Construction disputes: key takeaways from an expert

Erik, you have a vast experience both as counsel and as an arbitrator in construction-related cases. What are their most characteristic features?  

Construction disputes most often consist of a large number of separate individual claims and counterclaims. These individual claims may, in turn, be based on a plethora of causes, such as change orders, delays, disruptions, defects, unforeseen circumstances, and insufficient information. Each individual claim often requires an extensive amount of work. Sometimes, the factual issues concerning for example, a mere specific change order will be more burdensome to arbitrate/litigate than what is necessary when conducting a normal non-construction dispute in its entirety. Even though all claims are handled in one single proceeding, success requires that each individual claim be treated as its own case. This requires a certain skillset.

First of all, construction disputes often become very document intensive. To handle this, one must be able to navigate through the material and separate the chaff from the wheat. In addition, a construction dispute is rarely a one-man job. It is key to have a team of highly skilled construction lawyers working together side by side.

Secondly, construction disputes almost always concern questions of a technical nature. Therefore, one must acquire a deep understanding regarding the technical aspects of the issues at hand. In this instance, it is a great asset to have a wide network of technical experts. 

Thirdly, given the nature of a construction dispute one must be structured and organized. Without a well-functioning case administration, you will be unable to handle complex and large construction disputes.

Finally, one must increasingly in Swedish law governed construction contracts, be well-versed in the general principles of Swedish civil law. In the last few years, the Swedish Supreme Court has issued a number of precedents which has allowed general principles to flow into the previously somewhat isolated room of construction law. More specifically, these precedents mean that contractual provisions shall often be interpreted in accordance with the general norms of Swedish civil law. This has increased foreseeability.

Which fast-track dispute resolution procedures work best in your experience? 

Although efficiency is important, one must never compromise the due process of law. Certain construction disputes can become very complex. With that said, on-going construction projects will benefit from having contractual and factual issues quickly resolved in order to move on with business rather than becoming bogged-down in lengthy legal conflicts. In most projects, “time is money”. 

I believe that the newly launched SCC Express will be an attractive option in this process; in particular when the parties are unable to negotiate an amicable solution themselves. The SCC Express provides a cost-efficient method facilitating the project to proceed while the dispute is resolved. In construction projects, a quick resolution could be the difference between a successful and an unsuccessful project. 

In addition, we have very good experience when resolving construction disputes within the framework of the SCC Rules. I believe that Byggandets Kontraktskommitté should consider replacing the dispute resolution mechanism in the widely used Swedish standard form contracts AB 04 and ABT 06, which provide for ad hoc arbitration (and in certain situations for litigation in Swedish courts) instead of SCC arbitration. The benefits of the SCC Rules are plentiful, including a deadline for the proceedings, a fixed fee for the Arbitral Tribunal, and more efficient – less onerous – case administration.

Generally, I also believe that parties should avoid having construction disputes resolved through litigation rather than arbitration. Arbitration provides for much faster dispute resolution.

What should an inhouse lawyer think about when negotiating construction contracts? 

Preventing a conflict in the first place is better than solving one. Having a clear and comprehensive contract will prevent arduous disputes from arising. Hence, understanding and mitigating the risks is key. Vague or otherwise uncertain contractual provisions should, if possible, be avoided. Provisions to pay extra attention to in this regard would be e.g., provisions governing liquidated damages, change orders and any substantial provisions which deviates from the standard form agreements. Of course, clear payment terms are vital. It is also important to markedly define the scope of the contractor’s undertaking (i.e., the contract works), and to clarify the responsibility for information provided. On another general note, contract writers should, if possible, take some time to study the general principles of Swedish civil law in cases where Swedish law is applicable to the contract. These may, as I stated earlier, prove to be of crucial importance to the interpretation of the contract. Finally, I would recommend spending some time considering the dispute resolution mechanism. As I touched upon previously, there are often strong arguments for deviating from the mechanism provided in the widely used standard form contracts AB 04 and ABT 06.