This article was featured in our 2023 Construction Arbitration Report, which is part of a series of industry-focused arbitration reports edited by Jus Connect and Jus Mundi.
This issue explores the construction industry and presents a goldmine of information based on data available on Jus Mundi and Jus Connect as of May 2023. Discover updated insights into construction arbitration and exclusive statistics & rankings, as well as in-depth global and regional perspectives on construction projects, disputes, & arbitration from leading lawyers, arbitrators, experts, arbitral institutions, and in-house counsel.
THE AUTHORS:
Luis M. Martinez, Vice President of the American Arbitration Association – International Centre for Dispute
Michael A. Marra, Vice President of the American Arbitration Association – International Centre for Dispute
Aisha Nadar, Arbitrator at Advokatfirman Runeland
The American Arbitration Association (“AAA”) and its international division, the International Centre for Dispute Resolution (“ICDR”), are global leaders in the administration of construction arbitrations. Within the United States, the AAA administered 3713 domestic construction cases filed in 2022, with claims over 3.3 Billion USD and a median time of 8.8 months from filing to award. Internationally, the ICDR administered 55 international construction cases in 2022.
The AAA administers its construction cases pursuant to its Construction Rules and Mediation Procedures which were developed with input from the National Construction Dispute Resolution Committee (“NCDRC”). The NCDRC is an advisory group founded in 1966 by the AAA in coopera- tion with the American Institute of Architects (“AIA”) and other industry, trade, and professional associations.
For domestic cases, the AAA has a roster of Construction Industry Panels of Arbitrators and Mediators comprised of highly-qualified, diverse, and experienced construction attorneys and industry professionals. Additionally, the AAA has its Construction Mega Project Panel members who are top construction arbitrators specializing in construction and rated by a committee of attorneys and in-house counsel experienced in representing owners, contractors, design professionals, and insurers in disputes arising out of major construction and infrastructure projects.
Internationally, cases are likewise administered under the AAA’s Construction Rules or the ICDR’s International Arbitration Rules, which are designed specifically for international arbitration but also include provisions that may be applicable in a construction dispute.
Arbitrators may be appointed from the ICDR’s international panel or the ICDR may consider arbitrators from the AAA’s construction panel.
AAA-ICDR Dispute Avoidance and Resolution Board Procedures.
The AAA-ICDR (International Centre for Dispute Resolution) recently revised their Dispute Review Board Rules which had been in effect since 2001. The revision resulted in the Dispute Avoidance and Resolution Board Procedures (“DARB”), which took effect on November 1, 2022.
The AAA-ICDR working with its NCDRC and international advisors provided input for the new DARB procedures.
The complexity and long-term nature of construction projects make it impossible at the outset to resolve every detail and foresee all external factors that may impact a dispute at the outset. As the provider of choice for dispute avoidance, conflict management and dispute resolution services, the AAA- ICDR offers their Dispute Avoidance and Resolution Board (“DARB”) Procedures® in order to help parties avoid and resolve potential disputes at the project stage, focusing on real-time resolution, utilizing construction industry experts available throughout the project.
DARBs are independent panels of experienced professionals, appointed at the beginning of a domestic or international project to monitor the progress of the project and help parties avoid and resolve disputes in a timely manner. The primary role of a DARB is to identify and address potential disputes before they escalate into full-blown conflicts. The board members typically visit the construction site regularly, review project documents, observe construction projects and facilitate communications among the project participants. By proactively addressing issues and concerns as they arise, the DARB aims to foster collaboration, prevent disputes and promote the successful completion of the project.
Consistent with its focus on the importance of global expertise, the AAA-ICDR has also vetted and developed a roster of domestic and international dispute board professionals to be selected for these projects.
The DARB’s purpose and features are set out in the DARB Procedures and in the requirements of a Three-Party Agreement among the Owner, Contractor and the Board members formalizing the Board and the rights and responsibilities of the Board and Parties. All Board members and the authorized representatives of the Owner and Contractor must execute the Three-Party Agreement within 14 days after the selection of the third member of the Board.
The members are selected from a list provided by the AAA-ICDR from its Roster of DARB Members. The Parties will consult in good faith to reach agreement on the members that will constitute the Board, but if the Parties are unable to agree on the members, the Board will consist of: (1) one member nominated by the Owner and approved by the Contractor, (2) one member nominated by the Contractor and approved by the Owner, and (3) a third member nominated by the first two members and approved by both the Owner and the Contractor. The third member will serve as Chair unless the Parties agree otherwise. If the Parties do not agree on the selection of DARB members, the AAA-ICDR will select the members without the submission of additional lists.
