Multi-Party and Multi-Contract Arbitration in the Construction Industry

Dimitar Kondev, Mag. Jur., LL.M. Ph.D. in Law, MCIArb, MIR, is a lawyer specializing in construction law and dispute resolution.  He is an Associate in the International Arbitration Group of White & Case in Paris and a lecturer in International Construction Law at the Aarhus University, Denmark.  His practice includes construction law in general, construction disputes and international commercial arbitration. He has experience in various sectors, including commercial development, energy and infrastructure. Dimitar has authored several articles published in the International Construction Law Review, Construction Law International and other journals. He is registered as dispute adjudicator under the Bulgarian list of FIDIC dispute adjudication experts (BACEA National List).

• About the Author xForeword xiPreface xiiiAcknowledgements xvList of Abbreviations xvi1 Introduction 11.1 General background and research problem 11.2 Scope of the book, limitations and literature review 41.2.1 Scope of the book 41.2.2 Limitations 41.2.3 Literature review 51.3 Sources used 61.4 Structure of the book 91.5 Aims and contribution of the book 102 Multi‐Party Arbitration in General 112.1 Terminology notes 112.1.1 Definition of multi‐party arbitration 112.1.2 Multi‐party and multi‐contract arbitration: divergent or similar concepts? 122.1.3 Group of contracts doctrine 142.2 Legal techniques introducing multi‐party arbitration 152.2.1 Single request for arbitration 162.2.2 Joinder 162.2.3 Intervention 162.2.4 Consolidation 172.3 Advantages of multi‐party arbitration 182.3.1 Avoids risk of inconsistent findings 182.3.2 Less time and fewer costs 192.3.3 Fewer factual errors 202.4 Obstacles to multi‐party arbitration 212.4.1 Consensual nature of arbitration 212.4.2 Arbitration as a two‐party setup 232.4.3 Arbitration as a confidential process 242.4.4 Setting aside proceedings and non‐recognition and / or non‐enforcement of arbitral awards 262.4.5 Practical difficulties 303 The Need for Multi‐Party Arbitration in the Construction Sector 313.1 Specifics of construction disputes and construction arbitration 313.2 Introduction to international standard form construction agreements 333.2.1 FIDIC Conditions of Contract 333.2.2 NEC contracts 363.2.3 ICC contracts 373.2.4 ENAA model forms 383.2.5 IChemE contracts 393.2.6 PPC International and SPC International 393.3 Contractual structures in construction projects 403.3.1 ‘Build‐only’ projects 403.3.2 ‘Design‐build’ or ‘turnkey’ projects 413.3.3 Construction management 433.3.4 Management contracting 443.3.5 ‘Design‐build‐operate’ (‘DBO’) model 453.3.6 Partnering and alliancing 463.4 Parties’ interests in multi‐party arbitration 463.4.1 Employer 463.4.2 Contractor 513.4.3 Subcontractor 523.4.4 Designer 533.4.5 Engineer 543.4.6 Suppliers 563.4.7 Technical consultants 563.4.8 Guarantors 563.4.9 Concluding remarks 584 Multi‐Party Arbitration Solutions under Arbitration Rules 604.1 ICC Rules 614.1.1 Multi‐contract claims and prima facie assessment 624.1.2 Joinder 674.1.3 Consolidation 694.2 CEPANI Rules 714.2.1 Multiple parties and multi‐contract claims 714.2.2 Joinder and intervention 734.2.3 Consolidation 754.3 LCIA Rules 774.4 UNCITRAL Rules 804.5 Swiss Rules 844.5.1 Prima facie test 844.5.2 Consolidation 844.5.3 Joinder and intervention 884.6 Rules adopted by the American Arbitration Association (‘AAA’) 904.6.1 Construction Industry Arbitration Rules (‘CIAR’) 904.6.2 ICDR Rules 924.7 Vienna Rules 944.7.1 Joinder 954.7.2 Consolidation 984.8 DIS Arbitration Rules 994.9 SCC Rules 1004.10 DIA Rules 1014.11 Arbitration rules in Asia 1024.11.1 CIETAC Rules 1024.11.2 SIAC Rules 1064.11.3 HKIAC Rules 1094.11.4 JCAA Rules 1144.12 Concluding remarks regarding arbitration rules 1155 Multi‐Party Arbitration Solutions under Arbitration Laws 1215.1 UNCITRAL Model Law 1225.2 The United Kingdom 1245.3 The Netherlands 1295.4 Belgium 1315.5 New Zealand 1325.6 Hong Kong 1335.7 Canada 1375.8 Australia 1385.9 Other countries 1395.10 Multi‐party arbitration in the United States 1405.10.1 Legal framework 1405.10.2 United States’ case law on multi‐party arbitration 1465.11 Should arbitration laws deal with multi‐party arbitration? 