REALWorld Law

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

The Australian infrastructure market is dominated by standard form contracts, which are prepared and issued by various industry bodies.

These standard forms are used by both government and the private sector, have a widely understood risk allocation and have in many cases been the subject of judicial comment.

The most commonly used standard forms are:

• Australian Standards contracts (issued by Standards Australia) – Australian Standards forms range from construct only, to design and construct, construction management, supply and subcontract
• Australian Building Industry Contract (ABIC) – a joint publication of the Master Builders Association and the Royal Australian Institute of Architects
• Forms issued by the Master Builders Association (MBA) – the MBA has offices in each state and territory
• Forms issued by the Housing Industry Association – usually used for smaller and residential projects
• NPWC (National Public Works Committee) standard form construct-only contract – used by a number of government agencies
• GC-21 (NSW Government) – suitable for construction contracts in a number of different circumstances: for projects valued at more than A$1M, at less than A$1M, for minor works around A$50,000 and for consultancy services

Some forms of contract more commonly used outside Australia are also occasionally used on Australian projects, such as:

• FIDIC forms of contract (EPC, design build, construction, electrical and mechanical and civil engineering) – these are occasionally used, particularly on large infrastructure projects involving offshore contractors
• The English New Engineering Contract suite

While most standard forms are periodically updated and reissued, many of the commonly used forms are more than ten years old. As a result, they are typically amended by the insertion of special conditions in order to tailor or adjust the risk allocation, take account of legislative change or to address project-specific needs. It is now unusual for any major project to be delivered using a standard form contract which has not been extensively amended. Many large employers have their own ‘standard form’ contract which incorporates detailed special conditions to address project and risk requirements and specific commercial drivers.

Whilst some government agencies have now developed template contract forms and guidelines for delivery of alliance projects, there are no commercially available standard form contracts applicable to forms of delivery such as alliance contracting, public-private partnerships (PPP) or for hybrid forms such as ‘Early Contractor Involvement’ (ECI). These are generally prepared on a project-by-project basis. Some agencies which use these methods of procurement frequently will tend to use the same form of contract repetitively.

Most government agencies which procure infrastructure have suites of pro forma or standard contracts for use on their projects. For example, the federal Department of Defence has an extensive suite of contracts for use on the whole spectrum of defence infrastructure projects.

With the exception of FIDIC and NEC, other international forms of contract are rarely used in Australia. 

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

The main parties involved in a construction project are:

Employer/client/principal

This is the party procuring the work (typically, a land owner or land developer). In relation to building contracts, this entity is usually referred to as the employer or the principal. In relation to the contracts of appointment of the professional consultants, this party is commonly referred to as the client.

Contractor

A main building contractor is engaged by the employer to carry out and complete the works. This contractor will usually, in turn, engage sub-contractors to carry out and complete separate parts of the works. Contractors may also take responsibility for the design of all or part of the works they are to execute, depending on the procurement method and contract used.

Financier

This is the term used to describe the banks and other institutions and parties (for example, government or charitable organizations in the case of urban regeneration, infrastructure and cultural/sports projects) who provide finance to the employer towards the development (and require security in return). Depending on the size of the project, there might be a single bank or a syndicate of banks.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

In so-called ‘traditional’ procurement, the building contractor is responsible for the construction of the works, but not for their design. In design and construct (D&C) contracts, the building contractor also takes on responsibility for design of the works either by appointing the design consultants or assuming responsibility for design consultants procured by the employer. In the latter instance, the design consultants may be appointed by the employer in the usual way, even before the building contractor is selected; when the employer enters into the D&C building contract, the design consultants’ appointments are simultaneously transferred across (or ‘novated’) to the building contractor and this places single point design (as well as workmanship) responsibility on the contractor and gives the building contractor control of the design process.

Force majeure clauses are often included in D&C contracts. Sometimes the scope of a force majeure clause will be quite limited because most construction contracts will already provide a contractor with some relief for delay caused by third-party events in the form of an extension to the date for completion of the works.

Given that force majeure clauses are creatures of contract, their interpretation will be governed by the normal rules of contractual construction. Force majeure provisions will be construed strictly in the event of any ambiguity. In this context, it means that the clause will be interpreted against the interests of the party that drafted and is seeking to rely on it (‘contra proferentem’). The parties may contract out of this rule.

Importantly, parties cannot invoke a force majeure clause if they are relying on their own acts or omissions.

