Procedural creativity in international construction arbitrations: a comparative analysis of institutional innovations in the US, Singapore and France

Eoin MoynihanWednesday 6 April 2022

Credit: Shutterstock/yuttana Contributor Studio

Arbitration is widely accepted as an effective dispute resolution mechanism for international construction disputes. This article will explore the extent to which various institutional rules have developed in a way that addresses the peculiar needs of disputants in the construction industry.

The article shall briefly examine three of those specific needs and show how each has (or has not) been addressed by certain institutions. First, it will consider issues related to the cost and duration of construction arbitrations, specifically, procedural expedience including expedited procedures, procedures for securing interim relief and the correlation between high quantum claims and high arbitration costs. This article will then explore the suitability of existing discovery procedures for construction disputes. Finally, it will address issues that arise when, as is often the case, multiple parties or agreements are involved in a construction dispute.

For each one of these needs, this article will seek to draw some tentative conclusions as to the extent to which certain institutional rules may arguably provide some tactical advantage to employers or contractors/subcontractors on construction projects, should they encounter a dispute that must be resolved by arbitration.

Time is money: cost-related considerations and the importance of being expeditious

Large construction projects are unusual in that there are few other commercial endeavours in which an entity is required to invest so much for so long before being able to generate a single cent of revenue. Between the execution of the contract and the ribbon-cutting of the finished product lies a daunting gauntlet of risks that threaten to undermine the profitability of the entire project.[1] Any delay by any participant can cause exponential delay to the completion of the overall project and potentially derail it entirely by disrupting the delicate interplay of each party’s cashflow and credit arrangements.[2]

When a dispute does arise, it is therefore imperative that the process to resolve it bears the following features: swiftness; the ability to grant interim relief so that the status quo can be maintained pending final resolution of the dispute; and suitability for resolving very high-value disputes at a competitive cost.

Fortunately, in recent years many arbitral institutions have introduced expedited procedures with the aim of shortening the time required to produce a final arbitral award

Swiftness

An unfortunate by-product of the fact that construction disputes typically involve huge technical documentation and extensive expert evidence, is that they can often take a long time to conclude in an award,[3] regardless of the institutional rules being applied.

Typically, before a construction arbitration can even commence, the claimant must comply with a lengthy multi-tiered pre-dispute protocol, mandated by the complex dispute resolution clauses contained in the industry’s standard-form construction contracts.[4] These clauses typically require:

1.   the claimant to submit the dispute to a DAAB[5] for resolution first;

2.   in the event of an adverse decision by the DAAB, to file a notice of dissatisfaction with the decision;

3.   to then enter into discussions with the counterparty to attempt to resolve the dispute amicably; and

4.   if all this fails, then and only then, to commence arbitration.

The objective[6] of this complicated layered approach to dispute resolution is to allow disputes to be resolved quickly and at a low cost with minimal disruption to the project.[7] However, the unintended but inevitable consequence of such a sequential process to disputes that are unresolved by it, is ironically, to ultimately delay their resolution, thereby causing disruption and increasing costs. The cumulative timelines for all these steps can potentially prevent a claimant from commencing an arbitration for up to almost five months from the time the whole process is first triggered.[8]

This criticism should not be taken to suggest that this popular dispute resolution process for construction disputes is not fit for purpose. It may well be that it is the least inefficient approach to resolving construction disputes generally.[9] The point is that the risk of disputes becoming protracted is particularly high in the construction industry. The effects of that risk will inevitably be most keenly felt by the least resourced players in the industry, the subcontractors and suppliers with the most precarious cashflows and the most vulnerable credit lines. For them, a work interruption caused by an inability to procure a quick remedy is an existential threat and they have the most to gain from any reforms to dispute resolution procedures that facilitate such a remedy.

Fortunately, in recent years many arbitral institutions have introduced expedited procedures with the aim of shortening the time required to produce a final arbitral award. Figure 1 summarises the main features of the expedited procedure of the three institutions’ rules being considered in this article: the International Chamber of Commerce Arbitration Rules 2017 (ICC Rules); the American Arbitration Association Construction Industry Rules 2015 (AAA Construction Rules); and the Singapore International Arbitration Centre Rules 2016 (SIAC Rules).[10][11]

While the time limits set out by each of these rules are ambitious and helpful to parties that can avail of them, their utility to many disputants in the construction industry may be limited given the frequency and magnitude of those disputes[12] and the relatively low claim caps applicable to each of these procedures.

The limit of US$100,000 under the AAA Construction Rules’ fast track procedure (Rule F-1) in particular is so low that it is only likely to be of assistance to the smallest of subcontractor disputes. If this limit were increased, it could provide other small disputants facing larger claims with access to a more prompt and cost-effective resolution of its dispute.