1585.12 Concluding remarks regarding arbitration laws 1646 Contractual Solutions to Multi‐Party Arbitration 1676.1 FIDIC Conditions of Contract 1696.2 Blue Form 1756.2.1 Clause 18(2) of the 1984 Blue Form 1756.2.2 Use of the Blue Form in conjunction with the FIDIC Conditions of Contract 1836.2.3 Commentary on clause 18(2) 1896.2.4 Clause 18(8) of the 1991 Blue Form 2016.2.5 Clause 18(10) of the 1998 Blue Form 2056.2.6 Clause 18C(4) of the 2008 Blue Form 2066.3 JCT Contracts 2086.3.1 JCT 80 approach to multi‐party arbitration 2096.3.2 Commentary on the JCT 80 approach 2196.3.3 New JCT approach 2226.4 ACA standard forms 2236.5 Nec3 2266.5.1 Main contract provisions 2276.5.2 Subcontract provisions 2296.5.3 Do NEC3 provisions create a self‐contained mechanism for joint adjudication? 2306.5.4 Compatibility between the joint adjudication provisions and the dispute notification requirements 2326.6 IChemE contracts 2346.7 ICC contracts 2376.8 PPC and SPC International 2386.9 ENAA Model forms 2406.10 AIA standard forms 2426.11 ConsensusDocs 2476.12 AB 92 and ABT 93 2506.13 Concluding remarks regarding contractual approaches 2527 Proposed Solutions 2557.1 Jurisdictional approach 2567.2 Abstract consensual approach 2627.3 Proposed contractual solutions 2647.3.1 IBA guidelines for Drafting International Arbitration Clauses 2677.3.2 AAA Guide to Drafting Alternative Dispute Resolution Clauses for Construction Contracts 2717.3.3 Drafting Multi‐Party Arbitration Clauses 2737.3.4 Sample multi‐party arbitration clause 3037.4 Institutional approach 3137.4.1 How to create a workable multi‐party arbitration mechanism under arbitration rules? 3157.4.2 Compatibility of arbitration agreements 3197.4.3 Other circumstances 3228 Conclusion 325Table 1 Summary of Multi-Party Arbitration Provisions under the Reviewed Arbitration Rules 328Table 2 Summary of Multi-Party Arbitration Provisions under Arbitration Laws 333Appendix 1 Second Alternative Clause of Clause 20 of the FIDIC Subcontract 337Appendix 2 Multi‐Party Arbitration Provisions under the Blue Form 351Appendix 3 Multi‐Party Arbitration Clauses under the ENAA Model Form – International Contract for Process Plant Construction, 2010 and Related Subcontracts 355Bibliography 358Index 381

"Dr Dimitar Kondev's book on multi-party and multi-contract arbitration in the construction industry tackles a complex topic, which presents many hurdles in practice. Dr Kondev has successfully accomplished this difficult task. He leads the reader through the intricacies and pitfalls of this subject in an efficient and well-structured manner. He also takes a convincing stance on the most controversial issue and proposes pragmatic and workable solutions to the recurring problems that arise with respect to multi-party arbitration in construction disputes. This book might be of interest not only for practitioners specialised in construction arbitration but also for the arbitration community...In view of the foregoing, there is no doubt that this book is a must read for arbitration practitioners.  Let us hope that Dr Kondev’s recommendations will be well received and implemented by the practitioners and drafters of international standard forms and arbitration rules. This would be a significant step-forward in enhancing dispute resolution in the construction industry."Fabrice Robert-Tissot, International Business Law Journal (RDAI 2018/1, pp 121-124)“This is the first book which deals with multi-party and multi-contract arbitration in the construction sector.… In his book, Dr Kondev makes an in-depth analysis of the legal regulation of this type of arbitration contained in the most popular institutional arbitration rules and the arbitration laws of different jurisdictions.  The book also offers an up-to-date and thorough review of how multi-party and multi-contract arbitration is dealt with in the most widely used international standard forms of construction contract (such as the FIDIC books, NEC3, etc.) and some domestic standard forms (used mostly in Great Britain, the US and some Scandinavian countries)… The book also contains practical guidelines for drafting multi-party arbitration clauses… Because of the importance of the matters discussed in this treatise, it would be of great value to lawyers, arbitrators and academics in the field of international commercial arbitration.”Society and Law (5/2017, pp 111-112)"Complex arbitration disputes involving multiple parties and multiple contracts are both an evergreen – as demonstrated by the extensive literature on the subject – and a hot topic – confirmed, eg, by numerous amendments to arbitration rules in recent years... Given this background, is it possible to add anything new or meaningful? KONDEV has demonstrated that it definitely is. On the one hand, his study is clearly structured, well written, and