Comprehensive Analysis of Clause 20.6 Arbitration

Purpose

The primary objective of Clause 20.6 Arbitration is to serve as a “safety net” for conflict resolution in instances where the Dispute Adjudication Board (DAB) hasn’t provided a resolution that is final and binding. It turns the spotlight on international arbitration as the ultimate means to resolve disputes, providing a structured pathway that is agreed upon by both parties involved.

Implications

1. Finality of Arbitration: When this clause is invoked, it signifies that the parties have exhausted other avenues of dispute resolution like amicable settlement and DAB decisions. The arbitration’s outcome is considered final, leaving no room for further disputes.

2. Language and Law: The clause refers to Sub-Clause 1.4 for the language to be used in the arbitration proceedings. This is crucial for maintaining legal consistency and ensuring that both parties are on the same page, literally and metaphorically.

   

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3. Arbitrator’s Authority: The arbitrator(s) are empowered to revisit, review, and even revise any decisions, instructions, or valuations made by the Engineer or the DAB. This allows for a comprehensive re-examination of all related matters.

4. Unrestricted Evidence and Arguments: The clause liberates the parties from sticking to the evidence or arguments that were initially presented to the DAB. This freedom allows for a more exhaustive and thorough examination of the dispute.

5. Obligations During Arbitration: The clause makes it clear that arbitration can take place before or after the completion of the Works without affecting the contractual obligations of the parties involved.

Primary Aspects

1. Rules of Arbitration by the ICC: This clause specifies that if the parties do not agree otherwise, the arbitration will be governed by the Rules of Arbitration of the International Chamber of Commerce (ICC). The ICC is a globally recognized institution that provides a legal framework for the fair and expeditious resolution of disputes. It’s headquartered in Paris, France, and is known for its neutrality and expertise in handling international disputes.

2. Number of Arbitrators: By default, the clause suggests a panel of three arbitrators who will be appointed according to the ICC’s rules. This is typical in substantial construction disputes to ensure a balanced and fair decision-making process.

3. Arbitration Location: While the clause doesn’t explicitly state the location, it implies that the location should be neutral, and preferably in a jurisdiction that has a well-established legal framework for arbitration. This is often a country that is neither the home of the Employer nor the Contractor.

Expert Opinions on Clause 20.6 Arbitration

1. Neutrality of ICC: Experts often recommend the International Chamber of Commerce (ICC) as a neutral body for arbitration, especially in contracts involving parties from different countries. Its global recognition and exhaustive rules provide a robust framework for fair arbitration.

2. Freedom to Present New Evidence: Legal experts view the clause’s provision allowing for new evidence during arbitration as a double-edged sword. While it provides flexibility, it may also prolong the dispute resolution process.

3. Arbitrator’s Authority: The extensive powers granted to the arbitrator(s) are generally seen as beneficial. However, some experts caution that this could also result in unpredictability in the arbitration outcome.

4. Timing of Arbitration: The clause’s flexibility regarding when arbitration may commence—either before or after the completion of the Works—is often lauded for its practicality. Yet, experts also warn that arbitration during ongoing work could create operational challenges.

Case Studies & Illustrations

1. Case Study 1: Language Barriers: In a project between a French employer and a Chinese contractor, the language for communications was not explicitly stated, leading to confusion. Invoking Clause 20.6, they proceeded with arbitration under ICC rules, which helped specify the language and streamlined the process.

2. Case Study 2: Engineer’s Decision Overruled: In a project in the Middle East, an arbitrator utilized their powers under Clause 20.6 to overturn an Engineer’s decision, which had been a point of contention between the parties. This showcases the arbitrator’s authority to review and revise decisions.

3. Case Study 3: Multiple Arbitrations: For a large-scale project in South America, multiple disputes arose at different phases. The parties used Clause 20.6 to conduct separate arbitrations for each phase, allowing work to proceed without waiting for a single, final arbitration outcome.

4. Illustration: Choosing Arbitration Location: A Canadian employer and an Australian contractor chose Singapore as the arbitration location, thanks to its modern arbitration laws and adherence to international treaties, aligning well with Clause 20.6‘s implied recommendation for a neutral location.

