CONSTRUCTION ARBITRATION - Chapter 23 - MENA Leading Arbitrators’ Guide to International Arbitration
Originally from The MENA Leading Arbitrators’ Guide to International Arbitration
A construction contract is generally associated with a high degree of uncertainty and complexity. A reasonably sized project typically involves a diverse range of skills and professional disciplines. The performance of the contract is a lengthy process during which all these professionals are contractually interlinked for a common purpose. Unforeseen circumstances are not unlikely to occur during the process, for example, an unforeseen change of weather or ground conditions. Further, a distinctive characteristic of a construction contract is that the product becomes part of the land, so the Latin maxim quicquid plantatur solo, solo cedit: i.e., what is joined to the land becomes part of the land, would apply to the materials in a construction project. The criticality of cash flow in construction is also a distinctive feature. Cash flow is said to be the lifeblood of the construction industry given the limited financial capabilities of contracting organizations comparing to the size of any bargains they are entered into.
Given these uncertainties and industry complexities, a construction dispute usually involves a significant amount of money and can possibly involve countless disputed technical, factual and/or legal issues—making the efficient, fair and just resolution of disputes a significant issue for employers and contractors, alike. Therefore, it comes as no surprise that initiating bodies of standard forms of construction contract keep introducing new innovative mechanisms, developing solutions and amending the traditionally used multi-tiered dispute resolution clauses to respond to the market needs and practical problems. The available dispute resolution tools range from unassisted party negotiation to litigation and arbitration. Cost and risk for each party can increase exponentially when dispute management crosses the line from a situation where the parties resolve the dispute themselves, and the third-party neutral facilitates, to a situation where the decision making is left to a judge or arbitrators.