Arbitration in the Time of COVID-19. The Romanian Perspective
by Sorina Olaru, Daniela Savin (Ghervas)-Managing Associate
Published: March, 2020
Submission: March, 2020
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Nestor Nestor Diculescu Kingston Petersen
Amid the spread of COVID-19, the Romanian President decreed a state of national emergency in Romania, with express measures to be taken in the justice system. Although the Decree does not refer to arbitration, the state of national emergency and the need of social distancing inevitably impact it as well. The main issues to be considered in this respect are:
Several arbitral institutions announced or recommended postponement or cancelation of in-person meetings and hearings and advised that all communications be conducted electronically (e.g. ICC,ICSID,LCIA,SCAI,SCC,SIAC,VIAC). For the time being, these arbitral institutions are operational, although staff members are working remotely in most cases.
The Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania (“CICA-CCIR”) is no exception. It has recommended arbitrators to reschedule the hearings, but only with prior consultation of the parties and with proper summoning of the parties for the next hearing.
However, the parties and arbitrators can discuss and agree upon alternative arrangements, such as the use of video or teleconferencing in order to avoid delay of the proceedings. Here comes the advantage of the arbitral institutions, which already have the necessary experience in conducting hearings virtually and can therefore adapt more easily to the new context compared to state courts.
CICA-CCIR did not provide any guidance with respect to the procedural time limits in the current context.
On the other hand, the President’s Decree on the state of emergency provides that limitation terms and forfeiture terms do not start to run and, if they have been running, they shall be suspended throughout the duration of the state of emergency.
However, the time limits in the arbitral proceedings should not fall under the provisions of this Decree, as the latter govern only state justice. The arbitral proceedings and the Rules of Arbitration are subject to procedural autonomy and, thus, a state authority should not be able to intervene in this respect (except for the limited intervention of the courts in setting-aside proceedings).
Thus, generally, all case deadlines (e.g. time limits for filing statement of defense, answer, other submissions etc., payment of arbitration costs and fees, rendering the award etc.) continue to apply and must be timely met.
The interested party can request the Arbitral Tribunal or the President of CICA-CCIR to extend any deadlines due to COVID-19 outbreak and the state of national emergency, under Art.6 (1) of CICA-CCIR Arbitration Rules. Likewise, the Arbitral Tribunal can order the extension of the time limit for rendering the award under Art.43 of CICA-CCIR Arbitration Rules.
Extension / modification of time limits due to the state of national emergency should be equally possible under the rules of arbitration of other arbitral institutions (e.g. Art. 24 (3)andArt. 31 (2) of ICC Rules of Arbitration, Rule 26(2)-(3) and Rule 46 of ICSID Arbitration Rules, Art. 22.1 (ii) and 22.5 of LCIA Rules of Arbitration).
However, in none of the above-mentioned cases is the Arbitral Tribunal or the Arbitral Institution bound to grant the extension; it will decide on a case-by-case basis whether the circumstances invoked by the interested party or by the Arbitral Tribunal qualify as justified reasons for the extension.
In our opinion, the fact that the time limits in the arbitral proceedings are not suspended during the state of emergency should not represent a ground for setting-aside the arbitral award, because as shown above the parties have sufficient mechanisms under the various Rules of Arbitration in order to secure their rights. Neither the fact that the Arbitral Tribunal does not extend the time limits should justify the setting-aside, unless the interested party is able to prove that its right to defense and due process have been breached.
Unlike the time limits in the arbitral proceedings, the limitation term is governed by the law applicable to the merits of the case (i.e. the Romanian legal system as the set of laws enacted by the state institutions).
Thus, in our opinion, the limitation term for commencing arbitral proceedings regarding rights subject to Romanian law falls under the provisions of the Decree on the state of emergency, according to which all limitation terms are suspended throughout the duration of the state of emergency.
It should be noted that under Art.2535 of the Civil Code, the suspension can be invoked only by the party that has been prevented to exercise its rights.
In this respect, parties domiciled or headquartered in Romania should benefit of the suspension due to the state of emergency, because a contrary interpretation would be against the scope of the Decree. On the other hand, it is arguable whether parties domiciled or headquartered outside Romania could invoke the fact that they were prevented to file the request due to the state of emergency in Romania and, consequently, to benefit from the suspension of the limitation term on this ground.
Regarding the effects of the suspension when the state of emergency ends, the limitation term will be resumed. Thus, the period lapsed before the suspension will be taken into consideration and parties should be careful when calculating the time left for launching the request for arbitration.
To this end, parties should refer also to Art. 2534 of the Civil Code, according to which the statute of limitation will not expire before the lapse of a 6 months’ time limit from the date when the cause of suspension (i.e. the state of emergency) ceased, except for limitation periods of 6 months or shorter, which will expire after the lapse of one month.
The suspension of the limitation term is a benefit that can be waived by the interested party. Thus, even though the limitation term is suspended, the interested party can submit the request for arbitration during the state of emergency.
Setting-aside proceedings are subject to state justice. Therefore, deadlines for setting-aside claims fall under the provisions of the Decree on the state of emergency.
It should be noted that under Romanian law, the nature of the setting-aside claim is debatable: some scholars consider it to be an appeal, others a statement of claim.
The distinction is relevant for the matter in discussion because if the setting-aside claim is considered an appeal, then under the Decree on the state of emergency, the term for its submission would be interrupted. However, if considered a statement of claim, the term for submission would be suspended.
The consequence would be that in case of interruption a new term of the same duration would start to run after the state of emergency ceases, while in case of suspension the original term for its submission would be resumed.
In this context, the safest approach would be to treat the setting-aside claim as a statement of claim and, thus, to consider that the term for its submission is subject to suspension throughout the duration of the state of emergency. The comments made above with respect to the suspension of the limitation term for filing the request for arbitration would be equally applicable to the term for filing the setting-aside claim.
Most of the Arbitral Institutions offer parties the possibility to obtain conservatory measures or other interim measures by means of the emergency arbitrator proceedings (e.g. CICA-CCIR,ICC,LCIA). These proceedings might be of particular interest for the parties during the state of emergency because they can provide rapid temporary relief.
The emergency arbitrator proceedings are conducted in principle only in written form. Thus, we do not expect the COVID-19 outbreak to cause major disruptions to such proceedings.
In terms of setting-aside claims against the emergency arbitrator order, it should be noted that the Romanian courts’ activity is in principle suspended, except for some limited extremely urgent cases. Although setting-aside claims against the emergency arbitrator order are not expressly listed among the cases to be solved during the state of emergency period, their resolution should not be suspended because they either regard conservatory measures or could be assimilated to the preliminary injunction claims, which are both included in the list of cases to be solved during this period. Still, we do not know what the court’s approach in this respect will be.
Also, in view of the above-mentioned debate regarding the nature of the setting-aside claims, it should be noted that if the setting-aside claim were considered to be an appeal and the emergency arbitrator order included among the cases for which the judicial activity is not suspended, then the term for filing such a claim would not be interrupted according to the Decree on the state of emergency.
The COVID-19 crisis will most probably impact the arbitration world even after it ends. Thus, we may assist to an increase of the number of disputes and to a change in their nature: it is expected to have more claims involving commercial delays or breaches of contracts due to disruptions provoked by this pandemic, in which the force majeure will be brought into discussion.
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