The underlying test in relation to most force majeure provisions is whether a particular event was within the contemplation of the parties when they made the contract. The event must also have been outside the control of the contracting party. There are generally three essential elements to force majeure:

1. It can occur with or without human intervention
2. It cannot have reasonably been foreseen by the parties
3. It was completely beyond the parties’ control and they could not have prevented its consequences

There are two aspects to the operation of force majeure clauses:

1. The definition of force majeure events
2. The operative clause that sets out the effect on the parties’ rights and obligations if a force majeure event occurs

The events which trigger the operative clause must be clearly defined. It is in the interests of both parties to ensure that the 'force majeure' is clearly defined in their contract.

The preferred approach for a developer is to define force majeure events as being any of the events in an exhaustive list set out in the contract. In this manner, both parties are aware of which events are force majeure events and which are not.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

The federal government defines a PPP as a procurement involving the use of private sector capital to wholly or partly fund an asset that would have otherwise been purchased directly by the public sector and which is used to deliver public sector outcomes. Australian Federal, State and Territory Governments will consider a PPP for any project with a capital cost in excess of A$50 million, in accordance with the National PPP Policy Framework.

PPP projects undertaken in the Australian market to date, the majority of which have been in New South Wales and Victoria, range from hospitals to courts to toll roads. In the case of toll roads, the government will usually hand over operation to the private sector participant for the period of the concession. In the case of social infrastructure such as hospitals and schools, the government will usually retain the obligation to provide the core services such as healthcare or education, although some projects have outsourced delivery of the core services to the private sector participant.

The Federal government (via Infrastructure Australia) has issued a set of National PPP Policy and Guidelines which now apply to all PPP projects released in the Australian market. . The various policies:

• Require the preparation of a number of rigorous and detailed business cases and assessments at each stage of the delivery of a project
• Require market testing at the procurement stage through a competitive tender process between the various private sector participants (usually structured as consortia in the form of a special purpose vehicle with interest by the financier, builder, designer, operator and maintenance contractor)
• Impose some form of a value for money test
• Are intended to be flexible enough to apply to different types of infrastructure while acknowledging that the market may be more receptive to certain kinds of PPP projects than others

The current trend is towards harmonization and an increasingly standardized approach to risk allocation by state governments, which is likely to lead to commoditization of PPP project documentation in the medium term.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

1. Variations to the scope of works (either instructed by the employer, or necessary for some other reason)
2. Other events which, should they occur – and for which the contractor is not responsible – would cause it to incur loss and damage, and
3. Fluctuations in the price of material or labour.

Whilst it is theoretically possible to draft a construction contract where the price is fixed (by omitting the three factors just mentioned), the commercial reality is that both the employer and the building contractor will want to have some flexibility built into the contract. The employer will usually want to have the right to instruct variations and the contractor will certainly want the right to claim for losses suffered and expenses incurred for which it is not blameworthy.

In essence, what parties usually mean when they talk about a ‘fixed price contract’ is a lump sum contract where the contractor’s entitlement to additional money is limited or controlled, for example there are no fluctuation provisions, or the events which would usually entitle the contractor to recompense for loss and expense are restricted or the developer retains strict control over the circumstances in which a change in price or scope may be directed or given.

Parties may often refer to a ‘guaranteed maximum price’ contract which, again, is unlikely ever to truly mean this – ‘employer changes’ and other possible occurrences will be excluded from the guaranteed maximum price figure.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

1. (In some states) professional indemnity insurance, which must be taken out by any person providing professional services in respect of construction or infrastructure work. This would cover architects, engineers, building surveyors and some project managers providing services on infrastructure projects
2. All of the state and territory based residential building legislation require a domestic builder to take out a policy covering limited defects and non-completion insurance. This insurance is very limited and usually only applies if the contractor has disappeared, become insolvent or died
3. Workers’ compensation insurance which covers most liabilities for death or injury to employees, and
4. Third-party motor vehicle insurance which covers third-party injury liability arising out of the use of a motor vehicle

Certain kinds of builders (for example demolition contractors) are required in some states to take out public liability insurance on specified terms.

