Berlin skyline. Credit: JFL Photography/Adobe Stock

8th Biennial Conference on Construction Projects from Conception to Completion

16–18 March 2023
Hotel de Rome, Berlin, Germany
China Irwin
LALIVE, Geneva

IBA International Construction Projects Committee members gathered in Berlin from 16–18 March 2023 for the eighth Biennial Conference on Construction Projects from Conception to Completion which took place at the Hotel de Rome. In addition to the instructive sessions described below, conference goers attended a lively welcome reception at the Hotel on Thursday evening and an entertaining dinner on Friday night at the Solar Sky Bar and Restaurant, with views of the city.

As explained below, the sessions were grouped to address the three main phases of international construction projects: project establishment, project execution, and the dispute resolution phase. Here’s a brief summary of the sessions.

Many thanks to the ICP Co-Chairs, Joseph Moore and Jean-Pierre van Eijck and to the conference organisers Rouven Bodenheimer and Rupert Choat for putting together this great event.

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Project establishment sessions

The first three sessions addressed issues relevant at the project establishment phase, including potential amendments to FIDIC standard form contracts, how to draft the ‘perfect’ variations clause, and ways to head off construction arbitrations before they start.

Friday 17 March

Session One

Amending FIDIC conditions

Session Chair

Aisha Nadar  Advokatfirman Runeland, Stockholm

Panellists

Frédéric Gillion  Pinsent Masons, Singapore
Jarrod Gutsa  Vinson & Elkins, London
Stephen Hibbert  Independent Arbitrator & Mediator, Dubai
Ulrich Kugler  Andritz Hydro GmbH, Ravensburg

There is plenty of advice against amending tried-and-true standard forms. However, the reality is that parties cannot resist amendments, particularly as amendments may be required by funders or to address aspects of the applicable law. The panellists of this session examined the pros and cons of amendments to FIDIC conditions, discussing examples they’ve seen in real-life projects.

The session chair, Aisha Nadar presented the FIDIC ‘Golden Principles’ meant to be upheld notwithstanding any amendments to the FIDIC conditions. She pointed out that the label should match what’s inside and that parties must fully understand the FIDIC system before they can successfully tailor it to individual projects through amendments. The panellists then discussed the circumstances in which parties may wish to amend FIDIC contracts, or other standard contract forms, and gave concrete examples, including amendments introduced in the Qatar Rail project. One particular type of amendment which led to a lively debate among the panellists concerned the role and authority of the ‘Engineer’, with the suggestion being made that the Engineer’s powers could be more limited in order to increase the employer’s direct involvement in a project, bringing the employer into the room with the contractor.

Session Two

The perfect variations clause

Session Chair

Ricardo Barreiro-Deymonnaz Barreiro Oliva De Luca Jaca Nicastro, Buenos Aires

Panellists

Ian de Vaz  WongPartnership, Singapore
Melis Mani  Strabag, Vienna
Shane O’Neil  Arthur Cox, Dublin

This panel considered the ‘perfect’ variations clause, that is, what should be included and what considerations must be taken into account when drafting and whether a perfect variations clause is even possible.

To begin with, the panellists noted that perfection is the enemy of good. Or, in the Spanish version of the saying, perfection is the enemy of the possible. However, the panellists agreed that the ideal (if not perfect) clause must communicate a clear message on the timing and communication of variations; who is authorised to instruct/request a variation; what constitutes a variation; and the means of valuation. Drafters must do their homework and look carefully at the contract as a whole, as well as local legislation. Drafters must also walk the tightrope of avoiding ambiguity while avoiding over-engineering the contract by defining too many terms.

As to the valuation of a variation, the panellists noted that robust contracts often provide a tiered approach to valuation, for example, the parties first attempt to agree; if no agreement is reached, the parties consider work of a similar nature; if the variation does not concern works of a similar nature to other work contemplated in the contract, the parties apply fair market rates and prices. The panellists also considered the issue of instructions to omit, which should be expressly addressed in the ideal variations clause.

