Belt and Road: Supporting the resolution of disputes

We have previously commented on how the sheer complexity and scale of China’s ambitious Belt and Road Initiative is prompting a welcome review of dispute resolution processes including efforts, led and supported by the Chinese government, to encourage mediation clauses in Belt and Road agreements.

In the following article, first published on http://arbitrationblog.kluwerarbitration.com on 16 April 2018, Mingchao Fan (ICC) and Briana Young and Anita Phillips (Herbert Smith Freehills) review the latest development in the efforts to support the resolution of Belt and Road disputes.


 

On 5 March 2018, the ICC Court announced the establishment of a commission to address dispute resolution in relation to China’s Belt and Road Initiative. The commission will drive the development of ICC’s existing dispute resolution procedures and infrastructure to support Belt and Road disputes.

The Belt and Road

The Belt and Road is China’s ambitious infrastructure project spanning more than 70 countries, with an increasing number of non-Chinese investors, contractors and developers – including sovereign states – involved. The project aims to build connectivity and cooperation between China across the land-based Silk Road Economic Belt and the 21st Century Maritime Silk Road. It spans large parts of Asia, the Middle East, Africa and Europe.

A construction and infrastructure initiative on this scale will inevitably generate disputes. With an estimated US$900bn in projects planned or already underway, the project gives rise to a multitude of actual and potential commercial disputes to consider. In response to this, Alexis Mourre, President of the ICC Court, announced the establishment of the commission during the ICC Court’s working session last fall.

It is a competitive field, with numerous existing institutions vying for a share of the Belt and Road disputes market, and new courts and institutions being established specifically for the purpose. It seems clear that parties who adopt the right dispute resolution model in their contracts today will be in a better position to resolve disputes as and when they may arise.

Make-up of the Commission

Justin D’Agostino, Global Head of Disputes at Herbert Smith Freehills and Hong Kong’s alternate member of the ICC Court, has been appointed commission chair. Dr Mingchao Fan, ICC Director for North Asia, will act as secretary. Other commission members are drawn from a range of sectors, representing jurisdictions including the PRC, Hong Kong and Singapore. A broader advisory board, representing other countries along the Belt and Road, is being considered.

ICC recognises the importance of engaging key stakeholders within both corporates and governments all along the Belt and Road, to ensure that it is offering the best possible service to parties on all sides.

Although the ICC Belt and Road Commission’s main objective is to raise awareness of the ICC as a “go-to” institution for disputes arising out of China’s Belt and Road Initiative, the commission has additional relevant aims:

 leveraging ICC’s unparalleled international coverage with secretariats and/or national committees in over 100 jurisdictions to attract Belt and Road disputes;
•  engaging with corporates, state-owned enterprises and governments across all Belt and Road territories; and
 highlighting Belt and Road dispute resolution at a series of events throughout the region, with the aim of promoting ICC’s capabilities widely. Events are planned in locations as diverse as China, Paris, Kazakhstan, Kyrgyzstan, Nigeria, Southeast Asia, Japan and Hong Kong, with more to come.

In the Commission’s view, the combination of the ICC’s tried-and-tested, multi-process services, its unrivalled geographical footprint, and its established credibility and independence, place it in a strong position to resolve Belt and Road disputes.

Sector expertise

On average, construction and engineering disputes account for close to a quarter of all ICC arbitration cases, while the finance and insurance sector accounts for approximately 20%. As the world’s leading arbitral institution, ICC is adept at handling complex multiparty cases as well as high-value, complex multi-party and multi-contract disputes (approximately half of all cases filed involve three or more parties). The introduction in 2017 of an expedited procedure also enables lower-value cases to be handled with greater time- and cost-efficiency.

Mediation matters too

There is no ‘one-size-fits-all’ method of resolving Belt and Road disputes. But there is a concerted effort, led and supported by the Chinese government, to encourage mediation clauses in Belt and Road agreements, with provision for arbitration if mediation fails. ICC is a world-leading arbitration and mediation provider, with tried and tested mechanisms and a strong pool of arbitrators and mediators. It is therefore well placed to provide appropriate, effective dispute resolution services to parties all along the New Silk Road. ICC’s stated objective is to ensure that where disputes arise, they are resolved efficiently and with minimal damage to the parties’ commercial relationships.

Enforcing dispute adjudication board decisions

We reported earlier this year on a spate of recent court decisions in different jurisdictions giving support for the use of dispute adjudication boards (DABs). DABs can provide an effective means for parties to obtain interim binding decisions on disputes pending any final resolution by arbitration or litigation – applying a ‘pay now, argue later’ approach designed to keep long term projects on track and avoid disruption to cashflow.

However, enforcing DAB decisions is not always straightforward, as highlighted in the recent decision of the Singapore Court of Appeal in PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (which is likely to be influential in other jurisdictions).   It now appears that the way should be clear for the contractor in that case to enforce the DAB's decision but it has taken him nearly seven years to reach this point.  What lessons can be drawn from this saga?  In our recent ebulletin, Mark Lloyd-Williams, Ann Levin and David Nitek, Partners in our London office, explore the details of the case and the salient take-away points.