The Board meets regularly with representatives of the Parties at the jobsite or virtually to discuss the progress of the work, difficulties encountered, potential future claims or disputes and ways to avoid and resolve them in real-time. A site visit may be made to observe the progress of the work. In the event a Dispute arises, the Owner or Contractor may refer it to the Board for resolution through either the Interim Advisory Process
or the Formal Process. The Interim Advisory Process is an expeditious proceeding intended to provide the Parties with immediate verbal or written guidance on an issue to help them resolve the issue promptly.
The Board’s Advisory Opinion is not binding on the Parties, and the Dispute may subsequently be presented through the Formal Process. In the Formal Process, each Party is given the opportunity to present its position in writing and then, if needed, verbally at a hearing. Promptly after completion of the proceedings, the Board provides the Parties with written Recommendations for the resolution of the Dispute.
Depending on the Contract requirements or other agreement of the Parties, the recommendations/determinations may be: (1) non-binding (Recommendations) or (2) binding (Determinations) until overturned in a subsequent dispute resolution proceeding.
If non-binding, the Recommendations may be designated as admissible or not admissible in a subsequent dispute resolution proceeding. If there is no designation, the default position will be that the Recommendation is admissible, but not binding, in a later proceeding. AAA-ICDR will assist in the selection of Board members, prepare and provide notices of meetings, transmit meeting minutes and Board recommendations, collect and disburse Board member fees and expenses, and provide other administrative services as required.
If Recommendations are not accepted by a Party, the Dispute will be resolved by arbitration administered by the AAA under its Construction Industry Arbitration Rules, or administered by the ICDR in accordance with its International Arbitration Rules if the dispute is determined to be international in scope.
Aisha Nadar, an AAA-ICDR DARB professional, states,
“The main advantage of using DARB Procedure is the avoidance and resolution of disputes in a fast and inexpensive manner. DARBs can serve as ‘insurance’ against drawn out litigation or arbitration, so to speak, but to my mind, the main advantage of DARBs is the possibility of preventing issues from escalating into disputes. Dispute Boards are underutilized, but that may change because today’s cost-sensitive environment demands that the parties focus on project success and effectively avoid disputes and resolve unavoidable disputes efficiently”.
The AAA-ICDR DARB Procedures can be found here.
ABOUT THE AUTHORS
Luis M. Martinez is Vice President of the International Centre for Dispute Resolution, (ICDR) the international division of the American Arbitration Association, (AAA) and is an Honorary President of the Inter-American Commercial Arbitration Commission, (IACAC). Luis M. Martinez, as the Vice President of the ICDR located in New York, serves as an integral part of the ICDR’s international strategy team and is responsible for international arbitration and mediation business development for the East Coast of the United States (from Maine to Florida), Central and South America, the Caribbean, EU and UK. Mr. Martinez is also responsible for case administration of international cases out of the AAA-ICDR’s Miami office.
Michael A. Marra, is Vice President for the Construction Division and has served with the American Arbitration Association (AAA) for more than twenty-two years. Mr. Marra is currently responsible for expanding the use of AAA construction ADR services in the Mid-Atlantic and New England States. In that role, he also interacts with the AAA’s clients who file construction and real estate cases and the neutrals who serve as arbitrators and mediators. Mr. Marra also has national responsibility for developing the AAA’s construction caseload and works closely with construction industry associations through the AAA’s National Construction Dispute Resolution Committee (NCDRC). In this capacity, he assists the corporate, legal and public sector communities in educating them on the various construction industry dispute avoidance and resolution techniques and in designing dispute resolution systems to meet their specific needs.
Aisha Nadar is active in international construction and dispute resolution. For thirty-five years she has handled all phases of project implementation of large-scale cross-border infrastructure and defence programs. She advises clients on strategic procurement planning, contract drafting, contract management and dispute resolution. She acts as arbitrator, mediator and dispute board member. She is listed on the Panel of Conciliators at the International Center for Settlement of Investment Disputes (“ICSID”) and is Vice Chair of the Commission on Arbitration and ADR at the International Chamber of Commerce (“ICC”). She served as a member of the FIDIC Board, responsible for the Contracts Committee (2016-2020) and has carried out assignments related to procurement reform for organizations such as the World Bank, US Agency for International Development and US Department of Defense. Aisha holds a BS in Electrical Engineering (University of Nebraska-Lincoln), an MBA (University of Texas-Austin), an LL.M. in International Commercial Dispute Resolution (Queen Mary, University of London) and the CIArb Diploma in International Commercial Arbitration (Keble College, Oxford).
Find more data-backed insights in our 2023 Construction Arbitration Report
