How common are multi-party disputes? How is liability apportioned between multiple defendants? Does your jurisdiction recognise net contribution clauses (which limit the liability of a defaulting party to a “fair and reasonable” proportion of the innocent party’s losses), and are these commonly used?
More often than not construction disputes involve several parties in the construction process (architect, contractor, client, etc.).
There are several ways of apportioning liability.
In the absence of a specific rule, contractual provision or custom providing joint and several liability, each defendant can only be held to pay for its own share of liability (the apportionement of which is often determined with the assistance of the court appointed expert).
However, if several parties jointly commit a fault causing the same damage, the judge can impose in solidum liability, meaning that the defendants can be held to pay the entirety of the damages (with the possibility for that defendant to recover with the others).
It is permissible pursuant to CCPL for a plaintiff or defendant to join third parties to ongoing proceedings before the Omani courts where it is apparent or alleged that the third party is partly responsible for damage or breach resulting under a contract. In such circumstances, the court would have a discretion to hold such parties responsible for the damage caused either in its entirety or in part. In light of this, we are of the view that the Omani courts should recognise and uphold net contribution clauses as may be provided for by contract.
Multi-party disputes are very common in Denmark, as arbitration agreements are part of all of the AB Standards (except for AB-Consumers), and the AB Standards allow for defendants to have their other contracting parties (sub-consultants, sub-contractors and suppliers) joined as parties to the arbitration proceedings.
An employer can also decide to take legal action against more than one party under the same arbitration proceedings, e.g. if it is unclear whether a defect is caused by design work, construction work or both.
If two or more parties are found liable for a loss, they will be jointly and severally liable to the claim holder, unless otherwise agreed. Under ABR 89, the consultant’s liability for losses in some situations is limited to the proportion of the loss that has been caused by the consultant (pro rata liability).
The apportionment of liability between two or more liable parties is for the arbitrators to decide. Arbitration tribunals in Denmark are known for being pragmatic, and the liability will typically be apportioned based on the degree of negligence and other specific circumstances.
They are relatively common. Liability is mutual (solidaria) unless it is expressly agreed as joint (mancomunada).
The limitation of liability to a fair and reasonable proportion is not included in the contracts. This type of clauses is not recognized in our jurisdiction.
Multi-party disputes is common in construction contracts, especially for major construction contracts where multiple parties are involved in the construction process, for example consultants, designers, contractors, sub-contractors, etc.
If, for example, the construction contract provides Indonesian courts as the dispute resolution mechanism, in a lawsuit being filed by a project owner, for example in the failure of the contractors to deliver the project according to what has been agreed, it is common to drag multiple parties as defendants in the lawsuit.
This is particularly to ensure completeness of the parties in lawsuit. This is to avoid the lawsuit being rejected by the court under the basis of a demurrer of insufficient (lack of parties) to the lawsuit, filed by the defendants.
The apportionment of liability between the defendants would need to be proved by the plaintiff based on the contract and the factual circumstances during the construction of the project. The burden of proof will be with the plaintiff under the principle contained in the Indonesian Civil Procedure Code which essentially provides that “any party who states he has the right or if he states a certain action to emphasize such right or to rebut the rights of another party would require such person to prove the existence of such right or event“. Therefore, the judge would render its decision based on the evidences submitted by the plaintiffs which has been proven during the court proceedings.
As mentioned above, based on the principle of freedom of contract, the parties may include such net contribution or limitation of liability clauses. We have seen these clauses have been used in construction contracts in Indonesia.
Multy party disputes are not very common. However in the case of government contracts, where there is a joint and several clause, the liability is applied according to the civil law provisions and decisions of the court.
Multi-party disputes are not very common in Colombia.
Colombian Commercial Code (art. 825) provides that unless expressly agreed otherwise, multiple debtors are jointly and severally liable.
Net contribution clauses do appear in sophisticated contracts in Colombia, but they are not commonly used. Arguments can be made for and against the validity of this type of clauses under Colombian law. To our knowledge, the Colombian Supreme Court of Justice has not yet settled this issue.
Multi-party dispute are common when works are performed by several contractors and the origin of a defect/damage may not be determined with certainty. This is even more often when each contractor is insured with a different insurance company. Contracts may exclude joint liability, thus triggering a comparable result as “net contribution clauses”.
Multi-party disputes are common. Liability for a breach of a duty to take care is apportioned under state and territory proportionate liability legislation. Some states allow parties to contract out of this legislation (Western Australia) while others expressly prohibit it (Queensland), or contain provisions exempting typical construction contracts from its application (New South Wales and Tasmania). Court rules allow for the joinder of parties to seek contributions, however this is not permissible in arbitration unless otherwise agreed to by the parties.