These procedures are therefore unlikely to be significant factors in the decision-making of parties in the construction industry when selecting arbitral rules except perhaps when engaging subcontractors or suppliers for small contracts. Subcontractors and suppliers are, on average, more likely than contractors or employers to benefit from the selection of any of these rules for dispute resolution, particularly in the case of the AAA Construction Rules, as they are more likely to have low-value disputes that can benefit from these expedited procedures.

The ability to grant interim relief so that the status quo can be maintained pending final resolution of the dispute

As explained above, the need for quick effective interim relief is particularly acute for contractors with limited capital reserves. A common example of this need would be when a contractor seeks to block the employer from drawing on a performance bond or letter of credit. In the absence of such relief, the contractor would have to wait for a final award to be issued before trying to recoup the loss by enforcing against what could by then well be an insolvent employer. In the meantime, the damage to the contractor’s credit rating may be irreparable.[13]

All three institutions’ rules empower arbitrators to make orders for interim relief including injunctions and conservatory measures. They all allow the arbitrator to require that the party requesting the relief provide security if the relief is granted. They all permit parties to seek interim relief from a court of competent authority without being in breach of their arbitration agreement.

All three institutions’ rules also provide for the appointment of emergency arbitrators at short notice to consider requests for such interim relief before a tribunal has been appointed. Figure 2 shows the applicable time limits for the three institutions’ respective emergency arbitrator procedures.

Figure 2: applicable time limits for the appointment of emergency arbitrators under the ICC Rules, the AAA Construction Rules, and the SIAC Rules.

The AAA Construction Rules are the only one of the three that impose no deadline on the making of an emergency interim award. In theory, disputants can agree on a deadline for the making of such an award. However, the absence of this mandatory deadline under the AAA Construction Rules significantly undermines their usefulness to contentious disputants with urgent needs as respondents can often be understandably uncooperative in facilitating the prompt making of interim awards against them.

Furthermore, there are difficulties in some jurisdictions with enforcing partial arbitral awards[14] that may make these emergency procedures less useful than parties would like.[15] The AAA Construction Rules and SIAC Rules both allow an emergency arbitrator to give interim relief by way of an award or an order. The ICC Rules only allow an order. A mere order of an emergency arbitrator may be even more difficult to enforce in some jurisdictions than an award.[16]

Accordingly, while access to interim relief is extremely important in construction disputes and widely available across most major institutions,[17] the usefulness (and therefore importance) of emergency interim relief should not be overstated in assessing the suitability of any institutional arbitral rules for construction disputes.

Suitability for resolving very high-value disputes at a competitive cost

Given the cashflow challenges facing all players in the construction industry and the thin profit margins which are common among contractors in competitive markets,[18] the cost-competitiveness of various arbitral institutions for resolving high value disputes is a crucial factor when selecting arbitral rules.

High cost may give large well-resourced employers and contractors an advantage over smaller subcontractors and suppliers that are less likely to be able to withstand a sustained war of attrition

Furthermore, the quantum of construction claims can be very large. With huge sums at stake, parties typically feel more comfortable spreading the risk of an unfavourable arbitral outcome by providing for a three-member tribunal in their arbitration agreement rather than a sole arbitrator. Naturally, this increases costs.

Figure 3 sets out the possible costs of arbitration under each institution’s rules.[19][20]

Figure 3: possible costs of arbitration under the ICC Rules, the AAA Construction Rules, and the SIAC Rules.

For the most cost-conscious parties, the SIAC obviously offers the best value for money and the AAA the most cost uncertainty. Given the market for legal fees in the US, an AAA tribunal’s fees are likely to exceed the fee schedules of the ICC or SIAC. However, if the sum in dispute is very large, then it may be more cost-effective to arbitrate at the AAA, even at a high hourly rate, as arbitration costs are delinked from the value of the dispute. The alternative at SIAC or ICC of paying a percentage of the total sum in dispute may be undesirable in high value arbitrations.

High cost may give large well-resourced employers and contractors an advantage over smaller subcontractors and suppliers that are less likely to be able to withstand a sustained war of attrition.[21] The requirement to pay advances on costs in order for an arbitration to proceed and the ability of respondents simply to refuse to do so also puts poorly-resourced claimants at a disadvantage. Subcontractors or claimants for whom cost is a significant factor in selecting arbitral rules, and for whom geographic considerations are not, would arguably be well-advised to consider the SIAC and consider avoiding the AAA, except in very high-value disputes.

Discovery

One relatively consistent feature of construction arbitrations is that they tend to involve the disclosure of a large amount of technical documentation.[22] Disputants in the construction industry therefore, in choosing arbitral rules, ought to consider the extent to which they facilitate efficient and effective document disclosure.

