DIAC Co-Hosts Seminar on Recent Trends in MENA Construction Disputes
The event co-hosted by the Republic of Korea’s Ministry of Justice, DIAC, KCAB and SIDRC recognized the increasing involvement of Korean parties in MENA construction disputes
On Thursday, 12 May 2016, representatives of the Republic of Korea’s Ministry of Justice, Korean Commercial Arbitration Board (KCAB), Seoul International Dispute Resolution Center (SIDRC) and DIAC co-hosted a seminar focusing on recent trends and practices in Middle East construction disputes.
Attended by more than 140 legal practitioners, in-house counsel and other legal professionals from civil and common law backgrounds, the seminar provided a platform to discuss various relevant construction arbitration topics. Speakers and panelists included Abdul Moneim Bin Suwaidan, Christopher Lau, John P. Bang and Ben Cowling.
The KCAB, which recently celebrated its 50th anniversary, administered over 600 arbitrations in 2015, one third of which were construction related. While the KCAB brought its rules in line with UNICTRAL in 2011, amendments to further modernize its rules are scheduled for June 2016. This would appear to be timely given the panels acknowledgment that 70% of all construction disputes in the Saudi Arabia in 2015 involved Korean parties.
In what is often described as the ‘golden age’ for construction disputes, the rise in MENA construction arbitrations was said to have resulted in part, from the failure of parties to effectively seek amicable settlement. Other factors were highlighted including environmental issues causing project cancellations, delayed or failed payments, scarcity of construction materials and human resources, unrealistic goals and completion dates, bankruptcy of parties and variations or changes in scopes of work.
A notable topic of discussion was Korean parties’ apparent aversion to mediation, as a result of parties upholding Korean cultural norms when mediating commercial disputes. This was said to be compounded by the lack of formal mediation laws throughout the MENA region. It was suggested that arbitral tribunals have a duty to ensure that parties bring credible claims and have exhausted any escalation provisions contained in their arbitration agreements before submitting requests for arbitration.
John P. Bang offered insight into the suitability of arbitration over national courts for emergency relief in disputes involving on-demand bonds. Whereas national courts are often bound by strict legal tests when granting relief, Bang stated that the rules governing arbitral tribunal powers to grant provisional relief are not coterminous with national courts. An arbitral tribunal can certainly draw inspiration from international sources of law and, to the extent available, previous arbitral awards. Bang also suggested that an emergency arbitrator can apply a different and lower standard when deciding to stay an on-demand bond call where the cost of a stay to the owner might lead to irreparable harm, serious injury, could amount to fraud, or is simply a technique to improve a parties negotiating position. Emergency arbitrators were cautioned to consider the format, place of signature and translation of interim relief awards.
In March 2014, a delegation from DIAC embarked on an Asia tour that included Chongqing and Zhengzhou in China and Seoul in South Korea. The success of the May 2016 seminar shows that further steps have been taken to strengthen ties with an important Asian market. Exchanges such as these will help create certainty and offer some comfort for Asian parties seeking to forum shop in the MENA region. Invariably, this will be welcomed by parties in the construction industry where disputes arising out of a lack of resources following the 2008 economic crisis are only now surfacing.
*Faris Nasrallah attended the seminar at DIAC’s convention centre at the Dubai Chamber of Commerce on behalf of Al Jallaf Advocates & Legal Consultants