DAB和国际仲裁要点+presentation+on+arbitration+14+March+2013

DISPUTERESOLUTION

ShouravLahiri,PartnerToday’sTalkLookatsomeformsofdisputeresolutionusedincertainstandardcontractsDescribetheseprocessesConsidersomeoftheadvantagesanddisadvantagesofeachofthemIllustratesomeoftheissuesbyrealexamplesDiscusssomeparticularissuesthatarerelevanttoArbitration2023/1/31Multi-tierdisputeclausesMulti-tierdisputeclausesarenowverycommonininternationalProjects

Importanttounderstandthevariouslevelsofdisputeresolutioninordertomaketherightselectiontounderstandtheselectionthathasbeenmadetooperatethedisputesclauseeffectivelyifadisputeoccurs

Whatisamulti-tierdisputesclause?VariouslevelsofdisputeresolutionwhichthepartiesagreetogothroughUsuallyarbitrationisthelastlevelAprocessbestavoidedbecauseoftime,costandpressurePurposeistoresolvedisputeswithoutneedforarbitrationSometimesearlierprocessesprovidean“interim”decisionasolutionthatwillbetemporarilybindingbutcanbereviewedinarbitrationlater

Multi-tierdisputeclausesSomeexamplesFIDICRedBookEngineer’sDeterminationDisputeAdjudicationBoardAmicableSettlementArbitrationTheHongKongGovernmentFormofContractDecisionbytheEngineerMediationArbitration2023/1/31MeetingsofSeniorExecutivesSomecontractsrequireacompulsorymeetingofrepresentativesofthePartiesPerhapsEmployerRepresentativeandContractorRepresentativeThenSeniorExecutivesfrombothpartiesCanovercomeproblemofunwillingnesstomakethefirstmoveMeetingsofSeniorExecutivesareoftensuccessfulExecutivePrideAwayfromanypersonalanimosityCommercialimperativesandanewview6TheEngineer’sDecision/DeterminationFIDIC

WhenevertheseConditionsprovidethattheEngineershall….agreeordetermineanymatter,theEngineershallconsultwitheachPartyinanendeavourtoreachagreement.Ifagreementisnotachieved,theEngineershallmakeafairdeterminationinaccordancewiththeContract,takingdueregardofallrelevantcircumstances.

EachPartyshallgiveeffecttoeachagreementordeterminationlessanduntilrevisedunderClause20[…Arbitration].TheEngineer’sDecision/DeterminationHKGov’tForm(sameastheoldFIDICRedBook)

“IfanydisputeordifferenceofanykindwhatsoevershallarisebetweentheEmployerandtheContractor…….itshallbereferredtoandsettledbytheEngineerwhoshallstatehisdecisioninwriting. …… SuchdecisionshallbefinalandbindingontheContractorandtheEmployerunlessanduntil..revisedinmediationorarbitration

2023/1/31TheEngineer’sDecision/DeterminationUsedtobethenormalwaythatalldisputesunderengineeringcontractswereresolved.ProblemsEngineersareoftenbeingaskedtoreviewtheirowndecisionsEngineersveryoftenclearlynotimpartialEngineersaremoreconcernedabouttheirownpositionsDisputeAdjudicationBoards(“DAB”)OneorthreeindependentandimpartialpersonsselectedbythecontractingpartiesDABmakesdecisionsin“realtimeoftheContract”andquickly(usually42to84days)DecisionsusuallybindingunlessanduntilreviewedbyarbitrationNoticeofdissatisfactioninshortperiod(usually28days)FIDIC“SilverBook”1999–DAB DisputesshallbeadjudicatedbyaDAB….. ThePartiesshalljointlyappointaDABbythedate28daysafteraPartygivesnoticetotheotherPartyofitsintentiontoreferadisputetoaDAB…

TheDABshallcomprise,asstatedintheParticularConditions,eitheroneorthreesuitablyqualifiedpersons…IfthenumberisnotsostatedandthePartiesdonotagreeotherwise,theDABshallcomprisethreepersons. IftheDABistocomprisethreepersons,eachPartyshallnominateonememberfortheapprovaloftheotherParty.ThePartiesshallconsultboththesemembersandshallagreeuponthethirdmember,whoshallbeappointedtoactaschairman.FIDIC“SilverBook”1999–DAB

