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The Evolving Construction Arbitration Process and the Search for Improvements

Andrew D Ness and Deborah S BallatiJAMS

Finding efficient and cost-effective means to resolve complex construction disputes through international arbitration remains a substantial challenge. To meet this challenge, practitioners and neutrals both need to consider new ideas and techniques that offer likely savings in time and costs. Viewed broadly, international construction dispute resolution has evolved considerably over the past 30 years. Starting in the 1990s, a larger range of alternative dispute resolution techniques began to be used, and this evolution continues. Mediation is now more commonly used in international disputes, and innovations such as dispute review boards, project neutrals and neutral evaluation continue to gain ground as well. But arbitration remains the keystone, as only arbitration provides a binding third-party decision and an award reasonably likely to be enforced in almost every major country. As a result, continued efforts to make arbitration simpler and less costly, without sacrificing its integrity or the quality of awards, remain a major priority.

Advancements in technology have already had a significant impact on the arbitration process. Delivering pleadings and exhibits electronically (by some combination of email attachments, USB drives and file-sharing sites) is now commonplace, and some arbitrators are sufficiently adept at using the electronic version that they are willing to forego receiving paper copies altogether, saving trees, production and assembly time, and shipping costs. The proliferation of different types of file-sharing sites, with different protocols for downloading and saving documents, still challenge many, so improvements are needed before electronic delivery is seamless and truly user-friendly. Presentation technology that allows any exhibit to be called up and presented on screen in a few seconds can certainly make witness testimony more effective and efficient, but hearing rooms need to be able to handle the screens, cables and electronic equipment involved in using this technology. 

The central challenge that remains, for counsel, the tribunal and witnesses alike, is accessing efficiently the particular portion of a case document that is needed at a particular time. A major construction arbitration commonly involves hundreds if not thousands of exhibits, many technical and lengthy in nature (such as specifications, drawings, technical reports, cost reports, invoice compilations). Many documents are lengthy and cumbersome, but only a relatively few pages are pertinent to the dispute; contracts with numerous appendices and attachments are often the leading examples of this. Moreover, exhibits are traditionally numbered sequentially by each party, in the order that they are referenced in the pleadings. Duplication, or near duplication (with only immaterial variations between versions) between many claimant and respondent exhibits is inevitable, absent substantial coordination efforts among counsel to reduce it. Depending on how email chains are handled, the same email may appear numerous times in the exhibits. 

Later in the case, and particularly at the hearing, the original organisational sequence driven by the organisation in the pleadings is often the least useful way to organise the exhibits. Indices organised chronologically, by topic or by witness, can be useful to avoid the need for more than one paper copy of exhibits. Keyword searching the electronic version of the exhibits can help, but is no panacea, particularly when a term is used a few hundred times in the documents. Counsel and arbitrators here are essentially at the mercy of software developers; the need for more capable and flexible software tools that can reorder exhibit files on command and incorporate more sophisticated search capabilities than simple keywords is obvious. Hopefully, much improved, user-friendly document management programmes optimised for document-intensive legal proceedings are not too far off. The benefits in terms of greater efficiency at hearings, in preparing motions and briefs, and in drafting awards would be significant.

Beyond advancements in technology, arbitration is evolving in other ways. The cross-pollination of innovations between US and international practice is clear and ongoing, to the benefit of arbitration and dispute resolution globally. There is now widespread recognition in international arbitration that a reasonable opportunity to request production of significant documents is often important in reaching a fair result. In construction cases in particular, there is a natural imbalance between owners and contractors in their control over documentation of key project events; limited document production can bring this into better balance. The IBA Rules on the Taking of Evidence in International Arbitration now contemplate production of “narrow and specific” categories of documents whose relevance can be clearly described. While certainly a far cry from the wide-ranging discovery available in a US court, this still represents a considerable shift in favour of greater disclosure in international arbitration. The primary benefit of this shift, however, relates to fairness of the process, not greater efficiency, as document disclosure has become a significant cost and time element within the international arbitration process. 

