I’ll see you in… interim non-binding ADR!

Alexandra Shelley (00:05): Hello and welcome to our series on navigating project disputes.

Shalom Cumbo-Steinmetz (00:10): Today we're discussing forum selection for project disputes. In other words, who's going to decide your dispute and what's the process the parties are going to use?

Alexandra Shelley (00:21): We appreciate the dispute resolution is often not the highest priority topic at the time of contract negotiation, when optimism for a smooth, successful project is at an all-time high. But investing time upfront and articulating some key dispute resolution requirements in your agreement can protect against procedural headaches in the event a dispute arises, as they so often do.

There are two key considerations when selecting the forum for disputes arising under the project agreement and drafting the related dispute resolution provisions. First, the timing of the dispute and second, finality desired.

Shalom Cumbo-Steinmetz (01:00): So, beginning with timing. It's possible to have different dispute mechanisms for different stages in a project life cycle. For example, disputes that arise in the middle of construction often need to be resolved quickly. For this type of dispute, full blown litigation may not be appropriate. We often see parties agree to establish an interim dispute resolution board that can hand down quick decisions during the course of a project.

These rough justice dispute processes can provide much needed decisions on short timelines, while still preserving the party's right to continue to litigate the issues at the end of the project.

Alexandra Shelley (01:42): Another way interim dispute resolution allows the project to advance is by limiting the resources, both human and capital, needed to resolve the dispute, and instead allow the parties to focus their resources on completing the project, which tends to be in everybody's interest. Unlike a mid-project dispute, a claim that is discovered after the completion of the project during the operation period may be better suited to moving straight into more traditional dispute resolution. This is because delay of the project is no longer a concern, and human capital is at less of a premium.

Shalom Cumbo-Steinmetz (02:19): When negotiating the project agreement. You should consider which types of disputes make sense for interim adjudication. Factors to consider include the importance of expedited decisions, the importance of the issue, and of course, the amount of money at stake.

Alexandra Shelley (02:37): In addition to itemizing in the project agreement which disputes are appropriate for interim adjudication the parties interim adjudication resolution provisions should also set out three things. First, the decision maker should be identified whether that is a single individual with defined expertise, or a larger board of independent professionals that is established at the outset of the project. Second, the procedure and timing for submission and adjudication of the dispute should be specified.

This includes identifying whether the parties must attempt a resolution or mediation before submitting the dispute for adjudication. Third, the dispute resolution provisions should address the finality, or lack thereof, of the interim decision.

Shalom Cumbo-Steinmetz (03:24): So, on finality with interim adjudication, often the process is structured to quickly resolve claims during construction while preserving the party's right to fully litigate the issues from scratch in court or an arbitration. After the project is complete. That's a popular model. It's the one adopted in the Ontario Construction Act, but it's not the only model.

Alexandra Shelley (03:49): Exactly, Shalom. If the parties wish decisions with respect to certain issues or below certain monetary thresholds to be final, they can contract for that. In this case, a party would have to be satisfied with a final decision rendered in a summary fashion. For disputes where legal issues such as contractual interpretation feature heavily, parties may wish to have an interim, non-binding decision for the life of the construction of the project and the ability to have the decision adjudicated by a court or an arbitrator at some point following substantial completion. The same could be true for disputes with a higher monetary value.

Shalom Cumbo-Steinmetz (04:27): These are only some of the forum selection considerations the Torys project team can help you think through. While many of these strategic decisions can be made at the time of contract negotiation, there may be strategic opportunities to revisit the appropriate forum, including the availability of interim adjudication after a dispute arises.