Construction Arbitration and Alternative Dispute Resolution

Theory and Practice around the World

Renato Nazzini, Renato Nazzini

• Publisher: Informa Law from Routledge
• Year: 2021
• ISBN:
  9781000448696
• Edition: 1
• Topic: Diritto
• Subtopic: Arbitrato, negoziazione e mediazione nel diritto

This book provides comprehensive, rigorous and up-to-date coverage of key issues that have emerged in the first quarter of the 21st Century in transnational construction arbitration and alternative dispute resolution (ADR).

Covering four general themes, this book discusses:

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• the increasing internationalisation of dispute resolution in construction law;

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• the increasing reliance on technology in the management of construction projects and construction arbitration/ADR;

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• the increasing prominence of collaborative contracting in construction and infrastructure projects;

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• the increasing importance of contractual adjudication such as dispute boards in construction and infrastructure projects;

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• the increasing prevalence of statutory adjudication mechanisms across the world; and

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• the greater incidence of investment disputes and disputes against States and State entities over construction and infrastructure concessions and agreements.

Tapping on their substantial expertise in practice and in research, the contributor team of senior practitioners and academics in the area of construction law and dispute resolution provide readers with information that balances an intellectually rigorous academic contribution against the backdrop of real concerns raised in practice.

Construction Arbitration and Alternative Dispute Resolution is an invaluable resource for practitioners in the field, academics in arbitration and construction law, and post-graduate students in construction law and dispute resolution.

chapter 1

Introduction

Renato Nazzini

1.1 This book builds upon the discussion we had at a conference held at the Centre of Construction Law and Dispute Resolution at King’s College London in June 2019. The debate centred on key dispute resolution themes that would be crucial for the construction industry in the first half of the 21st Century. However, the book is not simply a collection of the papers given at the conference. All the speakers have substantially reworked and expanded their contributions and the book includes chapters by authors who did not participate in the conference.

1.2 This is the second book that the Centre publishes in the Lloyd’s Arbitration Law Library based on a dynamic and interactive research methodology that brings together academia, legal practice and industry.¹ Research themes are discussed and selected at the Centre, in light of our ongoing projects and interaction with the industry. Then, the chosen themes are debated at a conference, which allows us to test assumptions, reasoning and conclusions, and obtain feedback from a wider audience. Following the conference, further research and analysis are carried out and our findings are published in a book aimed at practitioners, academics and students around the world.

The first is R Nazzini (ed), Key Themes in International Construction Arbitration (London, Informa 2017).

1.3 Our method is always to look at problems globally. The Centre is based in London, a stone’s throw from the Royal Courts of Justice, and it is only natural that often our starting point is English law. But the commercial and technical problems facing the construction industry today are not purely domestic but global. Therefore, as the previous book, this book also addresses questions on an international level, comparing different approaches and solutions, and identifying emerging trends that defy national boundaries.

1.4 This time we identified six main themes. The first is the internationalisation of dispute resolution. Internationalisation may take place in two ways. It may occur by a process of spontaneous convergence across jurisdictions adopting the same or similar approaches to resolving a given legal problem. Or it may happen by an international treaty or other binding instrument. In the first part of the book, we discuss one example of each approach. The problem of the law governing the arbitration agreement is an example of spontaneous convergence, at least in part.² The Singapore Convention on Mediation is an example of internationalisation by treaty and its impact on, and use by, the construction industry will certainly be topical for many years to come.

Under Article V(1)(a) of the New York Convention, enforcement of an arbitral award may be refused if the arbitration ‘agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made’. However, both in the interpretation of the Convention and beyond the scope of application of Article V(1)(a) there is ample room for spontaneous convergence (or indeed divergence) across jurisdictions: see R Nazzini, ‘The Problem of the Law Governing the Arbitration Clause between National Rules and Transnational Solutions’, in this book.

1.5 The second theme is the impact and use of artificial intelligence (‘AI’) in dispute resolution. This has two aspects: the implications of the use of AI (and other new technologies) during the procurement and execution of the project for dispute resolution and the use of AI in dispute resolution itself. Needless to say, all those involved in a construction project from the procurement stage to the ‘bitter end’ of arbitration or litigation cannot afford to ignore how new technologies will change the world as we know it.

1.6 The third theme is good faith and collaborative dispute resolution. Under this broad heading, the authors discuss good faith from substantive and procedural perspectives, comparing common law and civil law approaches to the problem. This is an area in which more convergence is certainly desirable and probably achievable through appropriate contract drafting. If the parties do wish to make use of dispute avoidance and dispute resolution techniques based on collaboration and good faith rather than adversarial procedures, they should be strongly encouraged to incorporate such techniques in their contracts and train the project teams to make effective use of these techniques.

1.7 The fourth theme is contractual adjudication or Dispute Boards. In this field, there have been significant developments in the past few years, not least the 2017 edition of the FIDIC suite of contracts. This section is likely to be of great interest to all practitioners in the field.