Insurance by agreement

The main types of insurances which may be required to be taken out under an infrastructure contract are:

• Public liability – covering liability for death, personal injury to any person, damage to third party property or other liability to pay compensation arising out of the works or project
• Contract works – which covers physical damage to the works, materials, plant, equipment and temporary structures
• Property damage – which covers damage to, or physical loss or destruction of all property belonging to the insured (not including the contract works)
• Business interruption or advanced loss of profits – which provides cover for consequential or pure economic losses including gross profits resulting from an interruption or interference with business if an insured asset is damaged. Insurance can also be obtained for advanced loss of profits (that is where the business has not yet commenced)
• Marine cargo – if the works include the provision of significant items from offshore there may be a requirement to take out marine cargo and other goods insurance

There may also be project specific insurance which needs to be taken out.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

In relation to the construction activities comprised within a development project, the financier will usually require the benefit of all of the material contracts to which the employer is a party to be assigned to it by way of security. In this context, the employer is, of course, the borrower of finance from the financier. The type of security which the employer will usually obtain from a contractor (and which may then be assigned to the financier) includes the construction contract itself, the guarantee to the employer of the building contractor’s obligations under the construction contract (which is given by one of its parent companies or – exceptionally for large contractors – the ultimate holding company in the group) and the performance security from a third party surety to the employer.

Performance security can be either ‘on demand’ in nature (meaning that the surety would release bond monies on written demand from the employer) or ‘on default’ in nature (meaning that, broadly, a court judgement or adjudicator’s decision would be required to be presented by the employer before the surety would release bond monies). These bonds generally take the form of an unconditional undertaking from a bank or an insurance bond. The other type of security which may be obtained is retention monies, that is, monies which are deducted from a payment made to the contractor. Retention monies and performance security are usually limited to 10% (or less) of the contract sum.

On large projects it is also reasonably common to require the parent company of the contractor to provide a guarantee of performance. These guarantees often contain some type of limitation clause or financial cap limiting the guarantor’s liability.

Employers and third-party financiers will also require collateral warranty agreements from the building contractor, the key professional consultants and sub-contractors with design responsibility – giving them direct rights for poor performance. In addition, they will require contractual step-in rights in the main contractor’s collateral warranty agreement given to them (which is sometimes termed a ‘direct agreement’), giving them (or their appointee) the right either temporarily or permanently to assume the role of the employer under the construction contract where the employer is in breach, and/or while an attempt is made to remedy the breach.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

1. Lump sum: The contract sets out a pre-agreed sum that the contractor/consultant/sub-contractor will be paid to carry out either a stage or the whole of the works that are required under the contract (subject to various provisions, including variations for which the contractor may receive additional monies)
2. Measurement: The work is measured and valued according to a formula or schedule of rates
3. Cost plus: Payment is by prime cost plus an added percentage for profit
4. A combination of the above – for example the base works may be a lump sum but variations may be carried out on a measured basis

For each of these methods, payment is usually made against the certification of completed works by the contract administrator. The inspection and certification of completed works can be made on a periodic basis (usually monthly) or a milestone basis (at pre-agreed specific milestones or stages).

Each Australian state and territory now has legislation dealing with security of payment for contractors, suppliers and subcontractors in the infrastructure industry and for those who provide related goods and services (such as engineers and architects).

While the detail varies from state to state, the SOP legislation has the following features:

• It enshrines a statutory right to payment for infrastructure work and services. In some jurisdictions this right is granted even if there is a similar existing right in the relevant infrastructure contract. In other jurisdictions it is only granted if the relevant contract contains no payment regime.
• It specifies a process which must be followed by both the party claiming under that statutory right, and the party who is liable to make payment.
• It prohibits ‘pay when paid’ clauses and other clauses considered adverse to a contractor’s right to be paid for work carried out.
• It prescribes a type of fast track dispute resolution in the form of adjudication of payment claims under contracts.

Some SOP Acts (such as those enacted in the Northern Territory and Western Australia) give a party a right to claim payment in respect of the work or services only if the relevant contract does not contain any provision for payment.

In other SOP Acts, notably those in Victoria, New South Wales and Queensland, the statutory right exists regardless of the presence in the applicable contract of provisions giving a right to a party to claim payment for work and services. This statutory right sits in parallel with the contractual right to payment.

The SOP legislation enacted in Australia has the following important impacts:

• It ‘speeds’ up certification of payment claims and requires contractors to have efficient contract administration processes.
• It improves the cash flow to subcontractor and suppliers, and means that contractors cannot rely on delaying payment to sustain cash flow and liquidity.
• It may have reduced the number of major disputes as many of these may be resolved at the adjudication stage.

Depending on the jurisdiction in which the works are being carried out, most construction and infrastructure contracts need to contain provisions dealing with SOP.

