Dispute Management Day 4

Table of Contents
I Alternative Dispute Resolution ..2
1.1 Negotiation ..4
1.2 Dispute Adjudication Boards (DAB)
',4
3 Mediation.. ..7
I 4 Arbitration ..8
1 The Nature of Arbitration .......... ..8
2 I nternational Arbitration
..9
3 Foreign arbitration subject to local rules ... 12
4 Arbitration procedure... 13

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1 Alternative Dispute Resolution

Main Areas causing Disputes
The most common causes of disputes, as identified or confirmed in research by the author,
are:
t. Contracts
lt. Defective work
1il. Variations or'extra works'
tv. Delays and extensions of time
V. Latent conditions
vt. Failure to adequately document the works
vil. Failure to adequately document daily events

Most disputes are settled by negotiation. That is the ordinary way of doing business and the
most sensible way to bring disputes to an end. Unfortunately, in a small proportion of cases
negotiation on its own does not succeed and it is necessary to look for other methods to
resolve differences. Traditional forms of dispute resolution include litigation, in other words
proceedings through the courts of whichever country is chosen, or alternatively and most
often the case in international construction projects, arbitration.
Litigation is not popular with many companies which operate on an international basis. There
is concern in some cases as to the independence of the courts and whether they are open to
outside influences. ln others there is concern as to the length of time it can take for matters
to be resolved. lnevitably it is also seen as expensive.
Arbitration, which has the distinct benefit of being confidential, was initially thought to be
cheaper and more flexible than litigation. That is no longer the case. Arbitrators have to be
paid by the parties to a dispute, not by the state. An ICC arbitration can be very expensive.
Not only are arbitrators themselves expensive but the ICC also charges a large
administration fee. With lawyers, experts and arbitrators the cost of arbitration can easily run
to many thousands of dollars per day. And that figure does not include the costs of preparing
for the hearing. Furthermore, because arbitrations are now generally run by lawyers the
process has become very like that used in courts and can therefore be procedurally drawn
out. lt is not unheard of for a full blown construction arbitration to go on for seven or eight
years and incur costs of much greater than the amount which was originally in dispute. That
being said we should of course emphasise that ICC arbitrations are generally expected to be
concluded within six months of the terms of reference being agreed.
While there are benefits to both arbitration and litigation, which in certain circumstances
make them the most appropriate forms of dispute resolution; as a consequence of the
growing realisation that they were so expensive, in the late 1980's and throughout the 1990's

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there was a growth in what is now known as Alternative Dispute Resolution (ADR). Such has
been the growth in the use of ADR that in a number of jurisdictions mediation is now a
condition precedent to pursuing claims before the courts and that principle has been carried
over into the construction industry.
These alternative forms of dispute resolution originally came from the United States primarily
because under their legal system costs in litigation are not recoverable. That position is not
the same in many other jurisdictions. For example under English law, which forms the basis
of many legal systems throughout the world, the winner recovers costs. Nevertheless the
perceived success and advantages of ADR have led to its increased use on the international
scene and its incorporation into international construction contracts.

Advantages of ADR

l. Speed
ll. Choice and expertise of impartial neutrals
lll. lnformality
lV. Privacy
V. Economy
Vl. Gives parties control of the process

Disadvantages of ADR

l. As the mediations process takes time the pressure to settle builds

ll. ADR or mediation demonstrates a weakness in the case
lll. Disclosing some important aspects of argument

Types of ADR

t. Negotiation
il. Conciliation
ilt. Fact-Finding
tv. Adjudication
V. Mediation
vt. Arbitration
vil. Med/Arb
vilt. Mini-Trial
tx. Summary Jury Trial

We are going to consider three forms of Alternative Dispute Resolution which might be
applicable to the construction industry. However there are other types of ADR which can be
used and these include, but are not limited to, those in the list above.

