PLC Construction Blog: Multi-party and multi-contract disputes: the developing story of complex arbitrations in the major institutions

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Summary: It is well recognised that because of its consensual foundation, arbitration can be difficult as a means of settling complex multi-party and multi-contract disputes. This has historically been a problem for construction practitioners and clients because an ever increasing proportion of large disputes are complex and involve multiple contracting parties.

It is well recognised that because of its consensual foundation, arbitration can be difficult as a means of settling complex multi-party and multi-contract disputes. This has historically been a problem for construction practitioners and clients because an ever increasing proportion of large disputes are complex and involve multiple contracting parties.

Complex arbitrations in the ICC

Two years ago, we looked at the draft of a new set of ICC rules. We were intrigued and impressed by the proposed changes, but remained cautious as to whether they could satisfactorily address the practical problems inherent in more complex multi-party, multi-contract disputes. Other observers took a similarly guarded approach at the time.

Two years on, how are the ICC 2012 Rules working out?

So far, our experience has been positive. In one case, the rules are truly showing their worth. That is an international construction dispute involving four parties with a complex series of contractual (and allegedly contractual) documents. Over the last couple of months, it has thrown up all of the following:

  • A challenge to an arbitrator.
  • A request for joinder.
  • A refusal by a prospective counterclaim respondent to join in the nomination of an arbitrator by other respondents and a consequent request to the ICC Court to appoint all three arbitrators.
  • A request for the separation of the advance on costs as between the principal claims and the counterclaim.
  • A request for the expedited determination of the principal claims.

All that, and the tribunal is not yet even constituted!

Under the old 1998 rules (which were more generic in their drafting and partial in their coverage), many of these applications would have been impossible, or would have been made and opposed in the most general or theoretical terms. The more detailed provisions in the 2012 Rules for multi-party arbitrations have made dealing with these procedural skirmishes easier and more rational. Together with the very helpful guide by the ICC Secretariat, the new rules are providing a coherent framework, a point of reference and a level of certainty and predictability for lawyers and clients alike.

The 2012 Rules cannot cover every eventuality, and the ICC Court remains Delphic in its pronouncements, but this case is proving to us that ICC arbitration is becoming a more accessible and more practical option for complex construction disputes.

What of the other arbitral institutions?

Many of the other major institutions have reformed or are reforming their rules with complex cases in mind. For example:

  • The HKIAC 2013 rules include new powers for a tribunal to join a party (article 27.1), to consolidate arbitrations (article 28.1), and to arbitrate claims under more than one contract (article 29.1). Crucially, none of these powers is dependent on the consent of all parties. Rather, the exercise of the power depends on the tribunal’s assessment of whether the relevant criteria are satisfied.
  • The VIAC 2013 rules include new powers of joinder and consolidation (articles 14 and 15), again to be exercised without the consent of all parties being established.

Many eyes are now on the LCIA, whose revised rules are not yet public (although it is widely anticipated that they are imminent), to see how these matters will be addressed in future LCIA arbitrations.

What does this mean for complex construction disputes?

The arbitral institutions are opening the door to complex disputes being dealt with in arbitration, with the ICC leading the way in terms of devising approaches to the practical day-to-day issues raised by such disputes. An open question is whether this will lead to a significant change in the destination of complex disputes.

It is too soon to tell whether there will be an avalanche of new arbitration filings, or a change in the profile of cases filed, and the institutions’ caseload statistics will not tell that story for some years yet. Certainly arbitration is in a better position than it was, but it is unlikely to become an automatic first choice until concrete progress is made on the perennial problem of delay and costs. And that is an issue for another post!

 

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.

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