Such provisions will not be standard, as careful consideration needs to be given to the nature of the project and how the payment provisions are intended to work. For example:

• In some jurisdictions, imposing a pre-condition on payment of a contractor or subcontractor, such as the provision of insurance details or security, may be in breach of the relevant SOP Act.
• Not all construction work is covered by the relevant SOP Act. Notable exclusions to the operation of the SOP Act in most jurisdictions are mining work, residential building work and work where the payment under the contract is not the value of the work performed but some other mechanism (as may be the case in a build own transfer project).
• There still exists in some jurisdictions legislation which gives contractors a right to place a charge over monies payable to the contractor (in the case of Queensland) or a lien over property to secure payment (in the case of South Australia).

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

Construction contracts require the works to be completed by a specified date. Instead of the employer bringing a claim for general damages (compensation) for late completion of the works by the building contractor, it is standard for the contractor to be required to pay what are termed 'liquidated damages' (LDs).

Liquidated damages are damages that are fixed and the amount is agreed by the parties in advance. A typical clause requires the building contractor to pay or allow the employer to deduct liquidated damages at a rate per day or week of delay in the completion of the works. The rate is usually set out in an appendix to the construction contract.

Contractual provisions for the payment of such sums are common in building contracts and favoured because:

• In some situations, it can be difficult and costly to ascertain the actual loss suffered by the employer
• LDs avoid the employer having to prove its loss by claiming general damages and avoid arguments over remoteness of damages
• The contractor is often keen to fix the level of its liability to the employer for late completion
• LD provisions save the time and cost of litigating over the amount of such loss

It is important to note that:

• If included in a contract, liquidated damages will be the only remedy for delay available to the employer.
• In order to be enforceable, liquidated damages must represent a genuine pre-estimate of the loss likely to be caused to the employer by the contractor's failure to complete on time. If they are not a genuine pre-estimate, then they may amount in law to a penalty and penalties are unenforceable under Australian law.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

• Employer-led changes: Under most standard form contracts, the employer has the right to request variations to the works, for which the building contractor is entitled to additional time and money. The building contractor is also entitled to raise reasonable objections to material changes.
• Contractor-driven changes: Where variations are necessary due to the building contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. The contractor is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

Australian construction contracts commonly refer to completion of the works as ‘Practical Completion’ (in other words, substantial completion). By this point in time, the works must be complete ‘for all practical purposes’ so as to enable beneficial occupation; they may be practically complete even if there are latent defects, but a certificate should not be issued if there are any patent defects.

Practical or substantial completion is usually achieved to the satisfaction of a third party certifier such as the architect, superintendent or other employer’s agent who has the discretion to certify practical completion where minor items are incomplete.

Practical or substantial completion is often defined in detail in industry standard form building contracts such as the Australian Standards and state which requirements must first be satisfied before the works may be certified as practically complete.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

In each state of Australia, legislation imposes a time period by which proceedings must be issued for a claim or dispute arising out of a contract. There are also limitation periods applicable to proceedings arising out of the Australian Competition and Consumer Act (such as misleading and deceptive conduct). Generally, the limitations of action legislation in each state and territory provides that actions with respect to torts and simple contracts which are written or oral cannot be brought more than six years after the date on which the cause of action accrued. However, this limitation period ranges from 12 to 15 years in state and territories legislation for contracts which were created by being formally documented in what is known as a 'deed'.

Finally, in Victoria, causes of action which are defined as a 'building dispute' cannot be brought more than 10 years after the date of completion. Specific advice should always be sought in terms of the limitation period which applies to any particular cause of action.

In contract, the cause of action accrues when a breach of that contract occurs rather than when the damage or actual loss is suffered or discovered. In negligence, the cause of action usually accrues when the loss is suffered or incurred.

A failure to issue proceedings before the relevant time period expires is likely to result in that claim becoming 'time barred'.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

With regard to the liability of the land developer procuring the works to the end-users of the building, it is often the case that the development agreement (or contract of sale, if applicable) will limit its liability for the design and construction of the works to a stipulated period (usually ending on the expiry of the defects liability period under the building contract for the development, but depending upon the developer, the nature of the project and the stage in the economic cycle, sometimes for considerably longer than this period) after completion of the works – except either for claims that have been issued or where the intention to make a claim in respect of accrued and identified rights of action has been notified to the developer before the expiry of the period.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

In a typical development project, there is no contractual relationship between the parties employed in connection with the design and construction of the development (the architect, engineers, other consultants, main building contractor and sub-contractors) and the end-users of the completed building.

