Over the past 10 years, disputes in the building, engineering and construction industry have increased in number and become more and more complex.
Construction disputes can be frustrating, upsetting and time consuming; the construction contracts tend to be complex and can have arduous conditions, and projects can be badly managed making delays, additional costs and liabilities unavoidable. Another marked change over the same time span is the complete sea change in the way in which we resolve these disputes, with the traditionally favoured litigation being replaced by arbitration, mediation, adjudication and dispute review boards. The ability to avoid disputes is perhaps even more important than managing them so it is essential to get the best contract arrangements in place.
This also makes it easier should any potential problem arise. Along with dispute resolution, advice may include: pre-tender and post-contract advice, risk assessment, delay analyses and final account preparation. This feature invites a number of leading dispute resolution experts who act for a broad range of clients, from private individuals to international property developers to share and promote their expertise. We aim to give our readers a rare opportunity to benefit from the skill of the world’s leading solicitors, mediators and arbitrators and provide a thorough update and insightful commentary on the topics that are currently affecting the industry. Some of the topics we’ll be touching on include: the practicality of enforcing clauses in cross-border disputes, up and coming arbitration seats, challenging public procurement decisions, how to enforce non-statutory adjudication decisions.Acquisition International speaks to the experts.
The contributors to the Freshfields Bruckhaus Deringer are all members of the Engineering Procurement and Construction Group in London of Freshfields Bruckhaus Deringer, an international magic circle law firm ranked in the top tier in Chambers guide to the legal profession 2012 for construction, procurement, international arbitration and litigation, as well as Corrs Chambers Westgarth, a full service national Australian law firm recognised as having a leading Construction and Major Projects / Infrastructure team (Chambers & Partners Asia Pacific Guide 2012)Jane Jenkins is a partner and head of the Engineering Procurement and Construction Group, she comments: “Our practice offers the “whole of life” service to our clients from the front end structuring, planning, procurement, deal documentation through contract administration and dispute resolution. This is a key differentiator of our practice from our competitors in London and elsewhere. We act on the largest, most complex High Court litigation including the Multiplex claim against Mott MacDonald –the largest case ever before the Technology and construction court in London, reported to be – adjudications before expert panels and dispute review boards and international arbitration.”
Jane Davies Evans is of Counsel and specialises in contentious and non contentious construction with a focus on international arbitration. Jane commented how different the approach towards dispute resolution within the industry now compared to the early noughties? :
“There has been a radical shift in the UK away from the lengthy ad hoc arbitration and litigation cases that dominated the last century. The introduction of fast track compulsory adjudication achieved a step change in the approach to dispute resolution for projects carried out in the UK. The specialist court, the Technology and Construction Court, has demonstrated a continuing determination to manage litigation effectively and impose rigour on the preparation for and conduct of cases. Use of expert panels and dispute review boards has continued as an intermediate step before arbitration on the largest international projects. Arbitration remains the preferred means of dispute resolution over litigation for projects with participants drawn from various jurisdictions largely because of the wish for a neutral forum and enforcement under the New York Convention. As noted above we have seen an increase in disputes being fought as the commercial flexibility and willingness to settle in the face of the global economic downturn has declined.”
Jonathan Brook is a senior associate and specialises in litigation and procurement, advisory and contentious. Kim Rosenberg is a senior associate and specialises in contentious construction, litigation, arbitration and other forms of dispute resolution they collectively comment on why arbitration, mediation, adjudication and dispute review boards are being favoured over litigation in the construction Industry: “With the exception of arbitration: the reason is the increased speed of resolution. The driver for this is cash flow, which is the life blood of projects. Without cash moving down the payment line, suppliers and subcontractors will down tools and the project will grind to a halt, eventually costing far more than anticipated for all participants.
This is brought to the fore when a dispute arises as parties cling to whatever money may otherwise owe. Generally speaking, therefore, in giving thought to dispute resolution mechanisms at the time of contract negotiation, participants to construction projects are willing to sacrifice getting the right answer for a quick answer.
