How are construction and engineering disputes typically resolved in your jurisdiction (e.g. arbitration, litigation, adjudication)? What alternatives are available?

Construction

Belgium Small Flag Belgium

Litigation with subsequent adjudication remains the most popular way of dealing with construction and engineering disputes, despite taking a lot of time.

In construction disputes, the judge will very often appoint an expert (usually an engineer with proven experience in construction) to advise on all relevant technical aspects of the case. Such procedures frequently take several years before a final solution is reached.

Arbitration clauses are not very common, except in important (international) projects. Parties are free to determine how arbitration proceedings shall take place (venue, applicable law, applicable rules, etc.).

Oman Small Flag Oman

Provided that contractual formalities are satisfied and that the contract does not require dispute resolution through arbitration, disputes are referred to the commercial bench of the Omani courts.

Oman’s Arbitration Law, RD 47/97 as amended (“OAL”) is applicable to any arbitration between parties under public or private law provided the arbitration takes place in Oman. Parties may also agree for a dispute to be arbitrated under the OAL in an international arbitration forum.

Parties are also at liberty to for the proceedings to be governed by alternative arbitration rules, for example, the International Chamber of Commerce (“ICC”) Rules in an international forum. Omani law also provides for the resolution of disputes through mediation and Omani courts will uphold any other contractual mechanisms provided for the resolution of disputes between the parties.

Denmark Small Flag Denmark

Within the Danish construction industry, a large majority of disputes (that are not settled amicably) are settled by arbitration.

Except for AB-Consumers, all of the AB Standards state that disputes are to be settled by an arbitration tribunal appointed by the Danish Building and Construction Arbitration Board, and the decisions made by such tribunals are final.

If the parties have not agreed on an AB Standard, or if the arbitration agreement therein has been deviated from, disputes will be settled by the Danish courts.

The AB Standards do not contain provisions that provide for an adjudicator to settle disputes between the parties.

In case of disputes, e.g. regarding whether the work performed is defective or in order to establish proof of a matter, a party may request the Danish Building and Construction Arbitration Board or the Danish courts to appoint an expert appraiser to provide a technical assessment.

The expert appraiser can inspect the work, register his/her findings (“inspection”) and make a technical assessment based on his/her inspections (“survey”). It is not the expert’s task to express his/her opinion on legal matters.

After having received the expert appraiser’s assessment, it is often possible to reach an out-of-court settlement. However, the expert’s assessment is not binding on the parties.

Historically, the use of mediation in Denmark is quite insignificant compared to many other jurisdictions. However, in the suggested revision of the AB Standards (AB 18 and ABR 18) dispute resolution by mediation is in many cases mandatory.

Spain Small Flag Spain

The three mentioned: arbitration, litigation and adjudication.

There is no other alternative.

Indonesia Small Flag Indonesia

The two common forms of dispute resolution for construction and engineering disputes in Indonesia are: (i) litigation; and (ii) arbitration (both domestic and international arbitration).

We have seen the trend to select arbitration as the dispute resolution mechanism amongst others due to the confidential nature of arbitration and the ability of the parties to choose experts in the area of construction as the arbitrators due to the often complexity in construction disputes.

For construction contracts funded by APBN, the Ministry of PWPH standard form contract (which may be used as a reference), provide an option for the contracting parties to choose either litigation or arbitration.

Mexico Small Flag Mexico

In the case of government contracts, the most used dispute resolution method is litigation. In certain projects mostly in the energy sector, arbitration is used under ICC or LCIA Rules, except in the case of unilateral termination of breach, and termination for convenience of the State. Adjudication does not exist, and dispute boards are not used except for the so called Technical Committees in Public Private Projects which are similar.

In the case of private contracts, parties are free to choose any dispute resolution method that they consider appropriate.

Colombia Small Flag Colombia

Under Colombian law, there is a variety of possible dispute resolution mechanisms. The practice has shown a tendency towards amicable composition and conciliation before going on court. If the parties agree so, every dispute regarding procurement controversies may be settled by arbitration. If the parties do not mention anything, the disputes are solved in the ordinary jurisdiction courts.

