Introduction

New Swiss arbitration rules which apply specifically to construction disputes contain several notable changes that may foreshadow the evolution of international construction arbitration procedures. For example, the new rules:

  • set out a procedure for the urgent determination by an expert of certain issues that frequently arise during construction projects;
  • grant arbitral tribunals the power to appoint technical experts as consultants, as opposed to tribunal-appointed experts; and
  • empower arbitral tribunals to facilitate settlements and require them to provide preliminary assessments to the parties to a dispute after the first round of detailed written submissions.

These innovations, which aim to improve efficiency and facilitate settlements, may be widely adopted by parties negotiating international construction contracts and arbitral institutions revising their rules.

Background

The Swiss Society of Engineers and Architects (SIA) issues the most widely used standard form contract for domestic Swiss construction projects, the SIA Norm 118.(1) It also issues an accompanying set of arbitration rules for construction disputes (SIA Norm 150), which underwent a radical revision in 2018.

SIA Norm 150: key changes

The new version of SIA Norm 150 includes several pioneering changes to the arbitral procedure.

Urgent determination procedure

The most groundbreaking feature of the new SIA Norm 150 is the optional annex that parties may seek the urgent determination by an expert of specific issues, such as whether:

  • an employer has the right to order a specific variation;
  • a contractor is entitled to additional costs and a time extension for a variation; and
  • certain works fall within the scope of a contract.

Throughout the life of a construction project, parties often face uncertainty in respect of certain contractual requirements. In practice, such issues often remain unresolved and build up until the completion of the project some months or years later, at which time their resolution becomes more difficult.

The new SIA Norm 150 enables parties to resort to an urgent determination procedure in which an expert will issue a finding on disputed questions within 30 days, thus allowing the parties to plan and act accordingly for the remainder of the project. The urgent determination becomes binding with the effect of a final arbitral award unless the concerned party challenges it within 30 days of receipt of the reasoned decision and initiates ordinary arbitral proceedings under the SIA 150.

Power of arbitral tribunals to appoint technical experts as consultants

Another notable innovation of the new SIA Norm 150 is that it gives arbitral tribunals the power to appoint technical experts as consultants. Unlike tribunal-appointed experts, technical experts have a special status as an advisory voice to the tribunal, enhancing its technical know-how without going through the lengthy and more costly exercise of obtaining expert evidence through reports.

Of course, technical experts cannot be a fourth arbitrator. The Federal Supreme Court has recognised that arbitral tribunals may be assisted by external consultants only if the arbitrators do not delegate their decision-making functions to such consultants. It is also debatable whether the right to be heard requires that parties be given the opportunity to comment on any advice or input provided by the consultant to the tribunal.

Facilitating settlements and providing preliminary assessments

Settlement facilitation is a recurring theme in the new SIA Norm 150. Several provisions aim to seize any possible opportunity for parties to resolve a dispute amicably.

First, arbitral tribunals are expressly empowered to facilitate settlements at any time during proceedings, without having to obtain the parties' prior agreement. With the parties' consent, the case management conference at the beginning of proceedings can also be used as an early opportunity for parties and an arbitral tribunal to discuss the dispute and reach a settlement before any further costs are incurred.

Should early settlement attempts be unsuccessful, the parties can make another attempt at the so-called instruction hearing that must be convened after the first round of detailed submissions. The concept of the instruction hearing follows a well-known trend in German arbitration that has gained some recognition and momentum in arbitral proceedings in recent years: the arbitrators provide the parties with a preliminary assessment of the case, including the arbitrators' view on the likely outcome of the matter based on the case file, prior to the taking of any oral evidence. As arbitrators' preliminary assessments identify the strengths and weaknesses of each party's case, they may – and often do – induce parties to settle a dispute amicably.

Comment

International construction arbitration practitioners are likely to follow with interest the success of the new SIA Norm 150 in practice. Only time will tell whether the new norm will inspire changes in arbitration agreements in construction contracts and arbitral rules on international construction arbitration.

For further information on this topic please contact Bernd Ehle or Samuel Moss at LALIVE by telephone (+41 58 105 2000) or email (behle@lalive.law or smoss@lalive.law). The LALIVE website can be accessed at www.lalive.ch.

Endnotes

(1) Further information is available here.

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