However, there is a diversity of views as to what efficient and effective document disclosure looks like.[23] US parties often tend to favour very expansive discovery that discloses any document with any relevance at all to the dispute,[24] which typically tends to include the entire universe of documentation for a given project.[25] Civil law parties usually favour extremely limited requests for specific necessary documents.[26] The rest of the common law world falls somewhere between these two extremes,[27] favouring the disclosure of relevant documents falling within specifically articulated categories.[28]

In the construction industry, claimant and respondent both often have access to much of the same project documentation, so the bulk of the documentary evidence relied upon typically does not result from requests to produce. For this reason, smaller subcontractors or suppliers with limited resources may prefer a more restrictive and specific disclosure exercise that avoids paying the significant costs necessitated by an exhaustive discovery. Conversely, well-resourced employers or contractors may prefer US-style discovery if they think their opponent lacks sufficient funding to carry out such an onerous and expensive exercise and might consequently accept a sub-optimal settlement offer in order to cut its losses and end the dispute. For such employers, efficiency is not their objective at all – quite the reverse.[29]

These factors are usually more likely to shape the parameters of discovery in a construction arbitration than the arbitral rules being used. Typically, most institutional rules defer to the parties’ agreement as to the procedure to be adopted for any document production, failing which the tribunal is endowed with broad discretion to set such procedure. Exceptions are the 2012 Swiss Rules of International Arbitration (Articles 18(3) and 19(2)) and the 2010 UNCITRAL Rules (Articles 20(4) and 21(4)), each of which broadly follows the restrictive civil law approach to disclosure, mandating the upfront provision by each party of the documents on which it relies in its memorials with very limited document exchange thereafter.

Conversely, the ICC Rules (Article 22), AAA Construction Rules and SIAC Rules (Rule 19) do not prescribe any specific discovery parameters and provide complete flexibility to the parties in agreeing the scope of discovery, and to the tribunal in deciding this in the absence of such agreement.

Of these rules, the AAA Construction Rules are the only ones that deal explicitly with the issue of discovery in any detail. This specificity is perhaps unsurprising given the specialised nature of these rules and the typical centrality of documentary evidence in construction arbitrations. The rules provide helpful guidance to arbitrators and parties regarding the basis on which the document production exercise should be curated.[30]

Specifically, the process should advance the efficient and economical resolution of the dispute and promote equality and fairness as between the parties.[31] Documents on which the parties intend to rely must be disclosed.[32] Document requests must be reasonable and for documents which are relevant and material to the outcome of disputed issues.[33] Documents must be in the most convenient and economical form and the arbitrator may determine reasonable search parameters to balance the need for production of relevant and material documents against the cost of locating and producing them.[34]

This guidance is helpful in setting parties’ expectations of how discovery should be scoped, particularly in the US context, where discovery might otherwise be expansive and onerous. However, when any claim exceeds US$1m, the Procedures for Large, Complex Construction Disputes (LCC Procedures) are triggered and potentially override the Regular Track Rules whenever it can be successfully argued that they are in conflict with each other.[35] Given that the majority of international construction arbitrations are likely to exceed US$1m,[36] the LCC Procedures warrant careful consideration by parties considering the selection of the AAA Construction Rules.

The process should advance the efficient and economical resolution of the dispute and promote equality and fairness as between the parties

With respect to discovery, these procedures require only that:

‘Parties shall cooperate in the exchange of documents, exhibits and information within such party’s control if the arbitrator considers such production to be consistent with the goal of achieving a just, efficient and cost-effective resolution of a large, complex construction case.’[37]

While the goals of efficiency and cost-effectiveness are laudable, the requirement to ‘cooperate’ appears aspirational and vague. This could be used by a disingenuous party to argue that the significance of the more specific goals set out in the Regular Track Rules, in particular relevance and materiality, is diminished in a Large, Complex Construction Case, where clarity and focus in scoping the parameters of discovery are arguably even more important.

The omission of similarly specific rules pertaining to discovery in the ICC and SIAC Rules is typically addressed by the parties’ voluntary adoption of the IBA Rules,[38] or more recently and to a lesser extent, the Rules on the Efficient Conduct of Proceedings in International Arbitration 2018 (Prague Rules), which are significantly more detailed than the discovery rules set out in the AAA Construction Rules. It is suggested that the integration of a loose discovery framework within the AAA Construction Rules themselves represent a pragmatic approach to reducing the cost and procedural inefficiency of the expansive US-style discovery that might otherwise prevail in an AAA arbitration. This is because an AAA arbitration is more likely than other arbitrations to involve a US party who may be unwilling to agree to the adoption of the IBA or Prague rules at the expense of departing from the expansive discovery regime of the legal tradition with which it is most familiar.[39]

The loose discovery framework required by the AAA Construction Rules is better than no framework at all. It is suggested that any party entering into an arbitration agreement with a US counterparty and for whom the cost and procedural efficiency of discovery are dominant concerns should consider adopting the AAA Construction Rules. For parties arbitrating with non-US adverse parties, the governing institutional rules are unlikely to have a significant impact on the scope of the discovery process as sensible general limiting principles for the scope of that exercise usually ought to be possible to agree.

