Arbitration of Construction Contract Disputes

A practical guide for principals, head contractors, subcontractors, consultants, suppliers, and insurers

Summary

Arbitration suits construction because it is private, expert-driven, and enforceable across borders. It can keep projects moving while disputes are handled online by specialists. This guide maps common issues, sets an online process, and provides a model clause tuned for construction programs.

Why arbitration suits construction

• Sector expertise. Appoint arbitrators with construction law, delay/quantum, engineering, and project controls experience.
• Continuity. Timetables can track critical-path activities, shutdowns, and commissioning windows.
• Confidentiality. Protect pricing, margins, methodologies, and design IP.
• Cross‑border enforcement. Awards are widely enforceable under the New York Convention.
• Online by default. Remote CMCs and hearings reduce site disruption and travel.

Typical construction disputes

• Variations/change orders; scope gaps; valuation; dayworks
• Delays, extensions of time (EOT), prolongation, acceleration, disruption, liquidated damages
• Defects and quality: non‑conformance, rework, latent defects, fitness for purpose
• Payment claims, set‑off, retention monies, milestone/percentage payments
• Design responsibility and coordination (D&B, EPC, EPCM); clashes; approvals
• Ground conditions and unforeseen site risks; utilities and access; permits
• Termination/suspension rights; demobilisation costs
• Bonds, guarantees, and insurance: performance bonds, advance‑payment guarantees, CAR policies
• Health, safety, and environmental compliance; incident investigations
• Consents and interfaces with authorities, utilities, and adjacent projects

When arbitration may not fit

• Statutory prompt‑payment adjudication schemes better suit very small or urgent payment disputes
• Urgent third‑party relief against non‑signatories that courts can grant more easily
• Issues needing authoritative precedent or insolvency processes

Key choices at the contract stage

• Seat and governing law. Choose an arbitration‑friendly seat. Align law with security of payment, bonds, and public‑policy issues.
• Rules. Pick rules that support online hearings, emergency relief, consolidation, and joinder.
• Tribunal. Prefer a sole arbitrator for speed unless stakes are high. Require demonstrable construction expertise.
• Language and venue. Specify English (or another language). Online hearings by default.
• Time limits. Set award deadlines and expedited procedures for program continuity.
• Multi‑tier path. Escalate from negotiation to dispute board/adjudication to arbitration.

Online process design

• Remote CMCs and hearings with breakout rooms; e‑bundles with hyperlinks; real‑time transcript.
• Digital evidence. Schedules (P6/MSP), as‑built data, daily diaries, T&M sheets, RFIs, submittals, inspection/test plans, NCRs, cost reports.
• Visual records. 360° site photos, drone imagery, LiDAR scans, CCTV captures, and progress videos with timestamps.
• BIM/CDE. Federated models, clash logs, model‑based quantity take‑offs, CDE audit trails.
• Forensics. Baseline and update schedules; time‑impact analysis; contemporaneous records; chain‑of‑custody for samples.
• Expert evidence. Delay and quantum experts; joint expert statements; concurrent evidence (hot‑tubbing).
• Virtual site inspections. Live video walkthroughs with agreed routes and measurements; independent inspectors where needed.
• Security and privacy. Protective orders, redaction of sensitive design and security details, secure data rooms.

Urgent and interim relief

• Emergency arbitrator to preserve evidence, maintain status quo, or manage critical works sequencing.
• Interim measures. Security for costs; escrow of disputed sums; supervised access; orders about calling on bonds or guarantees.

Multiparty, chain, and consolidation

Projects involve principals, head contractors, subcontractors, consultants, sureties, and insurers. Use clauses that permit joinder of consenting third parties and consolidation of related arbitrations arising from the same project. Nominate one institution to administer overlaps across contract tiers.

Remedies

• Damages and valuation of variations; prolongation and disruption costs
• Specific performance: access, design deliverables, rectification, or handover steps
• Declaratory relief: EOT entitlement, LD validity, responsibility for defects or scope
• Orders about bonds/guarantees, retention, and certificates
• Interest and costs per contract and rules

Costs and proportionality

• Documents‑only procedures for smaller claims; issue‑by‑issue phasing
• Scott Schedules for defects; page and exhibit limits; sample‑based defect proofing
• Targeted e‑disclosure with search protocols; privilege filters; production from CDEs
• Budget at first CMC; revisit after expert joint statements

Enforceability

Arbitral awards are widely enforceable across major construction markets. Choose a Convention seat and avoid public‑policy conflicts in likely enforcement venues.