Switzerland Small Flag Switzerland

Construction and engineering disputes in a domestic context are mostly resolved via litigation before ordinary courts. Arbitration is available (different ad hoc bodies have developed) but the number of cases resolved by this way remains limited, due to high costs associated thereto.

Australia Small Flag Australia

Adjudication is available under security of payment legislation, and is widely used as an interim procedure to resolve contractor payment disputes. However, adjudication is only binding on an interim basis. A party wishing to challenge the determination will use the contractual dispute resolution procedures to seek the final resolution of matters. In Western Australia and the Northern Territory, principals can initiate adjudication, unlike other Australian jurisdictions in which it is solely the prerogative of the contractor.

Contracts generally contain tiered dispute resolution mandating alternate dispute resolution be undertaken prior to litigation. Mediation is a widely adopted process, along with expert determination to resolve matters of a specialist nature, such as valuation issues. International arbitration is also commonly used on large resources projects, which invariably involve international companies.

Litigation is common as the final stage of a tiered dispute resolution clause, with dedicated Technology and Construction Lists in most jurisdictions which actively case manage construction disputes.

Norway Small Flag Norway

If the parties are unable to resolve the dispute through negotiations, the NS contracts provide for different dispute resolutions, depending on the contract and the economic value in question.

Disputes concerning large values are often referred to arbitration in the contact, unless the parties have agreed upon litigation.

There are no specialised courts for construction disputes in Norway. Construction and engineering disputes are typically handled through ordinary litigation, but the parties may require expert lay judges.

Judicial mediation is often carried out before litigation is commenced. Judicial mediation is a court-led mediation where the case can be concluded in the form of an in-court settlement. The purpose is for the parties to avoid litigation with the help of a judicial mediator, who is often a judge.

Another alternative is mediation outside of the court system, with an agreed mediator. This can be beneficial in large and complex construction disputes, where the parties can agree to use a mediator specialised within the field.

Sweden Small Flag Sweden

It is very common for construction and engineering disputes in Sweden to be resolved by arbitration. The dominant standard forms (AB 04 and ABT 06) contain arbitration clauses for all disputes over a certain threshold amount (ca. EUR 650,000).

There are no specific courts or judges in Sweden specialising in construction disputes. Nor are there any statutory provisions on binding adjudication or similar for construction disputes.

The relevant levels of court for civil law matters, including construction contracts, are the district courts, the courts of appeal and the Supreme Court. Almost all court decisions are available through various databases. There is no formal doctrine of binding precedents. However, the Supreme Court’s judgments are a source of law and generally must be followed by the district courts and the courts of appeal.

Hong Kong Small Flag Hong Kong

Commonly, construction contracts in Hong Kong will contain a ‘tiered’ dispute resolution process, usually involving discussion and mediation, followed by arbitration. Arbitration is a particularly popular mechanism for resolving construction disputes in Hong Kong, which is home to a leading arbitration centre, the Hong Kong International Arbitration Centre (HKIAC), as well as many skilled legal and non-legal professionals specialising in construction and engineering disputes. Mediation and arbitration have been Hong Kong Government policy for many years. Hong Kong is a pro-arbitration and pro-enforcement jurisdiction.
Arbitrations seated in Hong Kong are governed by the Arbitration Ordinance (Cap. 609) which very closely follows the UNCITRAL Model Law. One of the Arbitration Ordinance’s guiding principles is that, subject to the observance of the safeguards that are necessary in the public interest, the parties to a dispute should be free to agree on how the dispute should be resolved.

The High Court of Hong Kong has a specialist Construction and Arbitration List for hearing construction disputes and challenges to arbitral awards, headed by a dedicated judge.
There currently are no statutorily imposed adjudication processes in Hong Kong which could be compared to those imposed by security of payment regimes in other jurisdictions. The Hong Kong government has discussed potential security of payment legislation (“SOPL”) for the construction industry, but there is currently no indication of when, if at all, this may be passed. See Question 14 above.