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1.1 Negotiation
lf a contractor, or sub-contractor, has a valid case, has provided notices in accordance with
the original contract, maintained accurate and current records and has presented his case in
a logical and professional manner, then he will be beginning from a position of strength.
Whatever the merits of his claim, initial responses will usually concede very little as the
employer will also want to start negotiations from a position of strength. The contents of the
response may be positive, giving cause for optimism that a settlement can be reached
quickly, or it may be totally negative, rejecting every aspect of the claim. The former will
enable both sides to move fonnrard, whilst the latter will form a barrier to any early progress
to resolve the matter. lf the response is positive and negotiations commence, then both
parties may be able to settle the matters reasonably quickly.
lf there are reasonable grounds to suspect that a party is not genuinely trying to reach a fair
settlement, then the decision to commence formal proceedings should be taken sooner
rather than later so as to save time and money.
Negotiations may be conducted on an open basis (that is to say that the records of the
negotiations may be used by the parties in any proceedings), or they may be without
prejudice (that is to say that they cannot be referred to in any proceedings). ln most cases,
without prejudice negotiations are more satisfactory as they enable the parties to be more
frank and may facilitate concessions which can be withdrawn if the other party refuses to
make any concession on their part. lf there is agreement on any section of the claim, the
contractor should endeavour to persuade the employer to make the agreement open and to
certify any sums arising from it.

1.2 Dispute Adjudication Boards (DAB)

Another alternative is for a dispute to be referred to a Dispute Adjudication Board (DAB) as it
is called in the FIDIC form of contract, or a Dispute Resolutlon Board (DRB) as it is called in
the World Bank Form of contract.
Either board can be asked to adjudicate and make a decision on any matter in dispute. This
is the procedure that is envisaged by the forms of contract referred to earlier although there
are differences between the two procedures, the powers and the constitution of them.
The Disputes Adjudication Board is an impartial and independent panel of one or three
people who are ideally appointed at the start of project and give decisions on any disputes.
When the DAB is requested by both the Employer and the contractor then shall be available
to give advice or opinions on any matter relevant to the contract.
The DAB has four main functions:
l. To visit the site periodically and become familiar with the details of the project
ll. To keep up to date with activities, progress, developments and problems at the site
lll. Encourage the resolution of disputes by the parties

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lV. When a dispute is referred to it, hold a hearing, complete its deliberations and
prepare a decision in a professionaland timely manner

The FIDIC guidance notes for the preparation of particular conditions includes an alternative
paragraph for clause 20.4 which enables the engineer to be appointed as the DAB. This
cannot be recommended, as in practice the engineer is an employee of the employer and
will not be perceived to be either independent or impartial. Although the contract states that
the DAB shall comprise of either 1 or 3 suitably qualified persons it is often the case that on
large complex projects involving a number of disciplines a tribunal may consist of 5 people of
whom any 3, selected by the chairman, will sit at any time on a particular dispute.
ln most instances decisions by adjudication boards', or the like, are not final decisions but
can be overturned, if found completely unsatisfactory by arbitration or litigation. Often
however it proves to be the case that neither party wishes to challenge a decision of a board
and progress the dispute further, even if they are dissatisfied with a decision.
Each party is responsible for paying one half of the remuneration of the DAB members. Both
the employer and the contractor are jointly and severally liable to pay the DAB members
their fees and expenses.
The FIDIC Form of Contract specifies how a DAB is set up and there is an element of
flexibility as to whether or not the board should consist of one or three people. lf there is only
one individual then he becomes an adjudicator rather than a board.
lf the contractor does not make a claim for an extension of time within 28 days, of an event
occurring, then it will not be entitled to do so. This is a strict requirement of clause 20 and
there is little point in a contractor failing to comply with this time limit and then seeking to get
around it by going to the DAB.
Board members must be selected carefully because:
l. The parties empower the DAB to reach decisions with which they undertake to
comply
ll. The DAB member cannot ordinarily be removed, except with the agreement of both
parties

Board members should be well experienced and have the respect of all parties in order to
fulfil their obligations sufficiently well. The board is a team and should not act as individual
representatives for the parties involved in the dispute. As such the board should exhibit a
balance of experience and professional expertise. Unless the employer and the contractor
are from the same country it is preferable for each member of the DAB to be of a different
nationality to each other and not of the same nationality as any of the parties.
Clause 20.2 provides a procedure for the selection of a replacement DAB member or for the
termination of the appointment of any member. The clause safeguards against any unilateral
decision of a party. To remove a member from the DAB it is required that both parties agree.
The conditions of termination are defined within the tripartite agreement entered into with the
member and the parties.

