Advocacy in Construction Arbitration

Introduction

A number of matters render construction arbitration different from its general commercial cousins; and which, therefore, require particular attention, rigour and strategic consideration to successfully prosecute and defend construction claims in an arbitration context.

That the International Chamber of Commerce has now issued two Construction Arbitration Reports (albeit 18 years apart)^[2] is testament to the appreciation of the arbitration community that effective resolution of construction arbitrations involves many specific legal, evidential and practical considerations. Recognition of these differences on the part of both arbitrators and counsel is imperative, particularly given that construction-related disputes comprise a significant proportion of disputes referred to arbitration. The 2019 ICC Dispute Resolution Statistics states that ‘Disputes within the sectors of construction/engineering (211 cases) and energy (140) generated the largest number of ICC Arbitration cases and, as in previous years, account for approximately 40% of the ICC Arbitration caseload.’

This is a chapter with the word ‘advocacy’ in the title. However, the importance of advocacy does not relate only to the performance of counsel at a hearing. Whether in the context of construction or otherwise, the importance of written advocacy and detailed evidential preparation in the months or years leading to a substantive hearing should not be underestimated. This is particularly so in construction arbitrations, where understanding, explanation and presentation of technical concepts and the evidential record in an accessible manner is key.

It would be remiss not to mention, given the timing of this chapter, the impact of covid-19 on (1) parties’ substantive obligations, particularly in large international construction projects (e.g., where there are increased restrictions regarding movement of personnel and equipment and materials) and (2) international arbitration procedures. In the case of the former, the impacts of the disruption caused by the pandemic in the form of claims for relief will continue to be felt in coming years. In the context of the latter, the pandemic has forced international courts, arbitral tribunals and parties to embrace (or at least tolerate) the conduct of virtual hearings to an extent not previously seen. The impact of that in construction arbitration, given the technically detailed nature of evidence, cross-examination and submission, requires particular consideration when planning for a hearing.

Why is advocacy in the context of construction arbitration different from any other complex commercial dispute?

Claims in construction arbitrations address legal issues that often present themselves in other commercial arbitrations: breach of contract, tort, estoppel, mistake, good faith, the operation of indemnities, warranties. However, they tend to do so in combination with issues that are more specific to construction: the enforceability of liquidated damages and penalties,^[3] recovery of consequential or indirect losses, allocation of risk for concurrent delay,^[4] the scope and applicability of insurance cover,^[5] global claims,^[6] the extent of and allocation of liability and responsibility for design and interpretation of applicable engineering codes and standards.^[7]

Despite the stereotypical image of construction lawyers and experts drowning in a sea of technical specifications, drawings, programmes, payment certificates (as well as the usual correspondence and emails that arise from commercial disputes), construction disputes can sometimes relate almost solely to issues of contractual interpretation (though there are often follow-on disputes to deal with the implications).

Long-term legal practice in the construction sector brings with it a familiarity as to how construction contracts ‘work’ (or rather, should work, in many unfortunate instances). This undoubtedly assists in the efficiency and insight of the legal analysis, and the clarity of its presentation.

All lawyers can read and interpret a contract. However, construction projects that lead to international arbitration involve many contracts, between many different parties. While liability between two particular parties is usually defined by the contractual relationship between them, that is rarely the end of the matter in a large-scale construction project. One must often have an eye to, for instance, how one arbitration might affect a subsequent or different claim against a different project party – for example, an insurer who has otherwise refused to cover damage, a specialist consultant who assisted on a particular scope of work or a subcontractor who allegedly remains unpaid. If the project has been financed by external lenders, is consent required for the action being taken? (It most certainly will be required for any form of settlement.)

Expect assertive case management

The complexity and voluminous documentation of typically large construction cases requires assertive case management by tribunals to achieve an expeditious and cost-effective outcome, which most institutional rules prescribe, and end users want. An early case management conference to seek effective case management procedures is necessary, as is an early meeting with experts to identify methodologies and issues, well before experts’ reports and joint meetings. Redfern schedules should be directed for document requests rather than the old-fashioned common law listing of all documents. It is particularly important to direct joint statements on agreement and disagreement between experts of like disciplines, as properly implemented this can resolve a lot of expert issues. For pleadings, memorials and witness statements, succinct and focused is better than War and Peace. Guerrilla tactics by the respondent should be put down firmly, possibly by costs orders.

