Arbitrator and Counsel, Chinn Arbitration
A new era in resolving construction disputes has arrived.
This was the message conveyed at CEPANI’s annual Colloquium, which took place on 15 November at CEPANI headquarters in Brussels from 9:00-17:00. As in years past, the Colloquium drew a large number of CEPANI members and friends from diverse jurisdictions. Also as in years past, Wolters Kluwer has published a book containing detailed reports/articles authored by the speakers at the Colloquium.
This year’s topic - Construction and Arbitration (and other ADR methods) - reflects CEPANI’s longstanding experience in and commitment to resolving construction disputes. The Colloquium also provided an opportunity to announce the creation of C-BUILD, a separate section of CEPANI dedicated to the resolution of construction disputes. C-BUILD, which has its own dedicated place on the CEPANI website, provides tailored services for the construction industry including through the procedures of Arbitration, Mediation, Third Party Opinions and Decisions, and Standing Dispute Boards.
President of CEPANI Benoît Kohl opened the Colloquium, noting among other things CEPANI’s commitment to the construction industry.
Dirk de Meulemeester, Honorary President of CEPANI and Chairman of the CEPANI Academic Committee, then set the stage for the discussion, commenting on key features of international construction contracts and of managing disputes arising out of such contracts. He noted the diversity of the audience members and their collective experience in resolving construction disputes.
Next, Alejandro López Ortiz, Partner, Mayer Brown, Paris, built upon de Meulemeester’s introduction by providing a survey of the key features of international construction contracts that commonly find their way into disputes. Among the issues covered were: the various documents making up construction contracts and the importance of setting out a clear hierarchy; the types of construction contracts allocating risk to Employers/Owners or to Contractors according to their bargaining power and wishes; the history of the internationalization of various standard forms of contracts; and specific clauses or issues giving rise to disputes such as scope-of-work clauses, price-and-payment clauses, back-to-back contracts, advanced payments, and payment and performance guarantees. López Ortiz commented on the increasing importance of force majeure clauses, long forgotten, which have gained more importance in recent years in the wake of COVID-19 and other extraordinary events. López Ortiz noted that in the construction field, disputes are almost a certainty.
Marco Schoups, Partner, Schoups, Antwerp/Brussels, and Jacob Henriquez, Partner Ploum, Rotterdam, building on their report co-authored by Jef Feyaerts, Associate, Schoups, Antwerp, and Sophie de Krock, Associate, Schoups, Brussels, then took a closer look at construction contract claims.
Schoups agreed that construction claims are inevitable. Schoups however went into more detail illustrating how they could be efficiently managed and minimized with the help of astute dispute resolution practitioners during the claims process.
Among other things, Schoups noted the importance of keeping written records. “If it is not written, it does not exist.” Moreover, lack of clarity, notice and documentation is a death knell for claims. Accordingly, most claims never have the chance to succeed if they do not contain properly documented legal and factual bases. Schoups noted the importance of the support of the claim manager, contract manager, and/or quantity surveyor in knowing and showing the bases for claims to judges, arbitrators, and adjudicators. Schoups concluded by commenting on the importance of mediation in resolving claims, especially since claims may be a significant burden.
Next, Henriquez emphasized the importance of making clear and simple claims. He also discussed the evolution of dispute boards, adjudication boards, and binding and non-binding expert opinions as among the tools available to practitioners. As an example of simplifying the resolution of further disputes and thinking creatively when drafting contract clauses, Henriquez pointed to the example of liquidated damages – previously the domain of Employers/Owners- which might now also extend to Contractors in the context of prolongation costs when claiming EOT’s. The FIDIC Green Book at sub-clause 1.1.35 now provides such a clause related to on-site and off-site overheads associated with a compensable EOT, using a formula contained in the Contract Data. Clauses like these, according to Henriquez, might in the appropriate circumstance result in the simplification and better management of disputes.
Next, Melissa Magliana, Partner Lalive, Zurich, and Benoît Kohl, CEPANI President and Of Counsel, Stibbe, Brussels, discussed in more detail the particular mechanisms available for resolving construction disputes other than arbitration.
Magliana described the various models of adjudication and dispute boards, including their various features such as ad hoc or standing, binding or non-binding, and with the goal of dispute avoidance or resolution. She mentioned the UK model of mandatory domestic adjudication of construction claims and the UNCITRAL model clause on adjudication, which may also apply to construction disputes. Not all construction disputes are suitable for every model of adjudication, and Magliana provided guidance on the features of each particular model. She also discussed how various models may fit into multi-tier dispute resolution clauses.