More recently, the flow of innovations has been more from international arbitration to US proceedings, including increasing use of witness statements in lieu of direct testimony, and less often (but on the increase) requiring opposing experts to meet and produce a joint report identifying their points of agreement and differences. US lawyers not familiar with the use of written direct testimony often complain that they spend more time preparing witness statements than they would preparing and conducting oral direct testimony, but this largely misses the point. With little question, using witness statements and moving in short order to cross-examination reduces the overall hearing duration significantly, and hearing hours are far costlier than the hours spent by one attorney on a witness statement. An hour of hearing time saved reduces the bill from every hourly biller present in the hearing room; this reduction is substantial where multiple counsel and experts are present at the hearing. Similarly, a joint report that sets out points of common ground between the experts also avoids unnecessary hearing time otherwise used just to establish the areas where there is no real disagreement.

The use of witness conferencing (“hot-tubbing”) with matched pairs of experts, while adopted in only a minority of international arbitrations, is still far more prevalent internationally than in the US. Use of this technique seems destined to grow in both the international and domestic US arenas. While the details differ, when appropriately implemented, hot-tubbing offers an enormous improvement in the focus of cross-examination. Through this process, the tribunal can put the questions in which it is most interested directly to the experts simultaneously, and readily compare and contrast the experts’ respective positions on the key points. It also gives each expert a direct opportunity to point out the weak points in the opposing expert’s analysis, while allowing that opposing expert the ability to respond on the spot. Subsequent cross-examination by counsel then typically becomes much briefer. Perhaps the most significant inhibitor to the expanded use of this technique is its unfamiliarity, as well as uncertainty regarding the new and different demands it places on the experts, the tribunals, and counsel. With time and positive experiences, however, the benefits are likely to become more widely appreciated.

Similarly growing is the use of fixed time allocations to each party (“chess clock” arbitration). Fixed time allocations have proven highly effective in addressing a common problem in US arbitrations: the hearing exceeding the number of days allocated, requiring adjournment until additional hearing days can be scheduled. Such extended hearing durations and adjournments (sometimes on multiple occasions) inevitably result in greatly increased costs to all parties, and are something that conscientious neutrals seek strenuously to avoid. And while the process of fixed time allocations, if not properly managed, can result in one or both parties being left with almost no time to present the latter parts of their case, this result can be avoided by better time management and interim assessments as the case progresses.

It also seems likely that developing US expertise in overseeing e-discovery (the discovery of electronically maintained records, with emails being the most significant and problematic) may benefit international arbitrations in years to come. The advent of broad e-discovery has been the most significant change in the US litigation process in many years. It has spawned an entire new terminology as well as a new industry of e-discovery consultants, software platforms and vendors. Most importantly, it has driven the cost of US litigation to unprecedented levels, as the US concept of allowing litigating parties broad discovery rights is now applied to the many gigabytes of electronic records generated by even a moderately sized construction project. 

US arbitrators, in turn, have been increasingly called upon to fashion reasonable limitations, which are in general considerably more restrictive than most courts would apply, to permit critical e-discovery while also keeping costs within reason, and appropriate for the significance of the electronic records to the dispute at hand. The emerging techniques and expertise in setting such limits, gained with sometimes hard experience, seem likely to benefit international arbitration as well in the years to come.

Finally, there is clearly room for steps to reduce the arbitral process timeline. The cost of litigation or arbitration is time-related – the longer the process, the more it costs. Taking a harder look at the typical steps involved in the international arbitration process, and where they can be reasonably compressed, is likely to yield places where time and money can be saved. For example, the JAMS Arbitration Rules and Procedures provide that the parties are to “cooperate in good faith in the voluntary and informal exchange” of relevant documents, starting “immediately after the commencement of the arbitration”. While there is no enforcement mechanism associated with this obligation, it attempts to put to productive use the too-often extended period between initiating the arbitration and completing the appointment of the tribunal. Where the parties comply, overall time savings in the arbitral process often result, to the benefit of both parties.

While arbitration remains the most important dispute resolution process for international construction disputes, its costs are a significant burden that in the long term threaten its viability, especially for lesser value disputes. The continuing search for better methods and techniques to reduce process costs is an important one. The cross-pollination of ideas between US and international practices should continue to be a source of good ideas that can gain wider application, and that wider application will benefit all arbitral forums. 

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