Multi‐Party and Multi‐Contract Arbitration in the Construction Industry Multi‐Party and Multi‐Contract Arbitration in the Construction Industry Dimitar Kondev Ph.D., LL.M., Mag Jur., MCIArb, MIR This edition first published 2017 © 2017 by John Wiley & Sons Ltd Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom Editorial offices 9600 Garsington Road, Oxford, OX4 2DQ, United Kingdom The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our web site at www.wiley.com/wiley‐blackwell The right of the author to be identified as the author of this work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book Limit of Liability/Disclaimer of Warranty: While the publisher and author(s) have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required, the services of a competent professional should be sought Library of Congress Cataloging‐in‐Publication data applied for ISBN: 9781119251729 A catalogue record for this book is available from the British Library Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books Cover design by Wiley Cover image: Omar Jabri / EyeEm/Gettyimages Set in 10/12.5pt Minion by SPi Global, Pondicherry, India 10 9 8 7 6 5 4 3 2 1 Contents About the Author x Forewordxi Prefacexiii Acknowledgementsxv List of Abbreviations xvi 1 Introduction 1.1 General background and research problem 1.2 Scope of the book, limitations and literature review 1.2.1 Scope of the book 1.2.2 Limitations 1.2.3 Literature review 1.3 Sources used 1.4 Structure of the book 1.5 Aims and contribution of the book 1 4 10 Multi‐Party Arbitration in General 11 2.1 Terminology notes 11 2.1.1 Definition of multi‐party arbitration 11 2.1.2 Multi‐party and multi‐contract arbitration: divergent or similar concepts?12 2.1.3 Group of contracts doctrine 14 2.2 Legal techniques introducing multi‐party arbitration 15 2.2.1 Single request for arbitration 16 2.2.2 Joinder 16 2.2.3 Intervention 16 2.2.4 Consolidation 17 2.3 Advantages of multi‐party arbitration 18 2.3.1 Avoids risk of inconsistent findings 18 2.3.2 Less time and fewer costs 19 2.3.3 Fewer factual errors 20 2.4 Obstacles to multi‐party arbitration 21 2.4.1 Consensual nature of arbitration 21 2.4.2 Arbitration as a two‐party setup 23 2.4.3 Arbitration as a confidential process 24 v vi Contents 2.4.4 Setting aside proceedings and non‐recognition and / or non‐enforcement of arbitral awards 2.4.5 Practical difficulties 26 30 The Need for Multi‐Party Arbitration in the Construction Sector 3.1 Specifics of construction disputes and construction arbitration 3.2 Introduction to international standard form construction agreements 3.2.1 FIDIC Conditions of Contract 3.2.2 NEC contracts 3.2.3 ICC contracts 3.2.4 ENAA model forms 3.2.5 IChemE contracts 3.2.6 PPC International and SPC International 3.3 Contractual structures in construction projects 3.3.1 ‘Build‐only’ projects 3.3.2 ‘Design‐build’ or ‘turnkey’ projects 3.3.3 Construction management 3.3.4 Management contracting 3.3.5 ‘Design‐build‐operate’ (‘DBO’) model 3.3.6 Partnering and alliancing 3.4 Parties’ interests in multi‐party arbitration 3.4.1 Employer 3.4.2 Contractor 3.4.3 Subcontractor 3.4.4 Designer 3.4.5 Engineer 3.4.6 Suppliers 3.4.7 Technical consultants 3.4.8 Guarantors 3.4.9 Concluding remarks 31 31 33 33 36 37 38 39 39 40 40 41 43 44 45 46 46 46 51 52 53 54 56 56 56 58 Multi‐Party Arbitration Solutions under Arbitration Rules 4.1 ICC Rules 4.1.1 Multi‐contract claims and prima facie assessment 4.1.2 Joinder 4.1.3 Consolidation 4.2 CEPANI Rules 4.2.1 Multiple parties and multi‐contract claims 4.2.2 Joinder and intervention 4.2.3 Consolidation 4.3 LCIA Rules 4.4 UNCITRAL Rules 4.5 Swiss Rules 4.5.1 Prima facie test 4.5.2 Consolidation 4.5.3 Joinder and intervention 60 61 62 67 69 71 71 73 75 77 80 84 84 84 88 Contents 4.6 Rules adopted by the American Arbitration Association (‘AAA’) 4.6.1 Construction Industry Arbitration Rules (‘CIAR’) 4.6.2 ICDR Rules 4.7 Vienna Rules 4.7.1 Joinder 4.7.2 Consolidation 4.8 DIS Arbitration Rules 4.9 SCC Rules 4.10 DIA Rules 4.11 Arbitration rules in Asia 4.11.1 CIETAC Rules 4.11.2 SIAC Rules 4.11.3 HKIAC Rules 4.11.4 JCAA Rules 4.12 Concluding remarks regarding arbitration rules vii 90 90 92 94 95 98 99 100 101 102 102 106 109 114 115 Multi‐Party Arbitration Solutions under Arbitration Laws 5.1 UNCITRAL Model Law 5.2 The United Kingdom 5.3 The Netherlands 5.4 Belgium 5.5 New Zealand 5.6 Hong Kong 5.7 Canada 5.8 Australia 5.9 Other countries 5.10 Multi‐party arbitration in the United States 5.10.1 Legal framework 5.10.2 United States’ case law on multi‐party arbitration 5.11 Should arbitration laws deal with multi‐party arbitration? 