1.8 As our fifth theme, we decided to provide a strong comparative analysis and overview of statutory adjudication regimes across the world. This will provide a unique insight into the similarities and differences of how adjudication works, from the United Kingdom to Singapore, from Canada to New South Wales (and other Australian jurisdictions).

1.9 Last but not least, we look at the risks and traps of contracting with the State in the 21st Century and how to avoid them.

1.10 This book will be of interest to construction practitioners worldwide. It is yet one more example of the commitment of the Centre of Construction Law and Dispute Resolution to the study of how best to resolve construction disputes in a way which is both practical and truly international. It is part of a continuing endeavour that would not be possible without our dedicated staff at the Centre, our visiting professors and visiting fellows, all the authors of this book and the continuing support of our publisher. To all I express my unreserved gratitude.

Professor Renato Nazzini PhD FCIArb

Director, Centre of Construction Law and Dispute Resolution

King’s College London

London-Rome, 28 June 2021

Part I

The internationalisation of construction dispute resolution

chapter 2

The problem of the law governing the arbitration clause between national rules and transnational solutions

Renato Nazzini

Introduction

2.1 Parties rarely choose the law applicable to the arbitration clause.¹ This frequently gives rise to complexities. The obvious solution – but one that, for some reason, is not yet prevalent – is for arbitration clauses to make an express choice of the law applicable to the clause itself. It is difficult not to endorse this solution. If the parties choose the law applicable to the arbitration clause, in all but rare cases, such a choice will be given effect by arbitrators and courts. The determination of the law applicable to the arbitration clause will not be problematic. And this is the end of the matter.

In this chapter, the phrases ‘arbitration clause’ and ‘arbitration agreement’ will be used interchangeably. An arbitration agreement may be an arbitration clause but may also be a stand-alone agreement. Certain issues discussed in this chapter are relevant only to arbitration agreements that are in the form of clauses in a wider contract (eg, the question whether a choice of law of the main contract extends also to the arbitration clause) while others are relevant to stand-alone arbitration agreements as well (eg, the question of the jurisdiction most closely connected with an arbitration agreement). This will be apparent in the discussion.

2.2 However, the existence of a drafting solution does not mean that the analysis of the legal solution in the absence of clear drafting on the point is unnecessary. The first reason is, quite simply, that not all arbitration clauses have an express choice of law provision concerning the law applicable to the clause itself. Indeed, this is currently the case for the vast majority of arbitration clauses. And even when there is general awareness of the need for such a choice, there will no doubt still be some arbitration clauses without an express choice of law provision concerning the clause itself because, for example, the parties could not agree on such a law or simply due to neglect or forgetfulness. After all, there is an enormous amount of literature on arbitration clauses and how to draft them. And yet there are still problematic clauses that give rise to disputes. The perfect world of perfectly drafted contracts with perfectly drafted arbitration clauses does not yet exist. So problems arise.²

The problem may arise in several procedural contexts: see L Collins, ‘The Law Governing the Agreement and Procedure in International Arbitration in England’ in J Lew (ed), Contemporary Problems in International Arbitration (Dordrecht, Martin Nijhoff 1987) 127. Furthermore, different laws may govern these different aspects of the arbitration agreement. For a useful explanation of the various nuances see K P Berger, ‘Re-examining the Arbitration Agreement: Applicable Law – Consensus or Confusion?’ in Albert Jan van den Berg (ed), International Arbitration 2006: Back to Basics? ICCA Congress Series No 13 (Montreal 2006) (The Hague, Kluwer Law International 2007) 301, 303–306.

2.3 The second reason is that the study of the law applicable to the arbitration clause provides fertile ground for an analysis of the transnational dimension of international arbitration, that is, of the way in which international arbitration interacts with multiple national legal systems and multiple national legal systems interact with each other in framing internationally accepted solutions to legal problems. This chapter contributes to this debate by examining the problem of the law applicable to the existence, validity and effectiveness of the arbitration clause when there is no express choice of such a law.³ Its aim is to set out a framework for the development of a possible ‘transnational’⁴ solution to the problem so that convergence and predictability can, with time, be achieved.

This chapter builds upon R Nazzini, ‘The Law Applicable to the Arbitration Agreement: A Transnational Solution?’ (2016) 2 International and Comparative Law Quarterly 681 and a later chapter published by the author in R Nazzini (ed), Key Themes in International Construction Arbitration (London, Informa 2018) 5. For the purposes of this chapter, it is proposed to give the adjective ‘transnational’ the widest possible (negative) meaning of anything that is different from the application of national rules applicable to domestic arbitration. The term ‘transnational’ is probably more correct than the widely used ‘international’ because ‘international’ arbitration is, in fact, an arbitration that transcends the boundaries of one given national legal system but is still governed by a set of national laws.

2.4 Perhaps most importantly, the law governing the arbitration clause may be crucial to resolving disputes in the construction sector and lack of clarity thereof may give rise to significant uncertainty and costs. Consider the following exam...