Mediation & Arbitration / 5 min read
The question of whether the dispute resolution provision in your contract specifies the International Chamber of Commerce (ICC) as the agreed service provider for arbitration is growing in importance. Like all private arbitration structures, ICC arbitration offers some distinct benefits, especially to internationally diverse collaborators on construction projects, but it requires counsel to take careful and deliberate steps towards a final hearing.
The rise of the global economy has brought with it the rise of the global construction project, with owners and contractors traversing international borders to collaborate on engineering, procurement, and construction phases. The ICC, itself borderless and unlikely to bring with it any hometown disadvantages, has become the venue of choice for these projects. This preference matters and can catch unwary companies and practitioners, otherwise experienced in traditional domestic arbitral forums, by surprise. The ICC applies singularly unique practices and procedures that are far less deferential to the parties' decisions, particularly at the onset of the dispute.
This is not to suggest that ICC arbitration is inherently better or worse than any other forum, but novelty isn't the only potential complication that can arise from failing to put thought into whether your dispute resolution provision does or should specify the ICC over more conventional industry providers, such as the American Arbitration Association (AAA), the International Institute for Conflict Prevention and Resolution (CPR), or Judicial Arbitration and Mediation Services, Inc. (JAMS).
Contemporary construction litigators are in a unique position among their peers as some of the most experienced practitioners in alternative dispute resolution. As their practice and experience grows, many will see more arbitrations on their docket than court rooms. This industry preference for arbitration is logical. Complex construction disputes often involve multiple parties bound by a single chain of contractual privity, but separated by scopes of work, hierarchy, and bargaining power within that chain, as well as variable distributions of liability, damages, and indemnity. Often, insurance providers are heavily involved in the defense and decision making of their insureds. All of this favors a forum with a decision maker experienced in the industry, saving the parties the need to educate a judge or potentially bore a jury for several weeks on end. Arbitration also offers streamlined procedures that the parties and arbitrator(s) may customize to fit their dispute, all to the benefit of counsel and parties experienced in the nuances of construction contracts, laws, and practices. This last benefit, however, should not be assumed. Anecdotally, as a construction litigator, I've observed two reliable occurrences flow naturally from this common practice, particularly where so many are used to customized form contracts, such as through the American Institute of Architects. First, many businesses within the industry are used to an uncomplicated decision of simply checking a box for arbitration or litigation, often under the assumption that the AAA Construction Rules will apply. As a direct result of the former, contractual parties rarely put thought into what rules and procedures will actually govern the dispute, even if explicitly spelled out, nor do they pay careful attention to make sure that those dispute resolution requirements flow down. After all, few enter a contract with the intent to enter a dispute.
Anyone caught by surprise can tell you those rules can play a massive role, as can any flow down discrepancies. For starters, the ICC is more heavily involved in the early phases of a dispute. If you've agreed to ICC arbitration and are expecting an initial call with a case manager, a periodic invoice, and no further involvement from your provider, you will already be behind. If your upstream contract requires ICC arbitration, but your downstream contracts all default to another provider, you may find yourself in two separate disputes concerning a single project, with only one of them in the ICC.
Based in France, with offices in New York and Hong Kong, the ICC employs its Secretariat to assist the ICC Court in management of cases. The Secretariat is who you will interact with early on and throughout an ICC arbitration. The ICC analogizes the Secretariat as the "engine room" of the ICC Court. If you're already thinking that the word "Court" seems out of place in an arbitration, you may be starting to grasp the importance of knowing your venue.
Need a time extension on a looming deadline? Be prepared to formally ask for one from the secretariat, and do not assume it will be granted without good cause. Want to join a third party who contends to be unbound by an agreement to arbitrate? The Secretariat will take that to the Court who will weigh the request and issue a decision.
This article cannot effectively convey all the relevant timelines, procedures, and decisions dictated by the ICC Court and the Secretariat; that would take an entire book. Luckily, just such a book exists.
The Secretariat's Guide to ICC Arbitration is an indispensable tool published by the ICC. Its basis is the 2012 ICC Rules of Arbitration, which have since been revised, but the foundation the Guide lays can support any practitioner navigating the rules and requirements of a contemporary ICC arbitration. If you take nothing else from this article, this is the most important pointer I can offer.
Cost is another factor to consider, and the ICC prefers an advance on costs system, including a non-refundable filing fee (which may or may not be subject to the French value-added or VAT tax), a provisional advance on costs, and an advance on costs. These fees are based on the amount in controversy, and because the amount in controversy in an international dispute on a complex construction project is rarely less than in the millions, if not substantially more, those costs can be considerable. Here, too, the ICC provides parties resources to aid them in anticipating in the form of an online calculator.
Any seasoned construction counsel or company principal might be tempted to respond with an eye roll to a warning about something so obvious as researching the rules governing their dispute, but with seasoning often comes complacency. While all arbitration providers take differing approaches, none of them are quite so unique to North Americans as those utilized by the ICC. Do not be surprised to find yourself in an arbitration that is every bit as structured and at times bureaucratic as traditional litigation. Better yet, be prepared.