Interaction with Other Clauses

1. Clause 1.4 [Law and Language]: The language specified here is crucial as it forms the basis for arbitration proceedings. Consistency in language is essential for legal clarity and is directly referenced in Clause 20.6.

2. Clause 3.5 [Determinations]: Any determinations by the Engineer can be reviewed and revised by the arbitrator(s) in arbitration proceedings, giving Clause 20.6 a significant influence over this clause.

3. Clause 20.4 [Obtaining DAB’s Decision]: This clause outlines the process for obtaining a decision from the DAB. However, if the decision is not final and binding, Clause 20.6 serves as the next step for dispute resolution.

4. Clause 20.8 [Expiry of DAB’s Appointment]: If the DAB’s appointment expires without a decision, then Clause 20.6 acts as the ultimate pathway for dispute resolution.

5. Clause 2.5 [Employer’s Claims] & Clause 2.6 [Contractor’s Claims]: These clauses discuss the various claims that can be made by the Employer and the Contractor. Clause 20.6 may ultimately decide the validity and enforceability of these claims.

6. Clause 16 [Termination]: In extreme cases where the contract might be terminated due to disputes, Clause 20.6 can be invoked to settle any resulting conflicts.

7. Clause 19 [Force Majeure]: If a Force Majeure event leads to a dispute, Clause 20.6 could be the final avenue for resolution, especially if the event and its consequences were not clearly defined or resolved by the Engineer or the DAB.

Key Points to Remember for Clause 20.6 Arbitration

1. Final Resort: Clause 20.6 serves as the ultimate dispute resolution mechanism, applicable when all other means, including the Dispute Adjudication Board (DAB), have failed to provide a final resolution.

2. ICC Rules: Unless specified otherwise, the International Chamber of Commerce (ICC) governs the arbitration process. Its global recognition and comprehensive rules make it a reliable choice for international disputes.

3. Language Consistency: The language for arbitration is usually the same as specified in Sub-Clause 1.4 [Law and Language]. This ensures clarity and consistency in legal proceedings.

4. Arbitrator’s Authority: The arbitrator(s) have the power to review and revise any decisions, instructions, or opinions previously made by the Engineer or the DAB.

5. Freedom in Evidence: Parties are not confined to the evidence or arguments previously presented to the DAB, allowing for a more exhaustive review of the dispute.

6. Ongoing Work: Arbitration can occur during the progress of the Works, without affecting the ongoing obligations of the parties involved.

Sample Letters

Sample Letter 1: Initiating Arbitration

[Your Company]
[Your Address]
[Date]

[Recipient Company]
[Recipient Address]

Subject: Formal Invocation of Clause 20.6 Arbitration

Dear [Recipient’s Name],

We refer to our ongoing project under Contract No. [Contract Number]. Despite multiple attempts to resolve the dispute related to [Specific Issue], it appears that we have reached an impasse.

As per Clause 20.6 Arbitration of our contract, we hereby formally initiate the arbitration process under the Rules of Arbitration of the International Chamber of Commerce (ICC).

We request your prompt acknowledgment of this letter and look forward to resolving this matter amicably through the arbitration process.

Yours sincerely,
[Your Name]
[Your Position]

Sample Letter 2: Selecting Arbitrators

[Joint Letterhead of Both Parties]
[Address]
[Date]

International Chamber of Commerce
[ICC Address]

Subject: Selection of Arbitrators for Contract No. [Contract Number]

Dear Sir/Madam,

As per the requirements of Clause 20.6 Arbitration in our contract, we jointly write to you to initiate the selection of arbitrators for the arbitration process related to [Specific Issue].

We propose to proceed with a panel of three arbitrators, as suggested by the Rules of Arbitration of the International Chamber of Commerce.

We await your guidance and confirmation for the next steps in this process.

