Terms of reference and issues to be determined
The conflict that has been described in this case study can be effectively resolved only with the help of International Commercial Arbitration. In this section of the paper it is necessary to draw up terms of reference for the arbitration. Furthermore, we need to compile the list of those issues that will be investigated in the course of this trial. According to the standards, established by the International Chamber of Commerce (ICC) and International Court of Arbitration, the terms of reference (TOR) should include the following items:
- The scope of the tribunal’s duties and responsibilities.
- The names of conflicting parties: in this case, we need to speak about the Contractor (a construction company from Spain) and Employee (the Ministry of Communications in the Republic of Toupee).
- Contact addresses of both parties.
- The claims of both parties
- The list of issues to be determined. Under the circumstances, the court will have to focus on the following questions.
- The responsibilities of the employer and the contractor
It should be pointed out that this contract has been concluded on the basis of the Red Book provisions. According to these provisions, the responsibility for the most parts of the design lies on the shoulders of the Employer or Engineer (Burgan, p 26). The concept of design includes the selection of the construction site and this is arguably the underlying cause of this dispute. One should bear in mind that the Ministry of Communications decided to build a road in the area, liable to seasonal flooding. Furthermore, the Engineer determined the exact level of road, however, these estimations proved to be erroneous. As a result, additional work and extra costs were required from a contractor. Therefore, the court will need to decide whether this company is entitled to any compensation for their extra efforts. In construction contracts, such situations are normally classified as unforeseeable physical conditions (Burgan, p 33). The court will need to answer the question whether the supply could by any means predict that the road would have been flooded for more accurate estimation of costs. - The costs of change
The tribunal would have to ascertain whether the actual cost of change was two million dollars as it was noted by the contractor. As a matter of fact, this was the major stumbling block because the Ministry of Communications believes that the expenses, entailed by this change were much lesser. - Prolongation costs
The court will need to determine the amount of compensation, given to the contractor in connection with prolongation costs. It should be borne in mind that due to the devaluation of the local currency, Toupee Follicles (TF), the suppliers had to be paid in US dollars, and the contractor had to spend $ 150,000 each week. The tribunal will need to estimate the exact amount of prolongation costs and determine the extent of the Employer’s responsibility. - Delay Damages
The contractor managed to build the road on time; however, the safety barriers were not finished. Due this fact, the Employer deducted delay damages out of compensation, paid to the contractor. The arbitrators will need to ascertain whether the contractor could in any way avoid these delay damages. Again, allocation of responsibilities is the key issue in these circumstances. - Expatriation of Personnel
The tribunal will need to decide whether the contractor is free to abandon the project due to “temporary liquidity hiatus” in the country. - Payment on Termination
The major task of the tribunal is to determine the amount of reimbursement which the Ministry of Communications should pay to the contractor. This is one of those situations when the termination occurred due to the default of payment; therefore, the contractor is entitled to receive the payment security and loss of profit (Burgan, p 67).
- The responsibilities of the employer and the contractor
- Names and addresses of arbitrators
- The place of Arbitration.
Normally, place of arbitration does not really affect the verdict of the tribunal. Yet, it seems that these proceedings ought to be held in the Republic of Toupée because the arbitrators can be pressured by the local government and this will utterly undermine their impartiality and credibility. - Applicable procedural rules and regulations.
The existing regulations may significantly affect the outcomes of this conflict. The thing is that not all situations can be resolved by the existing legislative acts. Very often, arbitrators have to make their judgment only on basis of their own understanding of fairness and equity (ICC, p 11). - The submission of evidence
- The language of arbitral reference
- Procedures for stating evidence
- The procedures for the inspection of the construction site.
- Exchange of witness statements
- The names and addresses of party-appointed experts.
- The names and addresses of tribunal-appointed experts.
These are the major elements of TOR. On the whole, terms of references are necessary for ensuring the effectiveness and impartiality of the tribunal. They ensure that each of the parties has an opportunity to present one’s point of view.
Procedural Timetable
At this point, it is necessary for us to work out of schedule to which both parties need to adhere. While developing this schedule, we need to rely on the assumption that terms of reference were signed 9 November, 2009, and that a five-day hearing will start on 15 August, 2010. These timelines can be presented in table format.
While developing this schedule, we had to take into consideration that the discovery of evidence will be the most time-consuming process because the experts will need to carry out the inspection of the construction site, assess the causes of delays. Furthermore, the parties will need to provide financial documentation about their expenses. This task is particularly important for the contractor because this company needs to prove that their overrun has been caused due to the employer’s inability to inform them about the difficulties, associated with this construction project. Moreover, they need to provide evidence of the efforts they have made in order to minimize the delay. This is the reason why there is a substantial break between the signing of TOR and the first hearings. In addition to that, the arbitrators perform the functions of councilors who attempt to settle the conflict without a trial and help parties to find a compromise. This is the reason why pre-hearing negotiations are necessary. Certainly, this is only a hypothetical schedule; however such timeframes seem to be most convenient for both sides.
References
Burgan B.A. International Construction Contracts and Arbitration Notes. City University of London, 2008.
International Chamber of Commerce. Rules of Arbitration. International Chamber of Commerce & International Court of Arbitration, 2010, p 1-26.