October 20, 2011

Arbitration becoming the tool of choice for construction dispute resolution

DAN O’REILLY

correspondent

Although not as prevalent as in the United States, arbitration is increasingly being used in Canada as an alternative to litigation to resolving construction disputes, says a specialist in construction law.

The reasons are obvious, says Harvey Kirsh, a partner with Osler, Hoskin & Harcourt LLP and one of the featured speakers at the recent American Bar Association (ABA) annual conference in Toronto.

Not only is the arbitration process less costly and cumbersome, the decision of the arbitrator — or arbitrators — is usually final compared to a court ruling which can be appealed.

And unlike trials which are open to the public and press, the arbitration process is private and confidential.

Other benefits include the fact the arbitrator is a specialist in both law and construction and arbitration can usually be completed in less than a year, says Kirsh.

“If I am asked to be arbitrator I set out my expectations of the time lines and expect the parties to adhere to that deadline. That has to be in consultation with the parties.”

At the same time, arbitration does have its limitations and parties who choose it have to be cognizant of what is spelled out in the contract clauses and the laws of the governing jurisdiction, he told the delegates.

Citing specific examples of where Canadian contractors are working overseas and where foreign ones have project in this country, Kirsh said the global nature of construction means contractors, lawyers, and arbitrators have to abide the laws and culture of the province, state, or country where the project took place.

Citing his experience as an arbitration panel member in Chicago, he pointed how just complex a situation that can be. The arbitration related to claims that arose out of the construction of an oil refining facility near Salt Lake City.

“Although the construction project was located in Utah, the laws of Texas were to apply. Furthermore, all discovery depositions (and there were to have been 37 of them) were to be conducted in accordance with the U.S. Federal Rules of Civil Procedure.” Not one of the 37 facts and expert witnesses on the parties’ witnesses list were from Texas and only a few were from Utah, he pointed out.

There were several key messages in his presentation. One was that although the arbitration process has evolved and improved over the past 25 years, it needs to be evaluated and critically reviewed on an ongoing basis and won’t always be the most appropriate method to settle disputes.

“It’s not a one-size-fit all remedy.”

Another point was the need by arbitrators to be fully impartial and transparent. They can’t have any conflicts of interest and when a potential arbitrator is asked to fill that role he/she must take a conflict search and then make full disclosure on points such as previous professional or personal dealings with either of the disputing parties. When the arbitrator is a lawyer, that search has to include their partners.

And although arbitrations tend to be less formal than litigation hearings, arbitrators have to “control the process and make rulings on what evidence is introduced and what witnesses are heard.”

Some lawyers may want to try cases in arbitration “with the same intensity and the same tactics with which they were conducted in court.”

Kirsh made his comments as part of a seminar in which he also chaired. The general topic was “Resolving Construction Disputes in Canada and the United States.” Other panel members included Mr. Justice Edgar Sexton of Canada’s Federal Court of Appeal; Philip Bruner, a full time arbitrator and mediator and Director of the Global Engineering and Construction Group of JAMS); Douglas Oles, a construction attorney and from Seattle, whose practice also includes arbitration and mediation; and Toronto construction lawyer Duncan Glaholt whose practice also includes arbitration and mediation.

The seminar was just one of scores that were conducted during the five-day conference.

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