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It is notable that the clause notes that a replacement member shall be installed due to the
inability of a member to act. Definitions of inability to act include disability. lt can only be
assumed that it must be the case that it must be shown that the disability actually prevents a
member from undertaking all the responsibilities of his role on the board, The notice period
to the member of such termination is 42 days. The member may resign his appointment by
giving 70 days' notice to all parties.

Legislation in some areas can also determine the capacity to terminate an appointment due
to disability.
Unless allowed by law, neither party may challenge the decision of the DAB after it has
become binding. ln the case where the decision has become final and binding and a party
fails to comply with the decision then the failure itself may be referred to arbitration. This
process will allow for the mechanics of an award to be applied to the DAB's decision.

To summarise DAB:
l. Offers a quick solution;
ll. Can be cheap and will certainly be less expensive than arbitration
lll. May provide only an interim solution
lV. Can provide the wrong result
V. Are currently in fashion
Vl. Can be appealed or set aside if there is dissatisfaction with them

Disputes may be routed directly into arbitration thus by-passing the requirements of clause
20.4, in the event that there is no DAB in place.
There may be no DAB in place due to its appointment expiring or by any other reason such
as non-agreement of its constitution due to the intransigence of one of the parties. ln some
cases, although the DAB may have ceased to exist due to the termination of its appointment
period, its reconstitution on an ad-hoc basis may be considered to be a reasonable forum
within which any dispute may be resolved, avoiding unnecessary delay and expense. ln
some jurisdictions the submission of a dispute to arbitration may involve considerable time
and expense which may be unwarranted due to the scope of the dispute.
ln cases where a direct referral to arbitration is adopted then the specific requirements of
clause 20.4 and 20.5 will not apply.

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Sequence of Dispute Events in accordance with FIDIC

20.4AParly
8.1 refers a dispute
Commencement 20.2 Parties 20.4 A Party may 20.6 A Party may
to the DAB
Dâte appoint DAB lssue a'notice of ¡nitiate arbitration
classification'
Parties present
submissions to the ¡Amicable
DAB settlement

<28d <84d <28d <56d

Arbihators
appo¡nted

DAB gives its

decision

1.3 Mediation
It would not however be unreasonable for the contractor to be somewhat wary of entering
into a lengthy and complex arbitration being conscious of the substantial costs that can be
incurred. The contractor might therefore wish to consider mediation which is now one of the
most popular forms of alternative dispute resolution.
The mediator normally meets the parties separately and he may be empowered, if the
parties cannot be persuaded to agree, to make a recommendation on the matters in dispute.
Any confidential information which is made available to the mediator at private meetings with
one party cannot be divulged to the other. While not usually conducted in the formal manner
normally associated with arbitration, mediation proceedings may be conducted with lawyers
and other experts to present each party's case to the mediator.
The mediator will endeavour to find common ground at these separate meetings and will try
to find means of reaching a settlement. A meeting with both parties present will usually be
required at some stage. Whoever represents the parties at these discussions, it is essential
that they have the authority to agree and settle the dispute. Failing agreement, the mediator
may decide on the matters in dispute though the parties are not normally bound by the
mediator's decision. However, there is no impediment to the parties agree¡ng, at the outset
of these proceedings, to accept the mediator's decision as final and binding. lt is important to
consider the nature of the dispute before agreeing that the mediator's decision is to be final.
Disputes which involve only involve something specifically measurable such as time or
money may be suitable for mediation, whereas disputes which may turn on legal issues
would not normally be suitable without a right of appeal.
Despite initial misgivings concerning the process of mediation in the United Kingdom and the
US, figures suggest that somewhere between 70 and 85% of disputes referred to mediation
are resolved either at the mediation itself or shortly thereafter, and before the parties go to a
full arbitration hearing. Mediation has, therefore, very good prospects of success.

