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Christian Johansen
Bruun & Hjejle, Copenhagen, Denmark
chj@bruunhjejle.dk

Introduction

Though small in size, Denmark has two arbitration institutions. The Danish Institute of Arbitration,¹ which is the general arbitration institute, and the Danish Building and Construction Arbitration Board²(hereafter the ‘Danish Arbitration Board’), which issues the majority of Danish arbitration decisions.

Both institutions and their related tribunals, awards, decisions, etc, are governed by the Danish Arbitration Act from 2005, which is based on the UNCITRAL Model Law for International Commercial Arbitration.

The Danish Arbitration Board issued a new set of procedural rules in 2019 based on new standard form contracts for construction works. This article provides a brief overview of the new procedural rules.³

The Danish Arbitration Board’s procedural rules in a Danish context

The applicability of the Danish Arbitration Board’s procedural rules presupposes that the parties have agreed to solve a dispute at the Danish Arbitration Board. Most commonly, this is done by entering one of the Danish agreed documents; General Conditions for Turnkey Contracts (ABT 18); General Conditions for the provision of works and supplies withing building (AB 18); or General Conditions for Consulting Services (ABR 18) (hereafter the ‘AB documents’).

The new procedural rules under the Danish Arbitration Board are related to the aforementioned AB documents, and the new procedural rules are – as in all relations to arbitration agreements – only applicable if a dispute is commenced pursuant to an agreement to arbitrate, that is, by reference to the arbitration clause in one of the AB documents.

The Danish Arbitration Board enjoys substantial support in Denmark. In fact, disputes relating to large construction projects are rarely solved under the auspices of other arbitration institutes or in Danish courts. This reality leads to a number of advantages, especially with the possibility to arrange for multi-party arbitration, technical expertise and adjudication.

The new procedural rules issued by the Danish Arbitration Board are divided in the following versions:

• arbitration;
• mediation;
• technical expertise;
• decision on security provided;
• adjudication.

In the following section, the most essential changes in the new procedural rules are summarised under each of the categories listed above.

The Danish Arbitration Board’s new procedural rules

Arbitration

The new procedural rules regarding arbitration aim to resolve disputes faster, which has resulted in a standard deadline of four weeks for submission of the statements of defence, reply and rejoinder, unless the Danish Arbitration Board decides otherwise. The new rules further state that deadlines will not, as a starting point, be extended and requests for extension of deadlines must be submitted no later than one week before the expiry of the deadline.

The new procedural rules also grant the Danish Arbitration Board the authority to issue guidelines for the digital communication, handling of exhibits and other procedural matters. For now, the Danish Arbitration Board has decided that it is sufficient to only forward statements and exhibits electronically, including by email.

Parts of the new procedural rules are a codification of current case law. For example, in the revised procedural rules, a party can only submit expert opinions unilaterally obtained before the commencement of the arbitration case. Opinions obtained after the commencement of the case are rejected, and evidence must be obtained via the procedures on technical expertise. This is in line with the Danish Administration of Justice Act 2017 and the current case law by the Danish Arbitration Board.

Further, parties having agreed an arbitration clause with reference to the Danish Arbitration Board can be joined to an ongoing arbitration procedure to effectively ensure that the same decision of the tribunal is binding on multiple parties.

Mediation and conciliation

As a new initiative, the new procedural rules (and the AB documents of 2018) include rules on mediation and conciliation. The overall purpose of these rules is, of course, to provide a setting for a possible amicable solution whereby the parties will achieve a resolution that is faster and cheaper than proceeding to arbitration.

The mediation process is led by a mediator, who assists the parties in a constructive dialogue. However, the mediator may not present proposals for settlement or guide the parties on the probable outcome in a potential arbitration case. The goal is to narrow down the subject at issue, the points of view and the parties’ interest. Thus, in the right case, mediation can be a sensible process for further cooperation and possible amicable solutions or the narrowing of legal issues, not confined to strict legal points of view.

