1. Enhancing Business Opportunities in Africa: The Role, Reality and Future of Africa-Related Arbitration
Atlanta, Georgia USA
November 3-4, 2014
Dispute Prevention, Management and Resolution on Infrastructure and Construction Projects
Steve Clay
Randy Hafer
Kwadwo Sarkodie
Tony Smith
John Hinchey

2. Introduction Introduction by A. Stephens Clay
Context: Africa Market Review
Introduction of Panelists and Their Presentations
Randy Hafer
Kwadwo Sarkodie
Tony Smith
John Hinchey
Presentations
Dialogue

3. Multi-Tiered Approach to Management and Resolution of Disputes
Dispute Prevention, Management and Resolution on Infrastructure and Construction Projects
Multi-Tiered Approach to Management and Resolution of Disputes
Randy Hafer, Partner
Kilpatrick Townsend & Stockton LLP
November 4, 2014

4. Facts and Figures*
Disputes on major global construction projects increased in value, on average, to $32.1M in 2013
Construction dispute values were the highest in Asia at $41.9M, and the Middle East at $40.9M
On average, disputes took less time to resolve in 2013 at 11.8 months, down from 12.8 months in 2012.
* Global Construction Disputes 2014: Getting the Basics Right, Arcadis 2014; Global Construction Disputes: A Longer Resolution, EC Harris, 2013.

5. Principal Causes of Construction Disputes
Picking the Wrong Partner
Owners should thoroughly investigate capabilities of proposed contractor
Experience and expertise
Financial resources
Claims history
Require statement of qualifications and experience, key person resumes, financial statements
Consider pre-qualification
Contractors should also check out the owner
Financing in place
Governmental approvals
Political stability
Contracting approach
Experienced staff or new to construction
Track record re: payment, claims, etc.

6. Principal Causes of Construction Disputes
Ambiguous, Incomplete or Uncoordinated Contract Documents
Contract documents will control preparation of contractor’s estimate and plan for performing the work, the design and construction of the work, and the resolution of claims and disputes
At least 2/3 of all construction contract disputes result from conflicts, omissions, ambiguities and broad generalities in the contract documents
Contract documents should:
Clearly define the project and spell out work scope
Clearly and thoroughly describe the parties’ rights and obligations in an understandable manner – not everyone reading them will be a lawyer or an engineer
Coordinate all pieces of the contract documents

7. Principal Causes of Construction Disputes
Unrealistic Risk Allocation
“Equitable Risk Allocation” – Allocate to party most able to control it
Exculpatory/risk shifting provisions ( no-damage-for-delay, site conditions disclaimers, etc.):
Perceived protection/benefit is often illusory
Often lead to more, not fewer claims, and the dispute process is often more complex and expensive
Lack of Trust/Poor Contract Administration
Assemble the project team early, and meet often
Provide a clear contact for decisions and approvals
Address problems early

8. Give Peace A Chance – Resolve Claims and Disputes Early
Address disputes resolution in advance, in the contract documents – don’t wait until they arise
In the U.S %, some would say 90%, of all commercial disputes settle
For international business disputes about 60% settle through direct negotiation or mediation according to a 2013 study
So We recommend a Multi-tiered Approach – “Give peace a chance” - Contractually mandate multiple attempts to resolve a dispute within reasonable but achievable deadlines

9. Give Peace A Chance – Resolve Claims and Disputes Early
Disputes Resolution Continuum
Prevention
On-site Early
Intervention
External
Non-binding
External
Binding
Cost, Time, Aggravation,
Less Control of Outcome

10. Multi-Tiered Approach
Contractually agreed prevention and collaborative processes
Equitable risk allocation
Partnering
Contractually agreed early, on-site intervention
Negotiation – multi-step, structured
Dispute Boards/Standing Neutral
Contractually agreed external non-binding resolution
Mediation/facilitated negotiation
Neutral expert evaluation
Contractually agreed external binding resolution
Arbitration
Binding DB
Litigation

11. Multi-Tiered Approach
A survey undertaken by Queen Mary University Law School in London and first published in 2006 (and confirmed again by the International Arbitration Survey 2013: Corporate choices in International Arbitration) concluded that, for the resolution of cross-border disputes, “73% of respondents prefer to use international arbitration, either alone or in combination with Mediation or other amicable settlement techniques in a multi-tiered dispute resolution process, and that “the top reasons for choosing international arbitration are flexibility of procedure, the enforceability of awards, the privacy afforded by the process and the ability of parties to select the arbitrators”.