In such a case, assuming the subsequent owner does not have the benefit of any contractual warranties from the previous owner, the subsequent owner will need to rely on the law of negligence.

Over the last 20 years, Australian law has come to recognize that building owners who suffer loss because of defective building may have a cause of action against negligent builders and others, including municipalities who by negligent exercise of their statutory responsibilities (eg inspecting foundations) allowed defective building to take place.

An action in negligence offers a subsequent owner a right of recovery against the builder of, or a relevant consultant associated with the construction of, a building in circumstances where the subsequent owner suffers a particular kind of ‘economic loss’. That is, the diminution in the value of the building in that the plaintiff has acquired property of less value than was reasonably believed, and which required the expenditure of money to restore it to the contemplated standard.

It is also possible for end-users to require the main construction parties to provide them with separate collateral warranty agreements or ‘third-party-rights’. Such collateral warranties would contain exclusion and limitation clauses which restrict the damages which end-users could recover.

It is unlikely that a contractual exclusion in favour of a builder, which has the effect of excluding or modifying any duty of care between the builder and previous owner would operate to discharge the builder from a duty of care which would otherwise exist to third parties to the contract. This is because the builder’s duty of care in such circumstances is imposed by law. However there would be difficulty in holding that a builder owes a duty of care to avoid causing economic loss to a subsequent owner if performance of the duty would have required the builder to do more or different work than the contract with the original owner required or permitted.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

The construction process produces a built environment which has potentially adverse implications for future owners and occupiers. There are serious consequences for these parties, who have no control over the design and construction of their buildings, if the original building team gets it wrong.

Australian law recognizes that building owners who suffer loss because of defective building have a cause of action against negligent builders and others.

It is also possible for end-users to require the main construction parties to provide them with separate collateral warranty agreements or ‘third-party-rights. Such collateral warranties would contain exclusion and limitation clauses which restrict the damages which end-users could recover.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

Courts operate at both federal and state government levels in Australia. The separation of powers means that courts are independent of and separate to parliament and the executive government.

In most cases the jurisdiction of a court is governed by the amount in dispute or, in the case of the federal Courts, the subject matter of the dispute. In Australia, the highest level Court in each state – usually called a Supreme Court – has inherent jurisdiction to resolve a dispute.

In some jurisdictions industry-specific tribunals have power to hear disputes (for example the Land and Environment Court in New South Wales and the Domestic Building List in the Victorian Civil and Administrative Tribunal).

Unless the parties specifically and expressly agree to refer a dispute to arbitration, a claim must be pursued in a court.

In many jurisdictions specific lists have been established to manage building disputes. These lists are managed by a judge with experience in hearing such disputes, and are intended to enable prompt hearing of interlocutory or preliminary arguments, assist with the quick identification of the issues and enable a hearing date to be obtained at the earliest possible time. These specialist lists may incorporate a number of special features to enable prompt and timely settlement of disputes, such as:

• Referral to compulsory mediation
• If appropriate, determination by the court of a preliminary point in order to dispose of the dispute or limit the issues in dispute
• Referral to a special referee to consider key technical questions
• Dividing the proceeding into an assessment of liability and then amount (if the claim is successful)

While some courts will grant a trial date at the first directions hearing, in other courts there may be a time delay of up to two years until the trial commences.

Decisions of the Supreme Court for each State and Territory can be appealed to the Court of Appeal Division of the Supreme Court. The ultimate court of appeal in Australia is the High Court of Australia.

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

Arbitration is regulated in each state in Australia by domestic arbitration legislation (known as the uniform Commercial Arbitration Acts). Arbitration is private – the outcome remains confidential and the awards which are handed down by an arbitrator are not published. This makes it an attractive form of dispute resolution to parties like government agencies or those involved in sensitive disputes.

Because the relevant court would otherwise have inherent jurisdiction over a dispute, parties must expressly agree to use arbitration as the means of resolving their dispute. This agreement usually takes the form of a clause in the project contract setting out an agreement to arbitrate any dispute which arises under the contract.

In Australia, domestic commercial arbitration is now usually conducted on a very similar basis to litigation, with similar procedures, legal representation, and costs. In addition to confidentiality, another significant difference between litigation and arbitration is that an arbitrator charges a fee to hear the claim and prepare the award. The arbitrator’s fees and room hire costs can be significant.

Arbitrators are often lawyers. In the construction industry experienced engineers, architects and other building professionals with arbitration expertise are also often used.