Session Three

Avoiding construction arbitrations

Session Chair

Christopher Seppälä  White & Case, Paris

Panellists

Alexandra Cunliffe  Bechtel Corporation, London
Stefan Leupertz  Arbitrator, Adjudicator and Mediator, Cologne
James Perry  PS Consulting, Paris

In contrast to much of the discussion at the conference, which considered issues in the dispute context, this panel considered the best ways of avoiding arbitration in the first place, discussing procurement methods and contractual provisions which may be effective in heading off disputes. Among the options discussed was the use of dispute resolution boards, in particular the Dispute Avoidance/Adjudication Boards (DAABs) in the 2017 FIDIC suite of contracts. The DAAB can engage with the parties in many different ways, including for example sitting down together to discuss the meaning and application of a contract clause. The panel also considered the option of having legal experts on standby during a project, to give parties the benefit of hearing what a true neutral thinks about contractual and legal issues, whether through the format of conciliation and adjudication or moderation (as opposed to classic mediation). Lastly, the panel discussed the need for greater focus and time spent on genuine pre-contract alignment, putting egos aside and treating the project – and contract preparation – as a true joint effort. This includes, for example, putting the focus on the best and clearest contractual solutions rather than approaching negotiating the drafting of a contract as a competition.

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Project execution sessions

The next three sessions considered issues relevant to the project execution phase, including the impact of the applicable law on common issues arising during execution, how to address constructive acceleration and the process of defending against on-demand bonds.

Session One

The importance of the applicable law: how far do lawyers from civil law and common law backgrounds view the same construction law issues differently?

Session Chair

Rupert Choat KC  Atkin Chambers, London

Panellists

Katherine Bell  Schellenberg Wittmer, Zurich
Jesse Gardner  Singleton Urquhart Reynolds Vogel, Toronto, Ontario
Xingyu Huang  Zhong Lun Law Firm, Hong Kong
David Hume  Shearman & Sterling, Abu Dhabi

Following the popularity of this session at previous conferences, the panellists worked through a new case study, explaining how certain common construction law issues would be approached in different jurisdictions/under different legal systems. Issues discussed included allocation of risk with respect to matters outside of either party’s control (eg, adverse weather events), contractual allocation of risk to the contractor of a matter which the employer might have controlled (eg, an error in the Employer’s Requirements), and the effect of exclusion of liability in cases of gross negligence. The panellists’ focus was on Mainland China, Hong Kong, Canada, Switzerland and the UAE, but conference delegates also weighed in on the results of the hypotheticals posed in various other jurisdictions. As in previous editions of this session, the results of the hypotheticals were not all that dissimilar under the jurisdictions considered, albeit the legal routes to get there varied.

Session Two

Constructive acceleration

Session Chair

Albert Bates Jr Troutman Pepper Hamilton Sanders, Pittsburgh, Pennsylvania

Panellists

Tony Dymond Debevoise & Plimpton, London
Daewoong Lee Kim & Chang, Seoul
Anamaria Popescu Berkeley Research Group, Pine, Colorado

This panel examined the challenges to successfully pursuing a claim for the costs of accelerating where an employer has denied a valid request for an extension of time or been late in granting an extension. The panellists offered perspectives under English law, in the US and in South Korea. While it is usually said that English law does not generally recognise constructive acceleration, claims based on constructive acceleration or analogous doctrines are occasionally recognised under English Law and more frequently in other common law jurisdictions. As to the US, the legal doctrine of constructive acceleration is firmly established, yet remains difficult to prove in practice. In South Korea, while there is no specific doctrine, the courts have awarded contractor’s costs for acceleration works.

The panellists also offered recommendations for successful cost recovery in cases of acceleration, including creating and maintaining viable baseline schedule completing and schedule updates with valid critical paths, adherence to notice provisions, providing narrative explaining the acceleration efforts being employed and time periods, coding indirect and direct person-hours/costs to specific acceleration cost codes, and creating and maintaining an issue database to reinforce solid causation documentation for delay and the need for acceleration efforts.

