There are different types of multi-party and multi-contract construction structures that concern Central Europe. These contracts show exactly how Central Europe handles construction contracts and investments that involve multiple parties and states. It is becoming the norm in Central Europe for Companies and States to start a project involving multiple parties bringing their own expertise to form a whole project.
When that happens, an arbitration clause becomes a bit complicated, for example, in a situation where a foreign investor wins a construction contract in a Central European state. It may need to subcontract some of the roles to another company that may not have direct communication with the main employer. Suppose a dispute arises between the main contractor and the employing company. In that case, the question that has always come up is if the subcontractor can also be a part of the arbitration if such a clause was entered between the two major players.
Chain and Web Bilateral Contract
There are two major Bilateral contracts that explain how multi-party and multi-contract construction structure works with respect to arbitration in Central Europe. They are known as the Chain Bilateral contract and web bilateral contract.
The chain Bilateral contract is a multi-party construction contract in which an employer employs a company and that companies employ other firms or get subsidiaries involved in the process. In this case, the subcontracted firms will not be part of the arbitration clause if the employer and the main contractor have one in place. However, this is not the case in recent times as subsidiaries may be dragged into an arbitration they are not signatory due to certain multi-part established doctrines.
The Web Bilateral contract is one in which an employer employs different firms for a particular project and has different arbitration clauses. Suppose a delay in one firm leads to the main employer not meeting up with the expectation of another firm that finishes its contracts on time. In that case, an arbitration dispute may arise between the firm and the employer whose contract was breached.
When such happens, it is possible for the employer to take the firm which started the delay in the first place to the tribunal. However, a question that has risen in international arbitration as it relates to multi-party contracts is whether the tribunal could handle a chain arbitration in one seat when there are different clause agreements.
To answer the question that the two different bilateral contracts poses, the next section shall consider the jurisdiction impact of the Central Europe and how they may handle multi-party construction contracts.
The jurisdictional factors of Multi-Party and Multi-Contract Construction Arbitration
Obviously, it is clear that there is really no one common encompassing way t handle Multi-part and Multi-Contract construction arbitration. Every jurisdiction and arbitration institution in the CEE eventually gets to consider certain factors surrounding a particular multi-party and Multi-contract construction arbitration agreement. They then use the rule to determine its level of jurisdiction and which parties should be held liable to arbitrate when disputes come up.
Below are the two major issues that Multiparty and Multi-Contract Construction Arbitration could be handled in Central Europe.
Group of Companies Doctrine
While a normal arbitration agreement requires that parties involved in a contract must be signatory to it, the multi-party Construction arbitration agreement in Central Europe uses the group of Companies Doctrine (GOCD) to include non-signatories that play a relevant role in a particular dispute. The Doctrine emphasizes the need for non-signatories who are subcontractors in a Construction agreement to also be a part of an arbitration dispute that involves its main contractor and the employing party. This is particularly so when the subcontractor plays a major role in causing the dispute. The link that the GOCD is based on is known as that of Corporate bond.
Many courts and Arbitration institutions in Central Europe agree to the need for a significant party to participate in a contract with an arbitration clause to intervene and bear certain responsibilities even if it is not a signatory to the arbitration contract. In Paris Courts, the GOCD is considered as the DowChemical and stresses that contracts involving corporate bodies give arbitration institutions the right to extend their jurisdiction to all of them as a form of full encompassment.
While the GOCD seems to make it easy for International arbitration institutions handling Central Europe cases, it also tends to undermine the whole basis of the party having to sign an arbitration agreement before it can be demanded to arbitrate legally.
Due to the conflicting interest of the GOCD to the foundational requirements of arbitration globally, not all institutions and jurisdictions in Central Europe consider it is the best approach when a multi-party arbitration construction dispute arises. Hence, different arbitration institutions and jurisdictions handle multi-party construction disputes differently and on a case-by-case basis.
Group of Contracts Doctrine
The group of contract doctrine is the complimenting side of the group of companies Doctrine. And is the part that is focused on Bilateral web construction contracts. This Doctrine highlights how and when an arbitration institution should express jurisdiction over multiple contracts and hear it in one seating.
AS explained in the Bilateral web contract, it is possible for an employing party to enter several contracts with different companies with different arbitration clauses to achieve the success of one project. Each company will be contributing its own respective expertise to the project. Suppose there is a dispute between the employer and one contracted firm. In that case, the group of Contracts Doctrine explains that it is possible for other firms whose arbitration clauses are different from the firm having the dispute to be involved in the arbitration hearing.
The group of Contracts states that if the arbitration clauses are highly similar and one contracted firm is the reason the employing firm is having a dispute with another firm, then it is possible for every relevant firm to be taken to arbitration in an umbrella seating.
If it is a situation where the contracts are very different and the arbitration clauses are highly independent, then taking a firm not involved in a particular arbitration dispute will be extremely difficult.
In general, though, many institutions will consider each multi-contract construction case independently and adopt the best approach for the hearing.
Multi-party and Multi-contract arbitration contract cases are one of the biggest reasons why many firms award annulment are south in Central Europe. Interpreting multi-party and multi-contract construction disputes can be extremely tricky and easily lead to dissatisfaction. This is why the parties et expert arbitrators firm to draft a contract encompassing and protecting every party’s interest.
Rättsakuten is a major firm that can offer high expertise on Multiparty and multi-contract construction contract and how far arbitration can play a role. You should contact the firm for further information on how you can get started with an accurate arbitration contract drafting and how to prepare for possible disputes.
Rättsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rattsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC, and several other Arbitration tribunals