12. Randall F (Randy) Hafer
Partner Kilpatrick Townsend & Stockton LLP
Randy Hafer is head of Kilpatrick Townsend's Construction and Infrastructure Projects Team. The Team represents clients on all types of projects across the nation and internationally and is ranked highest among the nation’s leading construction practices. Mr. Hafer has been involved in matters across the United States and internationally on a wide variety of construction projects, including tunnels, wastewater treatment plants, airports, power plants, mass transit systems, mining facilities, bridges and highways, hospitals, office buildings, sports arenas, resort condominiums, universities and schools, manufacturing and processing facilities, and military facilities. He works directly with construction project participants to avoid disputes and effectively and efficiently resolve, on a “real-time” basis, those disputes that cannot be avoided. He is well-versed and experienced in negotiation, mediation, arbitration, dispute review boards, and other forms of construction alternative dispute resolution (ADR). Mr. Hafer has also helped create and has successfully implemented customized dispute resolution processes to fit the particular needs of a project when other more traditional ADR procedures are not working. Mr. Hafer is a fellow and co-chair of the Alternative Disputes Resolution Committee for the American College of Construction Lawyers, a member of the International Institute for Conflict Prevention and Resolution Construction Advisory Committee, a Dispute Resolution Board Foundation member, and a panel member on the American Arbitration Association’s Roster of Arbitrators and Mediators.

13. Using Dispute Boards to Make a Project Successful
Dispute Prevention, Management and Resolution and Construction Projects
Using Dispute Boards to Make a Project Successful
Kwadwo Sarkodie
Partner
4 November 2014

14. What is a dispute board?
Background.
Contractual process: not statutory (unlike English adjudication).
Short timescale to decision – issues resolved in “real time”.
May be binding or advisory.
Independent and impartial.
Interim: Step prior to reference to arbitration.

15. Initial considerations
Dispute adjudication or dispute review:
DAB v. DRB
Binding or advisory decision?
Standing or ad hoc?
Enforcement: Can binding decisions be enforced?
Tribunal
When to establish
Composition
Appointment

16. Dispute Adjudication Board
How do they work?
Dispute Review Board
Issues advisory decisions/opinions to assist the contract parties in resolving disputes
Responsibilities extend to dispute prevention
Reviews and monitors the progress of the project
Dispute Adjudication Board
Independent and impartial tribunal
Issues binding decisions to resolve disputes between the contract parties

17. Importance and benefits of project knowledge. FIDIC:
Standing or ad hoc?
Importance and benefits of project knowledge.
FIDIC:
Red Book, MDB and Gold Book provide for a standing DAB;
Yellow and Silver Books provide for an “ad hoc” DAB;
Rationale for difference.
Is a standing dispute board proportionate in view of the size of the project?

18. Composition of tribunal
A combination of disciplines may be desirable.
A compromise in a 3-member tribunal may be to have a lawyer (as chairman) and two construction professionals.
Different considerations apply depending on whether appointment is to a standing or an ad hoc dispute board.

19. FIDIC DAB provisions: who should sit as a DAB?
Contractual framework: Clause 20.2/Appendix (General Conditions of DAB Agreement)/Annex: Procedural Rules.
Identity
“Suitably qualified persons” (Clause 20.2)
“Experienced with the work” (Clause 3(a), DAB Agreement)
“Experienced in the interpretation of contract documentation” (Clause 3 (b), DAB Agreement)
“fluent in the language” (Clause 3(c), DAB Agreement)

20. FIDIC DAB provisions: Procedure
DAB hearings usually take place but this is not a requirement – initial short procedural hearing can be useful.
DAB has no power to extend time for decision beyond 84 days.
DAB can appoint advisors on law and technical issues.
FIDIC Guide provides for exchange of two rounds of submissions.
Hearing procedure in FIDIC Guide: oral submissions and DAB questions to parties.

21. FIDIC DAB provisions: Procedure (contd.)
Less complex disputes may only require one round of submissions and a short hearing.
No power to award costs and expenses to winning party.
Proportionality is key for appropriate and proper resolution of disputes, given that arbitration is the next step.
Care should be taken not to substantially extend the process without ensuring that decision is final and binding.

22. FIDIC DAB provisions: Appointment
FIDIC forms envisage that the DAB will be constituted of either one or three members.
Default position is for DAB to comprise three members (Clause 20.2).
Number of DAB members will depend on: size of contract, complexity and project needs in terms of expertise.