5.12 Concluding remarks regarding arbitration laws 121 122 124 129 131 132 133 137 138 139 140 140 146 158 164 Contractual Solutions to Multi‐Party Arbitration 6.1 FIDIC Conditions of Contract 6.2 Blue Form 6.2.1 Clause 18(2) of the 1984 Blue Form 6.2.2 Use of the Blue Form in conjunction with the FIDIC Conditions of Contract 6.2.3 Commentary on clause 18(2) 6.2.4 Clause 18(8) of the 1991 Blue Form 6.2.5 Clause 18(10) of the 1998 Blue Form 6.2.6 Clause 18C(4) of the 2008 Blue Form 6.3 JCT Contracts 6.3.1 JCT 80 approach to multi‐party arbitration 6.3.2 Commentary on the JCT 80 approach 6.3.3 New JCT approach 167 169 175 175 183 189 201 205 206 208 209 219 222 viii Contents 6.4 ACA standard forms 6.5 NEC3 6.5.1 Main contract provisions 6.5.2 Subcontract provisions 6.5.3 Do NEC3 provisions create a self‐contained mechanism for joint adjudication? 6.5.4 Compatibility between the joint adjudication provisions and the dispute n otification requirements 6.6 IChemE contracts 6.7 ICC contracts 6.8 PPC and SPC International 6.9 ENAA Model forms 6.10 AIA standard forms 6.11 ConsensusDocs 6.12 AB 92 and ABT 93 6.13 Concluding remarks regarding contractual approaches 223 226 227 229 Proposed Solutions 7.1 Jurisdictional approach 7.2 Abstract consensual approach 7.3 Proposed contractual solutions 7.3.1 IBA guidelines for Drafting International Arbitration Clauses 7.3.2 AAA Guide to Drafting Alternative Dispute Resolution Clauses for Construction Contracts 7.3.3 Drafting Multi‐Party Arbitration Clauses 7.3.4 Sample multi‐party arbitration clause 7.4 Institutional approach 7.4.1 How to create a workable multi‐party arbitration mechanism under arbitration rules? 7.4.2 Compatibility of arbitration agreements 7.4.3 Other circumstances 255 256 262 264 8 Conclusion 325 Table 1 Summary of Multi-Party Arbitration Provisions under the Reviewed Arbitration Rules Table 2 Summary of Multi-Party Arbitration Provisions under Arbitration Laws 230 232 234 237 238 240 242 247 250 252 267 271 273 303 313 315 319 322 328 333 Appendix 1 Second Alternative Clause of Clause 20 of the FIDIC Subcontract337 Appendix 2 Multi‐Party Arbitration Provisions under the Blue Form 351 Contents ix Appendix 3 Multi‐Party Arbitration Clauses under the ENAA Model Form – International Contract for Process Plant Construction, 2010 and Related Subcontracts 355 Bibliography358 Index381 About the Author Dimitar Kondev, Ph.D., LL.M., Mag Jur., MCIArb, MIR, is an international lawyer specializing in construction law and dispute resolution Dimitar has dealt with international construction agreements based on the FIDIC Conditions of Contract and bespoke contracts for over a decade He is currently working for White & Case LLP Paris on a research project in construction law Before joining White & Case he worked as a senior associate and practising attorney‐at‐law at DGKV, one of the largest law firms in Bulgaria, where he provided legal advice on all aspects and stages concerning the realization of large‐scale construction projects Dimitar has also worked as of counsel at the family‐owned law firm Law House Kondevi, Bourgas, Bulgaria Besides his professional background as an attorney, Dimitar has dealt with international construction law on an academic level He obtained his LL.M degree in international business law from the Vrije Universiteit Amsterdam Dimitar’s doctoral dissertation at Aarhus University in Denmark, which forms the basis of this