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ln summary mediation:
l. Has a very good chance of success
ll. Must be voluntary
lll. ls not giving in
lV. ls quick
V. ls less expensive than traditionalforms of resolution
Vl. ls nearly always worth trying

1.4 Arbitration
Here we explain the practice and procedure to resolve claims by formal international
arbitration. ln our case study matters have taken a turn for the worse. The parties wanted to
mediate the dispute but were unable to reach a successful resolution. The only avenue left
to the contractor is to commence an international arbitration. However, our contractor has
never before been involved in arbitration. This next section looks at aspects of arbitration
and how the process operates.
We consider three main aspects of arbitration:

1. The Nature of Arbitration

Arbitration is a private and building dispute resolution process. lt arises out of a contractual
agreement between the parties to resolve any disputes between them by arbitration. The
parties agree in their contract that they will abide by the decision of an independent arbitrator
or arbitrators (the tribunal). The parties may also agree in their contract the specific
procedural rules that will apply to the conduct of that arbitration.
Having summarised the nature of arbitration, it is worthwhile discussing its advantages and
disadvantages.
The Advantages of lnternational Arbitration
l. The process is private and confidential. Only the contracting parties that have agreed
to the process are involved. No one outside that arrangement is aware of the dispute,
the arbitration process, any evidence or documents arising from the process or any
awards.
ll. The procedure is flexible and can be tailored to suit any dispute that arises, large or
small, simple or complex.
lll. The tribunal consists of a specialised arbiter or arbiters. The parties are able to select
the arbiter or arbiters they wish to deal with their dispute, and can instruct specialists
in particular fields relevant to the particular dispute, electrical engineers for example,
structural engineers, geo-technical engineers or architects.
lV' The flexibility gives speed. ln general terms, international arbitrations are brought to
a conclusion much earlier than they would have been in court.

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V. The flexibility gives reduced cost. Largely because of the speedier and more flexible
procedures, international arbitration is in general terms cheaper than the equivalent
proceedings in court.
The Disadvantages of International Arbitration
L No third parties can be brought into the proceedings. Because arbitration is borne out
of a contractual relationship, no unwilling third party who is not party to the contract
can be brought into proceedings. Where there are more than two parties this can
lead to a series of many arbitrations, rather than all the disputes and all the parties
being consolidated into one set of proceedings as can happen in Court.
ll. There can be restricted availability of arbiters who are usually very busy. This means
that it is often difficult to obtain appointments with arbiters to progress proceedings.
This causes more delay than is often expected of the arbitration process.

2. lnternational Arbitration
The parties are able to agree the arbitration rules which will apply to their arbitration. The
most commonly used rules are UNCITRAL, the rules of the London Chamber of lnternational
Arbitration and the rules of the lnternational Chamber of Commerce (lCC).
As the FIDIC rainbow forms refer to the ICC rules, these are explained in some detail. The
other rules referred follow, in general, similar stages other than those relating to the terms of
reference. The ICC rules to which I refer are those in force as from 1 January 1998.
lnternational arbitration is the private adjudication of commercial disputes with international
aspects and/or internationally diverse parties. lt includes both ad hoc and institutional
arbitration. Ad hoc arbitration is administered and conducted in a manner specifically
designed by the parties.
The ICC rules are perhaps the most commonly used procedure in international construction
contracts. The place of arbitration is fixed by the court unless agreed by the parties (Article
14). However, it is usual (unless the contract provides otherwise) for the arbitration to be
held where the chairman of the tribunal resides (or where the single arbiter resides if only
one is required). The ICC usually appoints a chairman from a country other than those from
which the parties are nationals (unless othenryise agreed by the parties).
However, in recent years, the greater flexibility of the UNCITRAL arbitration rules has led to
an increasing acceptance of these rules for ad hoc arbitration. ln the UK, the London court of
arbitration rules are based on the UNCITRAL model and also allow for the parties to agree
to arbitration under the UNCITRAL rules with the London court acting as administrator. A
number of countries now embody the UNCITRAL model law as part of their arbitration
machinery; for example Scotland, Hong Kong, USA, Canada and Australia. Provision to opt
out of the UNCITRAL model law is normally available by agreement between the parties.