– David Bateson, 39 Essex Chambers

These competing considerations bring with them the need for consistency in approach and a cohesive strategy to ensure the interests of one’s client are not prejudiced. Contractual arrangements on construction projects are designed to ‘fit together’ in the sense that risk is often allocated in particular and (for an experienced practitioner) expected ways. One must be mindful of this, while not operating on the basis of assumption. After all, a party’s rights and obligations are specific to the particular terms of the contract in question.

Accordingly, legal argument before a tribunal, whether written or oral, also requires an ability to explain clearly and logically the contractual framework and operative risk allocation.

The other obvious, and perhaps more often-quoted, factor that sets construction disputes apart from others is the need for examination of technical matters. ‘Technical’ in this context entails any of or all the issues that require specialist input before, during the course of or after a construction project (depending on the nature and location of that project). Experienced counsel have the practised project management skills that assist with the navigation, review, analysis and assimilation of vast amounts of technical information, in addition to ways of presenting technical concepts to a tribunal otherwise unfamiliar with the issues.

Are all these documents really necessary?

The potential for enormous amounts of documentation and disclosure is a vision that immediately comes to mind at the mention of construction disputes. It is 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.

Different lawyers from different legal systems (and dependent on their perceived position of their clients’ position on the merits) may take different views as to the extent of disclosure properly to be expected in arbitration.^[8] However, it is the authors’ view that, including in their experience of civil law systems where burdensome disclosure obligations are less usual, to prove one’s case in a complex construction project there is a minimum of documents that will be required. Unfortunately, the volume of those will necessarily be significant. Technical experts are also unlikely to be able to give informed independent opinions absent analysis of all of the technical documentation that they would normally examine in their specific industry (specifications, drawings, etc.). Any of those documents might impact their view as to what did or did not happen or should or should not reasonably have or could have been done. The nature and number of activities taking place on a construction project (and the number of parties undertaking them) results in the volume of documents so often referred to. It is a rare occasion that a witness remembers precisely what was happening on-site on a Tuesday five years ago on one of the world’s largest construction projects. Contemporaneous documentation is essential.

Take, for example, an allegation that the owner terminated a contractor for accumulated poor performance during the course of a project. That, in turn, creates a large number of allegations of failure on the contractor’s part, one of which is the late installation of a crucial piece of equipment that prevented the start-up of the facility and earning of substantial revenue for several weeks or months. Consider again, even on this one example, how many activities are taking place on a construction project from design, procurement through to construction.

It is not simply a question of whether the piece of equipment in question was in fact late on site. The owner could have, in parallel, delayed approval of the design of an equally important part of the works, without which the project could not be completed. In turn, that may raise a technical question as to whether the design was adequate.

Drawings, daily, weekly and monthly reports, evidence of orders placed, site photographs, emails, programmes and schedules (in addition to factual and expert evidence) will all be necessary to resolve the question of who caused the delay to completion and to what extent (putting aside the legal result of that).

Putting aside disclosure obligations themselves, for the purposes of analysing one’s case and advising one’s client, a review of contemporaneous documentary evidence needs to be planned as early in case preparation as possible. It is a costly exercise and parties can (understandably) be resistant to making such an investment so far in advance of formal disclosure and preparation of evidence. However, it cannot be assumed that significant document review and investigation can wait until the formal procedural step of disclosure.

Only if a party has a mastery of the underlying documents and a deep understanding of the evidence and technical issues can the above approach be adequately dealt with. This is critical in large construction cases if they are not to descend into merely a battle of poorly evidenced assertion.

Build your case around the evidence, not the other way around

It is important that a party’s case is thought through from the outset of the arbitration, especially in disputes involving a large volume of facts and technical evidence, such as typically in construction disputes. This requires that delay experts, for example, are engaged at the outset of the arbitration to provide an objective and as detailed as possible assessment of the existing evidence that can enable a party to construct a solid case. The main thrust of the case should be built around the existing evidence and not on evidence that counsel assume will be taken in the course of the arbitration. It is often the case that counsel have to change the whole narrative and supporting basis of their parties’ case, or drop some of the claims in the course of the arbitration when they realise that the evidence that was eventually procured does not support the parties’ original claims, or at least the full extent of their original claims. When this happens, counsel risk losing credibility with the tribunal in relation to the entire case. Importantly, too, tribunals may be minded to take haphazard handling of evidence into account at the allocation of costs, especially when dropping claims or changing the narrative of a case has resulted in unnecessary delays and expenses.

