The International Bar Association’s (IBA) International Construction Projects Committee has published country guides on alternative dispute resolution (ADR) in construction disputes. We consider the benefit of these guides to industry users.
The IBA’s Country Guide project has published guides to ADR in construction projects across different jurisdictions.1 It currently offers guides for fourteen different countries (Argentina, Australia, Chile, Germany, Hong Kong, India, Indonesia, Ireland, Malaysia, Russia, Scotland, Spain, Switzerland and the USA), with further countries to be added in time.
The guides are based on questionnaires completed by experienced practitioners in each jurisdiction. Whilst the IBA points out that they should not be construed as legal advice, they provide a useful reference for anyone working on projects in unfamiliar jurisdictions.
Each guide starts by providing some background information about which sorts of dispute resolution processes are commonly used on construction projects in that jurisdiction, be it litigation, arbitration, mediation or other forms of ADR such as adjudication or dispute adjudication boards (DABs). It also discusses whether certain processes are mandatory where they have been specified in the contract. It ends with an interesting section on current trends and developments.
It is a useful starting point for businesses to get an idea of how sophisticated a country’s ADR regimes are and what approach the industry favours. For example, Argentina and Germany both prefer litigation, whereas in Indonesia the courts are perceived as not being transparent or expert enough and arbitration is favoured. India, in part due to the legacy of a number of World Bank funded contracts, favours arbitration but barely uses mediation. Whereas in countries like Spain, Hong Kong, Ireland and the USA mediation is a popular choice, and in some cases even legislated for. Ireland, Australia and Malaysia all have statutory adjudication procedures, and Germany is considering introducing such a process.
The guides will be of particular interest to FIDIC users as they focus on the use of DABs and the enforceability of DAB decisions. For example, they consider whether DAB awards are enforceable through the local courts without first having to obtain an arbitral award. Readers will also find Richard Booth’s article on the Persero case in this Bulletin of interest, in which the Singapore High Court considered the enforcement of a DAB decision by arbitration.
Many contracts contain multi-tiered dispute resolution clauses which provide for progressive escalation of a dispute through different stages of ADR before final determination. The guides explain how these are treated in different jurisdictions and in particular whether the local courts insist on them being followed. In most jurisdictions, if the steps are stated to be conditions precedent to arbitration or litigation, then they are typically treated as being mandatory. This is not the case in all jurisdictions. For example, in the USA steps can be omitted if pursuing them would be futile. On the other hand, in Russia there are no consequences for skipping steps before arbitration, but if steps are ignored before litigation, the court will refuse to consider the claim.
The guides also give information on the regulations concerning how public bodies must act in a variety of jurisdictions. For example, whether public entities are barred from settling disputes using ADR, whether they enjoy immunity, and whether procurement disputes can be settled using ADR. In Spain, for example, public bodies are barred from using ADR, and in India it is very rare for them to compromise disputes due to watchdog bodies that will scrutinise their decisions. In Russia there is no formal immunity, but in reality public bodies may be protected by “budget immunity”, where any compensation payable is limited by the funds allocated to that body by the Russian Federation for paying out damages.
The IBA’s guides provide a good analysis of arbitration and other forms of ADR across various jurisdictions, flagging up important commercial and legal differences.