thoroughly researched; this alone makes it stand out and merit a strong recommendation. On the other hand, KONDEV adds a specialist perspective to the debate, namely that of the construction industry... The author ‘attempted to bridge the gap between the theoretical proposals regarding multi-party arbitration and their practical application’ (pp 326-327). It is submitted that he fully succeeded. Anyone dealing with multi-party, multicontract issues in the construction industry will benefit from this new book – drafters of contracts or rules as well as counsel, arbitrators, or judges in pending proceedings."Johannes Landbrecht, 36 ASA Bulletin 1/2018 (March), p. 256“Another publication on multi-party arbitration? Was that necessary, given that a lot has been written about this topic over the years already? It was. For at least two reasons. First, most of the existing contributions discuss the issue in a general context without regard to the peculiarities of disputes and specific contractual frameworks found in the construction industry. Second, many articles identify the numerous problems of multi-party arbitration without providing any self-contained practical solutions. Dimitar Kondev’s 408-page book fills these two gaps…For a number of reasons, Kondev’s book is of great value. It provides a useful overview of different approaches in arbitration rules, arbitration legislation and standard form contracts. It explains the importance of tailoring arbitration agreements to reflect the peculiarities of each project, the peculiarities of the underlying contracts, the peculiarities of the applicable arbitration rules and relevant national laws. Finally, the author addresses concerns and provides thoughts and ideas that are absolutely essential for drafting multi-party arbitration clauses. Not only, but in particular, the last two chapters of the book are very inspiring, even for experienced practitioners, and the various committees and working groups involved in the development of standard form contracts and arbitration rules.”Hein-Jürgen Schramke, Construction Law International 13 (1) (March 2018)“As surprising as it may sound, Multi-Party and Multi-Contract Arbitration in the Construction Industry appears to be the first published monograph dealing specifically with the topic of multi-party and multi-contract arbitration in the construction sector. [Dr Kondev's] dual background as practicing lawyer and scholar allows him to address with success the topic of this book from both theoretical and practical standpoints...Dr Kondev’s expertise and well researched approach makes this monograph a highly informative read. Dr Kondev’s insightful book will be of use first and foremost to construction practitioners who are looking for a comprehensive study of the difficulties raised by the multi-party and multi-contract nature of construction disputes. That book, however, should also appeal to general arbitration practitioners and academics looking to deepen their understanding of multi-party and multi-contract arbitration, as much of the insights transpose well into areas of arbitration practice other than construction."Dr. Remy Gerbay, ICC Dispute Resolution Bulletin, Issue 2 (2018), pp. 83-84  “Dr Kondev’s book provides a useful in-depth analysis of the three main legal sources of the regulation of multi-party arbitration: the arbitration agreement, applicable arbitration rules and arbitration laws… Dr Kondev’s clear analysis leads him to conclude that the current legal framework has largely failed to provide workable solutions for the construction sector.  He suggests two ways in which this framework could be improved: through the contractual regulation of multi-party disputes and by amendments to the arbitration institutional rules. Of particular practical use, recognising that the drafting of multi-party arbitration clauses can be a daunting complex exercise, Dr Kondev considers in detail the drafting of such clauses. He provides clear, and sensible guidelines, as a checklist for the drafter.Overall Dr Kondev has achieved his aim: to contribute at the theoretical level and to produce a book with a clear practical approach to the problems discussed.  His book is of interest to anyone involved or interested in international construction arbitration including in-house lawyers, arbitrators, private practitioners, academics and those involved in drafting international standard forms and arbitration rules. “Marion Smith QC, 35 The International Construction Law Review, No. 3 (2018), pp. 359-360