IfalistofpotentialmembersisincludedintheContract,themembersshallbeselectedfromthoseonthelist… TheagreementbetweenthePartiesandeitherthesolemember(“adjudicator”)oreachofthethreemembersshallincorporatebyreferencetheGeneralConditionsofDisputeAdjudicationAgreementcontainedintheAppendix UnlessotherwiseagreedbybothParties,theappointmentoftheDAB(includingeachmembers)shallexpirewhentheDABhasgivenitsdecisiononthedispute….unlessotherdisputeshavebeenreferredtotheDABbythattimeFIDIC“SilverBook”1999–DAB

Within84days,orwithinsuchotherperiodasmaybeproposedbytheDABandapprovedbybothParties,theDABshallgiveitsdecision.

IfeitherPartyisdissatisfiedwiththeDAB'sdecision,then[he]may,within28daysafterreceivingthedecision,givenoticetotheotherPartyofitsdissatisfaction IfnonoticeofdissatisfactionhasbeengivenbyeitherPartywithin28daysafteritreceivedtheDAB'sdecision,thenthedecisionshallbecomefinalandbindinguponbothParties.”

FIDIC“SilverBook”1999–DAB

….NeitherPartyshallbeentitledtocommencearbitrationofadisputeunlessanoticeofdissatisfactionhasbeengiveninaccordancewiththisSub-Clause.FIDIC“RedBook”1999–DABAdifferentapproachtothepreviousone

DisputesshallbeadjudicatedbyaDABinaccordancewithSub-Clause

…ThePartiesshalljointlyappointaDABbythedatestatedintheAppendixtoTender.

If,….[apartyhasnotappointedhismemberoftheDABornoChairmanhasbeenagreed]…thentheappointingentityorofficialnamedintheAppendixtoTendershall,upontherequestofeitherorbothofthePartiesandafterdueconsultationwithbothParties,appointthismemberoftheDAB.FIDIC“RedBook”1999–DAB

Ifadispute(ofanykindwhatsoever)arisesbetweenthePartiesinconnectionwith,orarisingoutof,theContractortheexecutionoftheWorks,includinganydisputeastoanycertificate,determination,instruction,opinionorvaluationoftheEngineer,eitherPartymayreferthedisputeinwritingtotheDABforitsdecision….

DisputeReviewBoards(“DRBs)IndependentBoard(3or1)FormedatstartofprojectVisitssiteregularlyReceiveskeyprojectinformationMeetspartiesandlistenstopresentationsinrelationtoanydisputesandsuggestsonnonbindingsolutionsonaconfidentialbasisSuccessreliesonpartiesacceptingrecommendationsoratleasttakingnoteofthem17DABvsDRBDistinguishfromDisputeReviewBoards(DRBs）DRBsnodecisiononlyrecommendation

DRBstendtospendmoreefforttryingtofindanagreement

AdvantagesofDABsAdecisionwhenthecontractneedsitAdecisionbypeoplechosenbythePartiesAdecisionatanearlystageInvolvingthe“decisionmakers”Lessadversarial/formalthanarbitrationPartoftheadministrationofthecontractSharedCostDABAdvantagesofthe“RedBook”typeofDABvs“SilverBook”typeofDABDABiswellinformedDABcanmakeknownitsviewsonsomeissuesbeforetheybecomedisputesDrivesPartiestofindsolutions/AbandonfixedpositionsDisadvantage

CostWhythedifferentapproaches?Differentskillsfordifferentstages?DABs–CaseStudyITheChannelTunnel7bn.PoundprojectforatransportprojectfromEnglandtoFrance

3tunnels,innovativerailwaysystemjoiningtwoverydifferentsystems

Largeterminalcomplexes

Anglo/FrenchEmployer

Privatelyfinanced–noGovernmentsupport

20DABs–CaseStudyIVeryunusualLawClauseCommonprinciplesofEnglishandFrenchLawTheDABwascomprisedofaFrenchProfessorofLawandapanelof4engineers

Over20disputes,someverylarge(overabillionpoundsononeoccasion)

