Sponsored briefing: Navigant’s Peter Brooker on how London retains its position in global construction disputes
20 March 2017 10:01
by Guest Blog
Whether for commercial litigation or arbitration, London has established a position as one of the leading centres for international construction dispute resolution. The UK Bar and judiciary are generally held in high regard around the world, upholding the highest standards of integrity and independence. English common law is widely used throughout the world and written into many construction contracts.
In addition, the City's role as the hub of the international insurance market ensures a steady stream of international and domestic dispute work is arbitrated or litigated in the UK.
In shipping and shipbuilding, disputes often gravitate to London as – even if the parties are based outside the UK – the specialist lawyers and arbitrators in this field have a considerable foothold in the City.
This critical mass of disputes in London brings with it a caseload to attract and support a strong professional body of experts in construction contract law and project management. Their cumulative experience – documented and published in professional journals – enables effective dispute avoidance strategies to be deployed so that emerging disputes can be settled before they become formalised. If a dispute cannot be avoided, there are experts available to forensically examine project schedules, assess liability and quantify damages.
Construction disputes and English courts
English courts have a tradition of robust disclosure, which contributes to their appeal as a venue for resolving international disputes compared to other jurisdictions. The Technology and Construction Court, the Commercial Court and the London Court of International Arbitration have established their reputation for technical understanding and independence, so they are likely to remain the venue of choice written into many construction contracts, bonds or insurance policies. Arbitration remains an attractive option for clients wishing to maintain confidentiality. Clients and contractors often choose a place neutral to both parties, and the seat may be influenced by the law of the contract.
The introduction of modern technology into the court system has brought benefits in terms of speed and convenience. In the paperless court, all disclosure is electronic, enabling rapid sharing and referencing of documents during proceedings. From the perspective of the expert witness, remote access to live proceedings has brought about efficiency improvements. From an office anywhere in the world, experts can see an instant transcript on screen, listen to court procedure and communicate with counsel.
Sectors trends in construction project disputes
In the market at large, the uncertain economic outlook has put at risk some major engineering, procurement and construction contracts. As contract owners have delayed payments to contractors, insolvencies in the supply chain have increased, leading to more disputes.
Currency and commodity price volatility have triggered a number of construction disputes over the last few years, particularly in the oil and gas, offshore, power plant and natural resources sectors. The effect of oil prices is twofold. It can directly impact the economic viability of any project in the oil industry. Secondly, in economies that are heavily dependent on oil revenues, falling oil prices can reduce the amount of available capital for government-led projects, as well as the appetite for risk in the private sector.
Increasing uncertainty in construction projects
In addition to the uncertainty that the economic cycle brings to long-term construction projects, there are fundamental trends that have added to the inherently risky and complex nature of large-scale capital projects. Construction itself is more complex than ever, driven by new technologies and delivery methods, multiple contractors and faster-paced schedules. Even with careful scheduling and detailed site investigation, there remain risks around project delays, cost overruns, quality concerns and the inevitable changes in scope.
In the last few decades, economic growth in emerging markets has led to increased opportunities for global construction firms to bid for work worldwide, particularly in complex infrastructure projects where their technical knowledge and management techniques are highly prized.
But this in turn has created new challenges for contractors in learning to do business across multiple cultures and languages, especially when communicating with owners or subcontractors. This has put more onus on local management skills and on tightly-worded contract documents. Given the increasingly complex nature of projects, experts need time when examining and untangling project schedules, with the potential knock-on effect that today's disputes take more time to resolve.
Positive outlook for London
Looking ahead, London's prospects as a centre for dispute resolution remain very good, given its expertise in construction contract law, underpinned by a deep pool of experienced practitioners. Britain leaving the EU will probably not change this dynamic. Although Brexit brings uncertainty in terms of the UK's ability to trade freely around the world, it seems unlikely that it will influence the law of the contract and the choice of seat or language.
The author is managing director, global construction practice, Navigant Consulting