According to the Disputes Act of 2005 several parties may sue or be sued in the same case if the claims are under Norwegian jurisdiction, the claims are submitted under the jurisdiction of the court and the claims can be handed by the court with the same composition and mainly according to the same case processing rules. Parties on the same side in a lawsuit are considered as independent parties to the counterparty.
The Disputes Act of 2005 also opens for a lawsuit being submitted for or against a group (e.g. of people, organisations, companies) on the same actual and legal basis. A verdict will be binding on all participants in the group.
It is not uncommon to have multiple parties on one or more sides in a dispute. However, group lawsuits are more uncommon.
Clauses limiting the liability of the party in breach is recognised, but is often limited by gross negligence and intent. This is especially common in advisory contracts as well as in manufacturing contracts. The liability for delay liquidated damages is limited in the NS contracts. Limitations in Norwegian contracts are usually limited to a predefined limit, and not on the basis of what is fair and reasonable.
Multi-party construction disputes are not very common in Sweden. If multiple defendants are held liable, they will be jointly and severally liable to the claimant under Swedish law, unless otherwise agreed. The defendants are free to regulate in their agreement how to internally apportion their liability. There are no statutory provisions that regulate the internal apportionment of the liability between the defendants. If it cannot be ascertained what loss each defendant has caused, general Swedish contract law principles provide that the liability shall be apportioned between them in a “fair and reasonable way”. In practice, this will often be in equal shares.
It is common for disputes in the industry to involve multiple parties, but given the consensual and contractual basis for arbitration, it is rare for there to be multi-party arbitrations in Hong Kong. Multi-party court actions are more common.
Some Hong Kong standard form construction contracts allow for consolidation of related disputes, or for “name borrowing” (whereby a subcontractor may sue the employer directly in the main contractor’s name). In addition, the HKIAC 2013 Administered Arbitration Rules expressly allow for joinder of additional parties and consolidation of related arbitrations.
It is fairly standard for Hong Kong contracts, where one of the contracting parties is a multi-party unincorporated joint venture, to provide that the members of the joint venture are jointly and severally liable for their contractual obligations.
In apportioning liability between multiple defendants, a court or tribunal generally will have regard to the contract terms and the particular facts of the case. The Civil Liability (Contribution) Ordinance (Cap. 377) allows a defendant who has incurred liability, for which one or more other parties is partly responsible, to recover from those parties according to the degree of responsibility for the liability that each of them bears.
Net contribution clauses are not commonly seen in Hong Kong, although generally the Hong Kong courts prioritise freedom of contract and consequently would be likely to uphold such clauses, subject to the Control of Exemption Clauses Ordinance (Cap. 71). This Ordinance, which is substantially similar to the UK Unfair Contract Terms Act 1977, provides that, where a party contracts on the basis of its own standard terms of business, and a provision of those standard terms purports to exclude or restrict liability for breach of contract or tort, such a provision is only enforceable to the extent that it satisfies the requirement of reasonableness. Between sophisticated commercial parties, it would be uncommon for any such term to be deemed unreasonable.
Many disputes involve multiple parties, given the preponderance of complex contractual frameworks, overlaps in design responsibility and difficulties establishing causation (for example, a defect might be caused by poor design or workmanship).
The English courts have wide case management powers to join parties and consolidate disputes. However, the costs of multi-party litigation can be prohibitive.
Moreover, since the most common method of dispute resolution in the industry is adjudication, most formal disputes are between two parties. This is because of the short time frames involved, which leave little scope for consolidation or joinder. It is possible to have two adjudications, one between the subcontractor and main contractor, and one between employer and main contractor, held at the same time as and before the same adjudicator.
Where two parties are liable for the same damage, they are held to be jointly and severally liable to the claimant, and one claim a contribution from the other under the Civil Liability (Contribution) Act 1978.
Net contribution clauses are sometimes adopted in collateral warranties from consultants, and where used they are upheld by the courts.
Multi-party disputes are common in the United States. For example, it is not uncommon for an owner asserting a claim for defective work to sue both the contractor and the designer for the same scope of damages. Likewise, claims can be asserted against multiple parties for delay damages were there are multiple concurrent delay events resulting in the assessment of liquidated damages or delays to substantial and final completion.
While multi-party disputes are common in the United States, the use of net contribution clauses is not. In fact, depending upon the nature of the claim the methodology for apportioning liability will depend upon the state where the dispute proceeds. For example, in the tort arena every state has adopted a different methodology for apportionment of liability. Some states, such as Maryland and Virginia are pure joint and several liability states. That means that plaintiffs prevailing against multiple parties on tort claims can recover the full amount of their damages from any one of the parties. Other states, such as Georgia and Kansas, have adopted pure several liability, meaning that each party is responsible to pay for only its portion of the awarded damages. As with most other issues in the United States, the answer as to how liability will be apportioned will be dictated based on the location of the dispute.
