Out-Law Analysis | 16 Dec 2019 | 10:43 am | 9 min. read
This is part of a series of articles exploring aspects of international arbitration in the context of construction disputes. Other articles look at issues and claims, submissions and hearings, the evidence process, and the issue of arbitral awards.
The significance of the selection of an arbitral tribunal in construction industry arbitrations has been recognised this year by both the International Chamber of Commerce (the ICC) Commission on Arbitration and ADR and by those who participate in such arbitrations.
The views of those participants, which include counsel in private practice, arbitrators, expert witnesses, in-house counsel, those who work at arbitral institutions, academics and litigation funders, were captured in a global study, conducted by the School of International Arbitration at Queen Mary University of London (QMUL) in partnership with Pinsent Masons, the results of which have only recently been published.
The study included a survey of more than 600 people from within the construction industry and their views complement the findings of the ICC Commission in its February 2019 report entitled 'Construction Industry Arbitrations: Recommended Tools and Techniques for Effective Management ( 2019 Update).
The ability to select arbitrators was identified by survey respondents as one of the top three reasons why parties chose arbitration over litigation for the resolution of international construction disputes, behind avoiding national legal systems or national courts and ahead of confidentiality and privacy.
The arbitral tribunal is the principal conductor of the proceedings, regardless of whether the parties adopt a procedural organisation influenced by common law or civil law approaches or something in between. In this role, the arbitral tribunal wields a significant amount of power that can be used to manage the proceedings in a way which maximises efficiency. As the ICC Commission's report noted, the arbitral tribunal's judgment is crucial to achieving a cost-effective arbitration and even more so for complex cases.
This was also the sentiment revealed in the QMUL study. Survey respondents identified arbitrator appointments / tribunal constitution as one of the top three procedural elements which they considered offered the greatest potential to improve efficiency in international construction arbitrations, behind the summary disposal of unmeritorious claims or defences at an early stage and ahead of the streamlining of evidential hearings and submissions.
Not surprisingly, it appears to be universally accepted that the selection of the arbitral tribunal for arbitrations in the construction industry will significantly influence whether and to what extent an effective resolution of the underlying dispute can be achieved.
There appears to be some variance in institution and participant views on what parties should regard as the central qualities of an arbitrator.
The ICC Commission's report recommends that parties should consider certain qualities when selecting the arbitral tribunal for an international construction arbitration. A number of these institution-recommended qualities are echoed in the QMUL survey, which shines a light on how these and other qualities appear to be perceived and prioritised among participants to international construction arbitrations.
One of the central qualities recommended in the ICC Commission's report is familiarity with the construction industry and cultural nuances. This, it said, includes familiarity with construction contracts and their interpretation, how construction disputes evolve and how they are best resolved.
QMUL survey respondents appear to agree with this recommendation, at least in part, having selected experience in international construction arbitration and construction industry experience among the top three qualities that they look for when appointing an arbitrator for an international construction arbitration.
Notably, experience with international construction arbitrations ranks at the top of their list of ideal arbitrator qualities. Further,, survey respondents pointed to a lack of experience in construction sector disputes among arbitrators, and counsel, as a cause of inefficiency in international construction arbitrations.
Experience with international construction arbitrations is also endorsed in the ICC Commission's report, albeit in the context of strong case management skills.
In the context of familiarity with the construction industry and cultural nuances, the ICC Commission's report also discusses legal and technical expertise. While the ICC Commission does not insist that each arbitrator must be a technical specialist, it does recommend that he or she be a "cross-functional construction professional", possessing the ability to grasp, and willingness to understand, both technical and legal issues.
Balance of legal and technical construction expertise was also among the top three qualities that QMUL survey respondents said they look for when appointing an arbitrator for an international construction arbitration. Participants appear to agree with the view expressed by the ICC Commission that the arbitrators selected need not be technical experts and both groups appear to appreciate the need to balance legal and technical expertise on the arbitral tribunal.
Survey respondents identified certain factors which would encourage them to appoint a technical, as opposed to a legal, expert as an arbitrator in an international construction arbitration. The top three factors identified were the principal matter in dispute is technical in nature, the technical expert has legal qualifications and a range of matters in dispute fall within the arbitrator's technical expertise.
Interestingly, only a relatively small number of the respondents consider efficiency to be a reason for appointing a technical expert as an arbitrator. Still, they regard having technical knowledge of construction among the top four characteristics of an efficient international construction arbitrator.
While technical expertise is clearly a preferred quality for an arbitral tribunal in an international construction arbitration, it appears that legal expertise will still take precedence in the eyes of participants. Only a relatively small proportion of survey respondents would consider appointing a technical expert as the sole arbitrator in an international construction arbitration and some said they simply would not appoint a technical expert as an arbitrator, seemingly regardless of whether the arbitrator was to serve as a sole arbitrator or on a panel of three arbitrators.
Unsurprisingly, another institution-recommended quality in the selection of arbitrators for construction industry arbitrations is arbitrator availability, which the ICC Commission said is critical for "heavy" construction cases in particular. Participants appear to agree with the significance of arbitrator availability, as it was the fourth most preferred quality that respondents to the QMUL survey said they look for in appointing an arbitrator for an international construction arbitration.
Good availability was ranked fifth by the respondents among the characteristics of an efficient international construction arbitrator. Consistent with this view, a number of them identified the limited availability of arbitrators as one of the factors which can make international construction arbitration inefficient.