Yours faithfully,
[Party A’s Representative]
[Party B’s Representative]

Sample Letter 3: Request for Language Clarification

[Your Company]
[Your Address]
[Date]

Arbitration Panel
[Address]

Subject: Language to be Used in Arbitration Proceedings for Contract No. [Contract Number]

Dear Panel Members,

As we prepare for the arbitration proceedings under Clause 20.6 Arbitration, we seek to clarify the language to be used. Our contract specifies under Sub-Clause 1.4 [Law and Language] that [Language] will be the medium of communication.

We request confirmation that this language will be adhered to during the arbitration process.

Yours sincerely,
[Your Name]
[Your Position]

Sample Letter 4: Submitting New Evidence

[Your Company]
[Your Address]
[Date]

[Recipient Company]
[Recipient Address]

Subject: Submission of New Evidence in Arbitration Proceedings for Contract No. [Contract Number]

Dear [Recipient’s Name],

As allowed under Clause 20.6 Arbitration, we intend to introduce new evidence in the upcoming arbitration proceedings. This evidence pertains to [Specific Issue] and was not presented before the Dispute Adjudication Board.

We will share the documents and information at the earliest opportunity to ensure a fair and transparent process.

Yours sincerely,
[Your Name]
[Your Position]

Sample Letter 5: Completion of Arbitration

[Your Company]
[Your Address]
[Date]

[Recipient Company]
[Recipient Address]

Subject: Conclusion of Arbitration Proceedings for Contract No. [Contract Number]

Dear [Recipient’s Name],

We acknowledge the conclusion of the arbitration process as per Clause 20.6 Arbitration. We respect the final decision rendered by the arbitration panel on [Date] and consider this matter resolved.

We look forward to continuing our collaborative work on this project.

Yours sincerely,
[Your Name]
[Your Position]

Checklists

Checklist for Proficient Execution and Deployment

Checklist for Assisting in Applying and Overseeing

Checklist for Guiding and Monitoring Execution

Flowchart for Clause 20.6 Arbitration

Detailed Explanation of the Flowchart

1. Start: Dispute Not Resolved Amicably
   • Overview: The process begins when a dispute between parties in a project is not resolved through amicable means.
   • Importance: This step marks the transition from informal dispute resolution methods to a formal arbitration process.
2. Refer to International Arbitration
   • Overview: The unresolved dispute is referred to international arbitration for a final and binding resolution.
   • Importance: International arbitration provides a neutral and globally recognized forum for dispute resolution.
3. Settle under ICC Arbitration Rules
   • Overview: The dispute is settled under the Rules of Arbitration of the International Chamber of Commerce (ICC).
   • Importance: The ICC rules are widely accepted and provide a structured framework for arbitration.
4. Appoint Three Arbitrators
   • Overview: Three arbitrators are appointed in accordance with the ICC rules to oversee the case.
   • Importance: Multiple arbitrators ensure a balanced and impartial judgment.
5. Conduct Arbitration in Defined Language
   • Overview: The arbitration proceedings are conducted in the language defined in Sub-Clause 1.4 [Law and Language].
   • Importance: Using a predefined language ensures clarity and mutual understanding among all parties involved.
6. Arbitrators Review Engineer’s Decisions
   • Overview: The arbitrators have the authority to review and revise any decisions made by the Engineer related to the dispute.
   • Importance: This step ensures that all aspects of the dispute, including technical decisions, are fairly reassessed.
7. Engineer as Witness in Arbitration
   • Overview: The Engineer may be called as a witness to provide evidence in the arbitration proceedings.
   • Importance: The Engineer’s testimony can offer crucial insights and clarifications on technical matters.
8. No Limit on Evidence or Arguments
   • Overview: Parties are not limited to the evidence or arguments previously presented to the DAB.
   • Importance: This allows for a comprehensive presentation of the case, ensuring all relevant information is considered.
9. DAB Decision Admissible in Arbitration
   • Overview: Any decision made by the DAB is admissible as evidence in the arbitration proceedings.
   • Importance: The DAB’s decision can provide valuable context and background for the arbitrators.
10. Arbitration During or After Works Completion
    • Overview: Arbitration can commence either during the progress of the works or after their completion.
    • Importance: This flexibility ensures that disputes do not necessarily halt project progress.
11. Obligations Unaltered During Arbitration
    • Overview: The obligations of the parties, the Engineer, and the DAB remain unchanged during the arbitration.
    • Importance: This maintains the contractual responsibilities and project continuity irrespective of the ongoing arbitration.
12. End of Arbitration Process
    • Overview: The process concludes with the arbitration decision, which is final and binding.
    • Importance: This marks the resolution of the dispute, allowing parties to move forward based on the arbitration outcome.