Ultimately, the institutional arbitral rules governing an arbitration are less likely to dominate parties’ discovery experience in most international arbitrations than other factors such as the legal traditions from which the parties come, the rules of evidence adopted by the tribunal and the amount of documentary evidence already available to the parties.

Joinder of third parties and consolidation of multiple arbitrations

In construction disputes, the need to join third parties to an action is not uncommon.[40] This is by virtue of the fact that cost overruns on a project can arise from a number of causes for which several participants in the project can be jointly responsible. It is therefore sometimes in the best interest of the parties to achieve a universal resolution of the dispute.[41]

This can sometimes be more difficult to achieve with arbitration than litigation given the issues of privity that can arise with a dispute resolution mechanism that relies for its jurisdiction on the consent of the parties.[42] The governing law of the agreement can sometimes provide various creative legal doctrines to overcome some of these difficulties, usually by essentially implying the consent of the non-party to be bound.[43] However, the applicability of such doctrines to a construction contract is doubtful.[44]

Preferably, this difficulty is anticipated and avoided entirely at the contracting stage[45] by inserting a cascading obligation in the master agreement to include identical dispute resolution clauses in all subcontracts which explicitly provide for multi-party arbitration.[46] The question being considered here is, when parties choose to coordinate their dispute resolution arrangements in advance in this manner, which institution’s rules, if any, are best equipped to allow a party to a separate arbitration agreement to be joined to an arbitration arising out of a different but related agreement.

On the question of when an application for joinder may be made, the SIAC Rules provide the most explicit flexibility allowing this before and after a tribunal is constituted (Rules 7.1, 7.8). The ICC Rules allow joinder only before the constitution of a tribunal absent the consent of all parties (Article 7.1). The AAA Construction Rules normally only allow joinder either before the constitution of a tribunal or within 90 days of commencement of the arbitration, whichever is later (Rule R-7(a)).

The SIAC Rules also provide the most procedural stages of scrutiny to the question of joinder. To even be considered, an application for joinder must first show that the party to be joined is prima facie bound by the arbitration agreement (Rule 7.1 a). This may sometimes be difficult where the applicant is relying on some novel legal doctrine to join the third party. If the application meets this prima facie threshold it can then go on to be fully considered by SIAC’s Court of Arbitration (if the application is made prior to the constitution of a tribunal). Its decision can then potentially be reviewed by the tribunal, once constituted (Rule 7.4).

This potentially lengthy procedure of multi-level scrutiny arguably sacrifices expedition in exchange for increased due process. Ultimately, such a sequential procedure is likely to result in delay, and in the author’s experience does so result. For any SIAC arbitration with aggregate claims of less than SGD6m where it is necessary to apply for joinder, the benefits of the application of SIAC’s expedited procedure are likely to be significantly diminished, if not completely lost, as a result of the potential delay caused by waiting for the determination of the preliminary issue of joinder. Given that parties in the construction industry are often motivated to agree to arbitration by considerations of procedural expedience and do so knowing that they are substantially waiving their right to appeal, such a procedure may not align with the parties’ expectations.

The ICC Rules also require a party being joined to be prima facie bound by the arbitration agreement before the application for its joinder can be considered by the International Court of Arbitration (Article 6.4(i)). However, its decision is not reviewable by a tribunal, once constituted, providing some degree of certainty and mitigating the risk of delay somewhat.

The AAA Construction Rules provide for the decision regarding whether a party should be joined to be made by a specially appointed ‘R-7 arbitrator’ whose sole purpose is to decide that single threshold issue and who has no involvement in the rest of the arbitration. These rules also set down a deadline of 14 days for parties to give their responses to the application for joinder, providing some welcome predictability as to the length of the delay to the arbitration likely to be caused by such an application (Rule R-7(c)). However, no guidance is provided as to the basis on which the decision to allow or deny an application for joinder is made, creating some unpredictability as to the likely outcome of such applications.

All three institutions’ rules also provide similar procedures for the consolidation of multiple arbitrations. The SIAC Rules, as with joinder, allow applications for consolidation to be made before and after the constitution of a tribunal. They also provide the widest bases on which to consolidate (Rule 8.1). As with joinder, the decision of SIAC’s Court of Arbitration (if the application is made prior to the constitution of a tribunal) is reviewable by the tribunal, once constituted (Rule 8.4).

The ICC Rules (Article 10) provide similar but slightly narrower bases for consolidating arbitrations[47] and applications for consolidation can also be made before and after the constitution of a tribunal. They also helpfully and explicitly provide that claims arising out of more than one contract may be commenced as a single arbitration, irrespective of whether the claims are made under a single arbitration agreement (Article 9).[48]

The AAA Construction Rules provide the same procedure for joinder and consolidation but give no guidance as to the basis on which consolidation may be allowed. This uncertainty should trouble potential disputants in the construction industry.

