Construction contracts are commonly part of a wider suite of project contracts,
involving multiple, overlapping parties. Depending on the project, this suite can include
concession/license agreements, joint venture agreements, offtake agreements,
financing agreements, direct agreements, guarantees and/or agreements with subcontractors.
This intertwined suite of contracts commonly means that when a dispute
arises, it arises under multiple project contracts. Each of those contracts may have a
well drafted dispute resolution clause, that was negotiated and agreed by the specific
parties to that contract, and which reflects how those parties wish to resolve any dispute
under that particular contract. However, such clauses often differ and are incompatible.
This disparity in dispute resolution
procedures across multi-contract projects
can lead to a series of concurrent
arbitrations and/or court proceedings in
relation to the same, or similar, issues
arising in connection to the project,
potentially resulting in conflicting
decisions. The costs and time burden
of dealing with multiple disputes on
multiple fronts can be significant, and
the difficulties of enforcing conflicting
decisions will inevitably delay the
satisfactory resolution of such disputes.
In some circumstances, this is the
commercial reality of such projects,
and may not be a priority for different
parties. However, if mitigating these
risks is a priority, such mitigation may
be achieved through arbitration and the
consolidation of arbitral proceedings.
Although difficult to accomplish, there
are steps that can be taken to give
parties the best chance of achieving
consolidation, and therefore to avoid
some of the issues associated with multicontract
projects. Below we answer some
of the frequently asked questions we
encounter in this respect.
What are some of the issues faced in drafting dispute resolution clauses for multiparty/multi-contract projects?
Large projects will inevitably have many
moving parts; multiple parties in different
jurisdictions, financiers, sponsors, and
contractors, and large volumes of
interlinking contracts. The contracts will
often be drafted across different internal
and external legal teams, including
situations where multiple firms are
advising on contractual terms. Various
parties to these contracts, especially
Government entities and lenders, will
push for particular dispute resolution
procedures, based on their internal
policies or commercial drivers. Other
parties may have differing experience
with dispute resolution procedures, or
particular arbitral bodies or seats of
arbitration, which lead them to prefer a
particular procedure. It is this
inconsistency which can cause issues
when a dispute arises under multiple
contracts, including concurrent
proceedings and conflicting decisions.
What is the key to mitigating these risks?
Consistency across dispute resolution
clauses is key. This could be achieved
by choosing the courts of a particular
location to have exclusive jurisdiction
over disputes arising under any
project document. However, if the
project has a number of parties from
different jurisdictions, this may not be
Choosing arbitration as the dispute
resolution procedure for each project
contract, and ensuring that the
arbitration agreement in each project
contract is consistent, will likely be a
more palatable option, and will give
the parties a good chance of achieving
consolidation of future disputes
under different project contracts.
Including specific drafting in relation to
consolidation will also be helpful.
What is meant by “consolidation”, and how is it different to “joinder”?
“Consolidation” is where two or more
separate arbitral proceedings are merged
into a single arbitration. The merged
arbitration can be presided over by one
of the existing arbitral tribunals, or a
new arbitral tribunal can be appointed
for the merged arbitration. The two
separate arbitral proceedings can be
in relation to disputes under the same
contract, or under different contracts,
but arising from similar facts. However,
for the purposes of this Q&A, the focus is
on situations where disputes arise under
different project contracts but in relation
to the same facts.
“Joinder” is where, upon the request of an
existing party to an arbitration, a third
person not yet involved in the arbitration
is brought in to participate in the
proceedings, or where the third party
is allowed to intervene in an existing
What are the recommended initial steps?
If possible, a holistic review of the
proposed dispute resolution procedures
for all project contracts should be
conducted. The proposed dispute
resolution clauses should be compared
to see if consistency is possible, and
negotiations should be conducted
with this in mind. If a project contract
has already been executed, the
parties to the other project contracts
should consider whether the dispute
resolution procedure adopted by the
executed contract can be mirrored
in the remaining contracts. If not, an
amendment to the signed contract can
Further, an analysis of where disputes
are likely to arise should be conducted.
If total consistency cannot be achieved
across all project contracts, it may still
be helpful to achieve consistency across
a set of contracts under which similar
disputes may arise.
What role does arbitration play?
For many different reasons, it is common
to see arbitration as the preferred dispute
resolution procedure in multi-party
project contracts, especially for those
projects that involve international
parties. Arbitration is often seen as a
more neutral forum than a local court
alternative, and in many circumstances
can be beneficial for enforcement. Many
of the most commonly used rules of
arbitral institution, including the ICC and
the LCIA, have provisions dealing with
joinder and consolidation, and give the
court of the respective arbitral institution the discretion to make appropriate
orders in certain circumstances. Such
rules differ in their content, however the
key to taking advantage of these rules,
particularly in respect of consolidation,
is to ensure that the essential parts of the
arbitration agreement in each project
contract are consistent. These essential parts
will include the seat of arbitration, the
arbitral rules and the number of arbitrators,
however they may also include any
specific procedural requirements written
into the arbitration agreement.
What impact does differing governing laws between contracts have?
Parties often believe that consolidation
cannot be achieved where proceedings
are brought under different contracts
providing for different governing laws.
However, while it may impact a tribunal's discretions in deciding whether or not to consolidate, it is not necessarily the case that different governing laws in all cases will prevent consolidation. Arbitral
tribunals regularly determine points of
law under different legal systems, and
this would be no different in a
consolidated arbitration. Accordingly, if,
say, it was necessary to determine whether
a particular fact scenario gave rise to a
breach of an EPC contract governed by
New York law, and then also whether
that same factual scenario gave rise to a
breach of a concession agreement
governed by English law, the arbitral
tribunal in a consolidated arbitration can
make such determinations.
What impact do stepped or split clauses have on consolidation?
Split clauses, being clauses which provide
that at the point when the dispute arises
one or more parties has the option to
choose the dispute resolution mechanism
(whether court or arbitration), can mean
that consistency across project documents,
and therefore the ability to consolidate
disputes, is lost.
Similarly, stepped clauses, which provide
that a number of dispute resolution
processes must be gone through before proceedings can be commenced
(e.g. first negotiation, then mediation,
then finally arbitration), can also mean
that consolidation is not possible.
The perceived advantage of such clauses
may outweigh the desire to achieve
consolidation, however this is something
that should be considered by the parties
Should a consolidation clause be included and what should it contain?
While notoriously difficult to draft,
thought should be given to including
a consolidation clause within the
dispute resolution clause of each project
contract, which expressly evidences the
parties agreement to consolidation. The
specific drafting of such clauses will
depend on the arbitral rules chosen (as
there may be different requirements in
relation to agreement to consolidate),
and also the contracts to which the
agreement to consolidate will apply.
Again, consistency of such consolidation
clauses across project contracts is key.