Kohl focused on expert determinations and early neutral evaluations, also citing to the CEPANI Rules and CEPANI’s commitment to providing tailored services to the construction industry, including expert determinations, adjudications, and mediation.
Françoise Lefèvre, Partner Lefevre Arbitration, Brussels, next discussed the arbitration clause and multi-party, multi-contract, and multi-issue disputes, building upon the report she co-authored with Patrick Baeten, Secretary General BESIX Group, Brussels.
Lefèvre presented several case studies of how there may be numerous parties to construction disputes, such that more than two parties may end up litigating, arbitrating, or otherwise resolving their disputes in various fora. The case studies she presented involved complex projects in the Unites States, Khujanstan, and the People’s Republic of China. Among the legal doctrines cited as available to bring non-signatories into arbitration were: estoppel, the group of contracts doctrine, community of obligations and interests, piercing of the corporate veil, implied consent to arbitrate, conduct during negotiations, performance and/or termination, and the group of companies doctrine (Dutco). Lefèvre also discussed the tools provided by the rules of various arbitral institutions such as CEPANI in bringing all relevant parties to the table.
Marco Schoups and Benoît Kohl then discussed the new C-BUILD initiative of CEPANI and CEPANI’s aim to continue its tradition of trust and transparency in the resolution of construction disputes via experienced practitioners listed on the CEPANI website.
Next, Olivier Caprasse, Partner Caprasse Arbitration, Brussels, and Nina Lauber-Thommesen, Independent Norwegian arbitrator, Geneva, discussed a few of their observations of effective techniques in the management of construction arbitrations, mainly from the arbitrator’s perspective.
Caprasse noted that, in the words of another arbitrator, arbitrators are not mere tennis referees, but they are instead more like the conductors of a symphony orchestra. An arbitrator must actively manage many aspects of the proceedings. Among other things, Caprasse mentioned the potential utility of an intermediate case management conference, as well as (in the appropriate case) some preliminary views from the tribunal earlier in the proceedings after having obtained the parties’ agreement not to challenge the tribunal for having given a non-binding preliminary view. Caprasse echoed other speakers’ view that a good practitioner must anticipate likely procedural difficulties.
Lauber-Thommesen discussed interim measures, or temporary orders by the tribunal pending final resolution of the dispute, as being particularly relevant in the context of construction disputes – in fact almost a rule rather than an exception. Such measures seek to address risks such as the dissipation of evidence and works, and damage to liquidity and credit. Lauber-Thommesen noted that interim measures in international arbitration are widely recognized under most legal systems, but that the standards vary greatly. While the conditions for interim measures may be different in any particular dispute, Lauber-Thommesen noted four core conditions to think of generally, consistent with the UNCITRAL Model Law, which may be thought of as: (i) prima facie jurisdiction and reasonable success on the merits, (ii) urgency, (iii) risk of serious harm, and (iv) the balance of harm or proportionality. Lauber-Thommesen also discussed means of enforcing the tribunal’s orders, which depending on the particular dispute and governing law/rules might include cost orders or fines for non-compliance by way of astreinte.
Peter Rosher, Partner Reed Smith, Paris, building upon his report co-authored by Alison Eslick, Senior Associate Reed Smith, Dubai, then turned the discussion to the preparation and the collection of evidence in construction arbitration. He discussed challenges faced during the production of documents – a tool often used in construction arbitrations – whereby parties are often better off by discussing their requests with the other side and by compromising (for example by limiting requests or providing for a confidential platform for document exchange), rather than leaving the decision to arbitrators. Rosher also discussed the “ships in the night” dilemma with respect to technical evidence; in the case of delay experts, one may be using fact-based programs while other may be using theoretical programs. Rosher also discussed the possible overuse and/or misuse of fact witnesses. In general, Rosher advocated for a more targeted approach to fact gathering and fact presenting focusing on facts likely to be material to the final award.
Next, all the speakers at the Colloquium answered questions from the audience. Topics included: how to limit submissions while still respecting party autonomy and legitimate needs in complex construction disputes; the timing of expert hot tubbing; the balancing of interests when granting interim relief; whether multi-tier clauses create more problems and whether the success of mediation has been affected by too much testosterone at the negotiating table or whether views have changed; the limited suitability of expedited adjudication; collaborative contracting; and how to allow for the tribunal to independently find solutions while respecting the adversarial process and the right of parties to comment on any issue decided on in the final award.
Benoît Kohl closed the Colloquium. Based on the attendance at the Colloquium and the vigorous and expert debates that had taken place, as well as on CEPANI’s new C-BUILD initiative, a new era in resolving construction disputes has indeed arrived.
