As we move into the second theme in our construction arbitration series, we dive into the arbitration process itself.
In this article, we take a look at the practicalities surrounding the referral of disputes to arbitration, including the need for an arbitration agreement, the drafting of an arbitration notice, and the selection of arbitrators.
Arbitration agreement
First, the parties to a dispute must have a valid and binding arbitration agreement. This is often an arbitration clause in a contract between the parties. If the parties do not have an existing agreement, they can still agree to refer a dispute to arbitration.
Request for arbitration
Unless the parties agree otherwise, an arbitration commences when the respondent receives a notice referring the dispute to arbitration.[1]
The parties may have agreed to a set of institutional rules to govern how any arbitral proceedings between them are to be initiated. Many institutional rules require the claimant to issue a notice of arbitration to the respondent to commence proceedings. While it depends on the institutional rules adopted, typical requirements for a claimant’s notice of arbitration include that it:
- identifies the arbitration agreement relied upon;
- identifies the legal instrument or relationship from which the dispute arises;
- clearly defines the scope of the dispute;
- states the relief or remedy the claimant seeks;
- demands the dispute be referred to arbitration; and
- includes suggestions as to the composition of the arbitral tribunal.
Claimants should also ensure the notice of arbitration complies with any requirements set out in the arbitration agreement. Even if the arbitration agreement does not prescribe any requirements and the parties have not agreed on a set of institutional rules, it remains best practice to issue a notice of arbitration that includes the key elements typically required by the major institutional rules.
Claimants should pay particular attention to how the notice defines the dispute – this definition will set the parameters of the proceedings and tribunal’s jurisdiction. Academics suggest that the notice should include “general wording which embraces all the outstanding matters in dispute between the parties, as well as specific wording identifying clear and discrete issues to be decided which can be described in the notice”.[2] However the parties may choose to refer only certain aspects of the disputes between them to arbitration. The wording should be carefully considered.
Number and choice of arbitrators
The parties are free to decide the number of arbitrators.[3] NZS 3910:2023, NZS 3910:2013 and NZIA SCC:2018 provide for a sole arbitrator to be appointed.[4] If the arbitration agreement does not specify the number of arbitrators and the parties cannot agree, there will be one arbitrator for domestic arbitrations and three for international arbitrations.[5]
The parties should endeavour to agree on the arbitrator when arbitral proceedings are commenced. However, construction contracts often give the parties an option of nominating the entity that will appoint an arbitrator if the parties cannot agree. If the parties cannot agree and no appointing entity is nominated, either party can request that the Arbitrators’ and Mediators’ Institute of New Zealand (AMINZ) appoint the arbitrator.[6]
The most common choice of sole arbitrator is a retired judge or senior barrister. Depending on the nature of the dispute, the parties may prefer an arbitrator with a technical background. For example, if the dispute involves complex technical engineering matters and few legal issues, it may be appropriate to appoint an experienced engineer (either as sole arbitrator or part of the tribunal). Similarly, if the dispute primarily concerns valuation of works (or quantum of loss/damages rather than a party’s liability), appointing an experienced quantity surveyor may be appropriate. The Building Disputes Tribunal and AMINZ each maintain a panel of experienced construction arbitrators.
Footnotes
[1] Arbitration Act 1996, Schedule 1, article 21.
[2] David Sutton, Judith Gill, Matthew Gearing Russell on Arbitration (24th ed, Sweet & Maxwell, London, 2015) at [5-027].
[3] Arbitration Act 1996, Schedule 1, article 10(1).
[4] NZS 3910:2023, clause 13.3.3; NZS 3910:2013, clause 13.4.3; NZIA SCC:2018, clause 17.5.1.
[5] Arbitration Act 1996, Schedule 1, article 10(2).
[6] AMINZ is the “nominated body” under the Arbitration Act 1996, Schedule 1, article 11.
MinterEllisonRuddWatts' Construction and Infrastructure team is New Zealand’s leading construction, infrastructure and engineering disputes practice. We have significant experience advising and acting for clients in all forms of domestic and international arbitration. This includes under the New Zealand Arbitration Act 1996 (and related jurisdictional issues) and a wide range of institutional arbitration rules, such as ICC, LCIA, DIAC, AMINZ, SIAC, the UNCITRAL Rules, and others. Please contact an expert in our team to discuss how we can assist you.
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