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IGG Rules of Arbitration 1998 (the "lGG Rules")

These rules are specifically designed for international arbitrations. The ICC provides
assistance for the resolution of disputes using its rules. lt does so via the lnternational Court
of Arbitration (lCC Court) which is attached to the lCC. lt is the ICC court's function to ensure
that the ICC rules are applied. The ICC court does so by operating through its secretariat.
The published ICC rules deal with such matters as commencing the arbitration, the
constitution of the tribunal, how the proceedings should be conducted, the nature of the
award and costs. What follows is a summary of the ICC rules following those general topics.
A party wishing to commence an ICC arbitration (the "Claimant") against another party (the
"Respondent") submits a Request for arbitration (the "Request") to the secretariat. The
secretariat notifies the claimant and respondent that it has received the request, and the
date of receipt is the date the arbitration proceedings commence.
The request must contain the following information:
l. The name, description and address of the parties
ll. A description of the nature and circumstances of the dispute(s)
lll. A summary of the relief sought and the amounts claimed
lV. A copy of the arbitration agreement
V. The claimants' submissions relating to the number of arbiters, specifically identifying
their choice of arbiter by name, the applicable and appropriate rules of law and the
applicable language to be used during arbitration
The secretariat sends a copy of the request and associated documents to the respondent so
that he can prepare his answer to the request and detail any counterclaims.

Answer to the Request and Gounterclaims

The respondent must file an answer to the request within 30 days of receiving it from the
secretariat,
That must contain the respondent's name, description and address and:
l. Comments on the nature and circumstances of the dispute
ll. lts response to the relief sought by the claimant
lll. Any comments it has on the claimant's suggestions as to the number of arbiters,
specifically identifying the respondent's choice of arbiter by name, the appropriate
rules of law and the appropriate language to use during the arbitration
Provided that the latter point is covered, the secretariat may grant more time to the
respondent to file its answer should the respondent apply to the secretariat for it.

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lf the respondent has any counterclaims, it must file those with the answer and provide:
l. A description of the nature and circumstances of the dispute
ll. A statement of the relief sought including amounts claimed
The secretariat then sends the claimant a copy of the respondents answer, any
counterclaims and all associated documents.

Reply to any Counterclaims

Within 30 days of receiving any counterclaims, the claimant must provide the secretariat with
a reply. This time period can be extended by the secretariat, if the claimant applies for an
extension. There is no detail in the ICC rules as to what the reply should contain, but good
practice is to include:

l. The claimant's comments on the nature and circumstances of the counterclaims

ll. The claimant's responses to the relief sought in relation to the counterclaims
To summarise the process up to this stage, each party has now set out its case in writing in
some detail, and has commented on the allegations made against it. However, all this
information and these documents are held by the secretariat. Arbiters have not yet been
appointed, and therefore have not been involved in the process at all so far. lndeed it is only
in these documents that the parties have first identified their suggested arbiters.

Choosing the Arbiters

ln order for arbitration to be successful, it is vitally ímportant that the arbiters are of a very
high standard, are appropriately selected, are independent and seen to be independent by
all parties. ln order to ensure this, there are several factors that the ICC court should take
into account when selecting the arbiters:
l. The arbiters nationality
ll. The arbiters residence
lll. The arbiters availability
lV. The arbiters ability to conduct the arbitration under the ICC rules
lf one party is not happy with the selection of a particular arbiter, it must quickly make an
application to the secretariat, in writing, stating the grounds for its challenge. The ICC court
will consider those submissions, and representations from any other interested party,
including the arbiter himself, before making a decision as to confirming or overturning the
appointment of the arbiter.

