The Client’s Role in Preparing the Case for Arbitration:

Avoiding Common Pitfalls in Case Preparation

A paper given at the

Society of Construction Law (Gulf)
conference in Dubai on 24 April 2014

Thomas Philip Wilson

Patton Boggs LLP

April 2014
www.scl-gulf.org
Introduction

Parties execute substantial construction projects through a multitude of interfaces and

interlocking relationships. Adverse events, both anticipated and unanticipated, can cause a
waterfall of consequences throughout a project. These consequences often have a series of
commercial impacts on cost and time for one or more project participants. When the project
parties are not in alignment as to how these commercial impacts are to be borne, disputes result.
When the parties are unable to resolve these disputes through amicable means, they are, more
often than not, referred to commercial arbitration.

The arbitration of construction disputes is unusual—if not unique—because, unlike with many
other disputes, the determination of construction disputes hinges on marshaling, understanding
and making effective use of the vast underlying web of facts, circumstances, events and
interfaces that constitute a construction project. The successful resolution of a construction
dispute often turns on the successful development and use of the facts underlying the project.

Anyone who has been through a hearing in a substantial construction arbitration knows that a
few weeks before the hearing is set to begin, the lawyers for the parties (or one of them) delivers
the “trial bundle” to the arbitrators and to the lead counsel for the parties. The trial bundle
includes all of the pleadings and legal submissions of the parties, the relevant contracts and
related documents, all of the witness statements and expert reports that have been submitted, and
a series of binders that set out in chronological order the project documents that have been
disclosed in the case—often called the “chron file.” The first thing the arbitrators and lead
counsel do to prepare for the hearings is work their way through the chron file in an effort to
figure out “what happened” to cause the dispute that has ended up in arbitration. The chron file
is, I submit, the most important resource available to arbitrators who need to find “the truth.” It
is therefore also the most important tool available for the use of counsel who must persuade the
arbitrators to see “the truth” in the light most favorable to their client.

The Problem

Far too often this important tool comes together only in the weeks prior to the hearing, and even
then is incomplete. This means that relevant facts often come to light too late to be used
effectively in case presentation, or—worse—do not come to light at all. In my career as an
advocate and arbitrator, I have seen far too many valid claims and defenses fail because of the
failure of a party to develop and understand the facts fully enough and early enough to make
effective use of them in the presentation of its case. This problem usually results from one or a
combination of the following: (1) The failure of a party to commit time and resources to early
case preparation, and (2) the failure to engage expert construction lawyers (or other consultants)
early enough in the process to be of meaningful assistance.

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The Solution

It is tempting to say that the solution to this problem is for the party to hire specialist
construction lawyers as soon as it discovers a problem that might cause a dispute. This is
certainly a solution that can work well, but it is not the solution that most clients want. Engaging
construction lawyers or other dispute specialists requires a cost commitment that most
contractors and employers do not wish to make until they are certain that it is necessary. The
result is that, in many cases, clients do nothing until it is too late.

Fortunately, engaging outside help is not the only solution. Parties can successfully use a do-it-
yourself (“DIY”) approach by beginning to develop a full understanding of the facts of their case
from the moment they perceive the potential for a dispute. There are pitfalls to the do-it-yourself
approach, however, that—unless avoided—will severely hamper the development and
presentation of the case. The balance of this paper seeks to help you avoid those pitfalls.

Avoid a Lack of Manpower

The first pitfall to avoid is understaffing. Most contractors, employers and other construction
industry operators have their staffs fully utilized before the dispute comes along and attempt DIY
fact development by assigning the task to people who already have a full-time job. This is a
recipe for failure. Developing the facts underlying even the most basic construction disputes can
be a tedious and time-consuming affair. Leaving the task to personnel with other demands on
their time often insures that the requisite time and attention will not be applied. In any
substantial matter, it is imperative that the individuals assigned to the task of fact development
have the time to devote themselves assiduously.

Avoid Problems with Prioritization and Access

Effective fact development often requires a substantial element of forensic investigation not only
of the counterparty’s actions and omissions but also one’s own. Most project teams and project
managers are uncomfortable, at best, with someone shining a flashlight into the darker corners of
project execution. Most project managers do not want their project “investigated” because
investigations will often reveal internal problems in the project. This inclination is
understandable, but highly dangerous. As such, it is imperative that “internal investigators”
work at the direction and with the unequivocal support of executive management. “Bad facts”
have a tendency to be discovered. It is always better to discover them early and internally so that
they can be appropriately dealt with and minimized, rather than to have them exposed for the
first time, and maximized, by opposing counsel on cross-examination.

Further, even when executive management takes the appropriate steps to dedicate an
investigatory fact development team and directly sanction their work, the existing project team
must also devote substantial time to assisting the investigation, while also executing the
project—i.e. while doing their day jobs. While a team of internal investigators with proper
access can assemble and review the relevant project documentation, the input of the project
execution team is almost always necessary for full understanding of the facts, circumstances and

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events underlying the dispute. It is imperative that the project team provide open and candid
assistance to the investigation.

Avoid Making Improper Determinations as to What is “Relevant”

Project management personnel usually take too narrow a view of what is “relevant” to the
matters in dispute. When relevant facts come to light too late, the reason expressed is often: “I
didn’t think it was relevant.” As a general rule, parties should leave the determination of
relevance to their counsel, as this determination almost always requires an application of legal
principles to the facts. Clients are well-advised to cast a broad net and leave it to counsel to sort
out the catch.

