Documents in Construction Disputes

Introduction

Documents are the most reliable evidence in construction arbitration. Each party to the dispute relies on documents to prove its claims or rebut the other party’s arguments. Documents are the main source of accurate and contemporaneous information, allowing the arbitrators to recreate the factual circumstances of the case and consequently decide on its merits. It is especially applicable to construction arbitration, where the execution of long-lasting projects requiring continuous cooperation between owners, general contractors, subcontractors, designers and other parties in a changing environment usually generates a complex factual background, recorded by the parties in various documents on a daily basis. If these circumstances lead to a dispute, they can be precisely unravelled only by deriving data from contemporaneous documents.

Therefore, before entering into a construction dispute, especially before commencing arbitration, parties to the arbitration have to diligently review the vast quantities of available documents, including letters, contemporaneous records and emails, in order to identify the documents relevant to their case, as well as any missing documents that may be in the possession of the opposite party or even a third party not involved in the dispute. In the latter case, it might be worth considering obtaining the documents through the disclosure procedure. Even if these stages are prudently executed, the number of documents required to support the parties’ cases in construction arbitration usually amounts to thousands. Consequently, it is also vital for the parties to effectively manage the documents filed in the arbitration and convincingly present them to the arbitrators during the hearings on the merits of the case.

This chapter provides guidance on handling documents in construction arbitration. It presents the types of documents commonly filed in arbitration that should draw the party’s attention during the document review process, the procedure of disclosure in international arbitration, and the management of documents during arbitration.

Documents as evidence

When it comes to international arbitration, there is no clear definition as to what a document or documentary evidence is. The evidence is anything in the form of material or information that a party can present to the tribunal to support its arguments.^[2]

By presenting evidence such as witness statements, expert reports and documents, the parties will attempt to discharge their burden of proof.^[3] The burden of proof is a commonly accepted rule providing that a party relying on a particular fact has the burden of establishing that fact.^[4]

In general, documentary evidence may be any form of written data such as letters, emails, contracts, reports and any other written communication. Moreover, it can include photographs, films, audio and video tapes, and drawings.^[5] The IBA Rules on the Taking of Evidence in International Arbitration (the IBA Rules) define a document as ‘a writing, communication, picture, drawing, program or data of any kind, whether recorded or maintained on paper or by electronic, audio, visual or any other means’.^[6] The term ‘document’ relates not only to physical media, but also to any type of electronic media such as emails, text messages, word processing documents, digital images or even metadata.

Typical documents in construction disputes

Different types of construction claims establish different requirements as to the burden of proof, both in relation to the claimant and the respondent.^[7] Consequently, different documents might be required to prove different claims.

Construction contracts also require the parties to create and exchange miscellaneous documents.^[8] The diversity of documentation that might serve as evidence is increased by the complexity of construction projects and the variety of record-keeping practices used by companies, especially from different jurisdictions.^[9]

Therefore, there is no universal list of documents that will be adequate to discharge the burden of proof in relation to each particular construction claim. However, there are some types of documents typically submitted by parties in arbitration to support their construction claims. These documents include pre-contractual and contractual documents; variation orders and schedule documentation; correspondence; contemporary records; and cost documentation. Parties involved in construction projects may consider producing these types of documents in order to accurately record the events occurring throughout the execution of the project, to effectively manage the project, and to settle any potential disputes during its execution or, in the worst-case scenario, to prepare evidentiary material for arbitration. A party preparing for arbitration may also revert first to these types of documents in order to find the documents relevant to the case. These types of documents are:

• pre-contractual documentation, including specifications, drawings, geotechnical data or clarifications of the tender requirements provided by the owner on one side and the contractor’s calculations, labour productivity assumptions, internal reports and worksheets on the other side, may be used to prove the parties’ assumptions, expectations and intentions as to the execution of the contract;
• contractual documentation, including the contract, final specification and drawings, which may vary from the pre-contractual versions, as well as annexes to the contract and variation orders; these documents evidence the scope of the parties’ obligations;
• schedules (original versions and updates), supplemented by charts and reports presenting any changed assumptions as to the resources envisaged to complete particular works, which are crucial in evidencing the liability for delays or entitlement to an extension of time and related monetary claims;
• correspondence, including letters, notices and emails, which contain information ranging from daily technical issues to legal statements impacting the execution of the project;
• other contemporaneous records, such as minutes of meetings, site logs, progress reports, daily reports on the man-hours and equipment hours worked, which might be helpful in evidencing the actual impact of any obstacles occurring during the execution of the works on the parties’ assumptions, including loss of productivity or acceleration measures; and
• cost documentation, including invoices, receipts and proofs of payment. Generally, the party seeking reimbursement of the actual cost incurred should submit this primary evidence to prove the quantum of the pursued claims. As this is usually a time-consuming and expensive exercise, in particular in large construction disputes, in practice the parties try to substitute the filing of the primary evidence with presenting an expert report on the accuracy of the sums claimed, accompanied by an invitation addressed to the other party or the expert appointed by the tribunal to review the calculations on a sample basis. Such measures are sometimes accepted by the tribunals.^[10]

Document review and disclosure

Before entering into a dispute, especially into construction arbitration, it is recommended to perform a document review. Document review is a process in which a party verifies the documents it possesses in order to eliminate those that are irrelevant or immaterial to the case.^[11]

This process is usually expensive and time-consuming, as an immense number of documents are produced during the life of a construction project. However, this process is also crucial for the successful outcome of a dispute, mainly due to the following reasons.

