Construction 2018: Roundtable

Who’s Who Legal brings together Michael Stokes at Navigant, Patrick McGeehin at FTI Consulting and Amit Garg at Secretariat International to discuss issues facing construction experts and the industry today.

Construction

 

WWL: What have been the main challenges facing construction expert witnesses over the past year?

MS: I have noticed that procedural timetables are becoming increasingly challenging, particularly in complex international arbitrations. While these are no doubt motivated on the part of the parties and the Tribunal by a desire to be efficient, it invariably requires the expert to be very nimble and responsive! Discipline and time management is key to ensure that all deadlines are met so that the Tribunal and those instructing you receive the advice they need in good time to keep the case on track. Hitting deadlines is always challenging but vital.

PM: Hiring experts too late in the procedural time frame can sometimes be a problem. The experts need to be involved well in advance of the deadlines for the Statement of Case but are often not.
Given the voluminous data productions, and the focus on memorial pleadings (where experts must write reports when the evidence in the case is sometimes partial), there are often unrealistic expectations about the fee levels necessary to provide expert reports – both affirmative and rebuttal.

AG: On complex matters, parties engaging experts may not have a clear understanding of the merits of their case and in turn their potential exposure. This becomes a challenge as it results in parties having a pre-conceived notion of their entitlement. As such, it is important for good experts to provide an objective view early on in their engagement.

WWL: Which types of projects are resulting in the most disputes at the moment? Why do you think this is?

MS: I am continuing to see a steady stream of LNG-related projects from around the world. I think this reflects the continued investment and expansion in LNG, the fact that, in some countries at least, LNG is new technology, and the fact that the projects are complex.
In addition, we are still dealing with the fallout from the collapse in the oil price, which resulted in a number of high-profile termination cases involving a wide range of assets including platforms, FPSOs and processing facilities.

PM: We are seeing a lot of large infrastructure projects, including tunnelling projects with differing site conditions issues, as well as oil and gas, and other energy projects that have been let using EPC methods of procurement. Often, the contract documents on these projects are incomplete and unclear in certain respects, leading to disputes. This is also true for long-term contracts without any provisions for fluctuations for escalation and other high-risk cost elements.
Given that we are involved in projects where disputes occur, it is not surprising that many of those projects include provisions with risk primarily shifted to the contractor, including unforeseen ground conditions.
Given the uncertainty of certain industries and the fall in oil prices, we are also seeing terminations, as well as litigation pursuant to investment agreements between countries, referred to as “BIT’s”.

AG: Large projects, particularly those involving transportation and power infrastructure, O&G/mineral production and processing, have a greater tendency to generate disputes. This is because these projects have unique design, are complex to construct, and usually involve numerous parties that have not worked together previously. On occasion, these projects may be located in parts of the world where the parties executing them may not have significant experience. Parties frequently underestimate the risks arising from the above-mentioned factors, and this results in conflicts during project execution.

WWL: Why do you think arbitration has become such a popular form of dispute resolution for the construction industry?

MS: I am not sure that domestically, that is, in the UK, arbitration remains popular in construction. The success of adjudication, and the significant improvement in the Technology and Construction Court means that litigation is more often than not the best option.
The situation remains different for international construction projects, particularly where the contractor is foreign to the employer or location of the project. In these circumstances arbitration remains the default dispute resolution forum. This is really a question for lawyers, but it seems to me that there are many reasons for this, including the ability to choose a neutral seat, concerns regarding either the neutrality or quality of the judicial system in certain jurisdictions, the perceived increased party control in arbitration and, of course, the confidential nature of arbitration. These are compelling reasons why arbitration remains a popular choice in international construction projects.

PM: Primarily, of course, arbitration affords a neutral venue for entities involved in international disputes, and the ability to enforce awards in certain venues, such as the ICC. In addition, for highly complex matters, arbitrators can be selected with technical expertise and experience tailored to the issues between the parties, making the process more efficient.
A perception also exists that there is more control over the process, although that is not always the case.

AG: The increase in construction arbitrations is due to a combination of the continued development of these large projects (of the kind mentioned above) in newer project locations and the growing interest of globally ambitious contractors in expanding in these regions, where they had not worked previously. In such projects, the parties involved are from different countries, and as such arbitration becomes a more obvious choice than litigation.

WWL: How has the role of expert witness developed over the past few years?

MS: I do not think the fundamentals have changed. The requirement is still to provide entirely independent and objective opinion to assist the tribunal or judge make an informed decision in respect of your area of expertise.
What I would say is that as projects and business models become increasingly complex, it is becoming more common for me to find myself working as part of a multi-disciplinary team, working closely with leading experts from other disciplines. Typically, this will be forensic accounting experts and/or legal technology data analysts. With very large losses there is often an accounting piece or revenue loss to the damages assessment. Equally, the amount of data to be analysed or reviewed on large cases is becoming almost impossible without deploying sophisticated technology solutions. Being able to work closely and seamlessly with my colleagues in this way always results in significant benefits in terms of efficiency and, perhaps even more importantly, the increased effectiveness of the evidence provided.

PM: With experts working across the globe on large international matters, there is a need for the experts to be virtually available 24/7 to assist law firms and clients.
We have also seen an increase in the cases that use expert joint meetings and “hot-tubbing” to reduce issues and assist the arbitration panels on complex technical and quantum issues.
Of course, there is also more need for technical electronic and data specialists on the expert team to handle the volume of data that is typically generated on large international construction litigation matters.

AG: Further over the last few years, there has been an increasing push by the Tribunals in using hot-tubbing and witness conferencing as part of expert witness testimony. Depending on the case, these tools can be very valuable as they require the experts to clearly explain why their views differ from each other.

WWL: How has the competition for expert witness work developed since you began practising?

MS: It is fair to say that construction dispute resolution in general has developed significantly since I first started practising in the late 1980s. Developments in education and training, the constantly increasing reputation and status of bodies such as the Society of Construction Law, and the continual drive by the legal community to better serve the industry with novel contracts and more efficient ways to avoid or settle disputes means the field continues to evolve and thrive.
One would expect this in turn to lead to increased competition in the expert field. Sadly, this is not my experience. While in relation to quantum many quantity surveyors will “have a go”, there remains a lack of experienced and skilled experts for the large and complex cases. The situation is even worse in relation to scheduling and delay experts. Top quality experienced delay experts remain in short supply globally. Good quality competition is a good thing. It drives innovation and improves performance all round. Hence, I invest in the development of our “junior” experts to become the stars of the future.

PM: The competition really depends on the size and complexity of the cases. On smaller cases, there are many local and international professionals that are considered for expert assignments. In general, however, lawyers on the large international arbitration matters with “bet the company” exposure look to a small subset of that group of professionals who have the experience and skill to manage such cases. On those cases, experts still command high hourly rates in comparison to domestic litigation.
There has also recently been more fee pressure and requests to “cap” fees for various phases of the work.

AG: Although there are now more firms on the horizon that have experts on board, expert witness work, particularly in delay analysis in international construction arbitrations, remains a relatively closed field with a small number of good experts available worldwide. As such there is limited competition at that level.

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