The conciliation process envisaged by the new rules differs from mediation, as the conciliator leading the process is entitled to present proposals for settlement and guide the parties on the probable outcome of, and uncertainties in, a possible arbitration.

In the AB documents, mediation and conciliation are voluntarily, but must be conducted if a party so requests. Arbitration cannot be initiated if mediation or conciliation relating to the same dispute is pending.

Technical expertise

As a codification of current case law of experts appointed by the Danish Arbitration Court, the new procedural rules regarding expertise explicitly state that an expert appraisal may be conducted as an ‘urgent matter’ if there is a risk that the possibility to secure evidence is otherwise lost. In such process, certain (otherwise applicable) procedural rules may be skipped.

In addition, the new procedural rules state certain deadlines, such as deadlines for the opposing party’s remarks to the questions to be answered by the expert (no later than two weeks after the request), the expert appraisal proceedings (no later than four weeks after the request) as well as the issuance of the expert opinion (no later than four weeks after the case has been fully made out).

Decision on security provided

The possibility to obtain a legally binding decision on security provided, including payment thereunder, reduction of, or cessation of, security provided by the contractor and the client, was introduced in the AB documents of 1992 and is re-enacted in the AB documents of 2018, and the procedure is also reflected in the new procedural rules.

The new procedural rules contain a more detailed regulation of the process than found in previous iterations of the rules. For example, an expert is appointed after having heard the parties, subject to a time limit of only three working days. Strict deadlines also apply to the opposing party’s comments on the submitted request for an expert decision, which is ten working days after having received the request.

Further, a decision on security is now defined as a binding arbitral decision and is binding on both the guarantor and the parties. The decision must be complied with by the parties within eight weeks unless the decision is appealed to arbitration at the Danish Arbitration Board.

Adjudication

The Danish construction sector is particularly affected by a high number of disputes, which may be a contributing factor to the lack of increasing productivity and efficiency in the sector. For comparison, at the Danish Arbitration Board, the average processing time for an arbitration case was 16.7 months for cases concluded with an award in 2018. Timely resolution of disputes is, of course, essential to the overall integrity and effectiveness of the rules and the Danish Arbitration Board.

One particularly helpful initiative is the introduction of adjudication and the introduction of the dispute resolution ladder in the AB documents of 2018 and the related procedural rules (as well as mediation and conciliation rules, see above).

The dispute resolution ladder includes a compulsory effort to resolve and settle a dispute through negotiation between the parties’ project managers and, subsequently, management representatives of the parties. Completion of the dispute resolution ladder is a condition for initiating an arbitration case, just as there is a four-week cooling-off period before arbitration can be initiated.

The rules on adjudication are inspired by the United Kingdom adjudication rules. The rules include a process in which an appointed umpire, at the request of a party, makes a decision on, for example, the client’s entitlement to withhold payments or offset amounts, the client’s right to order variations and the contractor’s right to execute such variations, the contractor’s and the client’s right to extension of time, etc.

The procedural rules relating to adjudication state that the opposing party must present a submission within ten working days after having received the request for an umpire’s decision. Thereafter, each party may present an additional submission no later than five working days after having received the opposing party’s latest submission. No later than ten working days after the umpire has received the latest submission, the umpire makes a legally binding decision on the dispute. The decision must be complied with by the parties within eight weeks unless appealed to arbitration.

Conclusion
As appears from the above, the Danish Arbitration Board’s new procedural rules constitute a welcome update that provides clearer time frames and time control, both of which contribute to increased transparency and predictability in the process. Also, further opportunities to resolve disputes faster are set out in an attempt to decrease resources spent on solving disputes. Parties are referred to a dispute resolution ‘ladder’, which should support early dispute resolution and prevent more disputes from reaching arbitration.

Notes

1. https://voldgiftsinstituttet.dk/en.
2. https://voldgift.dk/?lang=en.
3. Available at https://voldgift.dk/?lang=en.

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