Arbitration is “way forward” for construction disputes

Construction: Strong support for arbitration

Arbitration is the best available process for resolving disputes arising from international construction projects and should be augmented but not replaced by technology, according to the findings of one of the largest surveys of the sector ever undertaken.

The research, conducted by academics at Queen Mary University of London’s school of international arbitration, also revealed that, by contrast, compliance with voluntary decisions arising from other forms of alternative dispute resolution (ADR) was experienced only about a quarter of the time.

There was backing for the greater use of technological solutions for aspects of the arbitration process, such as helping with automating document-heavy bodies of evidence.

But there was very little enthusiasm – just 6% overall and none of the in-house counsel respondents – for technology replacing human involvement in decisions.

The survey’s authors observed: “[This] certainly suggests a resistance to the use of artificial intelligence for the decision-making process.”

However, the survey found support for increased efficiency throughout arbitration, right up to the time taken to issue an award.

In particular, responses indicated an appetite for the greater use of interim or provisional orders, which, it was believed, could lead to parties resolving matters at a much earlier stage. Making interim decisions binding so that money changed hands at an earlier stage could cause the parties to resolve the dispute.

The survey, the first of its kind to concentrate on construction and infrastructure disputes and backed by international firm Pinsent Masons, was built on 646 questionnaires and 66 personal interviews with a range of stakeholders.

The most popular venue for arbitration was London (46%), followed by Paris (35%), Dubai (26%) and Singapore (22%).

Key findings were that construction experience was highly valued in arbitrators, and almost four out of 10 had experience of technical, as opposed to legal, experts being appointed.

Almost half pitched the minimum amount commercially worthy pursuing through international construction arbitration at between $1m (£776,000) and $10m, although most in-house counsel put the threshold at $11m to $25m.

Experience of ADR was not encouraging. Just 28% reported frequent compliance with voluntary remedies; the remainder finding they were complied with some or none of the time.

There was widespread support for mandatory compliance with pre-arbitral decisions as a pre-condition to arbitration.

Respondents said ‘due process paranoia’ – the concern that awards could be challenged for a lack of due process – was a significant factor inhibiting arbitrators from taking a robust approach to case management and using “all the armoury of remedies available to them”.

Elements thought to be likely to improve efficiency in arbitrations included the summary disposal of unmeritorious claims or defences at an early stage.

In terms of making hearings more efficient, there was majority support for advance identification by arbitrators of issues to be covered, presentation by the parties of agreed statements of facts, and time-limiting opening or closing submissions.

Almost two-thirds of respondents had no experience of third-party funding of arbitrations in construction.

Jason Hambury, co-head of Pinsent’s international arbitration practice, said, the survey provided “valuable insight on the concerns of the construction industry and how the arbitration community might respond to them to ensure that the arbitral process is more efficient and economical at all stages, and facilitates the resolution of disputes at an earlier stage”.

He added: “This is particularly the case for lower-value disputes… where more flexibility and speed is required if arbitration is to be more accessible to parties, along with alternative processes such as dispute adjudication boards, and serve the industry in this respect.”

HyunJung (Chandel) Lee, legal counsel at Hyundai Engineering & Construction, said: “Whilst arbitration and ADR are seen as the popular choice of resolving disputes arising out of international construction disputes, I think the survey reveals important insights and analysis of using international construction arbitration in reality and suggests directions for future development.”

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