Multi-Party and Multi-Contract Arbitration in the Construction Industry

By Dr Dimitar Kondev

Published by Wiley Blackwell (2017), 408 pages, Foreword by Professor Torsten Iversen

ISBN: 978-1-119-25172-9

As surprising as it may sound, Multi-Party and Multi-Contract Arbitration in the Construction Industry appears to be the first published monograph dealing specifically with the topic of multi-party and multi-contract arbitration in the construction sector. Although construction is just one sector in which multi-party and multi-contract arbitration occurs, it is worth in-depth analysis as multi-party and multi-contract disputes are notoriously frequent within the construction sector.

Like many of his illustrious predecessors who have taken an interest in the topic of construction arbitration (including for example Professor Phillip Capper and John Uff QC¹) or of multi-party and multi-contract disputes (including Professor Bernard Hanotiau),² Dr Dimitar Kondev may be described as a ‘scholar-practitioner’. He is an associate practicing in the international arbitration group of White & Case in Paris, who completed his doctoral studies at Aarhus University in Denmark, where he continues to teach. His dual background as practicing lawyer and scholar allows him to address with success the topic of this book from both theoretical and practical standpoints.

This book is divided into eight Chapters. Chapter one, an introductory chapter, provides a roadmap for the rest of the book, lays out the author’s objectives, and examines the limitations of the book’s research. As the book is based on the author’s doctoral dissertation, it is unsurprising that much care has gone into laying down the theoretical foundations of the research, including the research methodology and the place the book occupies in the existing literature.

Chapter two explains the process of multi-party arbitration generally and clarifies important terminology used in the field (e.g. multi-party vs. multi-contract arbitration, the notion of ‘group of companies’ doctrine etc.). It reviews the different techniques by which a multi-party element may be introduced in arbitration proceedings, including ‘joinder’ of third parties, ‘consolidation’ of proceedings, ‘intervention’, and the filing of a single request for arbitration against multiple parties. Naturally, this overview also addresses some of the advantages of multi-party arbitration vis-à-vis multiple separate proceedings. The Chapter also describes some of the inherent difficulties of multi-party arbitrations such as those relating to consent, confidentiality and the traditionally bi-partite nature of arbitration.

Chapter three identifies characteristics that are specific to construction disputes. It does so by first providing an introduction to some of the key standard form construction agreements (FIDIC, NEC, ENAA, etc.), and then by discussing the contractual structures of various types of projects including for instance ‘build-only’, ‘turnkey’, and ‘design-build-operate’ projects.

The Chapter also offers and interesting description of the distinct ‘interests’ of the various stakeholders – employers, contractors, sub-contractors, designers, suppliers etc. – involved in construction projects.

Chapters four, five, and six offer a detailed analysis of the solutions to multi-party arbitrations that can be found in institutional arbitration rules, domestic laws, and contractual instruments respectively. The breadth of resources reviewed in these three Chapters is impressive. Chapter 4 for instance touches upon the arbitration rules of the ICC, but also of other institutions such as the LCIA, SCC, VIAC, the Danish Institute of Arbitration, the DIS, CIETAC, SIAC, HKIAC, JCAA and the UNCITRAL rules. Chapter five comprises an analysis of the laws of England, the Netherlands, Belgium, New Zealand, Hong Kong, the United States and the Model Law, just to cite a few examples. Chapter 6 touches on the FIDIC Conditions of Contract but also the JCT contracts, the ACA standard forms, NEC3 and many others.

Chapter seven presents Dr Kondev’s own ideas of how multi-party arbitrations can be improved and seeks to address some of the shortcomings of the current system. The final Chapter summarizes the author’s findings and reiterates his proposals for reform. One of the key theses of Multi-Party and Multi-Contract Arbitration in the Construction Industry is that the current legal rules and arbitration laws have failed to provide satisfactory solutions for multi-party arbitrations, and specifically disputes in the construction sector. According to the author, however, regulation of multi-party arbitrations should not be dealt with by way of statutory instruments (i.e. by the law of the seat of the arbitration) because such an approach is at odds with the ‘consensual nature of arbitration’ (see at p. 159):

In the context of construction disputes, consent to arbitration means not only consent to arbitrate in general, but rather consent to arbitrate specific disputes arising under a specific contract against a specific party – the contractual counterparty under the same contract.

Instead, Dr Kondev’s proposes two solutions to address the problems inherent in multi-party arbitrations:

• The first, a contractual solution, consists of the inclusion of self-contained multi-party arbitration provisions in international construction project contracts (see at p. 265):

Given the current lack of appropriate solutions at the level of the institutional arbitration rules and the absence of standardized approaches on the matter in international standard forms, ad hoc clauses in parties’ agreements remain the only feasible solution for the time being.

Dr Kondev offers a sample multi-party clause in his book designed to work with the FIDIC Red Book. This kind of umbrella provision is rarely found in international construction project agreements, but the author expects that increasing awareness of the difficulties arising from multi-party arbitrations will eventually change this.

• The second, longer term, solution proposed is for arbitral institutions to be granted wider power to order multi-party arbitration, and for institutional rules to provide an “unequivocal jurisdictional basis” for the conduct of multi-party arbitrations.

Interestingly, Dr Kondev’s assumed preference for solutions that remain true to the traditional ‘consensual nature of arbitration’ leads him to reject the ‘jurisdictional approach’ first theorised by Professor Stavros Brekoulakis in his leading monograph ‘Third Parties in International Commercial Arbitration’ (Oxford University Press, 2010).

In conclusion, Dr Kondev’s expertise and well researched approach makes this monograph a highly informative read. Dr Kondev’s insightful book will be of use first and foremost to construction practitioners who are looking for a comprehensive study of the difficulties raised by the multi-party and multi-contract nature of construction disputes. That book, however, should also appeal to general arbitration practitioners and academics looking to deepen their understanding of multi-party and multi-contract arbitration, as much of the insights transpose well into areas of arbitration practice other than construction.

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