In summary, the SIAC Rules seem to provide the greatest potential for successful joinder and consolidation, although with the potential for delay in doing so. Ultimately, all three institutions permit joinder and consolidation. However, at the time of drafting the arbitration clause, parties will not know whether it will be in their future interests to advance or avoid joinder or consolidation. Therefore, the ease of doing so may not be a decisive factor. It is sufficient and essential that any rules governing a construction arbitration provide for some mechanism to join third parties and consolidate proceedings. The exact workings of those mechanisms will not greatly concern most parties in the construction industry when a dispute has yet to materialise.

Parties would be well advised to take a little more time to consider which regime is best suited to their specific needs, before rushing to sign on the dotted line.

Concluding observations

Clearly the rules of all three institutions adequately facilitate the resolution of construction disputes. Some institutions address certain challenges more comprehensively than others, but ultimately, factors other than the chosen rules are likely to dominate the outcome of the arbitration. The factors explored above are just some of those which ought to be carefully considered by parties in the construction industry when selecting arbitral rules. Their selection when entering into a construction contract is an exercise which is too often made to feel like a hurried and uncomfortable formality, which parties would rather avoid exploring fully. No one wants to discuss divorce before the wedding. In a commercial relationship, failing to do so would be a mistake.[49]

To the extent that parties take any interest in the selection of arbitral rules, the dominant consideration tends to be cost, and consequently, the potential to obtain a quick remedy. These considerations in particular are likely to weigh most heavily on the subcontractors at the bottom of the construction value chain who typically have limited cash reserves, and whose very existence is contingent upon access to vulnerable credit lines and the maintenance of a delicate interdependent ecosystem of harmoniously coordinated cashflows.[50] Disruption of this fragile ecosystem presents a constant existential threat and, if it materialises, parties need to be able to rely on a responsive and affordable arbitral regime. Accordingly, parties would be well advised to take a little more time to consider which regime is best suited to their specific needs, before rushing to sign on the dotted line.

 

[1] ‘It is indeed very rare that a major construction project is completed without a dispute arising between the parties.’ Nael G Bunni, ‘Case Study: Splitting the Cake by Submitting Partial Issues to Expert Determination/Conciliation’ (Manz Verglag 2008).

[2] ‘Delay and disruption are commonplace in construction projects, significantly increasing overall costs and giving rise to numerous arbitrations […] Time for completion is of great importance both for the employer, as late delivery of the asset may entail loss of profit, and for the contractor, since an extended construction period usually entails additional costs and lower margins.’ Jean-François Djanett and Jean-Luc Guitera, ‘Delay and Quantum: the Role of Delay Analysis Programmes and Financial Methods for the Computation of Costs and Damages in Construction Arbitration’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 114.

[3] “[…] parties cannot always wait the years it will take for an eventual final award to have an exigent issue addressed […]”. David Kiefer and Adrian Cole, ‘Suitability of Arbitration Rules for Construction Disputes’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 176.

[4] The Fédération Internationale des Ingénieurs-Conseils (FIDIC) publishes standard construction contracts which have become widely used in international construction projects. They have developed the multi-tiered dispute resolution mechanisms discussed here. For a detailed overview of these contracts, see Ellis Baker, Anthony Lavers and Rebecca Major, ‘Introduction to the FIDIC Suite of Contracts’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 54.

[5] Dispute Avoidance/Adjudication Board. For a detailed overview of various kinds of dispute boards, see Lindy Patterson QC and Nicholas Higgs, ‘Dispute Boards’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 155

[6] ‘Given the frequency of these types of claims, the contractual claims procedures are set up to try to resolve them expediently, in the hope that formal dispute resolution processes, such as litigation in national courts or arbitration, are avoided. Claims procedures are not intended to be adversarial (though in reality this is how they are viewed), but are aimed at resolving claims efficiently.’ Philip Norman and Leanie van de Merwe, ‘Claims Resolution Procedures in Construction Contracts’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 146.

[7] ‘A key philosophy that underpins the use of prearbitral mechanisms such as Dispute Boards is the enhanced possibility of early issue identification and dispute avoidance […] Another reason parties turn to DABs or DRBs during the performance of a contract is time and expense. Using DBs as a means of avoiding and/or resolving a disagreement or a dispute is less time consuming and less expensive than arbitration.’ ICC Commission, Construction Industry Arbitrations: Recommended Tools and Techniques for Effective Management (ICC Commission Report, 2019) 9.

[8] See, eg, Cl 21, FIDIC Conditions of Contract for EPC/Turnkey Projects.

[9] For an in-depth examination of the pros and cons of this multi-tiered dispute resolution model, see Ellis Baker, ‘Is it All Necessary? Who Benefits? Provision for Multi-tier Dispute Resolution in International Construction Contracts’ (January 2009) Society of Construction Law 154.

