On 7th September 2021 we hosted an ‘in-conversation’ style webinar on international arbitration. Chaired by Paul Gibbons, four world-class experts in construction, law and dispute resolution examined the latest developments in construction and dispute resolution.
You can watch the video here, or read the write up from the event below.
Construction contracts around the world end in dispute if not done correctly from the start and working on international projects can raise unique challenges. Rupa Lakha, disputes lawyer at Charles Russell Speechlys advises that minimising the risk of disputes is completely dependent on what you put in at the outset.
There is a tendency to want to get things started quickly. However, slowing down and carefully considering things like the appropriate procurement model, level of resources priced for and whether the programme is realistic, can pay dividends in the long term.
It is important early on to pay heed to warning signs. If it looks like the price of a project is too cheap, this could be a red flag. Be realistic and invest time at the beginning and during every stage. Don’t take unnecessary risks. Set the contract up to deal with every factor, the legal aspect, the risk and the technical aspects. Consider what the project is aiming to deliver and ensure everyone is on the same page.
Minimising Risk
Looking at minimising risks from the contractor’s perspective, Mitesh Vekaria notes that it is important to use a pre contract services agreement if you can. As an Employer, it may be tempting to put all the risks onto the contractor but it is not always the best way forward.
Spend the time you have early on. Make use of workshops, education and training for everyone and ensure they spend time on this stage. If employers put time in their Gantt chart specifically for this, it would make such a difference.
Mitesh goes on to say you can avoid having to go down the litigation route by ensuring clear communication with all stakeholders and CEOs. Nobody wants to end a project in dispute. Clear communication can help the people involved stay detached enough to work things out without the need for any use of litigation and a shooting match.
Warning Signs
As a project progresses, there can often be warning signs that a dispute may arise. Rupa warns us to take notice if notices start being fired off or letters start coming in. If use of the contract becomes defensive, you know there is a problem. People are trying to protect themselves rather than work with others and use the contract as a tool.
Once disputes become inevitable, delay analyst Tom Francis explains that the biggest issue often becomes a lack of good records. People seem to not keep their records. That can make the difference between winning and losing. If you keep a good trail of evidence any claim is likely to be more successful. Photographic evidence is very important. The culture of construction needs to evolve so evidence keeping and record keeping becomes the norm.
On the subject of notices, Tom thinks attitudes need to change. Giving notice should be a positive thing, a warning sign.
Experts
So what is the role of an expert in a dispute? In Tom’s experience it is important to be clear what your instructions are. Are you a claims consultant/expert, an advocate at an early stage? What is your exact role and what input do clients want? Advocate and expert roles are very separate and the difference needs to be clear especially when it comes to arbitration and litigation.
Formal Dispute Resolution
David Brynmor Thomas QC of 39 Essex Chambers explains what our options are in the event that a dispute does arise. He says every contract should have a final and binding form of dispute resolution included, usually either litigation or arbitration.
If you do not include any clause, then you line yourself up for the potential of immediate litigation in court. FIDIC, the construction contract widely used on large international projects, uses arbitration as its default form of dispute resolution. Another option is expert determination – this is often seen as ‘cuddlier’ than arbitration and litigation to many. David explains this is in fact wrong.
Statutory adjudication is an option for quick simple disputes. However, David advises that one of the better options for large international projects would be the use of dispute review boards or DABs. However, he warns that many put these boards in place but then they are not used correctly. Effective dispute review boards visit the project regularly. They ask what is happening, is the programme on time, is anything slipping, are there any problems? By asking the right questions, they can see if the project is going wrong anywhere.
Be Prepared
Rupa stresses the importance of getting your advisors in early, in preparation for the dispute resolution process. You need legal advice pre contract and continue working with your advisors throughout the life cycle of the project. That way they can help tackle any problems that may arise in any stage of the project.
If you allow a problem to grow, then only bring an advisor in at the end, it becomes very difficult and very expensive. It also means you take valuable resources away from the project.
Formal dispute resolution is sometimes necessary and appropriate. However, there is value to having lawyers involved from the start. Little and often is when advisory works best, helping you avoid problems getting too big.
David agrees and advises to work with the legal team who put the contract and the project together continually. Having an expert or a consultant like Tom on the programming makes matters better as well. They can make sure you are using notices correctly and appropriately. A programmer can make the barrister’s job much more straight forward should disputes arise later.
Mitesh adds that for his larger projects, he advocates for them to demonstrate due diligence little and often with the use of delay analysis and programmers throughout.
Clear Roles and Responsibilities
Construction disputes are different to other disputes. Rupa explains that they need an interface between the lawyer and the expert. A good close relationship is essential between the sharing of information and knowledge. The legal knowledge and the technical knowledge need each other to work, they rely on each other and that is fundamental. That is very particular to construction disputes.
Tom warns us to be wary of blurring the line between being an advocate and expert. He asks can you honestly put yourself forward as an independent expert if you were involved in the writing of the contract? The key here is being open and clear with your past and present roles. Make sure your role is clear from the start before you get into a tricky situation.
Thank you to all the speakers and attendees. Should you need any help with any of the issues raised in this webinar, please get in touch today.