 

UK: Supreme Court clarifies time limits for court proceedings following adjudication

We previously reported (here) on the Court of Appeal’s decision in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc, considering an important issue regarding the limitation periods applying in a situation where a party makes a payment pursuant to an adjudication decision and subsequently seeks to recover that payment through court proceedings.

That decision was subsequently appealed and the Supreme Court has now handed down its judgment in the case, upholding the Court of Appeal’s decision: Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38Michael Mendelblat of our Construction team considers the Supreme Court’s decision below. Continue reading

Upcoming webinar – Making the best use of Dispute Boards

We have previously reported (here) on a recent spate of court decisions in several jurisdictions which examined contractual clauses providing for the use of Dispute Boards as a dispute resolution procedure.

On Thursday 12 March 2015, at 9.00am (GMT), Mark Lloyd-Williams and David Nitek, Partners in our Construction and Engineering team in London, will deliver a webinar on ‘Making the best use of Dispute Boards‘.

Dispute Boards offer great flexibility – they may be appointed either as and when disputes arise, or for the life of a project; and can give either a (temporarily) binding decision, or a non-binding recommendation.  The webinar discussion will consider the circumstances in which Dispute Boards can add value to projects (with a focus on construction and engineering projects), techniques for maximising the advantages they can offer and the enforcement of Dispute Board decisions that are binding.

This event is part of our series of “Soundbite” webinars,  designed to update Herbert Smith Freehills LLP clients and contacts on recent developments without having to leave their desks. Once you have registered, the webinar can be accessed “live”, with a facility to send in questions to the speakers in real time, or you can listen to a recording after the event. The webinars, both live and archived, also qualify for one CPD point.

If you would like to register for the webinar, or to obtain a link to the archived version, please contact Jane Webber.

 

UK: Adjudicator’s decision not enforced due to a party’s misrepresentations in the appointment process

In a landmark decision, the Technology and Construction Court has refused to enforce an adjudicator's decision because the adjudicator had been invalidly appointed, due to misrepresentation by one party on its application to the appointing body.  The decision is a clear warning to parties that objections to adjudicators must be made honestly and not for ulterior motives:  Eurocom Ltd v Siemens plc [2014] EWHC 3710 (TCC).

In essence, the court accepted that the party's indication that various potential adjudicators had a conflict of interest was false or reckless and was designed for the purpose  of excluding those that the party did not want to be appointed    Although the courts have previously warned against improper interference with the adjudicator nomination process, this is the first decision to give that principle practical effect by refusing to enforce an adjudicator's decision on the basis of such conduct.

Read more on the decision in our Construction team's bulletin 'Appointing Adjudicators – The Limits of Objection'.

UK: Court of Appeal clarifies time limits for claiming repayment in adjudication

A recent Court of Appeal decision has clarified an important issue regarding the situation where a party makes a payment pursuant to an adjudication decision and subsequently seeks to recover that payment through court proceedings.

Under the relevant statute of limitations, any such court proceedings must be brought within a specified time (generally 6 years) from the date the relevant cause of action arose. However, there has been conflicting authority on whether the cause of action in such cases arises (and time therefore starts to run) at the time the payment was made or at the earlier time of the original breach or event that gave rise to the adjudicated claim.   The Court of Appeal has now confirmed that it is the former –  meaning that a paying party has up to 6 years from the date of payment to issue its own proceedings for repayment and does not need to take precautionary steps (such as seeking a negative declaration from the court) within the first 6 years of the original events giving rise to the dispute, as the lower court in this case had suggested.

Aspect Contracts (Asbestos) Ltd v Higgins Construction plc .  Read our Construction and Engineering team’s briefing on the decision here.

UK: Collateral warranties in construction projects may attract statutory adjudication rights

The UK Technology and Construction Court has recently delivered a judgment that has the potential to increase the use of adjudication as a means of dispute resolution in the construction industry. 

The decision addresses for the first time in the UK the question of when a collateral warranty given in connection with a construction project will itself be considered a 'construction contract' and thereby covered by the Construction Act (Housing Grants, Construction and Regeneration Act 1996, Part II). The decision indicates that some (but not all) collateral warranties will indeed be covered by the Act. Where that is the case, then either party to the warranty will have the statutory right to refer disputes under it to adjudication and court proceedings may be stayed in favour of the adjudication process. 

Click here to read more on the decision.

Natural justice in adjudication

It is now well established that the courts will refuse to enforce an adjudicator’s decision if the manner in which he has gone about his task is obviously unfair[1].  Whilst the courts have deplored attempts to comb through adjudicators’ reasons to find flimsy grounds on which to present a challenge, there will be cases where a challenge is justified.  A recent dispute in the UK Technology and Construction Court was such a case: ABB v Bam Nuttall [2013] EWHC 1983. Continue reading