[10] Case management conference. This time limit may be extended by the ICC court.

[11] Or US$2m pursuant to the old 2017 ICC Rules if the arbitration was concluded between 1 March 2018 and 1 January 2021.

[12] In 2019, the average claim in a SIAC arbitration was just under US$31m and in an ICC arbitration was US$52m. SIAC accepted only 32 requests for its expedited procedure in 2019, less than seven per cent of its caseload and the ICC had only 65 cases below its former US$2m threshold qualify for its expedited procedure, or 7.5 per cent of its caseload. See SIAC Annual Report 2019 and ICC Dispute Resolution 2019 Statistics.

[13] Kiefer & Cole (n 3) 177.

[14] ‘In those countries where the UNCITRAL Model Law has only inspired the local arbitration law, then the position as to enforceability of EA decisions varies widely, even when the arbitration law expressly authorises arbitral tribunals to grant interim measures […] countries such as India, Macedonia, Malaysia, Serbia and Thailand are reported to have a restrictive interpretation of EAs’ powers […] In other countries, arbitral tribunals do not have general powers to grant provisional and conservatory measures either by express provision of the law (eg, in Italy), or because the silence of the law is interpreted as a prohibition (eg, in Pakistan). Consequently, in those countries, the direct enforceability of EA decisions is uncertain.’ ICC Commission, Emergency Arbitrator Proceedings (ICC Commission Report, 2019) 30, 31. Note that Singapore addressed this problem by amending its International Arbitration Act (Cap 143A) in 2012 to explicitly confer upon emergency arbitrators all the powers of an arbitral tribunal. See s 2(1).

[15] Kiefer & Cole (n 3) 177.

[16] ‘The characterisation of the EA’s decision as an “order” or an “award” may be of some concern in some jurisdictions when it comes to enforceability, such as Australia, Lebanon, the UAE, Thailand and Russia.’ ICC Commission, Emergency Arbitrator Proceedings (ICC Commission Report, 2019) 31.

[17] Early statistics gathered by institutions seem to suggest a modest growth in the popularity of these fledgling emergency arbitrator procedures in recent years. However, in spite of the efforts of institutions, most notably the ICC, to analyse their data in order to identify trends, the procedure is very young and the sample sets too small to be able to derive any reliable conclusions about the extent to which parties find it useful and why. AAA introduced emergency arbitration in 2006 (they have had only 116 international cases since then as of 2020), SIAC in 2010 (they have had only 94 cases since then as of 2019) and ICC in 2012 (they have had only 120 cases since then as of 2019). For more information, see SIAC’s Annual Report 2019, ICC Dispute Resolution 2019 Statistics and ICC Commission, Emergency Arbitrator Proceedings (ICC Commission Report, 2019).

[18] ‘Employers with scarcer resources are awarding projects on tight budgets and employer friendly contractual terms, often to contractors who undervalue their bids in order to win the project, resulting in cash flow issues, delays and substandard works. In recent years, this increasingly common recipe has led to a very contentious international construction market and numerous construction arbitrations. Contractors are required to complete projects on time, at the required quality and at the agreed cost. Their ability to do that can be affected by a number of factors outside of their control […]’, James Bremen and Leith Ben Ammar, ‘Contractors’ Claims, Remedies and Reliefs’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 94.

[19] Calculations based on a US$30m claim, which is slightly below SIAC’s average claim size for 2019.

[20] AAA-ICDR Flexible Fee Schedule

[21] The increased availability of third-party funding in recent years has somewhat helped to ameliorate this problem for poorly-resourced claimants but does nothing to assist poorly-resourced respondents who do not have large counterclaims. Furthermore, the construction claims that get as far as the arbitration stage often turn on very specific technical issues, the outcome of which is difficult for a potential funder to reliably predict. This can make construction claims of this nature an unattractive investment for some of the more conservative funders and, accordingly, poorly-resourced claimants may continue to struggle to prosecute such claims. For more information on recent trends in this area, see International Council for Commercial Arbitration, Report Of The ICCA-Queen Mary Task Force On Third-Party Funding In International Arbitration (2018).

[22] ‘[…] the number of documents required to support the parties’ cases in construction arbitration usually amounts to thousands.’ Bartosz Kruz˙ewski and Robert Moj ‘Documents in Construction Disputes’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 246; and ‘Large construction and infrastructure projects generate large amounts of data, in the form of design drawings, daily activity logs, transport records, invoices, photos and videos of the project site, and all other sorts of planning, supply and building records. These projects also tend to entail voluminous records of contemporaneous correspondence at all levels, namely, between the employer and the contractor, with sub-contractors and suppliers, and internally within the employer’s and contractor’s teams. The large volume of contemporaneous data that is often available in relation to a construction project means that document disclosure requests are an important procedural step in construction arbitrations and can be extensive.’ Pierre-Yves Gunter and Anya Marinkovich, ‘Organisation of the Proceedings in Construction Arbitrations: General Considerations and Special Issues’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 217, 218.