Only4challenges

21DABs–CaseStudyIOnlyoneproceededtoaninterimarbitrationaward

Wasitsuccessful?2023/1/31DABs–CaseStudyIIARoadProjectinSlovakiaContractortobepaidasto80%inJapanesYenand20%SlovakCrownsRedBookbutPartiesneverappointedtheDABContractorsufferedenormouscurrencylostandclaimedthatitarosefromachangeoflawandwasthusrecoverable23DABs–CaseStudyIIUnsafeforcontractornottooffertoformaDABeventhoughclearneithersidewouldacceptitsdecisionDABofthreeleadinglawyersDecisionnotacceptedandsoArbitrationbeforethreeleadinglawyersWasteoftimeandmoney24MediationTheCentreforEffectiveDisputeResolution'sdefinition: “Mediationisaflexibleprocessconductedconfidentiallyinwhichaneutralpersonactivelyassistspartiesinworkingtowardsanegotiatedagreementofadisputeordifference,withthepartiesinultimatecontrolofthedecisiontosettleandofthetermsofresolution”.25MediationTheKeyIssueisConfidentialityUsuallyspecifiedintheagreementtomediateNowthelawinHongKongThewholeprocess

ExistenceofthemediationButmayneedtotellCourt/ArbitratorthatitwasattemptedWhatissaidandpapersproducedOverthecaucusmeetingswiththeMediatorOccasionallyjudgessaystheconfidentialityagreementdoesnotbindstheCourt–nowrare26MediationFacilitative/EvaluativeSometimestheMediationagreementisspecificUsuallybetterlefttotheMediatorTheMediator’sReportNowrarebutaconfidentialrecommendationtothepartiescanbehelpful27Mediation–CasestudyIPowerStationProjectdelayedforlongperiodContractorsayssomedelayswerecausedbyEmployerandsotimewas“atlarge”becauseofdefectincontractEmployersettledclaimsforcostofdelayfromtheContractorandmadeaclaimagainsttheDraftsmanofthecontractPartiesagreetogotoMediationKeyissuewasdidtheEmployerhavetopaytheclaimsbecausetheContractorhadnotcompliedwiththeNoticerequirementsintheContract.EmployersaysNoticenotaconditionprecedentbutdraftsmansaystheywereMediatordecidedthattherecouldbenosettlementuntilthisissuewasresolvedsoSitswiththedecisionmakersasapanelThelawyerstostatetheircaseandeachcrossquestiontheotherPaneltheninprivatediscusswhichargumentseemedmoreconvincing28Mediation–CasestudyIITheServiceRoadsforanindustrialestateContractrequiredreinforcingmeshtobeintop1/3rdRoadcompletedbutdiscoveredmeshinbottom1/3rdEmployerdemandsremoval/replacementofentireroadCostwouldbeenormousandEmployersaysContractormustindemnifyhimfromtenantclaimandlostrentsEmployer’sexpertsaysroadwillinevitablyrequiremoremaintenanceoverits20yearprojectedlifeContractor’sexpertsaystherewillbenoproblemandreplacingtheroadisdisproportionatePartiesgotomediationSolutionisthatroadremainsandContractoragreesmaintenancecontractguaranteedbyitsparent29Mediation–CasestudyIIIUKmilleniumbuildingMediationoverthecostofamajorUK“millenium”buildingBecameclearthatthe“Government”representative’sauthoritywasjustnothighenoughEventuallyhadameetingwithmoreseniorGovernmentemployeeHisconcernwaspubliccriticismatagreeingthislevelofincreaseAgreedthatMediatorwouldwriteanopinionastowhyinhisjudgmentsettlementatthislevelwasjustifiedContractoragreedtheMediatorwouldbefreetodiscussthemediationifcalledupontodosoInfactMediatoraskedforavailabilitybyPublicAccountsCommitteebutnevercalled30Mediation–somekeyissuesSelectionofmediatorThepartiestrustandconfidenceinthemediatoriscriticaltoasuccessfulmediationHeisthefacilitator,setstoneformediation,needstopersuadethepartiestocompromiseDifferentskillstoanarbitratorSpecialistorGeneralistLawyerornonlawyerbutNeedstobetrainedandexperiencedinmediationNeedstohaveright“bedside”manner–patience,abilitytoabsorbaparty’sfrustration,angeroranxietyNeedstobestrongandpersuasivewithcertainpartiesMaybecomediators31Mediation–somekeyissuesWhentomediateNottooearlybutnottoolateWhenthereissufficientinformationOvercomingtheconcernthatproposingmediationisasignofweakness?InvolvementoffacilitatortodesigntheADR/MediationstructureOnceMediationagreed,involvethemediatorbeforethehearingEnsurethereisauthoritytosettleThisneedstobedonebeforethemediationHowwillitbeobtained?HongKongGovernmentexperienceofpresetbudgetMakesurethedecisionmakerattendsthemediation32Mediation

