Construction Arbitration Two Ways

Title: Construction Arbitration Two Ways

Author: Erin Miller Rankin, Nicholas Lingard, Sarah-Jane Fick, and Monika Hlavkova

Published: 26. January.2018

Prepared by: Nurul Hilaliyyah Binti Madoseh@Abdullah

Sources: https://www.aiac.world/news/212/Construction-Arbitration-Two-Ways-

This article study about the two ways of construction arbitration.Generally, it is known that arbitration is an alternative to reconciling a dispute in private instead of litigation. Construction discord is suitable to the arbitration as the solution to the conflict arises. Flexibility, confidentiality, and industry-specific expertise are a must when disentangling construction disputes as it is the amalgamation of risky projects, intricate technical issues, and need the application of specific construction law. Arbitration is a consensual operation and the tribunal’s jurisdiction to tried and decide the dissension from the party’s agreement to arbitrate. This kind of agreement is usually incorporated into the party’s commercial contract although not every case, as it can also be subject to ad hoc agreement to submit the discord to arbitration. Malaysia and many other states have entered into bilateral and multilateral treaties that comprise Contracting State agreement to submit to arbitration if any disputes happen between the contracting state who professed the state conduct has been breached according to the relevant treaty. The two ways of construction are commercial arbitration and investment treaty arbitration.

Commercial arbitration is a submission of a dispute by agreement of business parties, it is included in the resolution provision of the parties’ construction contract. Even if when the contract is breached by the party involved, the resolution disputes part is still in power and the parties will be entitled to pursue arbitral proceeding as stated in the Malaysian Arbitration Act 2005. Basic principles that can be used to succeed in construction arbitration are the fact of the witness, experts, and technology. Fact witness evidence is a personal knowledge of the witness which normally will be submitted through written evidence as to their primary evidence and when called, they will testify their witness at the arbitral hearing. This fact witnesses ought to have first-hand knowledge of the issue, the evidence should be limit to the fact only without attaching personal view, ground, and evaluation. When the fact witnesses are corroborated with related project material it will strengthen the credibility of the testimonies. Existing employee or ex-employee of your client should also be considered as a witness. Expert evidence is generally submitted in form of a report, they offer their own opinion on issues falling in their expertise. Even though the expert may be brought by the parties involved according to their expertise, the expert report should be impartial and justified by detailed analysis and examples. Those experts may be cross-examined in the arbitral hearing, an expert who is easily exasperated and incompetent to explain the basis for their view is implausible when cross-examining. The technology offered such as 3D modeling software has been increased by claims consultants for the purpose of argumentative engagements. Tribunals have become more familiar with the use of digital simulations, therefore the use of technology might bring more benefit to the parties involved in the disputes.

Investment treaty arbitration is a procedure to resolve disputes between the foreign investor and host states. A contractor may be convenient under the umbrella of a bilateral investment treaty (BIT) or multilateral investment treaty. These treaties generally shield qualifying foreign investors against expropriation, unjustifiable treatment, and other unfavorable conduct by the foreign state. These treaties permit an investor to bring claims to arbitration against the state for the breach of treaty protection. If BIT exists between the investor and the state where the construction is conduct, the contractor has two obstacles to pass which are, does the contractor is a qualified “investor” and does it have an “investment”. For the first argument about the investor, it is stated in the 1995 Malaysia-India BIT that defines investor as “any national or company of contracting party”. While for the second debate regarding investment it is quite difficult to clarify it as there are several definitions from a different perspective such as BIT, construction perspective, and also the rule of International Center for Settlement of Investment Disputes. Under BIT there is an “umbrella clause”, which the investor can bring an argument under that BIT for breaches of contract that is entered with the state. These clauses are controversial as different tribunals apply different methods to determine the requirement for a claim to be brought. Therefore, contractors intending to invest abroad should always recognize the extent of treaty security available to them and arrange their investment, if possible, in order to achieve the required degree of treaty coverage.

Based on my opinion, commercial arbitration in a construction contract might be fair to the party who breaches the contract and can be unfair to the party with who the contract is breached. Why do I say so? It is because the party who the contract is breached might get more reward if the dispute is settled before the court. For instance, in arbitration, any information will not be leaked as it is one of the features in arbitration however the party who the contract is breached might want to expose everything to the world outside as a lesson to them not to get tricked like they are. Yet they are not able to do it because they already submit to the agreement in resolution provision which is signed when they are signing the contract. This commercial arbitration also makes them unable to get what they are supposed to get. For example, if they go to litigation, they might get more compensation than the arbitration reward that they receive. The binding form in a construction contract in resolution provision makes this party action is restricted as they are binding by the contract. The act of putting commercial arbitration in the construction contract when signing them are should be considered for not allowing it to be placed in the contract as it limits the parties from doing what they can do if disputes arise.

Next, I do believe that investment treaty arbitration does play its role to protect the foreign investor. However, the question may arise about the person chosen to be the arbitrator. As an illustration, if the arbitrator is from the country of the foreign investor, he or she might be biased toward their own country’s people same goes if the arbitrator comes from the other party country. Even though the arbitrator must be impartial when he or she gives the reward, they are still a human with a conscience of not wanting to hurt people from their own country and backing people from another country. However, since it is in their line of job, they must become impartial that’s what people expect from them. As humans we cannot read other people's minds, therefore the probability of the arbitrator becomes biased must not be hundred fully eliminated. As a suggestion, the arbitrator can be chosen from other countries that have no relation with the parties involved as he or she might give a more valid reward as the probability of he being biased is lower than arbitrator from the country of the parties involved. Nevertheless, everything comes with risk as for this issue if the arbitrator comes from a different country than the parties it might give impartial reward although the country names of the parties involved might be stained. If the arbitrator comes from the country of the parties the arbitrator might be prejudiced.

In conclusion, construction arbitration does perform its task efficiently as an alternative to disputes arise. Even though I believe, there are some part which still can be researched and improved to achieve a better result and will help more people to put their trust in construction arbitration more than litigation.