23. DAB decisions: Enforcement
FIDIC DAB decisions are binding and should be complied with by the parties during the project (Clause 20.4).
If no Notice of Dissatisfaction (NoD) is served within 28 days of the decision, it becomes final and binding.
NoD is a condition precedent to arbitration (FIDIC, Clause 20.6).
A failure to comply with a DAB decision can be referred for enforcement by arbitration.
FIDIC contracts do not provide a route for enforcement of a binding but not final decision.

24. DAB decisions: Enforcement (contd.)
Singapore courts have declined to enforce an award arising from a binding DAB decision because it was not final and binding.
Obtaining provisional awards or interim measures may be the answer to deal with this lacuna.
Depending on size and complexity of dispute, it may be quicker to launch an arbitration than to enforce a binding DAB decision.

25. Conclusions
Dispute boards offer a good means for avoiding, resolving and managing disputes in international projects.
Under either the DAB or DRB process, the effectiveness will depend on the goodwill of the parties throughout process.
Appointment/procedure needs to be tailored to take into account project needs.
A proportionate approach is required.

26. Speaker details
Kwadwo Sarkodie, Mayer Brown International LLP Partner, Construction & Engineering Group Kwadwo’s practice focuses on dispute resolution and risk management in complex construction and infrastructure projects in the UK and in emerging markets. Kwadwo has extensive experience acting for clients in DABs, international arbitrations (ICC, LCIA, UNCITRAL and ICSID) and court proceedings in various jurisdictions.

27. Enhancing Business Opportunities in Africa:
The Role, Reality, and Future
of Africa–Related Arbitration
November 2-4, 2014
George Anthony Smith
As the title suggests, my paper covers most of the basic concepts related to international arbitration.

28. The Arbitration Clause
Drafting Arbitration Clauses
Functions of an Arbitration Clause and Use of Model Clauses
Key Elements to Include and Sample Multi-Purpose Clause
Pathological Clauses .

29. Four Essential Functions:
An arbitration clause must produce mandatory consequences for the parties.
It must empower the arbitrator to settle the disputes likely to arise between the parties.
It must allow for an efficient and rapid procedure leading to an award that is judicially enforceable.
It must exclude the intervention of state courts in the settlement of the conflict, at least before an award is issued.
I won’t spend much time on this because I understand that the next panel of speakers (after ours) will be covering the subject in more detail. But . . .

30. The Arbitration Clause
Four Basic Questions to be Answered:
What is to be arbitrated?
By whom is it to be arbitrated?
Where is it to be arbitrated?
How is it to be arbitrated?
Who, what, where, and how?

31. The Arbitration Clause
“Any dispute or claim arising out of or in connection with this contract, including any question regarding its existence, validity, or termination, shall be referred to and finally resolved by arbitration [under LCIA Rules] [OR] [administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules] [OR] [ under the Rules of arbitration of the International Chamber of Commerce], which Rules are deemed to be incorporated by reference into this clause.”
A good model clause that will work well in almost any situation:

32. The Arbitration Clause
“The number of arbitrators shall be [one/three]”
“The seat, or legal place, of arbitration shall be [City and/or Country]” (usually a center like London or New York).
“The language to be used in the arbitral proceedings shall be [English].”
“The governing law of the contract shall be the substantive law of [(usually) where the centre is – in this example England or New York].”
Other factor that should always be covered: The Seat.
Very important consideration for three reasons:
Enforceability (is the seat country a signatory to the New York Convention)
What procedural law will control the proceedings?
The extent to which local courts may be empowered to jump in and muck around in the proceedings.

33. Okay, that’s what an effective arbitration clause should look like, BUT, what can happen is this:
The corporate partners in your firm will have been working on a large, cross- border deal for months and months, hammering out the fine details with exacting precision, negotiating with the other side, drafting and re-drafting the various provisions of the agreement.
And then they finally get down to the 11th hour, they’re about to sign the deal, and somebody says: “I suppose we should put in a dispute resolution clause. I’m sure we won’t ever get to that, but just to be sure. . .”
At that point, the lawyers for one side might say, “Why don’t we just refer it to ICC arbitration? I understand that’s where most of these things go.”
The attorney for the other side then might say, well, that’s okay I guess, but my client will insist that we do any arbitration in Stockholm; I’m sure there’s an International Chamber of Commerce there.”
At which point, everybody says, “Okay,” and hands something off to a young corporate associate to write it up quickly so they can put it in the contract before the deadline.
And so it goes into the contract, no one looks at it until 5 years later, when the project has turned into a disaster and someone says, “Let’s file for arbitration.”