Effective Document Collection and Review

Once a fact development and investigation team is assembled and given proper support and
access, their first task (after generally familiarizing themselves with the dispute through
discussions with project personnel) should be the collection and review of potentially relevant
documents. I have appended to this paper at Appendix 1 a checklist of the categories of project
documents that should be considered as potentially relevant. Of course not all of the classes of
document listed in the Appendix will be relevant to every dispute, but I recommend that the team
begin by considering each category as potentially relevant and exclude categories only through a
reasoned analysis of the dispute, bearing in mind the admonition to “cast a broad net.”

Once the potentially relevant classes of documentation are identified, the team should set about
collecting the documents in these classes and organizing them into two sets: (1) one set
organized by category of documents (i.e. individual files containing, for example, a full set of the
contract documents including amendments, a full set of project reports, full sets of the various
meeting minutes, etc.), and (2) another set in which all of the potentially relevant documents are
organized in chronological order. As these document sets are developed the team should review
the chron file to identify missing documents or “holes” in the file. When the project documents
are reviewed chronologically the project story quickly emerges and it becomes easier to identify
lacunas in the records. For example, any document referred to in a relevant document is also a
potentially relevant document. Often, the only way to insure that the second document is
included in the records is to to have reviewed the first document.

Key Project Personnel

Once the fact development and investigation team is well down the path of collecting and
reviewing the potentially relevant documents, it should develop from the documents a list of the
project personnel likely to have information relating to the issues in dispute, including personnel
from within their own organization and those employed by other entities involved in the project.
This list is often referred to as the “Cast of Characters or “Dramatis Personae.” The team should
then conduct initial interviews with their fellow employees on the list to assess the level and
extent of each employee’s involvement and knowledge in order to develop a subset of key
players.

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The key players should then be further interviewed in regard to the details of their involvement.
Whether this further interview should be conducted by the fact development and investigation
team or by legal counsel is a question on which the team should seek legal advice before
embarking on substantive interviews because of legal and ethical issues related to disclosure
obligations that can arise in connection with such interviews. Further, if key project personnel
give notice of an intention to leave the employment of the client during the pendency of the
dispute, the team should take legal advice on how to deal with the departure of the employee in
the context of the dispute. Subject to that legal advice, it may be that an effort should be made to
assure the continued availability of the departing employee to support and participate in the
dispute resolution process as necessary, or to take a witness statement from the employee for use
in any subsequent arbitration proceedings.

Site Visits

It is also important, where possible, to assure that the fact development and investigation team
conducts a “site visit” early in the fact development phase. Having a visual understanding of the
subject of the dispute is always helpful to an understanding of what one is reviewing in the
project records and assists immeasurably in the communication between the team and the project
personnel executing the project.

Conclusion

A DIY client who follows these instructions will undoubtedly have a better understanding of the
dispute and the strengths of its position than it otherwise would, which will help the client in
efforts to achieve an amicable resolution of the dispute. If, however, an amicable resolution is
not possible and the client must hire counsel to act for it in arbitration, the client can be certain
that counsel will be pleasantly surprised, and immensely grateful, for the work that has been
done in advance.

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 Appendix 1

• Pre-Contract
o Requests for Proposals/Invitations to Bid
o Clarifications
o Other tender-phase correspondence
o Estimates and estimation documentation
o Bid-phase programmes/schedules
• Contract Documents
o Joint Venture agreements
o The signature document
o Powers of Attorney
o General Conditions
o Special Conditions
o Appendices attached to or referenced in the contract documents
o Pre-contractual documents or correspondence referenced in the contract
documents
o Documents memorializing amendments to the contract
o Documents evidencing variations/changes to the contract works
o Performance/payment bonds and third party (e.g. parent company) guarantees
o Collateral agreements (e.g., with lenders, sponsors or other third parties)
o Subcontracts/purchase orders
o “Contract Programme/Schedule”
• Commercial/Contractual Correspondence
o Notices
o Claim Documents and responses
o Correspondence related to variations, changes, delays
o Requests for Engineer’s Decision and responses
o Applications for Payment
o Certifications of Payment Applications
• Project Execution Documentation
o Minutes of Meetings with attachments
o Regular (Quarterly, Monthly Weekly) Reports
o Programme/Schedule Updates
o Weekly/Daily Reports or Diaries of Foremen/Superintendents /Safety Personnel
o Drawings, Specifications and Shop Drawings
o Submittal and Approval records
o Fabrication records, “pour cards,” etc.
o Materials invoices, bills of lading, or other proof of delivery
o Test Reports for specialist materials (e.g. batch testing for concrete or asphalt,
hydrostatic testing of pipe, ISO certifications, etc…)
o Cost information including subcontractor and materials invoices, quotations, and
rates
o Requests for Inspections, and inspector’s comments and results
 o Specialist reports (e.g., Soil Reports, Traffic Studies, structural evaluations,
Quantity Surveyor Reports, etc.
o Timesheets
o Progress photos
• Email and other “personal” files
o Project related email files of project personnel should be reviewed for relevant
correspondence
o “Personal” filing systems on desktops/laptops of project personnel should be
reviewed.