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The Guide to Advocacy - Third Edition

Advocacy in Construction Arbitration

There are a number of aspects that render construction arbitration different from its general commercial cousins; and which, therefore, require particular attention, rigour and strategic consideration (in addition to deep understanding of the legal and technical issues that arise) in order to successfully prosecute and defend construction claims in an arbitration context.

What makes construction arbitration different

Construction disputes are in fact hugely varied in their subject matter. They do, unsurprisingly, arise out of construction projects – offshore or onshore, above or beneath ground or sea level, power, oil and gas, rail, road, sports stadia and other infrastructure.

The disputed issue (or more often, issues) can arise from events that occur well before construction has commenced, or long after its completion. They may relate, among other things, to liability for design delays or inadequacies; construction defects; responsibility for delays to completion; and payment for additional works said to be beyond the agreed contractual scope. Indeed, the dispute may not relate to the act of construction at all.

In addition, construction arbitrations tend to raise important matters of contractual interpretation and legal principle: the operation of indemnities, warranties, enforceability of liquidated damages and penalties,[2] recovery of consequential or indirect losses, the scope of insurance coverage; causation and global claims,[3] extent of and allocation of liability and responsibility for design and interpretation of applicable engineering codes and standards;[4] and rights of termination (to name a few).

In that regard, construction projects unavoidably involve many parties beyond simply the project employer or owner and the contractor responsible for the works in question. The contractor itself may be comprised of a joint venture of several parties between which responsibilities have been divided. There are usually numerous subcontractors (given contractors rarely have the ability to complete a large and complex scope on their own), architects, engineers; and indeed other contractors or consultants working on site with whom the contractor is obliged to coordinate. The picture is even more complicated where a project is financed by lenders (who often have certain rights and control over matters such as the operation of termination rights).

More than other arbitrations, construction arbitrations may, therefore, involve the examination of the performance and actions of many, many parties, even though the proceedings and allocation of liability may ultimately be determined as between two parties (whether owner and contractor, contractor and subcontractor, contractor and designer, or otherwise).[5]

Part of the challenge for construction practitioners lies in the fact that many or all of these disputed issues can arise in one set of proceedings. A contract termination may be the culmination of delays to progress and various defective works (along with other alleged contractual breaches) over an extended period. The employer would then claim all costs of completing the project via other means, and losses suffered for the delay in completion. This is usually met with counterclaims by the contractor for losses arising out of wrongful termination, payment for alleged variations and out of scope work, extensions of time and prolongation and disruption costs said to have been caused by the employer (or others for whom the employer was responsible).

In addition, contractual terms (always voluminous particularly given the technical specifications that are incorporated) are deployed so far as possible to argue for limitation or expansion (as the case may be) of types of recoverable damages and the required scope of works, including more generally, overall responsibility for the particular problem that has arisen.

At their simplest, construction arbitrations require examination and analysis of the events on a project on an almost daily basis over a number of years.

Construction arbitrations arise across many jurisdictions, and under all major institutional rules. The disputes can be governed by civil or common law. The flexibility of arbitration procedures, the truly international nature of construction projects that involve parties from numerous jurisdictions and legal backgrounds; and the availability of experienced arbitrators familiar with the contractual frameworks and other key legal and technical evidentiary matters, mean that arbitration is often the favoured dispute resolution mechanism on large construction projects.

There is no set of rules or procedural ‘must-haves’ that one must be familiar with for successful conduct of construction arbitration. Construction arbitration requires expertise in the legal issues that repeatedly arise in a construction setting; detailed understanding of the contractual web of responsibility; a rigorous approach to analysis of the contemporaneous documentary record; and a diligent and considerate approach to the presentation to the tribunal of difficult technical concepts and analysis.

The devil is in the detail

There is no escaping the decidedly unglamorous ‘document heavy’ mantra that is synonymous with construction arbitration. It is certainly true that the sheer quantity of documentation involved is something that sets construction arbitrations apart, and that renders successful conduct of construction arbitration particularly challenging.