CriticismofMediationNodecisionisguaranteedCanbeheavycostifnosettlementButIdentifieskeyissuesTestsstrengthoftheargumentsCanpreventescalationofdisputeOftenresolvespartsofthedisputeFormallyPracticallyOftenwillresultinanagreementastohowbest/mosteconomicallytoachieveasettlementSometimesobscurestheotherADRopportunities33MediationMediationparticularlysuitableforsituationswhereneitherpartycanaffordforthebusinessrelationshiptocollapsePPPcontractsIToutsourcingcontracts34

Arbitration

ArbitrationAprivatedecisionmakingprocess–“rentajudge”AlmostalwaysfinalandbindingAdecisionbyoneorthreearbitratorsUsuallyinvolveswrittenstatementsofeachparty’spositionAformalhearingOftenwitnessesbothastothefactsandexpertsCanbeslowandexpensiveVastproportionofarbitrationssettleReputationisthatChineseContractorswillnevergotoarbitrationDescriptionofICCarbitrationandaCaseStudylaterArbitration

Unlesssettledamicably,anydisputeinrespectofwhichtheDAB'sdecision(ifany)hasnotbecomefinalandbindingshallbefinallysettledbyinternationalarbitration.

UnlessotherwiseagreedbybothParties: (a)thedisputeshallbefinallysettledundertheRulesofArbitrationoftheInternationalChamberofCommerce, (b)thedisputeshallbesettledbythreearbitratorsappointedinaccordancewiththeseRules,and (c)….FIDICArbitrationThedisputeresolutionclausesinaContractareimportantbutfrequentlynotenoughattentionispaidtothem

PartieseitherbelievetheyarenotimportantbecausetheybelievethattheywillnothavetorelyontheseprovisionstoresolvetheirdisputesordonotwanttoraisetheissueinthenegotiationoftheAlso,veryoften,ContractorsthinktheyhavenochoicebuttoacceptwhattheOwnersspecify,whichisnormallyarbitrationinthehostcountry–thismightsometimes

bebecausethelocallawrequirestheprojectsinquestiontobesubjecttolocalarbitration37ArbitrationArbitrationasaformofdisputeresolutiontoultimatelyresolvetheParties’disputeisonlyusefulfortheContractorifitwillresultinanarbitralawardthatcanbeenforcedagainsttheEmployerandhisassetsChoiceofarbitrationprovisionisveryimportantindeterminingenforceabilityFirstthingtocheck–whatdoesthelawofthehostcountrysayaboutarbitrationofdisputesarisingundertheContract?thelocallawmightsayadisputeundertheContractcanonlybedeterminedbylocalcourtsorlocalauthorities38Arbitrationthelocallawmightsayadisputemustbereferredtoarbitrationbylocalarbitrationbodyandinthehostcountry,forexamplethiscanbethecaseinthePhilippinesthelocallawmightsayinternationalarbitrationisallowedbutonlywithconsentofacertainauthorityafterthedisputehasarisen,forexamplethisisthecaseinIran39ArbitrationSomeothervitalissuesfortheContractortoconsiderare:WhethertochoseanInstitutionalArbitrationsuchas:ICCCIETACSIACBACHKIACOradhocsuchasUNCITRAL

ArbitrationHowtheTribunalwillbeformed

OneArbitratororthree?

WhethertheTribunalislikelytobeindependentTheLanguageoftheArbitrationWhethertheproceduresincludemattersthatheisnotfamiliarwithDiscoveryChessclock

WilltheAwardbeenforceable?