The ICC Commission recommended familiarity with the relevant law and/or main legal traditions as another core quality to consider in selecting arbitrators in construction industry arbitrations. QMUL survey respondents ranked familiarity with the applicable law fifth among the preferred qualities of an arbitrator for an international construction arbitration.
The possession of strong case management skills is a further quality in arbitrators recommended by the ICC Commission. This quality is described as including sufficient familiarity with computers so as to manage materials, such as submissions, documents and other evidence, trial bundles and transcripts, which are stored and accessed electronically.
Additionally, the ICC Commission recommended in the context of case management skills that, where a three-member tribunal is to be appointed, at least two arbitrators have proven experience in observing how an international arbitration relating to a construction dispute is actually carried through from beginning to end. As to facilitating settlement, its report also suggests that settlement discussions and sealed offer procedures, if applicable, might be included in the arbitral tribunal's first case management conference agenda.
This aspect of case management skills is likewise considered by QMUL survey respondents to have an impact on efficiency, as discussed above together with arbitrators' experience with international construction arbitrations.
The QMUL survey results show that participants appear to share the ICC Commission's view that the arbitral tribunal's case management skills are likely to have a significant impact on the efficiency of a construction industry arbitration. Survey respondents ranked case and counsel management skills among the top three characteristics of an efficient international construction arbitrator, behind the issuance of an award within a reasonable period of time and on equal footing with being willing to make difficult decisions on procedural issues.
In the same vein, the respondents indicated that deficiencies in case management by the arbitral tribunal can make international construction arbitrations inefficient and ranked this factor second among various contributors to inefficient international construction arbitrations, behind party tactics and ahead of large amounts of evidence.
Underscoring these views, some respondents suggested that arbitrators should take a more proactive approach to case management. With respect to settlement, for example, echoing the ICC Commission's suggestion, a significant number of participants felt that an efficient construction arbitrator should facilitate settlement of the parties' dispute. However, the phenomenon known as 'due process paranoia' – i.e. the reluctance of arbitral tribunals to act decisively in certain situations for fear of the final award being challenged on the grounds of a party not having had the opportunity to fully present its case – was perceived by some to be responsible for arbitrators restraining themselves and avoiding such a proactive approach.
Gender, racial and ethnic diversity of arbitrators is also recommended by the ICC Commission as central quality for the selection of arbitrators. Difficulty in finding a diverse tribunal was identified by a relatively small number of QMUL survey respondents as a factor which makes international construction arbitration inefficient.
The ICC Commission also recommended having a "balanced" tribunal, such that the arbitrators possess, at least between them, all the core qualities identified. While not directly considered in the QMUL's study, participants appear to consider this quality in selecting the arbitral tribunal for international construction arbitrations. For example, some survey respondents indicated that they would be encouraged to appoint a technical expert as an arbitrator if the tribunal comprised three arbitrators or in order to balance other lawyers serving on the tribunal.
The QMUL's survey results reveal the factors that arbitration participants perceive would improve the efficiency of arbitral appointments in international construction arbitrations. The availability of a list of specialised construction arbitrators and the imposition of time limits on parties for the appointment of arbitrators were the two most popular factors they cited.
Interestingly, of less perceived importance to the efficiency of arbitral appointments were an increase in the selection of arbitrators by arbitral institutions or appointing authorities and an increase in the use of sole arbitrators, among other factors.
The concept of the emergency arbitrator is by no means new to the international arbitration community, with procedural rules having provided for such emergency arbitrator procedures for nearly 13 years. Emergency arbitrator procedures present a vital pathway for parties to seek urgent interim relief before the constitution of an arbitral tribunal and outside of national courts, within the confines and with all the attendant benefits of arbitration.
Emergency arbitrator proceedings are briefly addressed in the ICC Commission's report. It noted how they may be deployed in connection with proceedings before a dispute adjudication board or within similar pre-arbitral dispute resolution forums. While some of the tools and techniques discussed in the report are applicable to proceedings before an emergency arbitrator, including those concerning the first case management conference and the procedural timetable, the report does not seek to provide guidance specifically for a more efficient resolution of such emergency proceedings.
The QMUL survey considered emergency arbitrator proceedings in general as well and reveals that some participants perceive that this aspect of arbitral procedure offers great potential for improving the efficiency of international construction arbitration.
Given the urgent nature of emergency arbitrator proceedings, speed is in most cases of the utmost criticality and the efficiency of the emergency arbitrator itself is vital. Case management skills take on a slightly different slant as the emergency arbitrator procedure is meant to be swift but not simply a condensed version of a typical arbitration, though in some cases the submission of witness evidence, for example, may be appropriate. Legal and technical expertise also takes on a more central role. While the issues and fact patterns will vary, in many cases the emergency arbitrator will be called upon to determine whether or not to grant a preliminary injunction of some sort. Expertise in this area would therefore be valuable, especially having regard to the time pressures involved.
With this in mind, an efficient emergency arbitrator might be one who possesses a specialised set of skills and experiences that speak to these peculiarities. We accept that it may prove an arduous task to seek out and procure a sufficiently diverse panel of such specialised arbitrators across the different arbitral institutions. However, arbitral institutions might consider offering an emergency arbitrator training course to familiarise and equip potential appointees with specialised tools to maximise efficiency in emergency arbitrator proceedings.
18 Dec 2019
16 Dec 2019