First, the party aiming to win the arbitration has to meet its burden of proof. That means that this party has to provide the tribunal with evidence proving that the facts on which it relies actually occurred. The party must therefore conduct a document review in order to find the relevant documents to support its assertion as to the facts and to separate the pertinent documents from those of lesser importance. Document review may also help identify any missing documents that may be in possession of the other party or a third party, and may lead to a filing for disclosure early on in the arbitration process.

Second, providing the tribunal with only the relevant documents accelerates and simplifies the case, which in most cases may increase the chances of winning in arbitration. Providing the tribunal with thousands of documents without showing their importance or explaining their relevance to the case will increase the costs and may dilute the parties’ argumentation. Moreover, the tribunals have means of stopping such conduct of the parties by issuing procedural orders, and are indeed encouraged to do so by several institutional rules and guidelines on arbitration.^[12]

Furthermore, document review makes it possible to prevent any documents that are privileged or confidential from being filed in the arbitration. During the document review, the parties have the opportunity to exclude the documents that are confidential due to commercial or technical reasons or that are subject to legal privilege. Even though a party to the dispute will not always be allowed to withhold such documents from submitting them to the tribunal, after identifying such documents, it can argue that those specific documents cannot be submitted as they are confidential. The IBA Rules determine commercial or technical confidentiality as one of the grounds for the tribunal to exclude such evidence.^[13]

Finally, it is important to conduct a document review before commencing arbitration, as establishing the actual course of events in the project helps build the case strategy and properly structure the claims or defence, and makes it possible to mitigate any potential risks.

Therefore, conducting at least a limited document review is recommended before commencing arbitration.

Once the party has conducted the review and established the relevant documents in its possession, it can then assess what documents it needs to support its claims or defence. Those documents, if possessed by the opposing party or by a third party, can be subject to document disclosure.

Document disclosure has at its core the party’s right to request the production of documents by the opposing party^[14] or third parties.^[15] The problem in international arbitration is, however, how broad that right is, and to what extent the parties will be entitled to request the production of documents from another party.

Document production is available in most legal systems. However, there are significant differences between the common and the civil law systems in terms of the approach and scope of document production. In common law systems, the disclosure is much broader than in civil law systems. The scope of disclosure in common law systems is compared to the ‘all cards on the table’ rule – without regard to whether the party has to provide the opposing party with favourable or unfavourable documents.^[16] In the US, there is therefore a general duty of the parties to produce and present any documents that may be relevant to the case, no matter in which party’s interests.^[17] English law limits discovery that is now known as document disclosure and is narrower than the discovery was. The scope of document disclosure nowadays depends upon the tests of reasonableness and proportionality.^[18]

On the other hand, civil law systems are less stringent and considered ‘less ambitious in search for truth than the common law approach’.^[19] The general rule is that each party produces only the documents on which it relies. No general obligation exists as to the production of documents, in particular those that are unfavourable to the party’s contentions.^[20] There are rules that permit the party to request certain documents from the opposing party or third parties, but those rules require the requesting party to specify the documents and thus significantly limit the document production possibilities.

In view of such differences between legal systems when it comes to document disclosure, arbitration had to somehow strike a balance between the common law and the civil law rules – and it seems that it was successful. Numerous arbitration rules and guidelines on documentary evidence set up the general rules on document disclosure. The document production in arbitration is described as ‘one of the most remarkable examples of a merger between different national civil procedure approaches’.^[21]

The guidance as to document disclosure in international arbitration was provided in the IBA Rules in 1999.^[22] The IBA Rules are not a binding document but the parties may agree to adopt them or they can be used by the tribunal as guidance. The IBA Rules seem to find a balance between common and civil law rules on document disclosure.

