One of the greatest challenges facing today’s major projects is how to effectively and fairly manage the dispute process. Over the past two decades, dispute resolution techniques including arbitration, review boards, mediation and partnering have been built into increasing numbers of construction contracts. The techniques do not have to be mutually exclusive, and they often are used in combination. Still, arbitration is the main alternative to litigation. 

As megaprojects grow increasingly multinational, with stakeholders from all over the world working together, arbitration conducted under the rules promulgated by the International Chamber of Commerce (ICC) has seen unprecedented growth. In 2016, for example, a total of 966 new cases were filed in the Americas involving 3,099 parties from 137 different countries. Of these cases, four out of every five were between parties from different countries, according to the ICC.

Arbitration generally is perceived to be a faster, less expensive alternative to court litigation because it allows for more limited discovery and a less formal process with no right of appeal. In addition, ICC arbitration is well-suited to disputes between parties from different countries, providing “common ground” rules. 

ICC arbitration tends to have less discovery than arbitrations administered by some other widely recognized organizations. Of course, sometimes a party would be better off in presenting or defending a claim if it were able to conduct more in-depth discovery, in which case ICC arbitration would be less attractive. However, as the parties add discovery requirements, the advantage of speed and cost savings quickly wanes.

Arbitration also offers parties the ability to select the decision makers, a crucial early step that often does not get enough attention. Frequently, each party selects one arbitrator, and they collectively choose the president of the tribunal. Alternatively, the ICC may select the tribunal. Other organizations provide a list of potential arbitrators, and the parties provide input. Parties need to carefully weigh the background and experience of the arbitrators they are considering, including their technical education or experience and legal philosophy.

Most construction disputes involve both fact and expert witnesses. One technique routinely applied in ICC arbitration is for expert witnesses to be directed to work together to find common ground, and then present to the tribunal only those elements still in dispute. This approach is less common in arbitrations administered by other bodies. ICC arbitration flexibility also allows for experts to be questioned together by the tribunal in a process commonly known as “hot-tubbing.” Not only can this process be more efficient and cost-effective, but it can give a significant advantage to a party who retains experts familiar with and skilled at the process. 

One disadvantage to arbitration is that it lacks an appeal process. While obviously a time-saver, it can deprive a party of recourse for a perceived bad decision. Any challenge to the decision is difficult. Another disadvantage of arbitration is that it can be complicated or impossible to consolidate multiple disputes or join other parties unless they agree or have an arbitration clause that allows for that. This could be a major problem in today’s multiparty disputes. A possible disadvantage in ICC arbitration is that the ICC reviews arbitral awards before they are officially issued, which can delay the process for weeks or even months.

Nevertheless, the increased use of ICC arbitration and its record of success in the Americas is noteworthy—especially for what it tells us about what is preferred by parties and what works in today’s complex disputes.

If you have an idea for a column, please contact Viewpoint Editor Richard Korman at kormanr@enr.com.