Clearly, in the context of the types of claims identified above, relevant documents can include daily, weekly and monthly reports, various iterations of design drawings and specifications, geotechnical data, site photographs, programmes and schedules, documents evidencing man hours and equipment for each day and working area; and claim documentation from payments to third parties that a party seeks to recover. As with other arbitrations, internal email correspondence, which is always vast given the number of key personnel who tend to be engaged on large and long-running projects, is always of particular interest.

In light of the numerous parties involved in construction projects, early consideration must be given to third parties that may have documentation of assistance. At times there may in fact be a contractual right to access or request such documentation. Regard also, therefore, must be had in the disclosure phase to making requests for documentation produced by or from third parties of which the opposing party may have possession.

Commencement of analysis of this large amount of documentation at an early stage is essential. Good management, methodical and detailed review, and familiarity with the underlying contemporaneous documentation can often prove to be the key differences between the parties in construction advocacy.

Fortunately, the advancement of specialist dispute document management platforms makes this somewhat more manageable in respect of the transfer of documents contained in project document platforms and email accounts; and the ability to run advanced searches with various parameters.[6] However, this task remains, undeniably, a very substantial one.

It cannot be assumed that significant document review and investigation can wait until the formal procedural step of disclosure. An assessment of events over a lengthy period of time on an almost daily basis is often necessary in construction disputes before judgement can properly be made as to a party’s strongest and weakest arguments to respectively focus on and avoid (and therefore refinement of the case theory). Delaying this exercise results in counsel having to juggle first-level review of several thousands, if not hundreds of thousands, of documents with the very first assessment of the potential impact and significance of such documents – through interviews with witnesses and experts. Supplementing earlier work, in which the likely roadmap for a party’s case has been determined, is an entirely different exercise to grappling with the issues from a standing start when one is already in the throes of meeting procedural deadlines.

In addition, a respondent or counterclaimant must appreciate that the claimant will have spent many, many months preparing their case before proceedings commence. That work will have often included the benefit of expert input including sifting through programmes and detailed daily records of events; and assistance with the interpretation of highly technical documentation.

We need not repeat here the differing expectations of those from civil versus common law backgrounds in respect of the likely volume of disclosure. However, even if the parties agree that they shall produce nothing more than what they wish to rely upon (which is unusual in the authors’ experience), exchange of a large amount of material in construction arbitration is unavoidable, whatever the background of the arbitrators or the parties, or applicable rules. Ultimately, one has to produce the documentation that will discharge its burden of proof. In a construction context, that will often require disclosure of day-to-day project records.

Tactical issues

Aside from grappling with the substantive and legal issues at an early stage, there are additional tactical considerations that will set the tone and parameters for the arbitration going forward.

In various respects, such matters are precisely those faced by general commercial arbitration practitioners in large complex disputes: What characteristics should the arbitrators ideally have? How long should the hearing (or hearings) be? Should the arbitration be split into phases? However, a few of these issues are worthy of brief comment specifically in the context of construction arbitration.

Selection of arbitrators

Obviously the manner in which arbitrators will manage the arbitration will to some extent be a function of their legal background, albeit arbitration is ultimately a consensual process.

Counsel nominating party arbitrators (or trying to agree a process for selection of a president, where relevant) will have regard not only to the governing substantive law of the contract, but also to the nationality of the various parties involved and the legal system they are each used to (i.e., civil or common law); the legal system that their advisers practise in and, therefore, the evidential style of presentation and advocacy that they prefer; and the amount of technical detail and possible length of hearings that the tribunal will be expected to grapple with. In addition, parties often wish to overlay the above considerations with what they perceive to be the merits of their clients’ case (albeit a perception determined at this relatively early stage). An arbitrator who takes the most common-sense commercial view may be preferable to one who gives priority to the precise and literal wording of a contractual term. None of these considerations would surprise an arbitration practitioner.

The real question in construction arbitrations is whether the arbitrators (or some of them, if a panel of three) should have at least some expertise in construction law, whether as previous arbitrators, judges or experienced practitioners. There is much to be said for this approach, both for the benefit of the parties, and the tribunal themselves.[7] Arbitrators with relevant experience understand and are familiar with the legal and technical concepts that arise, as well as the contractual frameworks that operate in large projects. In addition, they are used to managing issues that present evidential challenges in construction cases, such as complicated delay analyses, and the manner in which to examine global claims and causation. These individuals also appreciate and expect the intensive and substantial workload (often taking place over a number of years) that may be required from them over the course of numerous lengthy substantive hearings.

