News Archive

January 2004 - Bauschiedsgerichtstag November 2002 (Construction Industry Arbitration Conference)

The conference was attended by some 50 delegates from various countries, with visitors from prominent international legal practices, arbitrators, judges, and international engineering consultancies.Formed in 1995, the Court of Arbitration for German and International Law provides an alternative venue to other European arbitration centres in Zurich, Geneva, Paris or London. The Court is active throughout the whole of Germany and also active within the European Union. The registered seat of the court is in Bad Honnef near Bonn. Upon request the court is also able to resolve disputes outside of Germany at any international location. Although the arbitral proceedings are undertaken in accordance with the ZPO (German Code of Civil Procedure) Article 1025, the court will apply the respective and applicable law of the contract with regard to any dispute.The Court of Arbitration for German and International Construction Law was formed in order to overcome the perceived disadvantages existing in Germany with respect to arbitration procedures. This procedure involved both parties each nominating an arbitrator who was supposed to act for the nominating party. The first activity of the two arbitrators was marked by the selection of the third arbitrator, a so-called chairman. Following this, one agreed upon an arbitration code according to which the legal dispute would be resolved. This frequently unavoidably lead to problems in view of fact that the arbitrators nominated by the parties were often associated with the party that had nominated them in an attempt to safeguard their own interests. In other words, the nominated arbitrator did not require the consent of the other party, nor was he entirely independent. The only neutral person to adjudicate on the dispute was thus the chairman. The Court of Arbitration for German and International Construction Law radically changed this procedure and the impartiality of the arbitrators is now guaranteed due to the fact that the arbitrators are all nominated by the Court of Arbitration, and do not require the agreement of the parties to the dispute.Lancaster House International Consulting’s Director Mr. L G. Hilton appeared as a guest speaker at the conference and addressed the delegates on the subject of the most common causes of disputes, and the preparation and prosecution of contractual claims in the international construction industry. Mr Hilton has worked in the international construction industry for over 30 years, and has extensive experience in the preparation and the prosecution of major contractual claims. He has also acted in a supporting role in the preparation of pleadings in close liaison with international construction lawyers on major litigation and arbitration cases.

In dealing with the most common causes of disputes on international construction contracts, he cited badly drafted tender and contract documents, the failure to adequately define interfaces between the executing parties, design changes and other contract variations leading to an increased scope of work, additional costs, disruption and delays, delayed approval procedures, and failure to give notice in accordance with the requirements of the contract. The typical phases of the preparation and prosecution of contractual claim were addressed in detail. Briefly these covered: Phase 1. The review of the project background, including: Preliminary Investigations
• Document management systems and review of key project documents;
• Interviewing key staff;
• Assessing reliability of statements;
• Assessing reliability of documents and identification of missing issues, including perceived weaknesses.
• Definition of specific issues/claims including, review of all claim issues and supporting documents.

Phase 2. The evaluation of the database, including: Claim Analysis and Preparation
• Document production and highlighting/coding of subjective data;
• Implementation of computerised database and chronological listing of subject correspondence;
• Preliminary analysis and evaluation of entitlements,
• Identification of additional documentation required for analysis, and the identification of discoverable documents (depending on the applicable legal system);
• Programme analysis, damages/cost analysis and technical construction analysis.
• Preparation of a preliminary report addressing risk exposure including strengths and weaknesses of any settlement/proposed settlement strategy;
• Drafting of a detailed statement of claim prepared with a view to achieving a negotiated settlement without having to refer the matter to arbitration or litigation.

Phase 3. Dispute Resolution through further and better particulars:
• Assistance with discovery and interrogatories;
• Provision and drafting of experts' reports;
• The exchange of experts' reports, including an analysis of the differences thereof;
• Provision of a possible revised strategy regarding settlement negotiations;
• Revised position/assessment of the strengths and weaknesses of specific issues/claims and the provision of a further report which would take due cognisance of the expert's findings and if necessary the provision of a further analysis of the programme, damages, and technical analysis.

Phase 4. Arbitration/Litigation. (In the event of the parties being unable to resolve the dispute out-of-court then this Phase would typically include the following (as far as the role of Lancaster House International Consulting would be concerned):
• Providing expert evidence at the trial/hearings;
• Providing assistance during the trial/hearing, researching further documents and issues, assisting counsel/lawyers;
• Researching further specific issues for cross-examination and re-examination, providing narratives on specific issues, including the provision of visuals and/or graphics.