Online‑ready model arbitration clause (customise in brackets)

Arbitration. Any dispute arising out of or in connection with this Contract, including any question regarding its existence, validity, performance, variation, time, or termination, shall be referred to and finally resolved by arbitration administered by [Institution] under its [Arbitration Rules], which are incorporated by reference.

Seat and law. The seat (legal place) of arbitration shall be [City, Country]. The governing law shall be [Jurisdiction].

Tribunal. The tribunal shall consist of [one/three] arbitrator(s). Appointments should reflect expertise in construction and project controls.

Language. The language of the arbitration shall be [English/…].

Online proceedings. All case management and hearings occur online by default. Electronic filing and e‑bundles are mandatory. Parties will use a secure data room designated by the administrator or tribunal.

Emergency and interim relief. The parties agree to the emergency arbitrator provisions. The tribunal may order interim measures to preserve evidence, maintain critical works, manage access, or regulate calls on bonds/guarantees.

Evidence preservation. Upon notice of arbitration, the parties will implement litigation holds and preserve schedules, progress data, RFIs, submittals, testing records, photos/video, and model/CDE logs. Hash values and chain of custody will be maintained.

Dispute boards/adjudication. Findings of any dispute board or adjudicator may be placed before the tribunal, which may adopt, vary, or set aside such findings.

Consolidation/joinder. The administrator or tribunal may consolidate related arbitrations and permit joinder of consenting third parties with materially similar arbitration agreements, including subcontractors, consultants, and sureties.

Expedited/amount in dispute. Claims not exceeding [currency and threshold] proceed on a documents‑only or expedited basis unless the tribunal directs otherwise.

Confidentiality. The arbitration, evidence, and award are confidential except as required for legal rights or enforcement.

Time limit. The tribunal will render its award within [six] months of constitution, subject to extension for good cause.

Contract hygiene checklist

• Clear scope and deliverables; drawings/specs precedence; design responsibility matrix
• Baseline program and reporting; notice provisions; EOT mechanics; delay and disruption methodology
• Change control workflow; valuation rules; dayworks; prime cost/provisional sums
• Payment regime; certification; retention; set‑off; prompt‑payment compliance
• Quality plan; ITPs; testing/commissioning; defects liability and warranties
• Risk allocation for ground conditions, utilities, and permits; access and interfaces
• Bonds/guarantees; insurances; notifications; claim procedures
• IP and confidentiality; security‑sensitive information handling
• Dispute path; seat, law, rules; online‑hearing default; emergency relief; consolidation and joinder

Roadmap of an online arbitration

1. Notice of arbitration and appointment process
2. First CMC: timetable tied to program; disclosure scope and search protocol; preservation orders; experts; hearing dates; budget
3. Pleadings and focused disclosure
4. Expert joint statements (delay and quantum) and issues list
5. Online merits hearing with real‑time transcript and virtual site inspection protocol as needed
6. Post‑hearing briefs if required; costs submissions
7. Final award and any enforcement

FAQs

• Can the tribunal restrain a call on a bond?

The tribunal can order interim measures regulating calls. Parties sometimes also seek urgent court relief depending on the seat.

• How do we handle defects efficiently?

Use Scott Schedules, sampling, and targeted inspections. Limit expert reports and focus on causation and rectification scope.

• What about statutory adjudication already underway?

Arbitration can proceed in parallel or after adjudication. The clause can allow the tribunal to consider adjudicator findings.

• Are virtual site inspections acceptable?

Yes. Use agreed routes, measurements, independent inspectors, and geotagged video/imagery.

• Can small claims be streamlined?

Yes. Tie expedited or documents‑only procedures to a monetary threshold.

This article provides general information and is not legal advice. Seek advice on your contracts, seat, rules, and enforcement strategy.