Why Construction Arbitration is Complex? (X)

Although the purpose of these articles is to explain the reasons why construction arbitration is complex, it is necessary to make a brief reference to other means of dispute resolution in this industry that are frequently used and often form part of escalation clauses for dispute resolution to avoid arbitration.

Through these escalation clauses, the parties agree to go through a series of pre-arbitration proceedings in order to try to resolve the dispute beforehand. These types of clauses originate from and are common in international treaties.

These escalation clauses may be agreed upon on an optional or mandatory basis, which determines whether it is absolutely necessary to resort to these means of dispute resolution beforehand. This will be assessed by the arbitral tribunal when deciding on its jurisdiction, respecting the principle of party autonomy.

The purpose of this preliminary process is to ensure that the progress of the works is affected as little as possible by facilitating the adoption of decisions that, at least on a temporary basis, guarantee the continuity of the works.

The first means of dispute resolution is prior agreement between the parties through discussion and negotiation.

It goes without saying that the best way to resolve conflicts arising from a contract is through constructive and open discussions in which problems are presented frankly and sincerely and solutions are sought for the good of the parties and the project.

This can be done at the level of regular project players or by escalating the conflict to senior management levels within the companies, where participants are somewhat removed from day-to-day problems and can adopt more objective solutions for the good of their respective businesses and interests.

Collaborative contracts encourage the identification and resolution of conflicts as they arise, so that they are resolved as they raise and avoid them accumulating into a final claim after the collaborative atmosphere has deteriorated throughout the duration of the works.

Through mediation and conciliation, the parties seek the intervention of a third party outside their circle with the aim of helping them to reconcile their positions.

In the case of mediation, it is the parties who must propose the solution, and the mediator attempts to bring the positions closer together so that they can reach an understanding.

In the case of conciliation, the conciliator may propose alternatives and is not limited to bringing positions closer together.

In both cases, if an agreement is reached, the parties may agree that the agreement is final and the dispute is definitively resolved.

Dispute resolution boards, also called dispute boards or dispute avoidance and adjudication boards (DAAB) in FIDIC contracts, are a panel of experts appointed at the start of the works who monitor their progress through regular meetings with the parties and visits to the works.

This means that when a dispute arises, usually of a technical nature, it can be resolved quickly due to their existing knowledge of the project situation. The panel is usually made up of technical experts, one appointed by each party and the third by mutual agreement between the other two. It is also common for the third member to be a lawyer.

The nature and binding scope of the decision of these entities depends on what the parties have agreed in the contract. In FIDIC practice, the DAAB's decision is binding on the parties so as not to interfere with the execution of the works. But it is not final because the party that disagrees with it can subsequently challenge it in arbitration proceedings. Its purpose is therefore to move forward in resolving disagreements and facilitate the development of the works without either party losing rights.

It is important to bear in mind that the procedure before a dispute resolution board must be expeditious and efficient, and the risk of turning it into a long and complex procedure similar to arbitration, which would render it ineffective, must be avoided.

In this regard, the documents and information to be provided to its members should be limited, and requests for documentary evidence should be kept to a minimum. The hearing, when necessary, should be conducted swiftly, following these same principles.

Arbitration is the final step in resolving disputes. The parties may agree to go to court to resolve their disputes when the prevention procedures have failed, but it is clearly accepted internationally that arbitration is the best procedure for resolving this type of dispute.

Among other reasons, this is because the rules and practice of arbitration are well suited to the particularities of construction disputes and allow the parties to prepare and present their case efficiently and confidentially. In fact, some arbitral institutions have issued guidelines or recommendations for the management of construction arbitrations, such as a report by the Paris International Chamber of Commerce on recommendations for the effective management of construction arbitrations (the "ICC Report"), to which we will refer frequently.

In the following articles we will look at the characteristics tht make construction arbitration complex.

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