Explanation of the Revised Flowchart for Clause 20.6 Arbitration

1. Start: Dispute Arises: The flowchart begins when a dispute arises between the parties involved in the contract.

2. Refer to DAB (Dispute Adjudication Board): The dispute is first referred to the Dispute Adjudication Board (DAB) for resolution.

3. Attempt Amicable Settlement: Both parties attempt to settle the dispute amicably. This is in line with Sub-Clause 20.5, which encourages amicable settlement.

4. Notice of Dissatisfaction Given?: If either party is dissatisfied with the DAB’s decision, they can issue a notice of dissatisfaction.

   • Yes: If a notice of dissatisfaction is given, the dispute proceeds to arbitration.
   • No: If no notice is given within 28 days, the DAB’s decision becomes final and binding.

5. Proceed to Arbitration: If dissatisfaction is noted, the dispute is taken to international arbitration, typically under the rules of the International Chamber of Commerce (ICC).

6. International Arbitration: The arbitration process is conducted, and a decision is made.

7. Settlement: Finally, the dispute is settled based on the arbitration decision.

Sequence Diagram

Detailed Explanation of the Sequence Diagram

1. Dispute Arises (PartyA -> PartyB)
   • The process starts when PartyA identifies a dispute and communicates it to PartyB. This step is crucial as it formally acknowledges the existence of a disagreement needing resolution.
2. Refer Dispute to DAB (PartyB -> DAB)
   • PartyB refers the dispute to the Dispute Adjudication Board (DAB). This referral is a formal request for an impartial decision on the dispute.
3. DAB Decision (DAB -> PartyA & PartyB)
   • The DAB reviews the dispute and provides its decision to both parties. The DAB’s decision is an initial attempt to resolve the dispute based on its merits.
4. Assess Satisfaction with DAB Decision (PartyA & PartyB)
   • Both parties independently assess their satisfaction with the DAB’s decision. This step is critical as it determines whether the dispute resolution process proceeds to arbitration.
5. Invoke Clause 20.5 (PartyA & PartyB -> Arbitrators)
   • If either party is dissatisfied with the DAB’s decision, they invoke Clause 20.5, leading to arbitration. This step escalates the dispute to a more formal resolution process.
6. Conduct Arbitration Proceedings (Arbitrators -> PartyA & PartyB)
   • The arbitrators conduct the arbitration proceedings, hearing arguments and evidence from both parties. This is a crucial phase where the dispute is examined in detail.
7. Call Engineer as Witness (Arbitrators -> Engineer)
   • If needed, the arbitrators may call the Engineer as a witness to provide evidence or clarification on technical aspects related to the dispute.
8. Implement Arbitration Decision or Reach Agreement (PartyA & PartyB)
   • Following the arbitration, each party implements the decision or reaches an agreement based on the outcome. This final step concludes the dispute resolution process.

FAQs for Clause 20.6 Arbitration

1. What is the purpose of Clause 20.6?

Clause 20.6 lays out the arbitration process for disputes that have not been amicably resolved or for which the DAB’s decision is not final.

2. Who oversees the arbitration?

Unless otherwise agreed by both parties, the arbitration will be settled under the Rules of Arbitration of the International Chamber of Commerce (ICC).

3. What language will the arbitration be conducted in?

The language for the arbitration will be the one defined for communications in Sub-Clause 1.4 [Law and Language].

4. Can the arbitrator review decisions made by the Engineer or the DAB?

Yes, the arbitrator has full power to review and revise any certificate, determination, instruction, opinion, or valuation of the Engineer, and any decision of the DAB.