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Place of the Arbitration

The parties are free to agree this. lf they cannot, the ICC court will decide. The place of any
hearings during proceedings can be agreed by the parties. lf they cannot agree, the tribunal
willdecide. The importance of this provision is often over-looked.
It is the law of the place of the arbitration which governs the procedural law applicable to the
arbitration process.
Language of the Arbitration
The parties are free to agree this. lf they cannot, the tribunal decides, taking account of the
language of the contract.

3. Foreign arbitration subject to local rules

lnternational firms operating in foreign countries may find themselves in disputes which will
be resolved according to local rules and law.
Kuwait
Until recently, arbitration under ICC rules was common in Kuwait. However, administrative
contracts between contractors and government departments are more likely to contain
provisions for disputes to be referred to the local courts. This process is líkely to be cosfly,
requiring all documents to be translated into Arabic (even if the language of the contract
and/or correspondence and records are in English).
The proceedings will usually be conducted in Arabic. Court fees are required for all
proceedings. A judge would normally submit technical issues to the department of experts to
report on their findings. Appeals are possible to the high court of appeal or to the courts of
cassation. some contracts in Kuwait may be subject to local arbitration.
Bahrain
Settlements in Bahrain are often referred to arbitrators appointed by the minister of justice
and lslamic affairs. However, in most commercial contracts, it is not unusual to have a
locally appointed arbitration committee comprising one arbiter appointed by one party, one
by the other party and a third (the chairman) by agreement of the two appointed members.

The principal centre for commercial arbitration is the Bahrain Chamber of Commerce and
lndustry (BCCI).
United Arab Emirates
The principal Emirates of Dubai, Sharjarh and Abu Dhabi rely to varying degrees on the
Shari'a (ancient lslamic law), commercial practice and statutory provisions. Commercial
arbitration in Dubai is usually conducted under the auspices of the Dubai chamber of
commerce and industry. Western practices are followed in most cases. Clause 67.3 of the
Dubai municipality's conditions of contract provides for each party to appoint a member to
the tribunal within forty-two days of the notice to commence arbitration.

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The third member is to be mutually chosen by the two appointed members. lf the parties fail
to appoint members to the tribunal, they shall be appointed by the Dubai chamber of
commerce and industry.
Hong Kong
ln Hong Kong arbitration is based mainly on the English arbitration acts embodied in the
Hong Kong arbitration ordinance, chapter 341 (for domestic arbitration). From April 1990,
Hong Kong adopted the UNCITRAL model law (for international arbitration). A number of
changes have taken place since 1 July 1997 to take account of the'Basic Law'following
transfer of sovereignty to China.

4. Arbitration procedure
ln the absence of a specified procedure in the contract, arbitration in the UK will probably
include the following stages:
Preliminary meeting
This will formalise the appointment of the arbiter and a preliminary timetable will usually be
drawn up. lf the parties can agree a timetable in advance, this will save time and reduce the
cost of the meeting.
Pleadings
These set out the matters in dispute, the facts and the contractual and legal provisions relied
upon. The sequence is as follows:
L The claimant submits the points of the claim
ll. The respondent submits points of defence and counter-claim (if any)
lll. The claimant submits points of reply to the defence and defence to counterclaim
lV. The respondent submits points of reply to defence to counter-claim

Discovery of documents
After close of pleadings, each party is required to prepare lists of documents for inspection
by the other party. ln most dísputes, discovery may be limited to documents which are
relevant to the issues in dispute. ln some cases, all documents may have to be disclosed
(general discovery). Documents which must be disclosed include those relied upon by either
party and any other documents which may be detrimental to the case, or of assistance to the
other party's case. There is a strict duty to disclose any and all material, no matter how much
it may be against the interests of the party having possession, power, or control over the
documents. Privileged documents (without prejudice correspondence and certain documents
which pass between the parties and their legal advisers) should also be listed, but they
should not be made available for inspection by the other party.

