BADAN ARBITRASE NASIONAL INDONESIA (BANI) · BADAN ARBITRASE NASIONAL INDONESIA (BANI) 29 November...

BADAN ARBITRASE NASIONAL INDONESIA (BANI)

29 November 2018

ENHANCING REGIONAL ARBITRATION COOPERATIONEMERGING AND CURRENT ISSUES

Victor P Leginsky, Chartered ArbitratorArbitrator & Mediator

+971 50 457 [email protected]

All rights reserved Victor P Leginsky © 2018

mailto:[email protected]


Construction Arbitration

Construction claims are costly and time-consuming

Construction arbitration can be as well

W&C/Queen Mary survey 2018 confirms trend that “cost” is yet again the most selected option as the worst feature of international arbitration, and by a significant margin


Construction Arbitration

Mindset that an international construction arbitration minimum time of 18 months is being challenged

W&C/Queen Mary survey 2018 shows about 80% of participants want consequences for delay by arbitrators and deadlines for issuing awards, showing time is an issue


Construction Disputes

Two parties differ in the assertion of a contractual right, resulting in a decision being given under the contract; further disagreement over such decision becomes a formal dispute.

The value of a dispute is the additional entitlement over that of the contract, for the additional work or event which is being claimed.

The length of a dispute is the period between when it becomes formalized under the contract and the time of settlement, or the conclusion, of the arbitration.


Construction Disputes in Asia

• ASEAN region 10 independent jurisdictions: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

• 7th largest trading block in the world

• need for infrastructure investment estimated by the Asia Development Bank to be in excess of US$2,759 billion for power, transportation, water and sanitary systems in ASEAN countries.


Construction Disputes in Asia“…major projects can be conceptualised and then approved without necessarily ensuring adequate certainty on the scope of the project, with poor or incomplete contractual and technical documentation, and without detailed budget development that allows for full contingencies. In practice, this leads to project participants having differing expectations as to how the project will be delivered. It is therefore common to see significant and complex arguments about variations (given scope and documentation issues) and pricing (as insufficient budget is allotted to cover the contingency).”Conventus Law - Building Infrastructure In Asia Pacific: Issues And Trends In Construction Disputes AcrossThe Region- 7 August, 2018


Construction Disputes in Asia“…state actors' ability to exert control over project participants to delay payment, including by issuing, applying or interpreting laws or regulations in a manner which impacts cash flow. …problems in countries such as Indonesia and Vietnam, where public procurement regulations and contractual payment mechanics can be applied in a manner which prevents or significantly delays payment processes, thereby negatively impacting contractor cash flow. These issues are also compounded by the potential for political change and uncertainty, which can bring with it reviews, delays and potential termination of projects; again giving rise to claims and disputes”.


Construction Disputes - Culture

Construction Dispute Resolution in Indonesia-Fredy Kurniawan - Proceedings of Narotama International Conferenceon Civil Engineering 2015


Causes of Disputes

Arcadis global Construction Disputes Report 2018


Causes of Disputes-Asia 2017

Arcadis global Construction Disputes Report 2017


Use of Pre-Arbitral Procedures

Negotiations of course

But an increased use of mediation

Arbitration-Mediation-Arbitration, 78% favourable in Singapore

Dispute boards?



In Asia generally, we see expert determination and some use of dispute boards, but not that common.

Favoured by governments wihich need infrastructure projects to be completed



Example, Singapore Infrastructure Dispute-Management Protocol

Recommended for infrastructure projects of more than S$500m (approx. $US360m) ; May be incorporated by parties into their contracts; Standing type

Provides that a mediated settlement, opinion or determination of the DB, may be enforced by an arbitral tribunal or court: including "summarily or by expedited procedure", without prejudice to a party's right to have the merits of the dispute finally determined by a arbitral tribunal or court



Also statutory adjudication has made in-roads in certain jurisdictions, example, Construction Industry Payment and Adjudication Act Malaysia and the Building and Construction Industry Security of Payment Act, Singapore

Also, specialized courts, example Singapore International Commercial Court with more than a dozen international judges


Search for Alternatives

AIIB experience


Use of Technology

Forensic Building Information Modeling (BIM)

• adds transparency to a project so can run different date-based scenarios to determine impact of occurances

• verify scope of work completed re contract requirmentsin claims of defects or omissions

• demonstrate impact of changes during the course of project


Use of Technology

Laser Scanning

• tracks project milestones to determine that design elements are installed in the correct place

• reduces DR costs by providing a three-dimensional representation of the project at various stages of construction, and thus capture where and when the project went astray


Use of Technology

Drones• Records work status and takes exact measurements• Point cloud scanning feeding into the BIM model• Upward filming drones allowing inspection of

overhead structures• Volumetric measurements of items on site, such as

excavated materials.• Waypoint flying - drone flying the same path to create

time lapse and comparative analysis• Recording of evidence.


Use of Technology

Arbitrations and Hearings• Blockchain and “smart” contracts.• if / then principle - if steel supplier delivers then requests

inspection. If the person responsible for inspecting the steel agrees quantity & qualityacceptable then steel co. gets paid.

• Each if / then scenario recorded on the Blockchain (and can be linked to a cryptocurrency).


Use of Technology

Arbitrations and Hearings• Blockchain and “smart” contracts.• Purchase of equipment direct from the manufacturer,

pay a portion of the cost when verified left port in the origin country; liability automatically transfered to shipping company; further payment released when the equipment arrives on site, again transferring liability, this time to the contractor responsible for installation. Then final payment can be issued once the plant has been installed (inspected=verified) and commissioned.


Use of Technology

Arbitrations and Hearings• Combining Smart Contracts to form a Decentralised

Autonomous Organisation (DAO)• Example - a building itself can be set up as a DAO at the

beginning of a project• Bundles of interrelated Smart Contracts self-execute to

complete the project

https://en.wikipedia.org/wiki/Decentralized_autonomous_organization


Use of Technology


Use of Technology

CodeLegit White Paper onBlockchain Arbitrationhttps://docs.google.com/document/d/1v_AdWbMuc2Ei70ghITC1mYX4_5VQsF_28O4PsLckNM4/edit#heading=h.m036npeinawi

https://docs.google.com/document/d/1v_AdWbMuc2Ei70ghITC1mYX4_5VQsF_28O4PsLckNM4/edit#heading=h.m036npeinawi


Use of Technology

Smart EPC Contract: “we can imagine that delay liquidated damages might be linked to the need for the power station to distribute electricity into a grid by a set date. If a sensor placed on the grid does not record electricity distribution by the required date, liquidated damages could be automatically levied by deducting funds from the contractor’s bank account. Similarly, conducting performance tests for the power station, which may be relevant to the achievement of performance guarantees and avoiding performance liquidated damages, might be determined based on a digital record of things that actually occur at the power station, such as the quantity of feedstock used to generate electricity, the level of noise and air pollution produced by the station and the amount of power fed into the grid….”. - Smart contracts in the construction industry, HFW, Mathew Blycha, September 13 2018

https://www.lexology.com/contributors/hfw


Discussion

∗ Discussion


Conclusion

Victor P. Leginsky, Chartered [email protected]

+971 50 457 3770

Terima kasih

mailto:[email protected]

BADAN ARBITRASE NASIONAL INDONESIA (BANI) · BADAN ARBITRASE NASIONAL INDONESIA (BANI) 29 November...

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