YOUR TOOLKIT FOR WINNING THE INTERNATIONAL CONSTRUCTION ARBITRATION

By Alvin F. Lindsay

INTRODUCTION

Disagreements among multinational parties on large-scale global construction projects

are perfectly suited to international arbitration. Without arbitration, those parties might

be forced to resolve their disputes in unfriendly courts with unskilled judges applying

undeveloped law. In arbitration, parties are free to choose the applicable law, retain

sophisticated arbitrators with expertise in the field, and have the matter heard in a

comfortable and neutral site.

For these reasons, among others, as many as 9% of all actions filed with the world’s

leading arbitration institutions are construction disputes.

Some common-law lawyers, in fact, bemoan the lack of new case law involving

construction, the result of what has become nearly exclusive use of arbitration clauses

in commercial construction contracts.

This article intends to provide professionals who represent parties in international

construction arbitrations with tools for winning the arbitration, while offering insight on

the differences between trying a case in arbitration versus court. .

THE PANEL: TOOLS FOR SELECTING THE ARBITRAL TRIBUNAL

Unlike the random selection process most courts use to assign judges, one of the great

advantages of arbitration is that parties are free to agree on who their finders of fact will

be, or at least agree to the method they will use to select the arbitration panel. Parties

in arbitration should never ignore or minimize this advantage, or they will fritter away an

asset they agreed to and for which they are paying.

Usually, an arbitration panel will consist of three arbitrators and, although different

institutions encourage different selection techniques, the institution’s rules can always be

supplanted by the parties’ agreement. Generally, in a two-party dispute, each party will

select one of the arbitrators, and those two arbitrators will then agree upon a chair. The

chair, of course, has much of the real power. The ability to agree upon and customize a

panel is one of the great benefits of arbitration, and must be approached carefully.

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When selecting or agreeing to an arbitrator, cultural

considerations are critical. Where is the potential arbitrator

from? Is she trained in the common law or civil law? Is there any

evidence the potential arbitrator might favor contractors over

owners? What is his background? Does the potential arbitrator

have a history of strictly enforcing contract language, or does

she allow equitable arguments to prevail?

Even something as simple as language is critical. If the contract

documents are in one language, but the main language spoken

orally and in writing during the project was another, should

the arbitrator speak one or both? If interpreting a particularly

complex or novel contract clause is important, it may be that the

language of the contract should also be the arbitrator’s native

tongue. If the testimony of the most important witnesses is

critical and will be in another language, even if translated, that

could be a factor in selecting a panel.

Because most arbitrators are lawyers, someone from a civil-law

country, where court disputes are centered on an inquisitorial

system with no disclosure or discovery procedures, is less likely

to permit broad and open document disclosure than someone

from a common-law system where broad discovery is ingrained

in the culture.

But where the parties each chose one arbitrator and those two

arbitrators select the chair, what can be done to influence that

selection? The rules of two of the world’s leading arbitration

institutions, the International Chamber of Commerce and the

International Centre for Dispute Resolution, provide that unless

the parties have agreed upon another method, the institution

itself will select the chair. While the associations often have

excellent stables of arbitrators and will often work with the

parties to appoint someone with relevant experience, why

would parties want to cede that control to anyone? Even if

the arbitration agreement is silent as to the selection process

or requires that the chair is selected by the party-appointed

arbitrators, or so-called wingmen, it might be of mutual

advantage to negotiate a better process at the outset.

Industry expertise and sometimes specific expertise in

discrete areas of construction (e.g., tunnel building) can be an

important factor for both sides in a case. Where the process

involves the party-appointed wingmen mutually deciding on

their chair, the parties are still usually permitted to inform

either both the selected arbitrators jointly, or their appointed

arbitrators individually, the general types of qualifications they

want from the chair. Again, these are important considerations

and, because arbitration is a creature of contract, if the parties

agree to a process, it will happen. Thus, it is generally in all

parties’ interests to take advantage of this freedom and ensure

a custom panel.

Of course, many times parties who think ahead will realize that

an important aspect of the case may depend on how strictly

an arbitrator might read an otherwise onerous contractual

provision or requirement in the face of strong equities against

enforcement. Whether the system used for appointments

involves lists, mutual agreement of the parties or their appointed

arbitrators, or third-party appointments, the only way to learn

and understand a potential arbitrator’s legal worldview is by

reading everything ever written about and by that person. This

can be difficult, as most arbitral decisions are unpublished,

but putting out feelers to friendly professional networks can

sometimes turn up examples of a potential arbitrator’s written

decisions. Also, many arbitrators are retired judges who do have

archives of publicly available opinions. Even where no actual

judicial or arbitral decisions by the potential arbitrator exist,

parties must still research major news media for any reporting on

all potential arbitrators.