Consideration must be given to the appropriate procedural course

It is not unusual for complex construction cases in the courts of common law jurisdictions[8] to be the subject of trials well over six months long (or indeed, more than one phase each of several months’ duration). However arbitration is not (self evidently) litigation. Hearings of such length are neither practically possible nor expected in arbitration (nor many would say, desirable).

The tribunal’s expectation as to hearing length, volume of disclosure, and methods of probing evidence will, to some extent, be dictated by their jurisdictional legal background and legal specialisms. Nonetheless, for all of the reasons set out above, it cannot be assumed that disputes arising from particularly large and complicated projects can resolved within a week or two.

Good arbitrators are often very busy individuals, who rarely have convenient substantial windows in their diaries waiting to be filled. That problem is obviously exacerbated when the diaries of three such individuals need to be coordinated. In addition, one has to have regard to the complexities, volume of material, resources and costs that will be incurred in running (say) a case involving hundreds of individual defects, or variations.

This being so, it is not unusual to see construction arbitrations broken into phases to enable particular issues or groups of issues to be dealt with on a staged basis over several years. As with other arbitration, thought must be given at an early stage to how that might most sensibly be approached and managed; and which course is the most beneficial to one’s case. Are there preliminary questions of law or fact that can be dealt with as separate and distinct issues? Will those actually be dispositive of certain key aspects otherwise in dispute? Can the matter simply be split into liability and quantum? Was the course of events such that it is sensible to first examine matters up to a certain key event or milestone? Perhaps more so in construction arbitrations, there are innumerable variants of the way in which parties might tackle this question.

However, caution must be exercised. While this course provides parties some welcome, though perhaps limited, relief from the burden of preparing an all-consuming case, it can present problems later.

Particularly given the duration over which construction arbitrations are resolved, parties sometimes spend many millions of dollars in early phases of the arbitration, only to later learn of an issue that will prove highly problematic despite earlier success. For example, it is not particularly useful for a claimant (or counterclaimant) to win issues of liability and then learn that the documentary evidence of loss (whether proof of the reasonableness of monies to be expended in settling claims with other parties, or simply evidence of paid invoices) is woefully inadequate.

In addition, construction projects in particular see the transfer or departure of key personnel after a few years, occasionally and luckily with the same employer, but often nonetheless to other demanding projects in different countries.

These types of issues are demonstrative of both the necessity to think carefully and strategically about how one is going to run a construction arbitration, and why a very large amount of work often has to be done in advance of proceedings’ substantive commencement.

Memorials v. pleadings

It is impossible not to comment briefly on the topic of memorials versus pleadings; an issue that famously divides arbitration practitioners but that is of particular relevance in construction disputes.

Construction arbitrations are some of the longest running and most complex and expensive of all commercial arbitrations. Whatever the approach, the parties should seek to (1) elucidate key issues at an early stage such that production and presentation of evidence is manageable, effective and useful to the tribunal; and (2) assist in narrowing issues in dispute, if possible.

Issues that arise in the context of construction disputes often require hundreds of pages of witness evidence and thousands of pages of expert analysis. It goes without saying that a memorial cannot be filed until this exercise has been refined and completed. In the largest and most complex construction arbitrations, it is not unusual for many, many months to pass before the claimant’s position is even produced (aside from a general request for arbitration). That may in fact suit a claimant who wishes to get its house entirely in order before nailing its colours to the mast, or indeed a respondent who is happy to defer the incurring of costs in the short term. However, upon receipt of so much material, the onus is upon an opposing party to avoid the temptation to answer and dispute every single point of evidence rather than stepping back to identify what the issues in contention truly are. That temptation is difficult to resist where an allegation, regardless of how minor, has been supported and supplemented with expert opinion.