ICCArbitrationFormofArbitrationadministeredbytheInternationalChamberofCommerce(“ICC”)underitsRulesCertainfunctionsareperformedbytheInternationalCourtofArbitrationoftheICCbutitdoesnotitselfdecidetheDisputesCertainadministrativefunctionsareperformedbytheSecretariatoftheICCTypicalStepsinanICCArbitrationStep1RequestforArbitrationClaimantsubmitsaRequestforArbitrationtotheSecretariattogetherwithanAdvancePaymentSecretariatnotifiesPartiesofreceiptofRequestRequestshouldcontainCertainformalinformation,suchasnamesandaddressesDescriptionofNatureandCircumstancesoftheDisputeStatementofwhatisclaimed(includingamount)InformationabouttheArbitratorsNumber(1or3)ifagreedIfnotagreed,Claimant’sproposalastonumberOtherinformationaboutidentityofArbitratorsifagreed,orifnotagreed,hisproposalsinrelationtheretoCommentsreplaceofarbitration,arbitrationrulesandlanguageTheSecretariatsendsacopyoftheRequesttotheRespondent;TypicalStepsinanICCArbitrationStep2AnswertotheRequestforArbitrationWithin30daysfromreceiptofRequestfromSecretariatRespondentfilesanAnswer.AnsweriscommunicatedtotheClaimantbytheSecretariatAnswershouldcontainRespondent’sresponsestothemattersrequiredtobeincludedbytheClaimantintheRequestAnyCounterclaim(s)mustbefiledwiththeAnswerandcontainDescriptionofNatureandCircumstancesoftheDisputegivingrisetotheCounterclaimAStatementofwhatisclaimedbytheCounterclaim(includingamount)Step3–ReplytoCounterclaim(ifany)Within30daysfromreceiptofCounterclaimfromSecretariatClaimantfilesaReplyTypicalStepsinanICCArbitrationStep4TheAppointmentoftheArbitralTribunal1or3ArbitratorsdependingonwhatPartieshaveagreedIfnoagreement,1ArbitratorunlessICCCourtthinksthattheDisputesmerit3If1arbitratorHeisappointedbyICCCourtunlessPartiesagreedthatthereshouldonlybeonearbitrator,andTheynominatedapersonforapprovalbyICCCourtwithin30daysofRespondent’sreceiptoftheRequestforArbitrationIf3ArbitratorsEachPartynominates(inRequestandAnswer)onepersonforconfirmationbyICCCourtIfnonominationICCCourtappointsChairmanappointedbyICCCourtunlessPartiesagreesomeotherprocessTypicalStepsinanICCArbitrationStep5:TermsofReferenceOncetheArbitralTribunalisconstitutedandtheAdvanceFeepaidtheSecretariattransmitsthefiletotheTribunalTribunalthendrawsupadocumentdefiningitsTermsofReference(“ToR”)TheToRcontainsCertainformalinformationUnlessTribunaldecidesotherwise,alistofissuestobedeterminedTheToRissignedbythePartiesandtheTribunalandthereafternopartycanmakeaclaimoutsidetheToRwithoutTribunal’sconsentStep6ProceduralTimetableAtthetimeofthedrawinguptheToR,orassoonaspossiblethereafter,Tribunal,afterconsultingparties,fixesaprovisionaltimetablefortheArbitrationTypicalStepsinanICCArbitrationStep7EstablishingtheFactsandUnderstandingtheArgumentsUsuallythroughwrittensubmissionsoftheparties,ahearingorhearingsatwhichWitnessesoffactgiveevidenceandcanbequestionedExpertsgiveevidenceandcanbequestionedEachParty’srepresentativesmakessubmissionsWrittenopeningandclosingsubmissionsbyeachPartyStep8TheAwardTheRulesrequiretheArbitralTribunaltorenderitsfinalAwardwithin6monthsfromtheToRbuttheICCCourtcan,andalwaysinpracticedoes,extendthisperiod.BeforeanyawardissigneditmustbeapprovedbytheICCCourtastoitsform.Enforcement:NewYorkConventionSignatoryCountriesarerequiredto:RecognisethatdisputescanbesubmittedtoandresolvedbyarbitrationEnforcearbitrationagreementsbyrefusingtotakejurisdictionoverCourtproceedingscommencedincontraventionofanarbitrationEx