International arbitration can sometimes be a lengthy process that does not always address the complex nature of construction disputes. The International Chamber of Commerce (ICC) has issued a revised set of rules for international arbitration, due to come into force from 1 January 2012 (the ICC Rules 2012). It hails these as being the “answer to today’s business needs”.
Amendments to the ICC Rules
Two changes to the ICC Rules are particularly relevant to international construction disputes:
- The methods for dealing with disputes involving multiple contracts and parties.
- Updated case management procedures.
Construction disputes are complex in that they routinely involve multiple contracts and parties. For example, you might have:
- A project being performed in South America.
- The engineering performed in China.
- Materials fabricated in India and shipped to South America.
- A USA-based owner.
- A European-based company headquartered in Germany as the EPC contractor.
- Mexican sub-contractors.
So what happens if something goes wrong (as it often does)? How does the owner, in the absence of an umbrella agreement, join the main sub-contractors into an arbitration against the EPC contractor?
The ICC Rules 2012 go some way to recognise the complexity of international construction disputes, as they include a number of new provisions regarding joinder of additional parties (Article 7), claims between multiple parties (Article 8), multiple contracts (Article 9), and consolidation of arbitrations (Article 10):
- Under Article 7, a party may now join an additional party to an existing arbitration by submitting a Request for Joinder to the Secretariat. This can be done without the consent of the additional party, but only if the application is made prior to confirmation or appointment of an arbitrator (that is, before the arbitral tribunal is constituted). Once any arbitrator is appointed or his appointment is confirmed, joinder will require the agreement of all parties, including the additional party.
- Article 9 expressly confirms that claims arising out of or in connection with more than one contract may be made in a single arbitration.
- In addition to Articles 7 and 9, Article 10 empowers the ICC Court to consolidate arbitrations, at the request of a party (subject to certain conditions).
Unfortunately, while it is very welcome, utilising the joinder provision (Article 7) may prove to be easier in theory than in practice. Obtaining the consent of a party to join an arbitration is likely to prove difficult, if not impossible. In my view, if a party wishes to join an additional party once the arbitrator has been confirmed or appointed, the only practical option will be to use the consolidation provision in Article 10.
Updated case management procedures
The revised case management procedures in Article 22 create a positive duty on both the arbitral tribunal and the parties to conduct the arbitration in an expeditious and cost effective manner. The principle in itself is definitely welcome. However, I question how this is going to work in practice.
The ICC have included a mandatory requirement for the tribunal to convene a case management conference, when the parties must be consulted on any procedural measures that should be adopted. This is meant to give the parties an opportunity to explore options for reducing the time and costs associated with the arbitration, including, for example, limiting the length and scope of witness statements and expert evidence.
This all sounds great in theory. However, when a client involved in a £150 million dispute is told that his witness statement must be no longer than 50 pages, is he going to be relieved that he is saving money in legal fees or feel cheated that he is not going to be able to tell the full story of what happened over the life of a project? Will it actually save fees? Condensing a long and complex story into a limited space can actually take more time than setting out the facts in full (although it will of course reduce the material that the tribunal is requested to read).
And what about experts? Are they going to have to learn how to express themselves clearly in as few words as possible?
This is definitely going to be a challenge and will involve considerable cooperation from all sides.
A welcome change?
The ICC Rules 2012 are most certainly welcome on a theoretical level, as they do seek to address today’s business needs. However, as always, we won’t be able to pass final judgment until they are tested. At present, it seems that they don’t go far enough and, as drafted, leave scope and room for existing problems to continue in practice.
This blog was first published by PLC Construction as part of our regular construction blog series in which we share our practical experiences of working in construction and engineering and give our opinion on the current and future legal developments that shape and will shape the industry. Please select the link for other PLC Construction blogs.