23 April 2020

Businesses around the world are currently being faced with the enormous funding and operational problems as the result of massive quarantines, which are being introduced by the national governments globally to slow down the spread of the Covid – 19 virus. Various measures are getting introduced to rescue the businesses, which are being hit the hardest now. Here we provide a short overview of the key bankruptcy law related measures, which have been introduced very recently or which are still being considered in Russia and in England.

Use of Video and Audio Conference Facilities Internationally and in Russia

International Overview - Courts

Even before the Covid-19 quarantines were imposed, many countries started to introduce the on-line technologies into their court systems in one way or another. With the quarantines fully in place, some jurisdictions made it possible to have the whole case managed on-line, including the hearings.

In England on 17 March 2020 the Lord Chief Justice issued a statement according to which "there is an urgent need to increase the use of telephone and video technology immediately to hold remote hearings where possible". Now a PRACTICE DIRECTION 51Y "VIDEO OR AUDIO HEARINGS DURING CORONAVIRUS PANDEMIC" is already in place (1), under which the court may direct that the hearing is to take place in private, as opposed to be broadcasted in the court building. The direction expressly allows for the proceedings to be conducted wholly by video or audio. The Direction 51Y was introduced via Coronavirus Act 2020 and the direction will cease to have an effect when the said act will come to an end in accordance with section 75 of that Act. It is up to a judge or a magistrate to decide whether it would be appropriate for a specific hearing to be conducted via video or audio conference facilities. It is also up to a judge or a magistrate to decide how to make sure that the "open justice" principles is observed, i.e. that a public access to the hearing is provided for (2).

In Hong Kong on 2 April the Judiciary issued a Guidance Note for the Remote Hearings for Civil Business in the High Court, which sets out the practice for remote hearings by video conferencing facilities (VCF) in civil cases in the Court of Appeal (CA) and the Court of First Instance (CFI) of the High Court during quarantine. In this regard, two cases have already been heard by way of VCF on April 6 and 7 at the CA and the CFI respectively. According to the Hong Kong government web site, where this information is published: "the proceedings for both cases were conducted smoothly and further remote hearings using VCF may be held for suitable cases in the near future"(3).

Similarly, the video and audio conference facilities are starting to get used in Singapore, India, mainland China and other countries.

Situation in Russia - Courts

Russian law generally provides for a possibility of having the court hearings conducted by VFC. On 18 March 2020 the Russian Supreme Court issued a note, in which it made a recommendation to make use of this possibility as much as possible. In practice, an implementation of this recommendation comes with great difficulties.

A hearing by VFC must be organized by the court, where a party is based, and it must take pace in the court's premises. The judge still has to conduct all the ID procedures in a traditional way, which means checking the ID documents and any necessary powers of attorneys issued to a representing lawyer in a physical presence of this lawyer. In other words, even if VFC is used, there is still a need for a direct physical contact between the judge, the judge's clerk and a party to a dispute. This clearly isn't in line with the main idea behind the quarantine. Another difficulty re: use of VFC in Russia is a general lack of the necessary equipment and a need to agree on the use of VFC at least two weeks in advance of the hearing itself. On top of this, often a coordination of the VFC hearing will have be done between two different courts, because each party to a dispute will need to attend the court, which is closest to where that party is based. If, for example, one party is based in Moscow and another party is in Petropavlovsk-Kamchatskiy, the time difference will be 9 hours, which makes it even more difficult to use the VFC in the current circumstances.

As the result, the recommendation of the Supreme Court re: use of VFC for the hearings in reality is not supported neither legally nor practically. To address these problems an announcement was made that a new law will be passed, which will allow the use of personal devises and will eliminate the need of being personally present on the court's premises. Although this legislation has not been passed yet, some judges already started to conduct the court proceedings via Skype, Whats'up and other programs on their own initiatives. Such cases are rare and more of an anecdotal nature. Having said this, following a statement of one of the judges of the Supreme Court, Mr. Momotov, made on 11 April 2020 during the International Legal Forum in St Petersburgh, such initiative of the individual judges is acceptable, provided both parties to a dispute gave their consents. On top of this, the experiments are being conducted at present to see whether the hearing could take place effectively when all the parties and the judge are in one building, but in different rooms.

Although efforts are being made in Russia to bring the modern communication facilities into the court system, the vast majority of cases are simply getting stayed with the hearings postponed to the later dates. Having said this, all the state arbitrazh courts and most of the courts of general jurisdiction accept the documents electronically. One should bear in mind that many courts are not used to this paperless approach and the registration unit might not register the documents properly and on time, if they were submitted only electronically. Oftentimes, even during this quarantine period, the documents are being sent by post.

International arbitration

It would probably be fair to say that major international arbitral institutions turn out to be best prepared for the current situation. The Stockholm Chamber of Commerce, London Court of International Arbitration, the Chamber of Commerce Arbitration Institute of Switzerland and other major institutions all already had in place their digital platforms or electronic communication systems for an on-line administering of the disputes long before the Covid-19.