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lnspection of the other party's documents is an important process and should be done by
someone who is experienced and knowledgeable about the matters in dispute. lt is equally
important to look for anything which is missing, but which should exist. A list of documents
which are required should be made and a request for copies should be sent to the other
party.

Agreed bundles
After collecting all of the relevant documents, those documents which will be referred to in
the hearing are collected and filed in a logical sequence in several bundles. Normally the
claimant will prepare the bundles and the respondent will be given the opportunity to add
further documents. The completed files are known as'agreed bundles'.
Witnesses: proofs of evidence
Witnesses have an important part to play, particularly if there are gaps in the written
evidence. lt is important that such witnesses should be selected for their first-hand
knowledge of the matters about which they will be asked to give evidence. They should be
properly briefed on the relevant part of the case and they should be cross-examined as early
as possible (preferably before pleadings) to ensure that their recollection of facts is
consistent with the case as pleaded. Considerable harm can be done if pleadings have been
exchanged, only to find out a few weeks before the hearing that an important allegation is
not supported by facts which come to light during cross-examination of a witness.
Expert witnesses may be called to give evidence on technical matters or on the size of a
claim. The arbiter may limit the number of experts to be called. The chosen expert may have
played a part in the presentation of the claim, in which case some of the arguments and
amounts claimed may have been put forward by the expert. lf this is the case, care should
be taken to ensure that the expert addresses himself to every issue which is open to
alternative argument or method of calculation. For example, the expert may be fully
convinced that the records and facts are sufficient for him to stand firmly by his view of rates
for variations or the costs of prolongation. ln these circumstances, his evidence on these
issues may be valuable at the hearing. On the other hand, if there are concurrent delays, or
if he has quantified the cost of disruption, there are bound to be ranges within which the
probable cost would fall. ln these circumstances, the expert would be abusing the process if
he attempted to stand firmly by calculations which were at the extreme end of the range that
favoured the party who called him fonruard as an expert.
lf an expert is to command respect and maintain credibility and integrity, he must resist any
pressure from his employer, or from his employer's legal advisers, to advance opinions
which he does not truly hold. An expert should advance the same opinion whichever party
he is representing and this should be tested in a 'mock cross-examination' before the
hearing.
lf there is any doubt about the expert's integrity and ability to stand up to cross-examination,
he should be withdrawn. Proofs of evidence by witnesses of fact and expert witnesses may
be exchanged before the hearing. This can be useful, particularly if it is used as a means to
agree facts and figures before the hearing commences.

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The hearing
The hearing often follows similar lines to court proceedings except that it is less formal.
Hearings are normally held at a neutral venue, such as a hotel, but there is no reason why
they should not be held at the offices of one either party. The arbiter formally opens the
hearing, followed by:
l. An opening address by the claimant which sets out the issues, the evidence
supporting the case and any submissions on the law which may be relevant
ll. A presentation by the claimant's witnesses and an examination of witnesses under
oath by the claimant;
lll. A cross-examination of the claimant's witnesses by the respondent and a re-
examination of the claimant's witnesses
lV. The respondent's opening address
V. A presentation of the respondent's witnesses and an examination of respondent's
witnesses by respondent;
Vl. A cross-examination of the respondent's witnesses by the claimant
Vll. A re-examination of the respondent's witnesses by respondent
Vlll. The respondent's closing address
lX. The claimant's closing address
The hearing may take one or two days, or it may consist of several hearings spread over
several months. Some hearings may deal with particular issues in the dispute, and some
may dealwith purely procedural matters.
The award
The arbiter will usually reserve judgement until some weeks after the hearing. The rules
governing the arbitration may contain a time limit within which the award must be given. The
award is final and binding on all parties, subject to a limited right of appeal pursuant to the
arbitration act.
Gosts
ln relation to the ICC and arbiters costs, there is a sliding scale for charges based on the
size of the claim and counterclaim(s). The parties will have paid fees on account prior to the
file being transferred to the tribunal earlier in the proceedings. As part of the award, the
tribunal will decide which of the parties should bear the total of these costs.
By way of example, a dispute where the claims and counterclaims are worth $5,000,000, the
administration fee would be $10,000, and the arbiters costs would be a minimum of $12,500
and a maximum of $50,000. Where the claims and counterclaims total $100,000,000, the
administration fee would be $75,800 and the arbiters costs would be a minimum of $20,000
and a maximum of $100,000.