book, focuses on construction law and dispute resolution Dimitar has written several articles for international peer‐reviewed construction law journals such as the International Construction Law Review and Construction Law International He has been teaching international construction law at Aarhus University since 2015 Dimitar is registered as a dispute adjudicator under the Bulgarian list of FIDIC adjudicators (BACEA National List) Contact details: d_kondev@mail.bg x Foreword I am delighted to have been invited to write a foreword to this book A proper discussion of multi‐party and multi‐contract arbitration issues in the construction sector is long overdue Disputes are inherent in the construction industry Large construction projects invariably involve a multitude of contracting parties, who are generally bound by a series of bilateral contracts Controversies arising under one of these contracts often have repercussions on parties not directly bound by that contract For example, an employer’s claim against the main contractor based on alleged defects in the subcontractor’s work will often trigger a recourse claim by the main contractor against the subcontractor Parties to international commercial contracts, including construction contracts, regularly resort to arbitration as a main dispute resolution method because of the advantages that arbitration offers over litigation Arbitration proceedings typically take place only between the (typically two) parties to the contract Third parties, who are non‐signatories to that contract, may not participate in the same proceedings As a result, related disputes on similar points of law and fact, such as the one mentioned above, often have to be resolved in parallel arbitrations This takes time, incurs costs and may result in inconsistent findings Multi‐party arbitration is not a new topic It has been the focal point of discussion and debate for several decades Numerous articles and a number of other contributions have been written on the topic In this context, it may seem surprising that very few of these contributions focus on the construction industry, where multi‐party disputes occur on a regular basis The present book is the first book on the market that provides for an in‐depth analysis of the legal issues associated with multi‐party and multi‐contract arbitration in the construction industry Having the background of a practising lawyer and a scholar, the author has approached this intrinsically difficult subject and its attendant problems from both a theoretical and a practical perspective In Chapters and 2, the book opens with an introduction to the problem of multi‐party arbitration In Chapter 3, the author steps into the shoes of each major participant in construction projects with the purpose of identifying their potential interests in participating in this type of arbitration Chapter contains an in‐depth analysis of the approaches to multi‐party arbitration under arbitration rules commonly encountered in construction disputes In this analysis, the author draws upon numerous articles and commentaries In Chapter 5, different legislative approaches to the problem are described and evaluated In Chapter 6, the book then focuses on the contractual solutions to multi‐party arbitration in a wide range of popular international and domestic standard forms together with case law pertaining to them The author critically analyses xi ... thereunder as multi- contract disputes or certain arbitration based on these disputes as multi- contract arbitration 10 John Marrin (2009) ‘Multiparty Arbitration in the Construction Industry’, in the Permanent... on the Law of International Trade, Reservation of Title, Multiparty Arbitration, Martinus Nijhoff, The Hague 11 Multi- Party and Multi- Contract Arbitration in the Construction Industry in the. .. for the conduct of multi party arbitrations21 These include the arbitration agreements contained in the parties’ contracts, the arbitration rules referred to in these agreements, and the arbitration