Out-Law Analysis | 10 Sep 2019 | 12:48 pm | 3 min. read
Construction disputes are known for their complexity, both from a factual and technical point of view and the difficult legal and procedural issues that can arise relating to specialised forms of contracts such as FIDIC, ICE or JCT. The ICC's Report on Construction Industry Arbitrations - Recommended Tools and Techniques for Effective Management addresses these particular complexities. It was first issued in 2001.
Construction disputes differ from other commercial disputes in a number of ways. By their very nature, construction projects involve more risks than other commercial projects, whether geological, political or legal risks. These risks are often compounded by the long duration and large scope of these projects.
Construction projects typically involve multiple parties over and above the employer and the contractor, such as engineers, architects and contract managers at several levels. When this is combined with the extensive timelines of these projects, which often span years, the volume of documentary evidence to be reviewed can be substantial.
In addition, construction projects often involve several phases which may run concurrently. This explains the existence of concepts unique to construction disputes such as concurrent delay, critical path and global claims.
By their very nature, construction projects involve more risks than other commercial projects, whether geological, political or legal risks.
The updated report recognises that there is no single 'right' way to conduct construction arbitrations. In addition, the importance of party autonomy means that its proposals only apply in so far as they are in keeping with the parties' wishes. However, it makes a number of general recommendations to assist parties in successfully managing construction arbitrations.
While arbitration remains the preferred method of construction dispute resolution, increasing emphasis has been put in recent years on pre-arbitral mechanisms such as dispute boards and mediation. The new FIDIC suite of contracts, released in 2017, emphasise the dispute avoidance function of dispute boards and recommend the use of Dispute Avoidance and Adjudication Boards (DAABs).
The report underlines that the use of dispute boards is unlikely to supplant arbitration for several reasons, including the possibility to deal with factual and legal matters more exhaustively during arbitration. More importantly, it points out that some disputes are intractable and may not be effectively settled by a dispute board - for example, issues arising out of the termination of a contract. The report explains that, in these cases, pre-arbitral steps act as a filter, refining and clarifying the issues that need to be resolved through arbitration. The aim of these pre-arbitral steps, aside from the settlement of certain disputes, is therefore to ensure that only the most intractable disputes are dealt with at the arbitration stage.
Parties to construction arbitrations should carefully consider their selection of arbitrators, bearing in mind:
Arbitral tribunals hearing construction disputes must not disregard the "expeditiousness" requirement enshrined in article 31(1) of the ICC Rules, and should take it into account when determining the procedural timetable, according to the report. However, tribunals hearing construction cases must carry out a delicate balancing act between the need for expeditiousness, and the need to give enough time to each party to properly argue its case when establishing the timetable.
The report exhorts tribunals to avoid any requests for document production, where possible, in a bid to control time and cost. Tribunals should also ensure that the parties manage and control e-disclosure in a cost-effective manner.
Expert appointments contribute to the high cost of construction arbitration. The report recommends that the tribunal should ensure that the scope of expert evidence is confined to questions and issues which are strictly relevant to the issues at stake or which are subject to disagreement between the parties. In this context, the report reminds arbitral tribunals that appointing their own experts could save costs insofar as that expert could assist in identifying the points on which expert or witness evidence or reports might be necessary.
Once arbitration is underway, parties often wrongly consider that settlement is no longer an option. The report underlines that arbitrators have a role to play in reminding parties that settling all or part of their dispute is always open to them "at any time during the ongoing arbitration".
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