The IBA Rules are influenced by four principles.^[23] First, there is no room for pretrial discovery and fishing expeditions in international arbitration. Second, the arbitral tribunal has the power to order the production of documents by one party, requested by another party. Third, the decision to order the document disclosure lies within the absolute discretion of the arbitral tribunal. And lastly, the requested party has a right to object to such an order, with the objections listed in the IBA Rules (Article 9.2).^[24]

Following these principles, Article 3 of the IBA Rules established the requirements the party has to fulfil if it wants the tribunal to order document disclosure. First of all, the request to produce documents must be submitted to the tribunal within the prescribed time limit set by the tribunal. The request has to contain a description of the document that is sufficient to identify it, or a description of categories of documents that is sufficiently narrow and specific. The requesting party has to explain how the requested documents are relevant to the case and material to its outcome, and confirm that the requested documents are not in its possession, and also explain why the requesting party assumes that the documents are in possession of the opposing party or a third party.^[25]

Similar restrictions are provided for in other rules and guidelines. The ICC Commission Report on Techniques for Controlling Time and Costs in Arbitration suggests limiting the number of possible requests for document production and establishing time limits. Moreover, the ICC Commission Report describes providing the tribunal with documents that are not relevant and material to the case as wasteful.^[26]

However, the requested party is not defenceless against the request for the production of documents. The IBA Rules provide that the requested party can put forward an objection to the disclosure of documents based on the circumstances listed in Article 9.2 of the IBA Rules. Those circumstances include:

• lack of sufficient relevance or materiality;
• legal impediment or privilege under legal or ethical rules;
• unreasonable burden to produce the requested evidence;
• loss or destruction of the document that has been reasonably shown to have occurred;
• grounds of commercial or technical confidentiality;
• grounds of special political or institutional sensitivity; or
• consideration of fairness or equality of the parties.^[27]

If the requested party files any objections, the requesting party will have the right to address them, and subsequently the tribunal will have the power to resolve the issue of document production by a procedural order.

If the tribunal orders a party to produce documents and the party does not comply with such order and refuses to provide the opposing party with the documents, it can face sanctions.

First, arbitrators can be authorised ‘to draw adverse inferences from the parties’ non-production of discoverable evidence’.^[28] It means that the tribunal can draw a legal inference, adverse to the party concerned, as a consequence of that party’s silence or the absence of requested evidence.^[29] The adverse inferences are aimed at ensuring the efficacy and fairness of the arbitral proceeding.

Furthermore, the arbitral tribunal may discharge from the burden of proof the party that provided insufficient proof due to the opposing party’s failure to comply with the order to produce documents. However, such sanctions should be expressly provided for in the arbitration rules governing the case.^[30]

Lastly, Article 9.7 of the IBA Rules provides that:

if the Arbitral Tribunal determines that a Party has failed to conduct itself in good faith in the taking of evidence, the Arbitral Tribunal may, in addition to any other measures available under these Rules, take such failure into account in its assignment of the costs of the arbitration, including costs arising out of or in connection with the taking of evidence.^[31]

These sanctions may not be applied if the request for disclosure concerns a third party that does not produce the requested documents.^[32] The parties must remain aware that the procedural law of the seat of arbitration may provide for more stringent sanctions.

Managing documents during the review, disclosure and arbitration proceedings

Since the scale of documents produced during the life of a construction project is usually large, there is an increased need to find proper document management tools, which may simplify and accelerate the review of documents, their disclosure and even their management in the arbitration.

Nowadays, the technology allows parties to use electronic document management systems (EDMS), which can assist in the process of searching, organising, producing and managing documents. The EDMS ‘are considered to be more accurate and less expensive than paper-based methods of document management’.^[33] The first and most obvious advantage of the EDMS is storage. Although it seems impossible to imagine that the need of keeping the paper documents in one place will disappear, storing documents in an electronic form reduces the costs of having to store and print all the paper documents. Moreover, the EDMS may be able to capture additional data from electronically stored documents since those documents contain the metadata.

Documents stored in the EDMS are coded with objective and subjective data fields.^[34] ‘Objective’ data fields ‘capture information such as the date, author and subject matter of the document, whereas “subjective” fields capture information such as the relative relevance of a document, or the issue to which a document relates’.^[35] Furthermore, the documents stored electronically in the EDMS can be accessed by several users at the same time and users can access them from different devices. The information from the EDMS can also be quickly transmitted to other users, including the other party or the arbitral tribunal.^[36]

Nonetheless, the EDMS have their flaws, such as costs of purchasing the appropriate hardware or software and training the users. Moreover, with the electronic search tools come certain limitations, especially regarding date restriction and key word search, where the risk is that not all the relevant documents will appear. To mitigate this risk, the parties are encouraged to use more advanced searching techniques, such as the ‘Boolean’ searches or ‘fuzzy’ searches created especially for accurate electronic document searches.^[37]

The ICC Commission Report on Managing E-Document Production also indicates that the parties may use the technique of data sampling, which:

entails the retrieval, review and production of only a portion of the repositories potentially containing relevant and material documents in order to assess whether the benefits of further review and production justify the costs and burdens of such review and productions.^[38]

A predictive coding tool should also gain the attention of the arbitration practitioners. Predictive coding is a learning technology that makes it possible to review documents and find the relevant ones on the basis of the tags and marks that were input by the person who reviewed the samples. It is a mixture of keyword search, filtering and sampling to automate portions of the e-discovery document review. The goal of predictive coding is to reduce the number of irrelevant and non-responsive documents that need to be reviewed manually.^[39]

By means of these techniques, it is possible for the party to limit the scale of documents that need to be reviewed. Consequently, these techniques allow the parties to conduct proceedings in a more cost- and time-effective manner.