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It is worth noting that under the ICC rules, there is no power for the tribunal to make an
award in favour of either party that causes them pay the other side's legal costs or
expenses. That is a matter of the procedural law governed by the place of the arbitration.
Proof
Put simply, the burden of proof lies with each party who needs to establish their own case;
the claimant must prove his claims and the respondent must prove his counterclaims.
ln order to do so, the parties must convince the tribunal that what it is saying is correct. The
tribunaljudge the case based on the balance of probabilities. Another way of putting this is
that the tribunal must believe what the party is alleging is more likely than not to be correct.
Even if the tribunal does have some doubt, provided that it is convinced on a "S1l4gYo" test
that the claim being made is correct, then that is sufficient for the claim to succeed.
However, this should not be seen as an easy test. lt must be remembered that in attempting
to achieve the necessary 51o/o, each party will start at0o/o.lndeed, it may start at a negative
figure because the other party will be trying to disprove precisely what the party is trying to
prove.

ln order to be successful, each party must martial its evidence very carefully and thoroughly.
This will involve three sources of evidence:
L Documentary evidence
ll. Witnesses of fact
lll. Expert opinion

Documentary Evidence
It is vitally important that as much as possible of a party's case can be proved by
documentary evidence. The taking and keeping of records is one of the major keys to
success in any case. lt is much more convincing for the tribunal to consider the documents
that were prepared at the time of events and which support the allegation in question.
ln most international arbitrations the tríbunal will direct that the parties must disclose all
documents upon which they rely. lt is also possible that the tribunal will allow each party to
request specific categories of documents from each other, provided that such requests are
reasonable and that the documents requested are strictly relevant to the matters in dispute.
This is one of the most time consuming aspects of any arbitration, but is key to success.

Witnesses of Fact
The tribunal in most international arbitrations is very keen to reduce the time spent in
listening to witnesses during the final arbitration hearing. ln most circumstances it is
preferred that the parties take witness statements from their own witnesses which are
exchanged and provided for the tribunal to consider before the hearing. These witness
statements must dealwith the following:

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l. The identity of the person making the statement

ll. A clear description of the issues in dispute to which that person can personally speak
lll. A clear statement of what the witness personal recollects about those matters,
including reference to any relevant documents
These witness statements form the basis of the witnesses' evidence in the final arbitration
hearing. The witnesses are then cross-examined by the legal representatives from the
opposing party who willtry to prove that the statements they are making are untrue.
Witness statements can be extremely lengthy. They can run to hundreds of pages and are
more often than not over 50 pages long.

Expert Opinion
ln the vast majority of international arbitrations expert opinion is an important part of the
parties'cases and presents evidence upon which they rely.
This involves an expert being instructed to produce a report dealing with all the relevant
issues within his scope of expertise and which relate to the matters in dispute. The parties
are responsible for instructing, appointing and paying the experts. However, the expert must
act as an independent professional, giving an independent and professional opinion. lt is
only in this way that the tribunal will be convinced by his views. lf the expert is seen to be
partisan and biased, he will have no credibility with the tribunal.
Expert reports are usually produced towards the end of the procedure, just before the final
arbitration hearing. An expert report must cover the following:
l. The identity of the expert and his area of expertise;
ll. A summary of his experience, which helps build his credibility
lll. A statement of what he has been instructed to cover, and what documents and
witness statements he has seen
lV. Set out what his opinion is on the relevant matters in dispute, including an
explanation of how those opinions have been reached.
When the experts are in the final arbitration hearing, they are subject to the same cross
examination regime as the witnesses of fact.

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