However, parties can agree (either in the contract or by later agreement) to use adjudication to resolve disputes. The HKIAC has published a template procedure for this purpose, but parties are free to agree to apply any other rules.

United Kingdom Small Flag United Kingdom

Construction disputes are typically resolved by adjudication. This is a 28-day procedure, with the emphasis on obtaining a speedy decision in order to aid the parties’ cash flow. The decision of an adjudicator is temporarily binding, until the dispute is finally resolved by court proceedings, arbitration, or by agreement. In reality adjudicators’ decisions, despite being reached very quickly, often become binding by default as it is uncommon for either party to refer the dispute to final determination.

The industry has its own specialist court, the Technology and Construction Court, which is a division of the Business and Property Courts. Disputes referred to court are usually heard within 12 months.

Arbitration is less commonly provided for in domestic projects but is still commonly found in international projects. Institutional rules commonly referred to are ICC and LCIA.

Other methods used include mediation and (less commonly) expert determination.

United States Small Flag United States

Construction and engineering disputes in the United States can be resolved through litigation or through alternative dispute resolution (i.e., mediation or arbitration). Most disputes are handled through either administered or non-administered arbitration and there are numerous different arbitration rules commonly used in construction contracts in the United States (e.g., American Arbitration Association, JAMS, International Institute for Conflict Prevention and Resolution or International Chamber of Commerce). The benefit to using arbitration in the United States is the ability to obtain a decision maker knowledgeable about construction and, in many instances, the ability to shorten the time for a decision on the claim. Stepped disputes clauses are typical in construction contracts, often requiring direct party-to-party negotiations and mediation prior to commencing litigation or arbitration.

Other alternative dispute methods exist in the United States, such as mini-trials or early neutral evaluations; however, these alternative dispute methods are infrequently used in the construction industry. Beside mediation and arbitration, most claims are handled by litigation in the state and federal courts.

Serbia Small Flag Serbia

Domestic arbitral award are considered as equal to court final and binding judgment. Further, Serbia is a contracting party to the New York Convention on recognition and enforcement of arbitral award, thus all arbitral awards rendered in the territory of another Contracting Party State shall be recognised and enforced without a re-examination of the merits of the case.

Arbitral award has to, however, fulfil the following conditions:

  1. It has to be rendered by a competent court of arbitration;
  2. It has to be rendered with respect to the parties’ right to participate in the arbitral proceedings (with special consideration on appropriate delivery of relevant documents)
  3. It has to be final;
  4. That none of the following reasons set out below are applicable to it:
    a) arbitral tribunal has exceeded given authority;
    b) there has been a breach of arbitration agreement;
    c) the arbitral award was based on a false statement of a witness or expert or on a forged document or the award
    d) the subject of dispute is not arbitrable;
    e) the recognition of the arbitral award would be against Serbian public policy.

The procedure of recognizing and enforcing a foreign arbitral award may take up to two years, based on the complexity of the case, the location of the assets and the cooperation of the debtor, etc.

UAE Small Flag UAE

Construction and engineering disputes are typically resolved by way of arbitration or in the local courts. Arbitration is the preferred dispute resolution mechanism for resolving complex construction and engineering disputes, especially those involving an international party. However, where one of the parties is a governmental organisation, the generally accepted position is that the local courts will resolve any disputes.

Arbitration remains popular because, unlike in the local courts, proceedings and awards are confidential; the relative ease of enforcing awards (especially internationally); and the winning party is often awarded its legal fees. Specifically, for complex construction and engineering disputes, arbitration offers the parties flexibility and control over proceedings, including the selection of the arbitration tribunal, that is suited to the dispute in question. By comparison, the local courts do not offer specialist construction judges and therefore rely on court appointed experts to effectively decide technical aspects of the case. The DIFC courts have, however, sought to address the apparent lack of expertise by launching the Technology and Construction Division of the DIFC courts at the end of 2017.

