international law quarterly
fall 2017 • volume XXXIII, no. 3
Construction Disputes, continued
• Consolidation and joinder. Similarly, most arbitral bodies have rules that govern the circumstances under which consolidation and joinder are permissible. The ICDR Rules, for example, allow the consolidation of different arbitrations if the parties agree. The parties should address what, if any, consolidation is acceptable. • The parties who fail to consider these aspects may risk simultaneous and overlapping arbitrations and inconsistent outcomes. International construction arbitration typically focuses on three categories of dispute. For all their complexity, most construction disputes involve one or more of the following categories of dispute: 1. Project schedule delay, when the project or a discrete aspect of the project took longer to complete than originally planned or allowed for, creating an impact on another party; 2. Defective design and/or services, when a party does not provide the agreed-upon work product or does not provide the agreed-upon work product to the standard set forth by the agreement between the parties; and 3. Cost overruns, either as a result of items (1) and/or (2) above, or general cost overruns to the original or agreed-upon budget as a result of other factors. The seemingly limited number of dispute categories can lead legal teams to assume a related arbitration will be “easy” or “straightforward.” This is typically not the case. International construction arbitrations are often related to the largest, most remote, and most complex construction and engineering projects in the world. (Think Modern Marvels meets Survivor.) As such, “simple” issues can quickly evolve into a convoluted, multifaceted, and interdependent web of disputes. The simple yet complex nature of international construction arbitration requires specific knowledge and experience in order to increase the likelihood of success. Legal teams and outside consultants advising on international construction disputes should be familiar with both the type of construction project in dispute as well as the international arbitration process itself. Similarly, the arbitration panel members hearing these types of cases are (or should be) carefully selected based
on their background in construction and engineering disputes and their knowledge or experience with the relevant type of project. In fact, most of the top arbitral institutions have created specific rules focused on construction arbitration.4 The technical nature, complexity, and magnitude of international construction projects, and the resulting high stakes of such projects, require specialized experience of the legal teams, advisors, and fact-triers working on such matters. International construction arbitrations rely heavily on expert witnesses. As outlined above, international construction arbitrations are often set to resolve complex technical issues, as opposed to solely legal issues to be decided in the course of an ordinary commercial dispute. The technical issues in dispute require not only specialized knowledge in the technical area, but also experience in the forensic investigation of such matters, which typically can only be fulfilled by an expert witness. Additionally, international construction projects are often led and executed by a community of expatriate construction management “mercenaries” who seemingly float around the world from one remote project to the next. These individuals waste no time in moving on to their next mandate following the conclusion of their last. As a result, finding key members of the project management team to provide fact testimony can prove difficult; if they can be found, these potential fact witnesses may be unavailable or unwilling to serve in that capacity. The technical nature of disputed issues and the often limited availability of fact witnesses lead to the heavy reliance on expert witnesses in international construction arbitration. Expert witnesses commonly opine on several key aspects: • Technical engineering or design issues, such as the failure of a plant to meet performance standards set out in the contract (e.g., a gold mine produces only 90 gold bars per day instead of the 100 specified); • Management issues, such as the overall diligence of a party to manage the project as a whole or a specific aspect such as engineering or procurement;
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