– Stavros Brekoulakis, 3 Verulam Buildings

Tactical issues

Selection of arbitrators and developments in success of challenges

The key question when it comes to selecting arbitrators 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 members themselves.^[9]

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 – and disclosure. 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 in the course of numerous lengthy substantive hearings. In that context, they can also be more realistic in their assessment of the necessary timing of future procedural steps.

The nomination of specialist arbitrators brings with it the issue of what is, relatively speaking, a limited pool of arbitrators that might have the requisite expertise, particularly in dealing with the largest and most complex construction disputes. It also, therefore, gives rise to the potential repeated appointments of particular arbitrators by a party or its counsel or other long-standing relationships between candidates and counsel (whether due to prior work as co-counsel or otherwise) and the potential for arbitrators to have been appointed on related matters or disputes on one project. The requisite standard of perceived impartiality of arbitrators, including the extent of disclosures they should make, and the approaches of various institutions, national laws and arbitral customs and practices to those questions, has been the subject of renewed debate in the past year in light of the UK Supreme Court decision in Halliburton v. Chubb.^[10] Whether a potential nominee may be subject to challenge is a matter for the appointing counsel to consider and the risk of that should be discussed with the counsel’s client in the relevant circumstances. However, it can be assumed in any event that one’s opponent will look very closely at whether any nomination gives their client cause for concern.

Procedure and timing in construction arbitration

Good arbitrators are often very busy people, who rarely have convenient substantial windows in their diaries waiting to be filled. That problem is obviously exacerbated when the diaries of three such arbitrators 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. Nonetheless, as is hopefully already established in this chapter, the complexity of construction arbitration means that particularly large construction disputes cannot be disposed of in their totality in a week, or often even in several weeks.

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 in stages 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.^[11] There are many factors that feed into 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. Regard must be had as to whether, if the case is split in a particular way, it will allow a party simply to revisit an argument that should have been disposed of previously. In addition, it is not particularly useful for a claimant to win issues of liability and then learn that the documentary evidence of loss (whether proof of the reasonableness of monies expended in settling claims with other parties, or simply evidence of paid invoices) is inadequate. In practice, many cases settle following a liability determination; however, that cannot be assumed.

Again, the experience of the tribunal will be central. It is essential that arbitrations, including in particular large complex disputes that may otherwise spiral out of control, be carefully and rigorously case managed. Proceeding on the basis that the arbitration must be finished within a defined period, that there will be one substantive hearing only, and setting hearing dates in a manner that allows for little to no flexibility, is counter-productive and quite possibly leads to an unsafe procedure and, therefore, award.

Expert evidence

The best construction advocates know how to present technical concepts and arguments to a tribunal in an accessible manner. These advocates spend many hours with the experts, understanding the concepts and, in turn, determining how best to articulate and therefore translate them into written and oral form. Further, while expert evidence is central in construction arbitrations, it is counsel who are responsible for the analysis and development of their client’s case. Counsel must understand precisely what analysis is being conducted by any experts, and why; and counsel are responsible for undertaking the relevant factual and legal investigations that inform the scope of the expert analysis.

Cases should not be driven by experts. There are numerous articles, and indeed cases, in the construction context, and otherwise, that illustrate the pitfalls of failing to properly manage the expert process.^[12]

Of particular concern in the context of construction arbitration is the unfortunate but seemingly regular engagement of experts who clearly act as advocates for their clients rather than being someone engaged to provide the tribunal with an independent view. This practice continues to this day, regardless of the value of the dispute or the governing law or seat. Most surprising is perhaps the assumption that this approach is desirable before an intelligent and sophisticated tribunal.

While confidentiality in arbitration is of course an advantage, it can provide a cloak of anonymity and unaccountability for many experts who suffer trenchant criticism from tribunals yet simply move on to the next engagement. This emphasises the need for a careful selection process in respect of experts, regardless of an individual’s discipline and experience of testifying.