A final but important point regarding the selection and

appointment of arbitrators is that in situations where the parties

each select a party-appointed arbitrator, that person must be

credible to the other arbitrators and especially the chair. Party-

appointed arbitrators don’t advocate for the party that selected

them, but the unspoken expectation is that they will at least

ensure that all of that party’s arguments will be fairly considered.

But the minute that arbitrator’s credibility is lost to the other

members of the panel, any attention that arbitrator can direct to

one of the appointing party’s arguments will only be negative.

Thus, parties should not only attempt to determine whether

arbitrators have successfully worked together in the past, but

they should ensure that their appointed arbitrator is credible,

persuasive, and a good communicator.

DISCOVERY: TOOLS FOR FINDING INFORMATION WITH LIMITED DISCOVERY

This issue of discovery is of special concern in construction

disputes given the web of contractual arrangements and massive

quantities of documents and information generated in even

relatively small projects.

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U.S. courts allow practically every discovery device imaginable

— depositions, document requests, interrogatories, depositions

upon written question , requests for admission, and so on.

Moreover, the scope of discovery in court is broad, allowing

parties to obtain practically any information in the possession

of their opponents that might relate to the claims or defenses

at issue.

Arbitration is different. The rules of most arbitral institutions

provide that the extent and scope of any discovery will be within

the sound discretion of the panel. As noted above, civil law-

trained arbitrators may be far less likely to permit full-blown

discovery, but even with U.S. arbitrators, discovery in arbitration

will generally be far more limited in both scope and method

than the U.S. rules of civil procedure contemplate. At minimum

this means forgetting about document requests that seek “all

documents referring, relating to, or otherwise concerning the

Project, ” and really honing in on the needed facts that will be

important to the outcome.

This is one area where experts can play an important role.

The delay expert, for example, may be in the best position to

articulate specifically which project schedules are necessary to

obtain and why. Defect experts can assist the legal professionals

in identifying specific underlying drawings, purchase orders, field

reports, inspection reports, or other documents that may be

necessary to explain the nature and extent of the defect.

Thus, it is critical for parties in arbitration to be able to define

not just what they really want, but what they really need, and

focus on getting that. The benefit of discovery in arbitration

done right is that all parties can be spared the time and expense

of reviewing and turning over the entire project file, and can

spend their limited resources working on what is important.

WITNESSES: TOOLS FOR PRESENTING AND CROSS-EXAMINING WITNESSES

Arbitrations, like court cases, have trials, although they are

called final hearings; unlike court trials, in most international

construction arbitrations, the direct testimony of party witnesses

is not presented live through friendly questioning, but in

written form through sworn witness statements that are usually

prepared with lawyer assistance. At the final hearing, after

perhaps a short introduction and verification that the witness’s

statement is accurate, the opposing party will begin cross-

examining the witness almost immediately. Thus, the witness

statement is incredibly important to the process.

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Of course, the first step in the witness-statement process is

identifying the right witnesses. Witnesses must not only have

firsthand knowledge but must be able to communicate that

knowledge under the harsh environment of cross-examination.

Many international arbitrators come from jurisdictions where

human testimony is considered inherently biased and therefore

suspect. So, again, credibility is everything. While, of course,

each party might have to present certain project managers

or other key personnel, they should always be alert to the

possibility of non-parties or others who can be shown to have

no material interest in the action supporting the claim. All else

being equal, arbitrators will be swayed by someone with no

horse in the race.

In terms of drafting the statements, while it is understood that

lawyers play a substantial role, care must be taken to avoid

conveying the impression that the lawyers simply wrote what

they want the witnesses’ testimony to be. So any hint of legalese

should be avoided in witness statements. Even legal footnote

and citation styles should be avoided. While there is no need to

attempt to mimic a certain witness’s folksy style in writing, the

most persuasive written testimony often rings true because it is

transcribed from something the witness actually said.

After garnering the witness’s knowledge and assisting the

witness to present that testimony in writing, the lawyer’s most

important role in the process may be to protect the witness by

guarding against the making of unsupported statements or any

other comment the opposing side may use to cross the witness.

As compelling as the witness’s story on a particular point may

sound, if it can be easily impeached by other facts or even by

the lack of supporting facts, perhaps that story is better left

untold. The lawyer’s job is to anticipate those infirmities and

make the sometimes hard call to jettison even ostensibly helpful

statements if there is any possibility they could be turned around

against the party.