Inevitably, this will also save on legal spend with clients reporting a significant saving on this head of cost where their disputes are resolved by mediation, adjudication or dispute resolution boards, as opposed to litigation or arbitration. “As to the arbitration vs litigation debate, in England and Wales, arbitration is favoured over litigation for international projects (because of the greater ease in enforcement), but not domestic projects.
This is in large part due to the specialised Technology and Construction Court that is available for litigation.While reduced cost is often cited as a factor in choosing arbitration over litigation, in our experience, there is often little to choose between the two. International arbitration will typically involve less cost-intensive document production than litigation, however, this saving is usually offset by the fees payable to the arbitral tribunal, arbitration institutions and the cost of hosting the arbitration itself.”
Joseph Barbaro is a Partner of Corrs Chambers Westgarth, in the Melbourne office Construction and Major Projects / Infrastructure team. He is a Partner of Corrs Chambers Westgarth, in the Melbourne office Construction and Major Projects / Infrastructure team. who works on all aspects of the procurement cycle, from documenting transactions, through to advising on contract and claims management and associated dispute resolution. He is currently advising on contract and claims management issues for one of Australia’s largest desalination projects, and in relation to an international arbitration involving offshore oil activities. Joseph Barbaro comments on Resolving disputes in a fast and efficient way and recent trends in Australia:
“The number and complexity of disputes in the construction industry in Australia continues to increase, partly due to the increased scale and value of public infrastructure and energy and resources projects. “Economic and human resource pressures, including the GFC and skilled labour shortage in Australia, have meant that industry participants have a reduced appetite for costly and drawn out disputes.
“Clients are seeking faster and more efficient ways to resolve disputes through the use of alternative dispute resolution methods and “fast track” processes, either prior to or as an alternative to commencing litigation.
“The range of options and solutions is broad and varied and Corrs works with its clients to plan ahead and make informed decisions.”Gregory H. Chertoff is Co-Managing Partner of Peckar & Abramson, PC’s New York City office, in which he actively represents clients in all areas of their construction-related legal matters and jointly manage our office of 17 attorneys.
All of the attorneys in our office specialize in construction law and directly affiliated practices. Greg commented on how he can help his clients to draft their contracts and anticipate disputes before they’ve even happened: “We regularly assist clients in reviewing, drafting and negotiating contracts. The process, when most effectively employed, begins with a clear understanding within the client’s organization of what their risk tolerance is for various key factors.
By way of just a few examples, we work with our clients to tailor an organizational risk paradigm related to issues such as delay damages clauses, liquidated damages, consequential damages, indemnity clauses, risk transfer through various insurance products, which party bears the risk of cash-flow issues driven by contested changes in contract scope, design risk transfer, how costs will be established and accounted for, just to scratch the surface.
Once the client, with our guidance, establishes its business policies related to the risk factors, we assist them in reviewing proposed contract clauses and operational policies as they conform or deviate from the established paradigm and then work cooperatively to negotiate agreements that conform as closely as possible to the target paradigm.
When deviations inevitably occur, those deviations are clearly identified and the clients are then aware that they must manage these risks through other means, such as insurance risk transfer or special operational attention. “Special mention should be made of the risk of contractual notice and waiver provisions, since great litigation expense is often incurred, and many claims are lost, because contracting parties fail to scrupulously abide by notice requirements.
Construction contracts are replete with clauses requiring parties to give prompt and comprehensive notices of events that may impact the schedule or cost of the project, or risk waiver of their claim rights. Knowing such clauses are in the contract, and then scrupulously following the mandated procedures, is the surest way to preserve rights; being ignorant or ineffectively complying is the surest way to lose rights. We have developed a product to assist our clients in this key concern, ProjectNotice©. It is a manual with form notices tailored to each specific contract and is designed to address every potential notice obligation under that contract, including reminders to the project-level user of when follow up notices are required.
ProjectNotice© has helped many of our clients preserve their rights and avoid historically problematic disputes by providing a ready and easily employed tool to assist their project-level staff in writing critical notices – a task construction contractors typically do not relish.”
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