As a related but separate matter, one must be aware in construction arbitration of claims consultants, who tend to be retained by clients during the life of a project to advise and assist in the management of claims. However, they are appointed to fulfil a particular role that is different to that of an independent expert. Further, claims consultants have the benefit of information obtained through discussion with their client over lengthy periods. This raises issues not only of independence but privilege over these communications. It must be remembered that each party’s independent expert should be entitled to access the same information to provide their opinion.

Preparation for and advocacy at the hearing (virtual or otherwise)

Preparation for and conduct of advocacy is a matter of personal preference. The best advocates have refined their approach over a number of years. Presentation must also be tailored to the tribunal to which one is presenting and the particular issues being debated. However, there are nonetheless a number of important points to be made.

Any advocate will spend hours with relevant experts preparing cross-examination of their opposite number. However, in construction disputes, there are often several (sometimes more than 10) expert disciplines and, therefore, experts. How that is to be dealt with requires early and realistic consideration.

Preparation time should not be underestimated, particularly in the case of solicitor advocates juggling a busy practice of multiple cases. Construction disputes are won and lost on the detail. All disputes practitioners know that developments across issues can, and often do, occur during hearings, and therefore need to be addressed urgently. This can only be tackled with a deep understanding of the subject matter and underlying evidence.

Preparation must also be such as to allow the advocate to be agile during submissions and cross-examination. If a document in the bundle would demonstrate that the witness is being untruthful, it is of little use if the advocate is unaware of its existence or a team member has failed to appreciate its importance. Assessment as to what should be asked and what responses are likely to be given is a matter of judgement and experience.

One must, therefore, give thought to the formation of the team assisting and their scope and extent of responsibility both during hearing preparation and at the hearing itself. A pure ‘divide and conquer’ approach is also unlikely to be satisfactory. Counsel are presenting a case theory to the tribunal in its totality.

Of all matters, precision in construction arbitration advocacy is key. It is key in answering the tribunal’s questions, key in preparing witnesses for cross-examination, key (perhaps most importantly) in conducting cross-examination. It is the habit of some advocates to ask questions in a deliberately vague manner, seeking to seduce the witness into agreeing seemingly uncontroversial propositions. It is the responsibility, again, of counsel to ensure that witnesses are prepared for such tactics. This approach to cross-examination is unlikely to gain much headway with an experienced tribunal, particularly if the advocate is overly relaxed as to what does and does not need to be put to a witness to test his or her evidence.

Cross-examination is a focus of preparation, for obvious reasons. However, one must always give thought to what else 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, road maps, brief summaries of key events, chronologies, full sets of photographs collated into a chronological run. Lawyers often think only in words. In general, however, this presentation at the hearing can be an obvious weakness in lawyers who have been entrenched in a matter for so long that they understand every detail but struggle to stand in the shoes of an arbitrator who is (compared to counsel) unfamiliar with the dispute.

Expert testimony

Whatever the approach to expert evidence, one must remember that experts have been retained for their expertise in technical matters. They are not advocates. ‘Hot-tubbing’, or witness conferencing, is the practice of concurrently cross-examining expert (or factual) witnesses.^[13] This method of giving evidence has become increasingly prevalent, particularly in technical disputes; however, in the largest and most complex cases, it does not appear to be the norm.

Memorials, please, not pleadings

Because of their complexity, construction arbitrations will usually benefit from the parties undertaking as early as possible during the process, and certainly by the date of the hearing, to do as much as they can to define clearly and precisely for the tribunal the nature and scope of the issues that divide the parties. In my experience, two tools are particularly useful in this regard. The first, which has been commonplace in international arbitrations conducted in many jurisdictions, but to some extent less so in common law jurisdictions such as England, is to jettison the English practice of exchanging pleadings in advance of producing the evidence upon which the parties rely and to adopt instead the continental practice of memorial-style pleading in which the memorials are accompanied by all the evidence upon which the parties respectively rely. This helps to ensure that each party knows as early as possible the case that it is required to meet and avoids tiresome debates between the parties, and before the tribunal, as to whether the pleadings have been sufficiently particularised or effectively amended by evidence subsequently submitted.

Second, early and frequent consultation between the parties’ expert witnesses in the disciplines for which they have been retained – leading to the production of one or more joint reports summarising areas of agreement and disagreement between them – is invaluable. This is a practice that is today the norm in some jurisdictions, such as England, but, unfortunately, insufficiently adopted in much of the rest of the world, where experts all too frequently meet each other for the first time at the hearing. Parties and counsel in many parts of the world are reluctant to accept expert witness conferencing of this kind out of fear as to where it might lead. But where it usually leads is to a narrowing of the dispute and, accordingly, greater efficiency, which is ultimately beneficial to the process and very helpful to, and much appreciated by, the tribunal.