In the context of breach of contract actions, most courts hold that a party is responsible for all the damages resulting from its breach. Moreover, most courts reject comparative fault in a breach of contract claim. As a result, a party who breaches its contract will be responsible for all of the damages sustained regardless whether there are multiple concurrent breaches by other parties. Some states have ameliorated this sometimes harsh result by adopting legal standards, such as the substantial factor test, that look for the most culpable party who caused the damages. Such rules are, however, the minority view in the United States.
Generally the multi-party disputes are common in Serbia.
The liability between multiple defendants could apportioned by; i) separate liability of each defendant in specific default; ii) joint liability of all defendants.
Serbian law provides that a provision of a contract shall be valid by which the highest amount of compensation is determined, unless such amount is in obvious disproportion to the damage and unless the law provides otherwise for the specific case.
Multi-party disputes are recognised in the UAE. The UAE Civil Code makes provision for claimants to join third parties to a court case and for defendants to join co-defendants. By contrast, the UAE Civil Code does not specifically recognise multi-party arbitrations. However, various institutional rules, including the DIAC and ADDCAC Rules, offer a procedure for appointing a tribunal where there are multiple parties.
The ADGM Arbitration Regulations and DIFC Arbitration Law address how tribunals are to be constituted where there are multiple parties. The ADGM Arbitration Regulations go a step further and explicitly set out a procedure for joinder of third parties to arbitration proceedings.
Under UAE law, the courts or arbitrators have wide discretion to apportion liability. So far as possible, the courts or arbitrators attribute liability between multiple defendants according to the proportion of their respective liability (rather than on an joint and several basis).
Net contribution clauses are recognised in the UAE and are treated like any other limitation and exclusion clause. They are enforceable to the extent that they do not seek to displace a mandatory provision of law or seek to exclude liability for delicit (tort) or for fraud and gross negligence.
Disputes between several parties are common. There is the legal institution of the so called "Streitverkündung“ (third-party notice), which involves other parties in the process and is easily admissible in state courts. There is no special division of liability in Germany. Net contribution provisions are not common in Germany.
The Austrian Code of Civil Procedure contains provisions governing multi-party proceedings. Multiple tortfeasors will, as a general rule, be liable pro rata in proportion to their share of culpability. Where causality and percentage of fault cannot be ascertained, their liability is per capita. Net contribution clauses are not customary.
Multi-party disputes are very common, especially in the construction sector considering the number of parties involved.
Liability will be allocated by the Courts between the responsible parties. To do so, the Courts will generally appoint a technical expert, who will give a technical opinion as to the allocation of liability between the parties.
Net contribution clauses are not common under French law.
In some cases, a joint liability can also be applied by the Courts, according to which the innocent party can request an indemnification for its entire damage against one of the defaulting parties, who will thereafter have a claim against the other defaulting to request the reimbursement of their own share of the damage. Such joint liability can be provided for in the contractor agreement if such agreement is granted to two or more contractors.
In commercial affairs in general and, particularly, in complicated construction projects, disputes in which multiple parties are engaged are common practice. In this respect, multi-party dispute resolution mechanisms are provided for in litigation (GCPC 74 et seq.), as well as in arbitration (867 et seq. GCPC) and mediation (Art. 171 para. 2 of Law 4512/2018).
Under Greek law, the parties to any commercial contract bear joint and several liability, only if such liability has been contractually stipulated or imposed by a mandatory law provision. Pursuant to Art. 480 of the GCC, unless provided otherwise, the parties are deemed to be severally liable in equal shares. Since such clause is soft law, the parties to a commercial contract are free to internally allocate their liability towards third parties as they deem proper. Significantly, in case of joint and several liability between multiple defendants, the party that fully compensated the claimant, may seek to recover a share of those damages from the other liable parties based on their internal allocation; in absence of such specific agreement, all defendants shall equally contribute to the paying party's loss (487 GCC). However, by way of derogation from the above, according to Art. 926 of the GCC, if two or more parties committed a tortious act, such parties are mandatorily held jointly and severally liable, whereas the court allocates the liability between the multiple offenders, according to each offender's share of fault; where such allocation of fault is not possible, the liability is considered equally shared (927 GCC). In this context, when it comes to contractual liability, net contribution clauses, though not widely used in practice, are recognised in the Greek jurisdiction.
As regards the limitation of a defaulting party's liability, please refer to Question 18 above.
Multi-party disputes are rare. Subcontractors cannot be impleaded to government contract disputes.