Written advocacy and expert evidence in construction arbitrations

Construction arbitrations almost always involve expert evidence. They certainly involve technical concepts. Often, they require a number of experts in varying (and often sometimes particularly niche) specialisms. Architecture, engineering, drilling, metallurgy and geotechnical engineering are only a few of the more usual disciplines involved.

The best construction advocates know how to present technical concepts and arguments in an accessible manner; whether by memorial or otherwise. Those advocates spend many hours with the experts, trying to understand these concepts and in turn, determining how best to articulate and therefore translate them in written form to a tribunal.

Persuading the tribunal that you are the party who takes the time to prepare written materials that make the relevant concepts accessible, who takes a straightforward and frank approach, and who will answer questions directly and accurately, is unlikely to be a disadvantage.

These matters should not be left to experts – there is no reason why advocates should not be able to undertake this duty and indeed, they are best placed to do so. They provide the bridge between the tribunal and the factual and expert evidence.

In part because of the technical nature of documentation that is difficult to interpret absent guidance from experts, parties and their counsel can be too heavily reliant upon experts. Experts can too often be left to their own devices, allowed to freely liaise with other experts and factual witnesses and trawl through documentation without involvement of instructing counsel.

Experts, of course, have a duty to be independent. However, experts who are instructed in this manner can make surprising and catastrophic disclosures when testifying about the way in which they have approached their analysis. It is counsel’s responsibility to ensure that the task carried out by experts is both appropriate and of assistance to the tribunal. There are a number of known issues in construction disputes that involve careful liaison between legal analysis and expert opinion, and that require constant care and attention.[9]

In that regard, a troubling number of issues arise repeatedly in the context of expert evidence during construction arbitration hearings on complex cases. For example, experts who declare that they are not in fact experts in an area they have been asked to opine upon (and who state that they informed their instructing solicitors that they lacked such expertise); experts who have not attributed analysis to the appropriate person (in particular, experts who simply rely on documentation produced by their own client); and experts who do not understand that their duty is to give an independent opinion and who have regard for nothing other than their own clients’ factual witness evidence.

This is not a chapter on expert evidence; however, a few obvious recurring issues as to what experts must do in order to provide appropriate and helpful evidence in construction arbitrations should be pointed out:

  • If there are limitations to an expert’s analysis then this should be identified expressly.
  • If the expert has been instructed to make particular assumptions, these should be set out.
  • An expert’s analysis must be given by reference to evidence that is on the record. Instructing counsel must ensure that any factual matters relied upon by an expert appear either in witness evidence or in contemporaneous documents. In that regard, the source relied upon should be identified expressly.
  • Experts should have regard to the evidence of both parties. This sounds obvious, but is surprisingly often ignored.

Sometimes the best experts are those who have had limited experience testifying and who either still work in or have recently retired from their own industry. That is because (1) they are in fact experts in the manner in which an issue would be approached during a major project; and (2) they view the task of being an expert in a dispute as a serious and daunting one and approach it accordingly. However, experts, whether experienced or otherwise, require the support and guidance of their instructing counsel.

In particular, counsel should test experts on their conclusions, based on counsel’s own work, and in response to the evidence produced by the other side.

Tackling global claims and causation

Certain matters tend to trouble practitioners in the course of construction arbitration in particular that are therefore relevant to the manner in which they approach their written and oral advocacy. These naturally arise out of the complexities of the projects concerned where a number of issues arise every day, such as a particular contractual breach or other foundation of entitlement, to which a party must tie a specific impact and, therefore, financial value. Often concurrent events with time or financial impacts are caused respectively by the claimant and respondent.

Causation is relevant to any commercial claim. However, demonstrating it can be particularly difficult in the context of construction disputes. Take, for example, the design engineer who issues hundreds or thousands of design changes on a major structure, long after they were contractually obliged to deliver the design. Over time, and after the design has been handed over to the contractor, that designer realises that they have made various errors, for multiple reasons, such as failing to account for structural loads, failing to account for the architect’s latest ‘vision’ and failing simply to account for lifts and other necessary facilities. They amend their design on an a continual and ad hoc basis. However, the designer is also the victim of last-minute changes from the client and architect. All of these changes impact detailed drafting, steel fabrication and structural progress along with the progress of follow-on trades (e.g., electrical and mechanical, cladding), to differing degrees. The contractor and its subcontractors suffer delays and disruption. The contractor concludes settlement agreements with its subcontractors, which settlement agreements compromise various issues of dispute, only some of which relate to the delayed design. Construction evolves from a plan of orderly section-by-section completion to chaos, where the contractor and its subcontractors do what they can.