Session Three

Jurisdictions of interest when defending calls against on-demand bonds

Session Chair

Michael Valo  Glaholt Bowles, Toronto, Ontario

Panellists

Thaís Fernandes Chebatt  Pinheiro Neto Advogados, São Paulo
Akihiro Hironaka  Nishimura & Asahi, Tokyo
Andrew McKenzie  DLA Piper, Dubai
Vishrov Mukerjee  Trilegal, New Delhi, Delhi

This panel considered the situation of a call on a demand guarantee (or an ‘on demand bond’) being anticipated or in fact made and compared the approaches taken in Canada, Brazil, Japan, the UAE and India, among other jurisdictions, working through the options available to defend against a call, be it seeking an injunction against the issuer from making payment or against the beneficiary from calling the bond. One question relevant in all the jurisdictions discussed was whether the autonomy principle – that is, that the issuing bank’s obligation to honour a draft on a credit when it is accompanied by documents in accordance with the terms and conditions of the credit, on their face, independent of the performance of the underlying contract – creates opportunities for abuse. In Canada, for example, the only established exception to the autonomy principle is in the case of a strong prima facie case of fraud (whether a party is seeking to enjoin a draw on a guarantee against the issuer or the beneficiary). The consensus seemed to be that ‘pay first, litigate later’ remains the spirit of an on-demand bond.

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Dispute resolutions sessions

The final three sessions focused specifically on dispute resolution, considering expert evidence in arbitration, addressing high volumes of low value claims, and allowing panellists and delegates to share ‘war stories’ of arbitrations gone awry.

Saturday 18 March

Session One

Reinvigorating independence in expert evidence

Session Chair

Alexis Mourre  Mourre Gutierrez Chessa Arbitration, Paris

Panellists

Lynette Chew  CMS Singapore, Singapore
Peter Fogh  Plesner, Copenhagen
Kristoffer Löf Mannheimer Swartling, Stockholm
Graham Lovett  Akin Gump Strauss Hauer & Feld, Dubai

The panellists in this session – with extensive audience participation – engaged in a very lively debate as to whether the perception among arbitration users that party-appointed experts do not always give independent and impartial evidence is well-founded and what measures are in place to ensure independence and impartiality. The measures discussed included the so-called ‘Sachs proposal’, proposed by Dr Klaus Sachs at an International Council for Commercial Arbitration (ICCA) conference, which combines elements of both party and tribunal expert appointments. The expert delegates in the audience vehemently protested at the idea that party-appointed experts (as opposed to tribunal-appointed experts) see themselves as ‘hired guns’. There seemed to be agreement that counsel instructions are a crucial issue, and that counsel must develop their approach based on the experts’ independent assessment, not vice versa.

Session Two

Addressing high volumes of low value claims in construction arbitration

Session Chair

Bernd Ehle  LALIVE, Geneva

Panellists

Nils Brammer Standardkessel Baumgarte, Mülheim
Jane Davies Evans  3 Verulam Buildings, London
Matei Purice  Freshfields, Paris

This panel considered available options for addressing low value, but often complex, claims in construction disputes, aimed at avoiding incurring disproportionate costs. Options discussed included sampling and extrapolation, active case management, and the use of Scott Schedules, among others. As to sampling, the panellists explained that English courts have historically been sympathetic to non-statistical sampling, albeit samples must be selected in a credible manner. In the Middle East, however, judges will generally need to look at claims separately, irrespective of value.

Before even starting arbitration or court proceedings, parties should critically evaluate the claims to be pursued, carrying out a thorough claim plausibility analysis and considering whether it is worthwhile to pursue all claims, even if previously included as part of the pre-arbitration or pre-litigation steps.

Once in arbitration proceedings, there are multiple options available, provided the parties consent. Such options may be tribunal-driven, expert-driven, or party-driven methods. For example, parties may agree not to cross-examine witnesses or experts on claims below a threshold monetary value. Or, parties could theoretically agree for the tribunal to determine the low-value claims without providing reasoned decisions for each individual claim.

Session Three

When it all ends in disaster…

Session Chair

Virginie Colaiuta  LMS Legal, London

Panellists

James Doe  Herbert Smith Freehills, London
Jonathan Taunton  Squire Patton Boggs, Atlanta, Georgia
Alfredo Yañez  Matesanz Acciona, Madrid

In the final session of the conference, the chair, panellists and delegates shared colourful ‘war stories’ from their own vast personal experience concerning fact witness testimony, expert testimony, and cross-examination. While this informal session was – as intended – entertaining, the stories shared also provided important common lessons, including the importance of due diligence on witnesses’ and experts’ backgrounds and thinking long and hard about whether they may do more harm than good.