– Eric Schwartz, Schwartz Arbitration

A hot-tubbing environment can be both totally foreign and uncomfortable to what is otherwise a very honest and diligent expert who would give straightforward answers to questions reasonably asked. In addition, it is not a format that lends itself to efficient conduct of a virtual hearing. It is more likely to lead to experts and tribunal members (unintentionally) speaking over each other and having to repeat themselves.

The ability of experts to provide lengthy introductory presentations prior to being cross-examined (which seems to be specific to arbitration rather than litigation) appears also to be increasing in prevalence to the point of standard practice. There are issues arising from this approach that counsel must bear in mind. It may be helpful to the tribunal for an expert briefly to set out certain introductory conceptual matters that should be uncontroversial. 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? The potential for an argument of procedural unfairness increases in such a circumstance.

The increase of fully or partially virtual hearings

While for the largest, most complex cases it seems unlikely that fully virtual hearings will be preferred, an increased hybrid approach (with some experts and witnesses appearing remotely) seems inevitable. Where there has traditionally been resistance to anything other than fully in-person hearings, particularly for the purposes of ensuring that cross-examination has maximum impact, there will be cases where the parties or the tribunal will now deem it disproportionate to do so – particularly where the ability to schedule a hearing is impacted by travel restrictions.

Some caution should be exercised by tribunals, however, particularly in cases involving highly contentious evidence or otherwise key factual or expert witnesses. It is too early at this stage (before the full impact of such procedural orders or measures is felt) to determine the prevalence of parties seeking to challenge an award on the basis that they did not have a proper opportunity to present their case as they would have wished at the hearing, due to an order that the hearing or part thereof was virtual against their protestations. Many institutional rules now allow specifically for virtual hearings. Accordingly, parties will need to consider the potential of their deemed agreement on that course depending on their arbitration agreement.

The functionality of e-bundles need not be set out. However, in construction disputes, with the large numbers of documents and witnesses (factual and expert), e-bundles, coupled with live transcripts, simultaneous translations (if necessary) and use of other technology, such as large screens to view technical documents, save substantial time and make the entire experience much more user-friendly (for parties, tribunal members, counsel and witnesses). That is the case whether a hearing is virtual or otherwise. In the context of the increasing advent of fully or partially virtual hearings, this type of functionality is, almost without exception, essential, whether by the most sophisticated high-tech providers or a simple, searchable PDF bundle controlled by the hearing platform provider, albeit depending on the size of the dispute. Confusion as to what particular programme activity, photograph or specification a witness or expert is being directed to can result in disastrous levels of disruption (and use of valuable hearing time). Functionality that ensures everyone is looking at the same page or item on their respective screens is the best way to manage that in a virtual setting in a construction arbitration.

Further to this, and to state the obvious, one must consider their personal work­station set-up and that of their witnesses, experts and clients for such a hearing. A laptop is unlikely to be sufficient to successfully review an electronic hearing bundle, the transcript and one’s own notes, and take part in group chats or confer with one’s team. Factual or expert witnesses may need to give evidence from a specific location that has the requisite facilities available.

As with all hearing preparation, such matters do not magically organise themselves. The increase of virtual hearings has certainly not decreased the administrative time spent organising hearing logistics. Indeed, the parties and tribunal may require protocols to be agreed, various tests to be conducted to verify connections and an acceptable set-up to be established, including ensuring visibility of witnesses (e.g., to ensure that they do not have their own notes and that they have no one else with them in the room (save any agreed neutral observer)). A great deal of cooperation between opposing solicitors and the various technical providers is required, along with rigorous attention to detail. All eventualities must be considered and catered for.

Concluding remarks

Early and detailed evidence review is required 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.

Selection and management of expert evidence is crucial. An expert who has clearly undertaken a thorough and independent expert analysis is always to be preferred over one who acts as an advocate for the client and indiscriminately accepts their own clients’ evidence.

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.

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.

Parties should always, but are in current times forced to, consider the most efficient, user-friendly and clear ways of presenting their position to the tribunal.

Notes