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A Practical Guide to Construction International Arbitration and Claims Management

FEATURED PAPER

by Dr. Eng. Moustafa I. Abu Dief, PhD, CFCC™
ZAMIL Group

Prof Mostafa Hassan Aly Kotb
Al Azhar University

Dr. Hatem Shaker El Beheiry
Al Azhar University

Kingdom of Saudi Arabia


ABSTRACT

Construction contracts include Arbitration as a global dispute approach normally involving disputes between contract parties from, either locally or from different nations frequently executing projects in different countries. An Egyptian contractor building an Islamic center in western Africa for the funder from Saudi Arabia as a project owner, may levy a claim for USD 2.0 million, for different causes and pursues Arbitration when the Employer is in default, such case constitutes an international arbitration case, where the Employer, Contractor and the project site are located in different countries. Over the past two decades it became normal to find mega projects in the middle east carried out by Chinese or European construction companies, as the world’s economy has become more globalized, many construction companies are working internationally. Recently, due to the stagnant in the Oil and Gas market, disputes in the construction industry have become a feature for many projects, more complicated and rigorous, as the contract parties had become unable to perform their contractual obligation. The projects went into delays caused by the Employer inability to pay for neither the Contractor nor the Engineer, Consequently the Engineer may cease the service and the Contractor starts pacing the work or notifies the Employer of termination in some cases.

Though arbitration is applicable in all construction contracts, it is not appropriate for all project parties, in all projects, it may cause shortcomings on the claimant situation, if not properly managed and prepared before deciding to activate the contractual Arbitration clause as a dispute resolution mechanism.

Different Contracting companies request the insert in the dispute resolution clause, the Arbitration as a contractual approach, to avoid the litigation mechanism with its inherent complications and disadvantages. Arbitration is considered as the most preferred dispute resolution approach for international companies, where the companies negotiate the Arbitration procedures, place, duration, the panel, governing law, specific arbitral institution rules and etc.

The project situation, where multiple claims are potential and the contract parties may seek an Arbitration as a crystalized case that demonstrates core discussions and interests, is to be reviewed and anatomized in this paper.

Key Words: Arbitration- Construction-Claims – FIDIC.

  1. Introduction

In recent times, the construction industry suffered a severe downturn, and the number of claims increased with a significant ratio between the contract parties, projects vendors, and suppliers, and even the projects designers and consultants. Consequently, the claims experts, contracts managers, legal consoles, and Arbitrators have become the subject matter involved in managing and resolving the claims and disputes between different parties.

Due to the current tide projects budgets and the doubt of completing the projects between the contract parties, vendors, and suppliers, the construction industry contracts have become a rigor and complicated endeavor while the existing projects need a prudent proactive management in order to close the projects in the win-win situation. If disputes between contract parties start to generate, it is expected to get multiple events causing a claimant to levy multiple claims. In the projects of multinationals parties and project site, are subjected to proceed to international Arbitration for dispute resolution, so the prudent parties should practice high care to settle all or most of the claims before starting the international Arbitration mechanism to resolve the disputed claims. During the start of an Arbitration is process between two contract parties, such as a project Employer and the Contractor, some quarries appear to be viable, mainly include the nature of the potential claims by either the Employer or the Contractor, also, whether it is practical to add new claims to the submitted list of claims. Another quarry may be highlighted, when more than one proceedings commence for claims between the same 2 parties; is it practical and cost efficient? It will be also discussed in the following sections.

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About the Authors

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Moustafa Ismail Abu Dief, PhD, CFCCTM

Kingdom of Saudi Arabia

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Dr. Moustafa Ismail Abu Dief. Ph.D., FICCP, CFCC™, CCP, PMOC, PMP®, Certified Forensic Claims Consultant, is a project management professional with over 25 years of experience in the field in Egypt and Saudi Arabia, mainly in contract and claims domain. Moustafa is delivering training courses in FIDIC, NEC3 contracts and claims management. Dr. Moustafa Ismail can be contacted at the following:

https://www.linkedin.com/in/moustafa-ismail-a-dief-ficcp-cfcc-ph-d-ccp-pmoc-pmp-93798a16?trk=nav_responsive_tab_profile
[email protected]
mailto:[email protected]
http://www.zbenaa-pm.com/



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Prof Dr. Mostafa Hassan Aly Kotb

Egypt

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Professor Mostafa Hassan Aly Kotb
is a seasoned expert in structural engineering with more than 38 years’ experience as an academic professor in Al Azhar University, Faculty of Engineering, and a project management expert. He can be contacted at [email protected]

 

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Dr. Hatem Shaker El Beheiry

Egypt

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Dr. Hatem Shaker El Beheiry is an Associate Professor in Al Azhar university in project management domain, he has more than 18 years of experience in the construction management and engineering management. He can be contacted at [email protected]