To reduce the costs and increase the effectiveness of document review, it is recommended to involve in the document review process those persons who were also involved in the construction project.

In order to simplify the presentation of crucial documents during the arbitration proceedings, the parties may submit a timeline (chronology) of events to the tribunal. The Final Report on Construction Industry Arbitrations issued by the ICC (the ICC Construction Report) goes as far as to indicate that the timeline is required in all disputes concerning delays and disruption.^[40] The timeline typically consists of three columns containing the date of the event, its description and evidence proving its occurrence.^[41]

A tool that might simplify the presentation of large amounts of information during the proceedings and resolution of complex construction cases is Building Information Modelling (BIM). BIM technology makes it possible to gather and process complex data concerning the object being built and present them in an interactive model. BIM is commonly used by engineers during the project design and construction stages. However, models created using BIM could also be used as visualisation and communication tools in the dispute resolution process. Despite that, BIM is still not popular among professionals working on claims.^[42]

Managing and using documents during the hearing

Documents should be properly managed and prepared not only for the purposes of written submissions, but the parties should also consider a convenient method for managing the documents during the hearings. The ICC Construction Report states that it is the tribunal that will need to ascertain:

whether it is practicable to work from printouts or whether it would be better if the material were accessed directly by the tribunal, in which case it will be necessary for the tribunal and every other party to be provided with the necessary software.^[43]

Such software may be an expensive tool; however, its benefits cannot be overestimated. One only has to imagine how the ability for the tribunal and the parties to comfortably access the instantly needed documents stored in a database would simplify and accelerate the hearings. At the same time, it would eliminate the need to ensure that everyone is literally on the same page, which may be a frustrating process in cases where large volumes of documents are involved.^[44] One of the examples of such a tool is a limited access secure website that will be accessible only to the approved persons. During the hearings, that website will be accessible to all the involved persons.^[45] The parties or the tribunal may thereafter decide whether each party and the tribunal should search for the relevant documents itself or whether they should be projected onto a screen.

Nevertheless, if the tribunal decides that it prefers to work with printouts, it is still possible and necessary to properly organise the documents in order to simplify and speed up the hearings. So far, there are no rules on managing the documents during the hearing in any particular way; however, the tribunal has the power to decide on that matter.^[46]

The ICC Construction Report proposes that the documents should be assembled into ‘working’ files, divided, for example, into complete sets of site minutes, programmes, instructions and ‘issue’ files, where each file will contain documents relevant to each issue.^[47] The parties may also agree to assemble the most relevant documents to which the parties would like to refer during the hearing into the hearing bundles. Presenting files or bundles relating to each issue or ‘working’ files not only streamlines the proceedings but also eliminates the issue of duplication of documents.

The ICC Construction Report also indicates the importance of document identification systems. The parties must number the documents according to the agreed numbering system and ideally should highlight the relevant section of each of those documents for ease of reference.^[48] The parties can also colour-code the documents according to their content.^[49] For example, the ‘working’ files, witness statements and issue files would each have an assigned colour.

Even if the arbitral tribunal does not decide on any particular way of managing the documents, it is in the parties’ interest to suggest that the tribunal do so.

It is also important to be aware of how to properly manage the documents during the examination of witnesses. During the examination, the parties may wish to consider showing to the witnesses the most relevant documents in order to flag these documents to the arbitrators. That way, the party can ensure that the tribunal will not overlook such a document.

Documents may also be presented during the opening and closing statements of the parties’ counsel. In order to effectively convey the arguments during such presentations, the documents may be projected onto a screen.

In 2017, the ICC issued a report on information technology in international arbitration, which describes the most common issues that may arise when using information technology in arbitration. The report describes, among other things, problems related to the use of EDMS or presentation of documents during the hearing and provides practical solutions to overcome these problems.^[50]

Conclusion

On one hand, documents are the most accurate and reliable evidence serving the parties, experts and finally the tribunals to decide on the merits of the case. On the other hand, the number of documents in construction disputes is overwhelming and might still increase in the future with the increase in the complexity of the construction projects and the development of the parties’ awareness of the role of documents as evidence in arbitration. Therefore, efficient management of documents in the construction disputes is important to the parties’ success in arbitration, and its role will grow in the future.

Notes