The Clyde & Co Global Projects & Construction team today launched their guide to global construction dispute resolution. The guide brings together issues which are generating disputes, both globally and in specific regions which contractors and project stakeholders need to be alive to as they take on work in new markets.
John Morris, global projects & construction group head, said:
Across the diverse range of political and legal landscapes in the global infrastructure market, it is pivotal that construction contractors and project stakeholders understand the context in which any dispute over legal, commercial or technical matters will be fought.
After a major construction dispute arises, one of the critical success factors from our analysis is the technical experts that are deployed during disputes. Whether you need a process engineer or a delay analyst, there is inevitably a select club of the world's best experts. Choosing the wrong one (or being too late to choose the best candidate) will have a major impact on your chances of success. There is a real issue around a lack of availability which is a key stumbling block when going through a dispute."
Ben Cowling, head of the projects & construction group in the Kingdom of Saudi Arabia commented further:
In an increasingly global marketplace, it is vital to understand where a dispute might end up and the local nuances when you are new to market. For example contractors or businesses with experience in more mature markets may be used to compulsory adjudication or Western-style court litigation while, in the Middle East and Asia, disputes will be resolved by arbitration or through the local court system. A business that is expanding into a new region needs to get grips with these "unknown unknowns" before commencing projects in order to be best armed should issues arise.
Looking forward, we expect to see multi-tiered dispute resolution procedures, including the use of Dispute Boards and requirement for mediation across the infrastructure sector globally. It is also likely that there will be more 'jurisdiction shopping' for construction disputes with the emergence and use of an increasingly diverse number of key arbitral centres around the world
Other global trends identified include:
Causes of disputes in the construction and infrastructure sector globally:
- Cost overruns, scope changes and payment disputes
- Delayed or non-performance issues
- Design and quality errors
Forms of construction contracts generating disputes and most commonly used globally:
- International forms such as FIDIC: Asia Pacific, Europe, Middle East and Africa
- Regional standard forms: Australia, North Americas
Regional and sector dispute trends:
- Africa: infrastructure development continues to emerge and unsurprisingly, energy and transport sectors are seeing an increase in activity – and therefore disputes
- Australia: the previous mining boom and tailing of this boom has led to disputes across the natural resources and transportation sectors.
- Europe: in many countries which have recently acceded to the European Union, disputes have arisen in relation to projects which have EU funding and then encounter scheduling or budget problems.
- Asia: Has experienced strong growth in commercial developments and with an increasing number of Chinese and Korean contractors focusing on opportunities in new regions, risk mitigation features through use of robust and tailored project contracts.
- South-East Asia: Countries such as Myanmar, Philippines and Indonesia are facing significant growth and investment in infrastructure. This growth is being supported and funded by third parties but is also leading to increased disputes.
- Middle East: The Middle East construction industry anticipates a vast number of disputes in relation to infrastructure development ahead of upcoming cultural and sporting events (World Expo 2020, Qatar 2022 etc), also the significant number of rail and transportation projects is also expected to generate disputes for those less familiar with local market requirements.
- Latin America: World events such as Rio 2016 Olympics are expected to continue generating disputes and arbitration in addition to the ongoing natural resources sector opportunities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.