Physical Inspections, When Planned and Conducted Properly, Can Prove Beneficial in International Construction Arbitration
Winter 2008
International Disputes Quarterly
Frank Panopoulos
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Introduction
In construction arbitration, the nature of the dispute often centers on the extent to which the structure at issue complies with contractual specifications. Although documents regarding the construction schedule or the materials and methods employed during construction may provide helpful relevant information, an ocular physical inspection of the structure itself can constitute persuasive evidence of the degree of contractual performance.1
To maximize the benefit of a physical inspection, and to preserve the principles of fairness and equality of the parties, it is important that the Tribunal and the parties establish a procedure to be followed during the inspection. The key steps in such a procedure are described below, followed by a brief discussion on the potential significance of statements and other evidence recorded or collected during an on-site survey of the structure at issue.
Establishment of an Inspection Protocol
Typically, the Tribunal (or, sometimes, a Tribunal-appointed expert) will conduct an ocular inspection of a structure or a construction site accompanied by representatives of the parties. Several procedural issues arise from this situation. It is not clear, for instance, whether the Tribunal and the parties should interact, and if so, how. Assume, for example, that during an inspection members of the Tribunal wish to ask questions. Because the answers to these questions may address directly the crux of the dispute, the parties need to devise a manner in which each can respond in an orderly fashion, with proper notice to the other party, and without engaging in legal argument.2 This constitutes merely one of several procedural matters the parties need to agree on, or the Tribunal needs to rule on, prior to inspection:3
Party Representatives: Each party should designate which of its representatives will accompany the Tribunal in an inspection. Each party should appoint a reasonable number of representatives to avoid potential safety concerns. If no Tribunal-appointed expert is present, and Tribunal members do not have sufficient technical expertise in construction matters to assess fully the importance of what they observe, the parties may opt to include their own experts in the inspection delegation. This can be particularly important if the inspection takes place close to or during a hearing on the merits, since expert commentary with the actual structure serving as an illustration of various technical points can be very helpful to the Tribunal. The manner in which these experts can assist the Tribunal should also be pre-determined, as discussed below (under "Interactions With The Tribunal").
Areas To Be Visited: Each party has a stake in presenting its case in the best possible light, and certain parts of the structure or site may accomplish this better than others. In the interest of fairness and expediency, the parties should reach agreement in advance as to which areas the Tribunal will visit without prejudicing either party's case or jeopardizing the safety of the Tribunal and the parties.
Route Of The Inspection: To preserve equality, neither party should "lead" the inspection — i.e., single-handedly determine the path through the construction site that the Tribunal should follow. After taking safety and security considerations into account (discussed below) the parties should agree on, or the Tribunal should set out, a route through each of the areas to be inspected.
Interactions With The Tribunal: Because of the concerns mentioned above, the parties should establish rules for addressing the Tribunal and responding to the Tribunal's questions, including the timing, length and format of any response (on-site oral answers, subsequent separate presentations or submissions). In any event, particular attention should be paid by the parties and the Tribunal so as not to transform the inspection into an ad hoc evidentiary hearing. Any rules established in this regard would apply to the parties' experts, as well.
Safety and Security: Construction sites and unfinished structures may pose dangers that require safety measures to be taken prior to inspection. The parties should decide collectively on the appropriate safety measures, including cordoning off hazardous areas, ensuring adequate signage and signing liability waivers. If necessary, the parties should devise a protocol to be followed in case of emergency.
On-Site Statements and Other Evidence
Important questions arise with respect to evidence collected during an inspection. Such evidence can include a recording of the inspection itself (typically by video- or photo-camera), and the statements made by either party or the Tribunal. Videographic or photographic images can be controversial, since their angle and order of presentation, among others, can convey a different impression than that of the naked eye. Moreover, given the fallibility of human memory, such images could ultimately affect the Tribunal's conclusions from the actual inspection.
Two solutions, therefore, seem appropriate. The Tribunal can appoint its own independent videographer or photographer, accompanied by assistants who would keep a written record (in transcript or note form) of the Tribunal's on-site findings. Alternatively, the Tribunal can allow each party to prepare its own set of images, with due regard to veracity and accuracy, and determine their admissibility similarly to any other type of documentary evidence.4
With respect to statements made by the parties during the inspection, as a general matter they should be aimed to assist the Tribunal and should not be used as evidence in the arbitration.5 This approach allows the inspection to proceed without evidentiary concerns and debates that would obstruct the overarching purpose of the process, namely to assist the Tribunal's understanding of the condition of the structure and the issues surrounding it.
Finally, it seems obvious that neither party should attempt to collect evidence during an inspection in a manner that alters in any way the condition of the structure. Any sampling or testing of materials during the inspection that could physically alter the structure or the site should be conducted only with permission from the Tribunal and carefully recorded.
Conclusion
An inspection of a structure or a construction site offers members of an arbitral tribunal a direct impression of the thing that usually lies at the heart of the construction dispute before them. To ensure that this impression is legally relevant and helpful towards the resolution of the dispute, and to protect fundamental principles of fairness and due process, parties and tribunals in international construction arbitration must ensure that an appropriate inspection protocol is established in advance and followed during the inspection. In addition, parties should agree on the appropriate method of recording the inspection and ensure that the inspection does not alter the state of the structure or site inspected.
1 Such a hands-on approach is contemplated in most mainstream arbitral rules and lies, therefore, squarely within the discretion of many arbitral tribunals. ICC Rule 20(1), for example, renders independent fact-finding by a Tribunal as a duty by providing that "the Tribunal shall proceed ... to establish the facts of the case by all appropriate means" — a broadly phrased rule that apparently allows on-site inspections. See ICC Rules of Arbitration, Art. 20(1). Other rules do so explicitly. ICSID Rules 34(2)(b) and 37; IBA Rules, Art. 7 (allowing on-site inspections of relevant goods or sites).
2 The UNCITRAL Notes on the Organization of Arbitral Proceedings, for example, explicitly preclude ex parte communications between a party and the Tribunal during an inspection. Note 57.
3 Most Tribunals enjoy broad discretion in determining arbitral procedure and can do so when the parties fail to agree. UNCITRAL Model Law on International Arbitration Art. 19, for example, states: "Subject to the provisions of this law, the parties are free to agree on the procedure to the followed by the arbitral tribunal in conducting the proceedings." If the parties fail, "the arbitral tribunal may, subject to the provisions of this Law, conduct the proceedings in any manner it deems appropriate." Prominent commentators have characterized Article 19 as the "most fundamental rule of due process and ordre public." Matti S. Kurkela and Hannes Snellman, Due Process in International Commercial Arbitration 182-84 (2005).
4 It is worth noting that the Tribunal has discretion to rely solely on the video or photo surveys of the parties, and forgo the inspection altogether.
5 UNCITRAL Notes on the Organization of Arbitral Proceedings, Note 58.
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