Arbitration in civil construction

Considering that a frozen construction work costs a lot of money, the sector needs a fast instrument to solve conflicts.

Vamilson José Costa
Marina Gabriela Santos Fusinato

Data released from the biggest arbitration chambers show that civil construction and infrastructure are among the main themes discussed in arbitration procedures. In the Business Arbitration Chamber – Brazil (Camarb), for instance, at least 40% of the demands it manages are related to civil construction and energy.

The activity relating to in civil construction is complex, involving several agents and independent participants – each one with several specialties, but all aiming the same goal. Therefore, in addition to the issues commonly seen throughout any contract, the projects of infrastructure and civil construction give rise to litigation typical of this industry: repeated renegotiations of contracts and controversies tied to mistakes in construction projects, settlement of payments when the work is finished, divergences in real estate development (such as calculation of the areas and distribution of expenses among the contracted), delay in the steps, enforcement of post-work guarantees and underestimation of costs in turnkey projects.

Insofar little problems become conflict, the price of the project is also increased, and the time and costs spent in definitively solving the controversy also increase. In the civil construction industry, the later the decisions are made, the bigger will be the expenses to implement the measures and the risks of payment suspension, delay in delivering the project and price variation.

It is not for nothing that since a long time ago the actors of this sector have been in the forefront of the development and the adoption of several measures to prevent and solve conflicts. Among them, the dispute boards (which shall be object of the next article) and the arbitration emerge as methods applicable to fulfill the expectations of this market, especially due to the specificity and speed that said market imposes.

The inclusion of arbitration clauses is now rule in infrastructure and civil construction contracts, especially when there is the presence of an international element. Today, once the obstacles in using arbitration by the public administration are overcome (please refer to the article “The Arbitration involving the public administration”), the arbitration clause is constant even in private-public contracting for significant infrastructure projects.

In reality, several are the international organisms, class organizations and study and professional groups of the area that recommend using arbitration. This is the case of the standard contracts of the International Federation of Consulting Engineers, instruments that are very used internationally and are beginning to have more space in the Brazilian scenario.

In a sector that prevails the saying that a frozen construction work costs a lot of money, it is natural that the civil construction and infrastructure industries to be one of the main enthusiasts of the development of the so-called arbitrations fast-track, especially when dealing with conflicts with less amount of money involved or with low complexity. In these new categories of arbitration procedure – today offered by most of the arbitration chambers – the deadlines established are narrower and the arbitrators (or, commonly, a sole arbitrator) may limit the production of evidence and decline certain steps, such as hearings and hearing of witnesses, in order to achieve an even faster procedure.

In summary, the choice of arbitration, whether in a expedite procedure or not, provides a dynamic and flexible solution of problems, adequate to the complexity and speed that the litigations involving civil construction demand. However, the prevention of litigation is still the most efficient and economic option. For that reason, implementing dispute boards throughout the execution of the contract has also been encouraged to identify problems and solve them before there is the characterization of litigation.