How does one identify the additional costs by way of delay and disruption that resulted from each of these design changes (or alleged breaches)? Identifying how best to do so (and then carrying out the analysis) can be a very expensive and time-intensive exercise. However, identifying how that exercise is best done, if indeed it can be done, is essential if one wants to prove their case and recover damages.

While different jurisdictions may have different attitudes to causation as a matter of legal analysis, grappling with this problem and its solution is, in the authors’ experience, essential, regardless of governing law. In that regard, the position in the UK, which has been the subject of detailed and extensive judicial consideration, remains of relevance in civil law jurisdictions.

Sampling

It is simply not possible to test, particularly in an arbitration context, the precise impact of every single alleged instruction or additional piece of work; or breach of contract, where these are said to number the hundreds or thousands.

As a result of the types of issues identified above with regard to global claims, and because construction disputes can arise out of hundreds or thousands of small changes or defects, conducting analysis of breach and causation by sampling is necessarily gaining some traction.[10] This essentially involves detailed analysis of only a selection of a sample of breaches or additional works and their impacts, to be extrapolated to a larger group of breaches and impacts.

Sampling can involve a statistically reliable (i.e., random) or other (e.g., by working area) sample. There are no easy answers in this regard and these matters require careful consideration before proceedings are commenced and pleadings exchanged. While this approach may be unavoidable, care must be exercised when selecting the sample as criticism by the opposing party will undoubtedly be twofold: representativeness of the sample; and the causal link between the breaches and impact. Even with sampling, it can be impossible to try to disentangle the alleged impact of a particular breach or event from the many other issues impacting the progress and cost of constructing a major project.

This is yet another reason why successful conduct of construction disputes requires substantial work before proceedings are commenced.

The hearing

Several issues regarding logistics and timing need (as in any arbitration) to be agreed in advance: length of opening submissions; running order; and division of time between claimant and respondent.

In construction arbitration, counsel are (rightly) absorbed in examining and presenting their arguments in detail. However, they sometimes forget to consider what is most helpful to the tribunal by way of presentation of evidence that numbers in the thousands of pages. There are various tools that can be deployed – graphics, flow charts, roadmaps, brief summaries of key events, chronologies, full sets of photographs collated into one chronological run. Again, there is no one appropriate answer.

This is not to suggest that one can limit presentation of a case to PowerPoints. In that regard, parties often use presentations to ‘simplify’ matters for the tribunal. However, given the volume and complexity of evidence it can be difficult for the tribunal to truly determine whether these simplifications and summaries are fair and accurate. Only if a party has a mastery of the underlying documents and a deep understanding of the evidence and technical issues can this approach be corrected and responded to. This is critical in large construction cases if they are not to descend into merely a battle of poorly evidenced assertion.

Treatment and use of experts

It is worth commenting on the developing format of expert evidence specifically in construction arbitration.

‘Hot tubbing’ or witness conferencing is the practice of concurrently cross-examining expert (or factual) witnesses.[11] Experts often, therefore, find themselves in a ‘debate’ scenario. This method of giving evidence has become increasingly prevalent, particularly in technical disputes.

Whatever the approach to expert evidence, one must remember that experts have been retained for their expertise in technical matters. Experts are not advocates. A hot-tubbing environment can be both totally foreign and uncomfortable to someone who is otherwise a very honest and diligent expert, and who would give straightforward answers to questions reasonably asked.

The ability of experts to provide lengthy introductory presentations prior to their cross-examination (which seems to be specific to arbitration rather than litigation) appears also to be increasing in prevalence. There are issues arising from this approach that counsel must bear in mind. It may, of course, be helpful to the tribunal for an expert to briefly set out certain introductory conceptual matters. However, what if an opinion is expressed that does not appear in a written report – how can opposing counsel fairly prepare for cross-examination on such a matter? A truly uncontroversial summary should be capable of agreement between the parties in advance of testimony.

