montreal office by telephone (+1 514 847 4747) or email (vanessa.rochester@nortonrosefulbright.com). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.