Arbitration
The UAE has emerged as a regional hub for arbitration. The UAE offers a wide array of arbitration institutions, the most popular of which include the Dubai International Arbitration Centre (DIAC), Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), DIFC-London Court of International Arbitration Centre in the DIFC (DIFC-LCIA) and more recently, the International Chamber of Commerce (ICC) which set up a representative office in the ADGM in 2017.

Arbitrations in the UAE can be seated “onshore” or “offshore”. Onshore arbitrations, i.e. where the seat is one of the seven Emirates, are governed by 16 provisions in the UAE Civil Procedure Code. At the beginning of 2018, the UAE Federal Council approved a new Federal Arbitration Law which is loosely based on the UNCITRAL Model Law. It is hoped that the new Federal Arbitration Law will bring the UAE in-line with international best practice and be in place by mid-late 2018.

Offshore arbitrations are those seated in either the ADGM or DIFC which offer their own arbitration legislation: the ADGM Arbitration Regulations 2015 and DIFC Arbitration Law 2008, both of which are based on UNCITRAL Model Law.

Local courts
The UAE is made up of seven Emirates which operate different court systems. Ajman, Fujairah, Sharjah and Umm Al Quwain operate under the Federal Court system consisting of the Federal Court of First Instance, Federal Court of Appeal and Federal Supreme Court. Abu Dhabi, Dubai and Ras Al Khaima, on the other hand, have their own three-tiered court systems consisting of the Emirate-specific Court of First Instance, Court of Appeal and Court of Cassation. All of the UAE courts, whether Federal or otherwise adopt the UAE Civil Procedure Code which effectively entitles an aggrieved party the automatic right of appeal from the Court of First Instance to the Court of Appeal on points of law or on the merits: appeals to the highest tiered court are only on points of law.

The Emirates of Abu Dhabi and Dubai have parallel court systems operating “offshore” in the ADGM and the DIFC. Each of the ADGM and DIFC courts offer a two-tiered system: the Court of First Instance and Court of Appeal.

ADR
Alternative forms of dispute resolution are not as commonly used in the UAE as some other jurisdictions. For cases brought in the UAE Federal Courts, parties are to first refer the dispute to the Mediation and Reconciliation Committees. However, parties can, and often do, opt out of the Mediation and Reconciliation process and simply go direct to the courts: the courts do not penalise parties that go directly to court. In 2009, the Dubai courts set up a similar scheme in the form of the Centre for Amicable Settlement of Disputes where parties can voluntarily refer their dispute to the Centre for non-binding reconciliation.

Some parties to a construction contract agree to adjudicate disputes, often pursuant to the FIDIC Dispute Adjudication Board procedure. However, since there is no statutory recognition of adjudications in the UAE, the enforcement of DAB decisions is difficult with parties having to commence fresh proceedings by way of arbitration or in the local courts to make a DAB decision binding.

Germany Small Flag Germany

Some disputes can be settled by out of court negations. Most disputes will go to the state courts. However, over the last several years, arbitration has become increasingly popular and arbitration provisions appear in more and more construction agreements. Like in the United States or in Great Britain, also in Germany arbitration can be compelled only by agreement. Some construction contracts contain arbitration clauses that compel one or both parties to submit disputes to arbitration. In the absence of a contract clause, arbitration is available only by the agreement of both sides.

Litigation is always an available method to resolve a dispute, unless there is a binding arbitration clause or a mandatory administrative proceeding. Though slow and costly, the process of the trial best eases the fleshing-out of complex issues, ensuring they are thoroughly dealt with.

Public authorities unusually reject arbitration clauses.

Austria Small Flag Austria

Construction law disputes are customarily resolved in court. Arbitration and alternative dispute resolution tends to be rare.

France Small Flag France

Litigation in front of local Courts is the traditional way to resolve disputes relating to construction.