[23] ‘Perhaps no other arbitration topic is more controversial than discovery. Arbitration purists view discovery with a jaundiced eye. In their estimation, allowing the wide-open discovery found in the civil courts transmogrifies the arbitral process into “arbigation” and deprives the parties of the speed and economy that are hallmarks of arbitration. On the other hand, discovery proponents argue that limitations on discovery represent the last vestiges of the “sporting theory of justice,” where the outcome of the proceeding depends more on the skill of counsel and the possession of evidence than the merits of the matters in dispute.’ Richard J Tyler, ‘Discovery in Arbitration’ (2015) 35 Constr Law 5; and ‘[…] parties (and their lawyers) may have differing expectations of the scope of permissible discovery, depending on whether they come from a common law or civil law jurisdiction, as document production is a practice that has its roots traditionally in the US and the UK and is therefore used more extensively by those with common law backgrounds, while parties and counsel coming from civil law jurisdictions tend to have a more restrictive view.’ Gunter & Marinkovich (n 22) 218.

[24] ‘First, discovery is broad, encompassing any document which may lead to admissible evidence, even if it does not constitute evidence in and of itself. Second, there is a general duty of each party to the action to produce any relevant document, including internal documents and documents which are contrary to that party’s interests.’ Gabrielle Kaufmann-Kohler, ‘Globalization of Arbitral Procedure’, Vanderbilt Journal of Transnational Law (2003) vol 36, 1325; See also the Federal Rules of Civil Procedure 26(b)(1).

[25] ‘Modern instruments of discovery serve a useful purpose […] They, together with pretrial procedures, make a trial less a game of blind man’s bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent.’ US v Procter & Gamble Co, 78 S. Ct. 983, 986–87 (1958).

[26] ‘[Civil law systems are] less ambitious in search for truth than the common law approach […]’ Pierre D Tercier and Tetiana Bersheda, ‘Document Production in Arbitration: A Civil Law Viewpoint’ in The Search for ‘Truth’ in Arbitration, ASA Special Series No. 35, (JurisNet 2011) 83.

[27] ‘English law limits discovery that is now known as document disclosure and is narrower than the discovery was. The scope of document disclosure nowadays depends upon the tests of reasonableness and proportionality.’ Kruz˙ewski and Moj (n 22) 250.

[28] The procedure set out in Art 3.3 of the IBA Rules on the Taking of Evidence in International Arbitration 2010 is the gold standard for this approach in international arbitration: ‘A Request to Produce shall contain:

(a) (i) a description of each requested Document sufficient to identify it, or (ii) a description in sufficient detail (including subject matter) of a narrow and specific requested category of Documents that are reasonably believed to exist[…]’

[29] Typically, the tactical benefits to each party of expansive or restrictive disclosure regimes, respectively, are unlikely to become apparent until the dispute itself has crystallised. Therefore, it may not be helpful to set the parameters of such a regime in advance in the contract from which that dispute subsequently arises. Usually, the decision as to whether to select evidence rules to guide the disclosure process, such as the IBA Rules or Prague Rules, is best made after a tribunal has been constituted, around the time of the arbitration’s first procedural conference. By then, parties should know sufficient basic details about the dispute to have some understanding of the role that discovery is likely to play in its resolution.

[30] ‘Under the Regular Track Procedures, the “discovery” permitted by the rules is quite limited, and the question of whether other discovery will be permitted is committed to the discretion of the arbitrator.’ Tyler (n 23) 11.

[31] AAA Construction Rules R-24 (a).

[32] AAA Construction Rules R-24 (b)(i) and (ii).

[33] AAA Construction Rules R-24(b)(iii).

[34] AAA Construction Rules R-24(b)(iv).

[35] AAA Construction Rules Rule L-1 ‘The LCC Procedures are designed to complement the Regular Track of these Rules. To the extent there is any conflict between the Regular Track and the LCC procedures, the LCC Procedures shall control.’ For the avoidance of doubt, the author is not of the view that these provisions regarding discovery are actually in conflict with each other. However, the potential for disingenuous parties to try to exploit this remains.

[36] In 2019, the average claim in a SIAC arbitration was just under US$31m and in an ICC arbitration was US$52m. Less than 25 per cent of ICC arbitrations in 2019 were under US$1m. See SIAC Annual Report 2019 and ICC Dispute Resolution 2019 Statistics.

[37] AAA Construction Rules L-4(e). L-4(f) also explicitly authorises the tribunal to allow depositions in exceptional circumstances.

