The Future of Arbitration in a Post-COVID World

Major Trends in Post-COVID Arbitration

The pandemic accelerated the adoption of modern dispute resolution mechanisms, with many changes now becoming common practice. Several key trends are shaping the future of arbitral practice in a post-pandemic world.

Rise of Force Majeure Claims

As the COVID-19 outbreak caused global disruptions, businesses increasingly invoked force majeure clauses to excuse non-performance of contractual obligations. These clauses became central to commercial dispute resolution, particularly in industries like the energy sector, supply chain logistics, and construction. Disputes regarding the scope and applicability of force majeure provisions surged, with arbitral tribunals being called upon to interpret and enforce them.

Increase in Earn-Out Disputes

The economic volatility caused by the coronavirus pandemic led to disagreements over earn-out provisions in mergers and acquisitions. Many sellers and buyers found themselves in cross-border disputes, as pandemic-related disruptions affected financial targets and performance benchmarks. Arbitration became the preferred method for resolving such conflicts due to its efficiency and confidentiality in arbitration compared to litigation.

Surge in Construction Arbitration

The construction industry saw a sharp rise in arbitration cases due to delays, cost overruns, and supply chain disruptions. Construction contract litigation has always been complex, but arbitration allowed for faster resolutions and industry-specific expertise. Moving forward, arbitration clauses in modern construction contracts are expected to include more specific provisions addressing pandemic-related delays and risk allocation.

Complications in Quantum Evaluations

The financial uncertainty caused by the pandemic complicated quantum evaluations in arbitration. Determining damages in disputes related to foreign investment claims, commercial disputes, and bilateral investment treaties became more challenging due to the COVID-19 Revolution in global markets. Arbitrators must now consider post-pandemic economic recovery trends, inflation, and market volatility when assessing damages.

Changes in Procedural Adaptations

The procedural landscape of arbitration has undergone significant changes, many of which are expected to persist in the post-COVID world.

Virtual Hearings and Remote Dispute Resolution

The shift to remote hearings was one of the most significant developments in arbitration during the pandemic. While physical hearings were once the norm, many arbitration institutions quickly adopted hybrid hearings, combining in-person and virtual participation. The International Court of Arbitration and Arbitration Place implemented guidelines to facilitate arbitral hearings while ensuring procedural fairness.

However, screen fatigue and challenges in assessing body language during virtual hearings remain concerns. While cost savings and access to technology make remote hearings attractive, they also pose technical issues related to access controls, confidentiality, and connectivity problems. The future of arbitration will likely involve a balance between electronic-only filings and oral hearings conducted in person.

Impact on Cybersecurity and Confidentiality

The increased use of electronic-only submissions has raised concerns about cybersecurity in international arbitration. Law firms, arbitral institutions, and counsel teams have implemented enhanced access controls to prevent data breaches and ensure compliance with national arbitration laws. Institutions like Wolters Kluwer have published reports emphasizing the importance of data protection and secure document transmission in arbitration.

Ensuring Procedural Fairness

While virtual hearings have improved accessibility, they have also introduced new concerns regarding procedural fairness. Arbitral rules reforms are being developed to address issues related to technical failures, time zone challenges, and the lack of physical interaction. The International Arbitration Survey has shown that while remote hearings are here to stay, they must be refined to maintain fairness standards.

Effects on Contract Enforcement

The COVID-19 pandemic exposed significant vulnerabilities in contract enforcement, forcing businesses and legal professionals to reconsider how arbitration clauses are drafted and applied in commercial contracts. Many companies found that their dispute resolution mechanisms were not equipped to handle pandemic-related disruptions, leading to increased disputes over contract breaches, delayed payments, and supply chain failures. This prompted a reevaluation of arbitration rules and the role of procedural rules in ensuring enforceability in complex and multi-party arbitrations.

Challenges in Enforcement Mechanisms

During the pandemic, enforcing arbitration awards became increasingly difficult due to court closures, administrative backlogs, and delays by arbitrators. Many businesses that relied on traditional court systems to recognize and enforce awards faced lengthy wait times, which in turn affected financial liquidity and commercial stability. The reliance on hard-copy submissions further complicated matters, as restrictions on physical operations slowed the conduct of arbitrations and delayed hearing sessions.

To address these challenges, arbitration users must explore alternative dispute resolution mechanisms that minimize reliance on national courts. Institutions such as SIAC (Singapore International Arbitration Centre) have adapted by implementing sets of arbitration rules that emphasize electronic filings and expedited enforcement procedures. Additionally, the 2015 International Arbitration Survey highlighted the growing preference for jurisdictions with efficient seats for arbitration, such as Hong Kong, which is recognized for its strong legal framework supporting international investment agreements.