Critics of the arbitration process allege a lack of availability of good arbitrators, and the fact that the cost of and time expended in an arbitration is in many cases the same as for litigation. Historically, domestic arbitration has also tended to attract more collateral court proceedings than does international arbitration. This is partly due to the fact that the Australian courts arguably have wider powers to intervene in domestic arbitration procedure.

International arbitration

International arbitration is governed by the International Arbitration Act 1974 (Cth) (IAA). The IAA provides that an arbitration is international if any of the circumstances set out below apply:

• The parties to an arbitration agreement have their places of business in different countries
• The place of arbitration determined in an arbitration agreement is outside the country in which a party's business is located
• The place where the commercial obligations are to be performed is outside the country in which a party's business is located
• The parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country

Currently in Australia, the types of projects which tend to involve foreign contractors are mining and dredging and other civil infrastructure works.

In July 2010 the IAA was amended to incorporate the 2006 version of the UNCITRAL model arbitration law and to streamline and expedite procedures.

Sydney and Melbourne operate as centres for international arbitration. The Australian Centre for International Commercial Arbitration (ACICA) provides international arbitration services. The ACICA rules are based on the UNCITRAL arbitration rules. Other providers used by Australian parties are the International Court of Arbitration, the London Court of International Arbitration and the Singapore International Arbitration Centre.

International arbitrations are usually run on the following basis:

• A panel of arbitrators
• Case summaries and position statements replace pleadings, particulars and discovery
• A 'stop clock' procedure where the parties must make their submissions and lead evidence from witnesses within a short timeframe, for example 10 days
• The incorporation of terms of reference which are agreed following the appointment of the arbitrator or arbitrators

Last modified 31 Aug 2020

In this country, what are the main rules relating to health and safety on construction sites? Do these rules in any way relate to the use of the development after construction is completed?

State and territory SOP legislation has introduced a relatively new dispute resolution process; a procedure known as 'adjudication', which is designed to help parties obtain a speedy decision. Parties to construction contracts now have a statutory right to adjudication. Contracts may also make express provision for adjudication, but the terms must comply with the legislation; if they do not, a statutory scheme will automatically apply.

The adjudicator must reach a decision within 10 business days of the referral, but this period may be extended with the consent of the both parties. This flexibility has allowed more complex disputes to be dealt with by adjudication which, otherwise, would have been referred to arbitration or litigation.

Mediation is a form of alternative dispute resolution which requires the participation of a third party, a mediator, whose role is to assist the parties to a dispute to reach agreement on the resolution of that dispute. A mediator does this by seeking to align the parties' interests where possible, identifying the possible outcomes of the litigation or arbitration, and examining what options might be available to the parties to settle the dispute.

A mediator does not make a binding determination on the dispute, although he or she may make observations on the strength or weakness of the parties' respective positions. Mediation is usually conducted on a confidential basis. In Australia mediators tend to be senior lawyers.

A key element of mediation is its consensual nature. If both parties sincerely want to mediate their dispute, then the prospects of settlement are probably higher.

Recently in Australia there has been a marked trend towards court-ordered mediation. This trend has developed in response to pressure on court resources and is particularly acute in the context of infrastructure disputation.

Mediation has been so successful that many infrastructure contracts contain a clause requiring the parties to mediate their dispute prior to taking any formal steps in litigation or arbitration.

Expert determination plays a valuable role where the issue in dispute is narrow and specific eg a pure valuation dispute (where the answer can be determined by a chartered accountant, a quantity surveyor or some other such professional) or a dispute concerning whether a piece of equipment meets its performance criteria (where the answer can be determined solely by an appropriate technical expert). The expert does not act in a judicial capacity and there is no general obligation on an expert to apply the rules of natural justice (this should be contrasted with adjudication, arbitration and litigation where, unquestionably, rules of natural justice apply). Expert determination will generally be regarded as final and binding; the court will not interfere with an expert determination, even if it is plainly wrong (provided the expert has purported to answer the right question). It is, therefore, inappropriate as a general form of dispute resolution.

Dispute Resolution Boards (DRB) are now being used on some larger projects.  DRB’s involve the appointment of a board usually of three people at the start of the project which is empowered to deal with disputes as and when they arise. The DRB does not use formal procedures and generally acts quickly and cost effectively. The advantage of the DRB is that it is project specific and can apply its working knowledge of the project to cut through issues.

Last modified 31 Aug 2020