[38] The IBA Rules on the Taking of Evidence in International Arbitration 2010: ‘[…] it is a good idea to agree on the use of guidelines specifically tailored to international arbitration, such as the IBA Rules, at the outset of the proceedings. Indeed, Article 3 of the IBA Rules, which contains the guidelines concerning document production, was specifically drafted to reflect the accepted document production practice in international arbitration that strikes a balance between US-style discovery and the more restrictive civil law approach.’ Gunter & Marinkovich (n 22) 218.

[39] See the Federal Rules of Civil Procedure 26(b)(1).

[40] ‘The completion of a construction project may involve several parties and interrelated agreements and any dispute between the employer and the contractor, for example, may often be based on the same facts and may raise similar legal issues in a dispute between the contractor and the subcontractor in the same project.’ Stavros Brekoulakis and Ahmed El Far, ‘Subcontracts and Multiparty Arbitration in Construction Disputes’ in Stavros Brekoulakis and David Brynmor Thomas (eds), Global Arbitration Review – The Guide to Construction Arbitration (3rd edn, Law Business Research 2019) 194.

[41] Kiefer & Cole (n 3) 173.

[42] ‘While multiparty arbitration proceedings involving an employer, a contractor and a subcontractor may be difficult to have because of the distinct and, typically, bilateral nature of the main construction contract and the subcontract, it may be (under certain circumstances) in the contractor’s interest to make sure that one single tribunal decides all disputes that it has against the employer and the subcontractor. This is because it is the contractor who has the risk, for example, to recover in a subsequent arbitration from the subcontractor any amount of liquidated damages it may have been awarded in favour of the employer in a previous arbitration.’ Brekoulakis & El Far (n 40) 194.

[43] For example, for a discussion of some of the doctrines typically available under the laws of US states, see Arthur Andersen LLP v Carlisle [2009] 556 US 624 and more recently, GE Energy v Outokumpu [2020] 140 S Ct 1637. They include assumption, piercing the corporate veil, alter ego, incorporation by reference, third party beneficiary theories, waiver, and estoppel.

[44] ‘In non-construction arbitrations, tribunals under certain circumstances may ascertain implied consent for multiparty arbitration on the basis of different legal doctrines such as agency, assignment, third-party beneficiary, incorporation by reference, alter ego or equitable or arbitral estoppel. Under these doctrines, an arbitration agreement between two parties can be “extended” to bind a non-signatory party. However, under typical construction contracts and subcontracts, it is unlikely that an arbitration agreement in the main construction contract between the employer and the contractor can be ‘extended’ to bind the non-signatory subcontractor under any of the above legal doctrines. Unless exceptional factual circumstances exist, arbitral tribunals will not usually find a subcontractor to be, for example, the principal of the main contractor, or the assignee or the third party beneficiary of the main contractor, or the alter ego for the main contractor.’ Brekoulakis & El Far (n 40) 195.

[45] ‘[…] multiparty arbitration will only be possible if all parties consent to it, either before the dispute arises or after it has arisen. Consent for multiparty arbitration before the dispute arises may be established if the arbitration clauses in the main construction contract and the subcontract expressly allow for multiparty arbitration, or if the applicable arbitration rules provide for multiparty arbitration.’ Ibid 195.

[46] ‘First, each of the separate agreements must provide for an arbitration before the same arbitral body. If not, the parties will have to negotiate and agree to a separate dispute resolution agreement that provides for arbitration before the same body […]’, Kiefer & Cole (n 3) 173.

[47] ICC Article 10: ‘[…] a) the parties have agreed to consolidation; or b) all of the claims in the arbitrations are made under the same arbitration agreement; or c) where the claims in the arbitrations are made under more than one arbitration agreement, the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship, and the Court finds the arbitration agreements to be compatible […]’ (emphasis added). Note more stringent criteria here.

[48] Note however, that if this is challenged, certain claims may be struck out unless the ICC Court of Arbitration is satisfied, on a prima facie basis that all parties may have agreed that the claims could be heard in a single arbitration. See ICC Art 6.4(ii).

[49] ‘[…] Often, attorneys address the need for a dispute resolution clause only when memorializing the final terms of the deal in a contract. Because the dispute resolution clause can sometimes be an afterthought when the major points of negotiation have been addressed and the deal is considered done, it is frequently referred to as a “midnight” or “champagne” clause. But the ADR clause should not be an afterthought. It should be carefully thought out and well-drafted.’ Nancy Holtz, ‘Beware the Midnight Clause: Hold the Champagne?’ (Inside Counsel, 19 Feb 2016) see https://www.jamsadr.com/files/uploads/documents/articles/holtz-insidecounsel.com-beware-the-midnight-clause.pdf accessed 16 February 2022.

[50] Giles Lambertson, ‘Subcontractors Struggle in Fight for Survival’ (Construction Equipment Guide, 20 May 2010) accessed 16 October 2020.

Eoin Moynihan is a managing associate at Global Legal Solutions in New York and can be contacted at eoin@gls.global.

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