Another issue that arose during the pandemic was the lack of standardized procedural rules for handling pandemic-related delays. Some arbitrators exercised broad discretion, while others adhered to rigid guidelines, leading to inconsistencies in substantive hearings and case management. Moving forward, arbitration institutions must work toward choice adaptation by developing clearer arbitration institutional policies that ensure timely enforcement of awards, even in crisis situations.

Implications for Investment Arbitration

The pandemic triggered a wave of foreign investment claims, as governments implemented emergency measures that disrupted business operations and affected investors’ rights under bilateral investment treaties. Many of these disputes centered around protection issues, such as whether state-imposed lockdowns or trade restrictions constituted legitimate regulatory actions or breaches of international investment agreements.

Investment arbitration will continue to evolve as states seek to balance investor protections with economic recovery policies. The Kluwer Arbitration Blog has noted that countries may renegotiate bilateral investment treaties to incorporate more robust force majeure provisions and clearer guidelines on government intervention during global crises. Additionally, defense counsel representing states and investors will likely push for arbitration reforms that enhance predictability in substantive hearings and procedural fairness.

Another key consideration for investment arbitration post-COVID is the shift toward clean energy and sustainability-focused investments. Governments that prioritized clean energy policies during the pandemic may now face disputes over regulatory changes affecting investors in traditional energy sectors. Arbitration practitioners and pool of arbitrators specializing in environmental and cost sanctions cases will play a crucial role in resolving these disputes.

Furthermore, the delay by arbitrators in processing pandemic-related cases has underscored the need for arbitration institutions to improve their administrative efficiency. Many parties found themselves waiting months for tribunal secretaries to schedule hearings, highlighting the importance of streamlining procedural rules and enforcing current choices that support faster arbitration outcomes.

In the wake of the COVID-19 virus, arbitration institutions are reassessing how they handle crisis-driven disputes. The introduction of Artificial Intelligence in arbitration case management is expected to enhance efficiency, while jurisdictions such as Hong Kong and Canada continue to refine their legal frameworks to accommodate arbitration users seeking faster dispute resolution. With these ongoing adaptations, arbitration will remain a seat of choice for resolving investment disputes in the post-pandemic era.

Long-Term Impacts on Foreign Investment and Sustainability

Balancing Investor Protections with Economic Recovery

Governments worldwide are reassessing foreign investment protections to stimulate economic recovery. Arbitration must adapt to new economic realities, ensuring that dispute resolution mechanisms remain effective in a rapidly changing legal landscape. Many countries are revising bilateral investment treaties to strike a balance between investor protections and state regulatory flexibility, particularly in industries affected by pandemic-related policy shifts. Additionally, arbitration institutions are refining procedural rules to address emerging disputes over government subsidies, trade restrictions, and tax incentives, ensuring that investment arbitration remains a viable and equitable solution in the post-pandemic economy.

Shifts in Sustainable Practices

Another post-pandemic trend is the push toward sustainable arbitration practices. Institutions are encouraging paperless arbitration, reducing the carbon footprint of international arbitration hearings. This aligns with broader global initiatives for green arbitration, emphasizing cost savings and environmental responsibility. Many arbitral institutions are adopting electronic-only filings and discouraging hard-copy submissions, further streamlining the conduct of arbitrations while minimizing waste. Additionally, the use of virtual hearings and hybrid hearings has significantly reduced the need for international travel, lowering overall emissions and making arbitration a more sustainable dispute resolution mechanism. Arbitrators and counsel teams are also leveraging Artificial Intelligence to manage case documents more efficiently, ensuring that digital arbitration remains both secure and effective. As sustainability becomes a core consideration in international arbitration, arbitral rules may evolve to require carbon-neutral practices, further reinforcing arbitration’s role in environmentally responsible dispute resolution.

Conclusion: The Future of Arbitration in a Post-COVID World

The COVID-19 pandemic reshaped the arbitration landscape, accelerating the adoption of virtual hearings, electronic filings, and cybersecurity measures. While remote dispute resolution has become a common practice, challenges such as screen fatigue, access to technology, and procedural fairness must be addressed. The future of arbitration will likely involve a hybrid approach, combining the efficiency of virtual hearings with the formality of in-person hearings.

As arbitral practice continues to evolve, parties must consider post-pandemic contract enforcement strategies, changes in arbitration clauses, and the impact of investment arbitration on global economic recovery. Institutions like the International Court of Arbitration and legal publishers such as Wolters Kluwer will play a crucial role in shaping arbitration’s future by refining arbitral rules and enhancing procedural fairness.

For more insights on arbitration’s evolving landscape, visit the American Arbitration Association (AAA), which continues to set fairness standards and best practices for arbitration users worldwide.