Arbitration can be provided for in private contracts, but, considering its costs, is not common.

In order to limit the risk of litigation, it is common to provide for an expert determination in the contractor agreement for disputes relating to technical issues such as completion of the works.

Alternative dispute resolution mechanism (such as conciliation or mediation) are also possible if the parties agree to it.

Greece Small Flag Greece

Commercial construction and engineering disputes in Greece can be resolved through litigation or through mediation or arbitration. The most common dispute resolution method is litigation, which is primarily governed by the Greek Civil Procedure Code ('GCPC'). However, the GCPC also provides for the following alternative paths: (a) judicial settlement, which can be attempted before a lawsuit is filed (209 et seq. GCPC); (b) out of court dispute resolution, which the litigants may launch at any stage of the trial (214A GCPC) and (c) judicial mediation, which can be initiated both prior to filing of a lawsuit and after the trial has started (214B GCPC); however, the above alternatives are not quite used in practice.

Arbitration is gradually growing into the most popular alternative dispute resolution method and can be conducted either in accordance with Art. 867 et seq. of the GCPC (national arbitration) or Law 2735/1999 and the respective supranational rules in case of international arbitration. Mediation is a relatively new alternative dispute resolution mechanism, introduced by Law 3898/2010 on ‘Mediation in Civil and Commercial Matters' and recently reformed though Law 4512/2018, both laws transposing Directive 2008/52/EU into the national law.

As far as the public projects are concerned, pre-contractual disputes in tenders with a budget over 60,000 EUR are resolved through a two-stage administrative and judicial process, as follows:

(a) Pursuant to Art. 346 and 360 of the Public Procurement Law, any act or omission of the contracting authority infringing national or EU law, can be challenged through an application for review before the newly established Authority for Review of Pre-Judicial Petitions ('AEPP'), filing of which is a condition precedent for the admissibility of any judicial recourse, while the tenderer may also seek for interim measures to be granted by the AEPP. Further, such recourse before AEPP can be filed for the annulment of an executed contract, inter alia, in case (a) no publication took place prior to the award or (b) the contracting authority proceeded with signing the contract in violation of the standstill obligation (Art. 368 of the Public Procurement Law).

(b) The rulings issued by AEPP on the aforementioned recourses, may in turn be challenged by both the tenderer and the contracting authority before the competent Administrative Court of Appeal though the filing of an application for suspension and an application for annulment (Article 372 of the Public Procurement Law).

(c) If the contracting authority's act has been annulled either by AEPP or the competent courts, the suffering tenderer may raise claims by filing an award for damages before the competent courts (Art. 373 of the Public Procurement Law).

Disputes arising during the execution of public works contracts are similarly resolved through a formal two-stage dispute resolution process, providing for both administrative and judicial recourses (Art. 174 and 175 of the Public Procurement Law).

Saudi Arabia Small Flag Saudi Arabia

Government contract disputes must be submitted to a three-member tribunal appointed by the Minister of Finance. The tribunal’s decisions can be appealed to the Administrative Court, which is also known as the Board of Grievances. Private sector disputes can be submitted to the Commercial Court or to arbitration.

Malaysia Small Flag Malaysia

In Malaysia, both technical and legal disputes arising out of a construction contract are resolved through arbitration, or litigation at the specialist construction court.

Nonetheless, construction contracts often impose a bar for the referral of time and payment disputes to court or arbitration, until after the contracts are terminated or after the works have been completed. As a consequence, in the event of a payment dispute, contractors may be compelled to either partly finance their works until completion, or abandon their works. With the introduction of CIPAA (See Question 14 above) parties now have an alternative dispute resolution mechanism which could potentially curb such problem. Accordingly, adjudication has become increasingly popular and is often the preferred route for contractors for claims for payment for work done. This may be attributed to the attainment of quick interim decisions which are binding unless set aside by arbitration, court proceedings or settled by a written agreement between parties.

Updated: October 30, 2018