34. And that’s how you end up with clauses like those which I’m going to use as examples – which are actual clauses gleaned from real cases where disputes arose.

35. Pathological Arbitration Clauses
Pathological Arbitration Clauses Can be Defined as Clauses Drafted in Such a Way That They May:
Lead to disputes over the interpretation of the arbitration agreement;
Result in the failure of the arbitral clause; or
Result in the unenforceability of an award.
The clauses are referred to as pathological, not because they are necessarily fatal in every instance – meaning that disputes could not be arbitrated at all – but that they were so unclear, uncertain or incomplete that, when one side ultimately wanted to arbitrate a dispute and made such demand, and the other side chose to resist arbitration, the clause itself gave rise to disputes, disagreements, and ultimately litigation over what, if anything, was required.

36. Examples of Pathological Arbitration Clauses
Internally Inconsistent:
“The arbitration shall be conducted in Dar es Salaam, Tanzania and, unless otherwise agreed by the Parties, the number of arbitrators shall be three, with such arbitrator to be nominated by agreement of the Parties within 30 days from the date when the claimant’s request for arbitration has been communicated to the other party, or failing such agreement, appointed in accordance with the ICC Rules”
(Steve Clay will recognize this one.)
Are we having one arbitrator, or three?
If three, how do we get them?
Both parties have to agree on the nomination of all 3? Not likely.
Ultimately here the ICC determined, in typical ICC process, that each party would nominate an arbitrator, and those two would then pick the chair.
That worked just fine, but that is certainly not what this clause says.

37. Examples of Pathological Arbitration Clauses
Equivocation as to Whether Binding Arbitration is Intended:
“In the case of a dispute, the parties undertake to submit to arbitration, but in case of litigation, the Tribunal de la Siene shall have exclusive jurisdiction.”
“In the event of any unresolved dispute, the matter will be referred to the International Chamber of Commerce.”
Okay, let’s look at some examples.
These first two illustrate equivocation as to whether binding arbitration is even intended.
“In the case of a dispute......”
> No Clue.
“In the event of any unresolved dispute ”
> For what purpose?

38. Examples of Pathological Arbitration Clauses
Ambiguity as to the Parties’ Intent:
“Arbitration, if any, to be held in Paris, France.”
> How do you enforce this as an agreement to arbitrate?

39. Examples of Pathological Arbitration Clauses
Mis-Identifying the Arbitral Institution by Name or by Country:
“The parties shall proceed to litigation before the Arbitration Court of the International Chamber of Commerce with the seat in Zurich.”
The “ICC Court of Arbitration in Madrid, Spain.”
The “Official Chamber of Commerce in Paris, France.”
In fact, the ICC took this and held the arbitration in
Zurich.
After a lot of argument, the ICC accepted this case as
well, with the venue in Spain. May not have been what was intended.
Doesn’t exist.

40. Examples of Pathological Arbitration Clauses
Providing Too Much Specificity With Respect to the Arbitrator’s Qualifications:
“The Arbitrator shall be an English-speaking Italian, with a French law degree and a familiarity with Mid-East construction contracts.”
“All disputes shall be finally settled by three arbitrators who are fluent in Spanish and Japanese, but are neither of Spanish nor Japanese citizenship.”
Clearly, the product of much negotiation and compromise. Chances are not good of finding this person, and if not, no “plan B.”
Same problems here.

41. Examples of Pathological Arbitration Clauses
Providing for Conflicting or Unclear Procedures:
“Disputes hereunder shall be referred to arbitration, to be carried out by arbitrators named by the International Chamber of Commerce in Geneva in accordance with the arbitration procedure set forth in the Civil Code of Venezuela and in the Civil Code of France, with due regard for the law of the place of arbitration.”
“All disputes hereunder shall be referred to arbitration before the ICC in Switzerland in accordance with the arbitration procedures set forth in the French Civil Code and the Civil Code of Argentina, insomuch as those procedures are not in conflict with the law of the place of arbitration.”
More compromise and negotiation!
Guaranteed to lead to delays and costly disputes.
If this arbitration ever gets to the point where an Award is issued, likely unenforceable.
TMI

42. Examples of Pathological Arbitration Clauses
Use of “May” vs. “Shall”:
“Any dispute of whatever nature arising out of or in any way relating to the Agreement or to its construction or fulfillment may be referred to arbitration under the Rules of the ICDR.”
Problem here is clear – depends on what your definition of “may” may be.
May or may not be referred?
Who decides?
Change “may” to “shall” and it works pretty well.