The Stockholm Chamber of Commerce created an online platform, where a separate web page with all the materials is created for each dispute. Pleadings and evidence submissions, making applications, receiving interim orders and final judgements, making payments – all these essential tasks can easily be completed online in the most cases dealt with by the major arbitral institutions. Having said this, whether the hearings should be conducted on-line is the question, which should be solved in each and every case separately. There is nothing to prevent the parties to a commercial arbitration to agree a procedure, under which a hearing will be conducted fully on-line. However, one should bear in mind that when there are many witnesses and the interpreters are involved it may be really difficult to keep the whole on-line session uninterrupted and at the right speed. Also, the immediate reaction of a witness, which can be really important during a cross examination gets somewhat undermined. On top of that, normally an independent party should be present during the cross examination, which may be difficult to arrange for, especially if a witness is under a quarantine. In other words, while many stages of the case may well be completed on-line, the online hearing is not always the best option, in which case the only way forward seems to be a postponement of a hearing to a future date, when the quarantine is lifted.

As for the Russian international arbitration institutions, the International Commercial Arbitration Court and the Maritime Arbitration Commission under the Chamber of Commerce and Industry are shut down for any visitors and hearings until the end of the quarantine restrictions period, which is now April 30, 2020. Having said this, the parties can still file the documents, including the pleadings, to ICAC and MAC electronically. As for the hearings, same as with other international arbitration institutions, this matter is for the parties to decide upon, taking into account all the circumstances of the case in question.

"Urgent" Cases and Extension of the Deadlines 

International Overview

As stated above, on-line hearing is not always the option, which is recognized of course not only in the context of international arbitration proceedings, but also in the context of state courts proceedings. This is why, despite the fact, that the courts in different jurisdiction are now allowing the use of on-line video and audio hearings, all of the pending litigations are simply stayed.

Many jurisdictions still have "live" cases on, however these cases are limited to the most urgent once, for example the ones, involving a custody of a child, a bail application , etc. The Supreme Court of Singapore, for example, accept application for the urgent hearings, however the Court specifically stated in their announcement, that in making such an application: "the parties should be mindful that a hearing is not essential or urgent merely because it is convenient for the parties to have the matter heard early. Further, such a request should not be made if the preparation for and/or conduct of the hearing will entail any breach of safe distancing measures (for example, due to the need for lawyers to come into physical proximity with their colleagues or opposing counsel, their staff or clients)…(4)"

In England certain hearings also continue to be conducted in the court buildings with the parties present. Having said this such hearings are also part of the urgent cases. On the UK government web site it is explained that the relevant court will inform the parties in cases where their presence is essential. Same as in Singapore, new guidelines regarding the social distances are now in place and will need to be observed by everyone attending the hearings in person (5). The hearing can also be postponed on an application for a party to a dispute. In the case of O'Driscoll v F.I.V.E Bianchi S.p.A the court stated that 56-day (or longer) extensions to deadlines can be agreed between the parites without further Court orders. Normally CPR3.8(4) allows the parties to agree an extensions of up to 28 days only. The judge made it clear that his permission was specifically to accommodate the impact of COVID-19.

Situation in Russia

In Russia certain cases are also considered urgent, and these are dealt with "alive" even now, during the quarantine period. In the Supreme Court's note of 8 April 2020 there is an open generic list of cases, which are considered "urgent". The list comes with the relevant criteria for determining whether a specific case is urgent or not. Unfortunately, the said criteria is applied very inconsistently: in some courts even "non-urgent" cases are still being heard in almost the usual way, the other courts would postpone the hearings of even the "urgent" cases from the said list. On top of that, the court's administration services might make a statement, that no cases are being heard at all, which will turn out to be untrue, as a party might find out latter, that the case was heard in fact. The situation requires the lawyers to be very careful and to monitor and control every hearing date constantly.

Limitation Periods

International Overview

Given that only a very limited number of courts remain operational in many countries and, in most cases, only the most urgent trials still can go ahead, a resolution of a very large number of cases is getting substantially delayed. One might ask how this affects the statutory limitation periods? The governments are trying to make sure that whilst the hearings are getting postponed, the documents can still be served and the claims can still be made so that the limitation periods are not impacted. In England claims and documents can be filed electronically in the Business and Property Courts. Similar systems are in operation in other countries, including Germany, Italy, South Korea and others. Some jurisdictions, like Hong Kong, provide an extension of the statutory limitation period by the time period when the relevant court is shut due to the Covid-19 pandemic.

Situation in Russia

In Russia the period from 30 March to 30 April is declared by the government as a "non-working" period. According to the circular of the Supreme Court of 1 April 2020, the deadlines are all moved to a first working day. Taking into account the public holidays in early May, the first working day is going to be April, 6th.

At the same time, in his speech of 11 April 2020, Viktor Momotov stated that the current procedural deadlines and the limitation periods will be all suspended for the period of the pandemic. The relevant regulation, which will address the current and upcoming procedural issues, caused by the pandemic, is currently being prepared by the Supreme Court. This order will hopefully bring more constituency and certainty to the current situation.

Final Observations

At these challenging times many national court systems are finding themselves in a need to incorporate the modern communicational technologies on an urgent basis. Whilst this process may well be painful, hopefully in the future it will bring very positive results, when the litigation proceedings around the globe will turn into paperless, efficient, transparent and cost effective mechanisms for the resolution of the disputes at all levels.

Marianna Rybynok, Senior Associate, Khrenov&Partners
Dmitry Shniger, Senior Associate, Khrenov&Partners