WRITTEN SUBMISSIONS: TOOLS FOR PRESENTING A COMPELLING CASE IN WRITING

In arbitration, a written legal brief, often called a memorial,

usually goes hand in hand with the submission of witness

statements. Claim memorials are akin to motions for summary

judgment in court to the extent that they provide both the legal

argument and the facts supporting a party’s claims or defenses.

Unlike motions for summary judgment, they do not result in a

pretrial ruling. Nonetheless, they are critical to prepare the panel,

and persuade it for the ultimate decision.

A good memorial will weave together the fact witness

statements , expert reports, and document discovery, as well

as the applicable law. Like many things in arbitration, there

is no rule or universally accepted standard in the format of a

memorial. Some memorials will footnote every sentence with

citations to exhibits or witness statements. Some will include

a section after each paragraph detailing the proofs supporting

that paragraph. Any style is correct as long as it allows for

presenting both the arguments and the evidence in a clear,

understandable, and supported manner.

In large cases, the memorials with their underlying statements,

reports, and exhibits can take up scores of binders (often called

bundles) of paper. While the paper format is still required, the

trend in arbitration is to simplify and reduce the burden through

what some call the electronic brief. Along with submitting

the required paper copies, many parties will also submit a

disk or thumb drive containing electronic versions of the

submission. The best of these will hyperlink exhibits directly

from the memorial or witness statements. Allowing arbitrators

the convenience of immediately clicking on a cited document

encourages them to look at and really consider that document.

WITNESSES: TOOLS FOR CROSS-EXAMINING WITNESSES WHO HAVE NOT BEEN DEPOSED

Like court proceedings, after whatever discovery permitted is

completed, and the witness statements and claim or defense

memorials are submitted, in arbitration the case goes to trial

or final hearing. Unlike court, where as many as 99% of all

cases filed are settled or otherwise disposed of before trial, in

construction arbitration more than 49% of all cases filed actually

go through hearing and a final decision by the arbitration

panel. Thus, while some litigators never actually go to trial, in

arbitration lawyers need to know how try a case and, specifically,

how to cross-examine witnesses.

The well-known adage about never asking questions when you

don’t know the answer still holds true, but the problem is that

with most witnesses in arbitration there will be no previous

deposition to use for impeachment, so holding to the rule

can be difficult. Instead of looking to a deposition transcript,

the questioning lawyer must instead impeach with any other

document that will prove the point. Thus, instead of “Were

you lying then or are you lying now?” the proverbial question

becomes “Who should we believe, you or this document that

was created at the time?”

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There are times, however, when this won’t be enough and the

lawyer simply will have to ask a question with no proof to back

it up. Those are best saved for after the questioner has already

trained the witness through other questions to expect that the

contrary support for wrong answers in fact does exist. It also

helps if those are questions that could conceivably be proved

one way or the other, even if the examining lawyer might not

have the proof at hand. The witness doesn’t know. Of course,

that technique carries risk and can only be used in circumstances

where the risk is justified.

Given the importance of experts in construction disputes,

crossing experts will usually be a critical aspect of the arbitration

hearing. Questioning lawyers will almost always be defeated

if they try to out-expert the experts on their own terms. Thus,

many times the best approach with experts is to make them

yours by avoiding or minimizing discussion on the opinions they

delivered for the other side, and instead focus on eliciting other

opinions on facts and themes that help the cross-examiner’s

theory of the case. Thus, as with selecting arbitrators, good

research into the experts’ past opinions, testimony, and writings

is critical. Obviously, anything contrary to the expert’s current

opinion will be fodder for impeachment, but the expert’s

background may also be helpful in limiting the scope of their

claimed expertise, or otherwise demonstrate a lack of experience

with the subject at hand.

CONCLUSION

Many big case litigators erroneously believe that if they can

persuade a jury in court, convincing a panel in arbitration will

be no different. This is wrong. Arbitration requires developing

and honing a different set of tools. In court, lawyers don’t

select their judges, are not required to submit witness

statements or draft memorials of their cases, and usually

have the luxury of questioning every witness in advance of

trial. These are major differences that cannot be minimized or

ignored, but the tools discussed above will go far in helping

build the winning arbitration.

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ABOUT THE AUTHOR

Alvin F. Lindsay is a partner in the Miami office of Hogan Lovells US LLP,

where he focuses on large-scale construction disputes in international

arbitration. This article is based on a panel titled “The Ultimate Toolkit

for Winning the International Construction Arbitration,” presented at the

Construction SuperConference in Las Vegas, Nevada, on Dec. 5, 2015.

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