43. Examples of Pathological Arbitration Clauses
Using Vague or Unclear Terminology:
“Any disputes arising from the interpretation of the present contract will be settled by an arbitral tribunal sitting in a country other than that of each of the parties.”
No Rules
No Seat
No way to select arbitrators
Very limited scope (arising from the interpretation of the contract)

44. Examples of Pathological Arbitration Clauses
Combining Non-Institutional Arbitration with Institutional Arbitration:
“In case such a dispute is not settled amicably by senior management within 30 days of escalation to senior management, such dispute shall be resolved and determined by an ICC arbitration board acting in accordance with the UNCITRAL Rules of Arbitration whose decision shall be final and binding upon the parties.”
Another example of a pathological clause: combining non-institutional with institutional arbitration.
Problem here is that use of the ICC Rules are mandatory IF the ICC itself is going to administer the arbitration.
ICC Rules and UNCITRAL rules are different – not consistent.
So how will this arbitration proceed? Probably WON’T.

45. Examples of Pathological Arbitration Clauses
Where Two Institutions Have Been Combined:
“ICC Arbitration to be administered by the AAA.”
Same kind of problems where two institutions are combined:
In this case, both institutions declined to accept this case.
The AAA was even sued to try to force it to adminsiter the case.
The clause is hopelessly pathological!
You’ve got to wonder WHY anyone would want to do this!

46. Examples of Pathological Arbitration Clauses
Too Narrowly Defining the Scope of the Arbitration Clause:
“Disputes and controversies arising hereunder AND relating to the interpretation of the contract AND matters of performance.”
Compare to “arising out of or in connection with this contract . . .”
“Disputes and controversies......” -- Ultimately, this one was construed by the courts to be limited to only disputs relating to contract interpretation issues.
Compare to “arising out of ” -- this covers every possible dispute.

47. Examples of Pathological Arbitration Clauses
No Clear Divisions Between Dispute Resolution Methods:
“In the event of disputes arising hereunder, the parties will initially attempt to resolve said disputes by mediation before a mediator to be mutually agreed by the parties. If both parties subsequently agree that the mediation has failed to resolve the dispute, then either party may refer the dispute to arbitration . . .”
The problem here is obvious: There is not a mandatory arbitration agreement, if one party wants to resist.
And then there’s that MAY problem again.

48. Examples of Pathological Arbitration Clauses
Naming a Person by Title to Appoint the Arbitrators:
President of the International Court of Justice
President of the Swiss Federal Tribunal
If the arbitrator selection process hits a snag, as I mentioned before, you need a Plan B.
While this might appear to be a good way to go, it is NOT.
While either one of these people may agree to step in and name an arbitrator if asked to do so, there is no obligation to do so.
If they refuse to get involved, what’s the back up plan?

49. Examples of Pathological Arbitration Clauses
“Other”:
Naming as arbitrator a specific person – who is now deceased, incapacitated, or who refuses to act.
Failing to name the seat of the arbitration.
Adopting the rules of an institution without a clear understanding of those rules.
Neglecting to specify applicable law.
And finally, some other examples, such as
To close, I suppose the key take away point I would leave you with is this?
Be very careful if you decide to do anything other than use one of the standard institutional arbitration clauses.
Any questions?

50. For more information: George Anthony Smith Weinberg, Wheeler,
Enhancing Business Opportunities in Africa: The Role, Reality, and Future of Africa-Related Arbitration November 2-4, 2014
For more information:
George Anthony Smith
Weinberg, Wheeler,
Hudgins, Gunn & Dial, LLC
Attorneys at Law
3344 Peachtree Road NE
Suite 2400
ATLANTA, GEORGIA 30326
telephone (404)
facsimile (404)

51. Dispute Prevention, Management and Resolution on Infrastructure and Construction Projects
Changes and Trends in International Disputes Resolution Procedures
John Hinchey
Chartered Arbitrator, CIArb
JAMS International
November 4, 2014

52. Changes and Trends in International Disputes Resolution Procedures
Concurrent Mediation and Arbitration
“Guided Choice” in Designing a Dispute Resolution Process
New International Arbitration Rules
IBA Guidelines on Party Representation in International Arbitration (2013)