International Arbitration in Construction

While arbitration is still regarded by construction companies as the preferred process for resolving disputes on international construction projects, there is scope for improved efficiency and flexibility at all stages of the arbitral process. That is particularly so for disputes valued at USD10m or less, where the cost of the process is often seen as a barrier to justice and the fair resolution of the dispute.

About the report 

Pinsent Masons' 2019 International Arbitration Survey, in partnership with the School of International Arbitration at Queen Mary University of London, focuses on issues affecting the efficiency of resolving disputes on international construction projects and how that might be improved. Findings suggest that although arbitration is seen as the most widely selected process for resolving international construction disputes, there is a desire within the construction sector to make the dispute resolution process and most particularly, arbitration, more economical and quicker for the end user.

The survey provides valuable insight into the factors that lead to inefficiency, how respondents from diverse backgrounds and different jurisdictions perceive these and how the arbitral process might be improved to meet the needs and concerns of the construction sector. This in-depth analysis will assist clients and practitioners in evaluating what steps might be taken to optimise the arbitral process with a view to resolving disputes more efficiently and, in particular, at a much earlier stage in the lifecycle of a dispute.

Key findings

• The value of the dispute can sway decision makers' views on whether it is a commercially sensible step to pursue arbitration. For 42% of respondents, the minimum threshold for considering arbitration is where the value of the dispute is between $1m and $10m, but the study found that 43% of in-house counsel surveyed believed that disputes need to be valued between $11m and $25m to make the claims worth pursuing in arbitration.
• 73% of respondents regard technical complexity as a defining feature of international construction arbitration, 66% of respondents cited the large amounts of evidence required. Multiple claims or parties (49%), and large amounts in dispute (41%) were also features commonly identified. 
• When appointing arbitrators, the vast majority of decision makers valued experience of how construction projects work above all other factors. In terms of arbitrator characteristics, the leading attributes comprised issuing an award within a reasonable period of time (70%), being willing to make difficult decisions, including on procedural issues (68%), possessing case and counsel management skills (68%) and having technical knowledge of construction disputes (63%).
• The majority of respondents (67%) showed support for mandatory compliance with pre-arbitral decisions (which might be obtained as part of the contractual dispute resolution mechanism) as a pre-condition to arbitration. This statistic was underpinned by other survey results which showed that more than two-fifths of parties do not voluntarily comply with decisions issued in alternative dispute resolution processes.
• Although respondents acknowledged that technical automation has a role to play in increasing the efficient management of large volumes of evidence, there was resistance to the idea of automating the entire decision making process.

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