Particular caution should be exercised in a construction context: good cross-examination requires great precision in the articulation of the issue at hand.

Documentation

Electronic trial bundles are now the easiest way to collate a hearing bundle of substantial volume in construction arbitration for various reasons. These have many benefits and features that make preparation for and conduct of the hearing easier for parties, counsel and decision makers.

For example, references in submissions, witness statements and other documents can be directly hyperlinked to the exhibit or document in question; all documents can be displayed instantaneously on screens around the hearing room and for the witness during cross-examination; and translations can be viewed alongside non-English documents simultaneously. Some discipline is required as regards structure and volume of even an electronic trial bundle, as the tendency can be to simply lump every disclosed document into the bundle, somewhere.

Depending on the technological capabilities of parties’ counsel and the tribunal, an electronic bundle can provide helpful tools to record an individuals’ own notes on the bundle and the transcripts of evidence throughout the hearing, with the user able to make such notes privately or publicly (i.e., within their own legal camp) accessible. Live transcript can be fed directly into the overall electronic bundle system as the hearing progresses (references in the transcript to documents are also hyperlinked). Indeed, tribunals are increasingly ordering the use of such systems as the norm, whether the preference of both parties or otherwise.

A key advantage of an electronic bundle in a construction context is that it saves a considerable amount of time in a hearing. Gone are the days of fumbling around for the right page among 100 binders, or pausing proceedings to deal with a missing page in a tribunal member’s bundle. These time-saving features can be extremely important where there are a number of witnesses and experts to get through. However, they are also a reason why parties sometimes like to avoid use of this tool.

Summary

There are a few, obvious, key points that arise from the above.

Early and detailed evidence review is required in order to identify and refine key arguments and case theory. Investigation should not be driven or limited by an assumption that there will be one short substantive hearing. Rather, the investigations and their outcome should drive identification of the most appropriate procedural course.

Even a tribunal fully comprised of construction specialists will need substantial assistance from the parties in the translation of the vast and detailed evidence and documentary record. Written documentation and presentation at the hearing must take account of this.

Advocacy is not limited to the review of detailed documentation and presentation of technical concepts. Real thought must be given to the approach to proof of causation on projects where many events and issues can concurrently give rise to losses and delays.

The best advocacy results from a detailed and deep understanding of the factual, technical and documentary evidence. That is the best tool not only for persuasively responding to assertion from the opposition, but for assisting the tribunal throughout the proceedings and at the hearing in particular.


Notes

[1] James Bremen is a partner and Elizabeth Wilson is of counsel at Quinn Emanuel Urquhart & Sullivan LLP.

[2] See for example Cavendish v. Makdessi; ParkingEye v. Beavis [2015] UKSC 67.

[3] For example, Walter Lilly & Company Ltd v. Mackay & Anor [2012] EWHC 1773.

[4] MT Hojgaard A/S v. E.ON Climate and Renewables UK Robin Rigg East Limited [2017] UKSC 59.

[5] Certain institutional rules (in particular the ICC Rules of Arbitration) allow for the consolidation of arbitrations or joinder of parties, which can be relevant in construction arbitrations given what is said here. However, an analysis of such rules is not the purpose of this chapter.

[6] Bartosz Kruz·ewski and Robert Moj, ‘Documents in Construction Disputes’, Global Arbitration Review’s Guide to Construction Arbitration, 2017.

[7] ‘Final Report on Construction Industry Arbitration’, ICC International Court of Arbitration Bulletin, Volume 12, No. 2.

[8] In particular, for example, in the Technology and Construction Court of the UK.

[9] For example, the analysis and treatment or responsibility for concurrent delays to construction (for further details see the Delay and Disruption Protocol 2nd Ed on the SCL website: www.scl.org.uk/resources/delay-disruption-protocol).

[10] F Piggott, ‘Proof by Sampling after Amey LG v. Cumbria County Council’ Society of Construction Law, July 2017.

[11] This is anticipated (only where appropriate) for example in the ICC Commission Report on Techniques for Controlling Time and Costs in Arbitration, 2015.