Our sincere appreciation for the opportunity to speak at this conference was extended to Dipl.-Ing. Thomas Rein of the Court of Arbitration for German and International Law. The event proved to be a most interesting and informative venue covering a range of topics in addition to our own. A word of appreciation goes out to Thomas Kessler of the Frankfurt office of Jones Day, US attorneys; whose persuasiveness finally convinced Mr. Hilton to address the delegates at the conference in the German language! Lancaster House International Consulting is appointed by the Court of Arbitration for German and International Construction Law as an alliance partner for the provision of independent reviews, expert witness statements, and reports in relation to matters coming under German and international arbitration proceedings.

For further information on the German Court of Arbitration please refer to: www.schiedsgericht.org

November 2003 - ICC and FIDIC Conference

We attended the ICC and FIDIC Conference in Paris at the end of October this year where the theme was "The Resolution of Disputes Under International Construction Contracts". This two day conference was well attended with over 160 delegates from 45 countries with the subject focus on claims and disputes under FIDIC Contracts followed by details on the nature of ICC arbitration and the post arbitration phase.

Of particular interest to us were the sections on the changes to the standard forms of contract which have been introduced to obviate or reduce the difficulties that were being experienced in resolving disputes through litigation or arbitration. New clauses which introduce the demise of the traditional role of the Engineer and now provide for the operation of Disputes Boards that operate under the FIDIC forms of contract (the Dispute Adjudication Board or DAB) and the World Bank's Procurement of Works document (the Dispute Review Board or DRB)

There has been a move in recent years from persuasive to mandatory settlement whereby the DRBs previously made recommendations for resolution of the dispute, whereas now, under both the FIDIC and World Bank documents, the boards are empowered to make binding decisions or recommendations which can only be overturned by an arbitral tribunal. These moves are perhaps a reflection of the increasing role, commercial importance and recognition of the economic needs of the developing economies of the third world. One consequence of this is a swing away from traditional utilization of common law style agreement towards those more in harmony with civil code jurisdictions. It will remain of great interest to those of us in the industry to see how international contracting parties react to the new provisions and procedures and whether the respective Dispute Boards lead to any significant change in the number and type of disputes being submitted than has historically been the case under immediate access to arbitral tribunals.

Notwithstanding these developments, we believe that all parties to a contract, whether domestic or international should be adopting an altogether less adversarial, more cooperative approach towards dispute avoidance. We strongly advocate this through higher standards and improved methods of project procurement route selection, tendering procedures and documentation subsequently supported by quality contract and claims management. LHi have always advocated that prevention is better than cure. The simple truth is that by taking the right decisions and making the right level of upfront investment at an early stage in the project cycle, the greater the commercial return. This includes avoiding or dramatically reducing the potential for damaging and costly dispute resolution.

Also of keen interest to us at the Conference, were the discussions on the influence of different jurisdictions upon arbitral proceedings and enforcement of ICC based awards under different conventions as well as the role of the arbitral tribunal and proceedings under Common Law and Civil Law jurisdictions when the dispute resolution process has failed for whatever reason. This is of practical relevance, especially when the new procedures are presently in their relative infancy. It was pointed out however by one speaker that "success" for DBs (so far as their experience as a contractor was concerned) was rather limited - the majority of decisions or recommendations had not been accepted and the dispute thus moved on to arbitration or litigation. Nevertheless, it was also recognized that DBs do greatly accelerate the process of resolution, are far less costly and the parties to the dispute do have the benefit of an independent expert's opinion. Something to serously consider before rejection and embarkation on a lengthy and costly alternative process.

Lastly, but by no means least, we were able to meet with both old and new colleagues, through the networking opportunities, from the UK, Germany, Singapore and Thailand. It was fascinating to see the changing nature of the participants at such conferences over the past 25 years, with an increase in the number of claims consultants, lawyers and dispute resolution practitioners at the apparent expense of engineers and contractors. Both FIDIC and the ICC are to be congratulated on the organization and content of their most interesting and informative conference. We certainly felt it was worthwhile and thoroughly enjoyed the event, despite the Parisian weather's attempts to dampen our spirits.