International Arbitration Considerations

by Pepper Hamilton LLP

Pepper Hamilton LLP

This article was published in the July 2017 issue of AGC Law in Brief (Volume 3, Issue 4), Practical Construction Law & Risk Issues. It is reprinted here with permission.

Over the past decade, the growing number of mergers and acquisitions of engineering and construction (E&C) firms has consolidated the construction industry, creating an increasingly global market with more multinational mega-firms involved in construction projects. The changing face of E&C firm ownership is causing a shift in construction contract negotiations as well, particularly with respect to dispute resolution, as international parties can be reluctant to bring disputes before a foreign court system. Adding a contract provision to require arbitration before an international arbitral institution is a common solution to this dilemma. Many contractors are unaware that the arbitration process, and the time and cost of the arbitration, can be greatly impacted by their choice of arbitral institution. Additionally, international arbitrations may deviate substantially from the traditional and expected process employed in arbitrations involving only domestic parties, depending on the parties’ choice of arbitral institution.

We have encountered contractors who were surprised by these differences when they did not consult with counsel before agreeing to a specific arbitral institution. This article will familiarize contractors with the distinctions between the traditional arbitration process employed in the United States and a more international process employed by other arbitral institutions.

Arbitral Institutions

When requiring arbitration in a construction contract to resolve disputes, the parties can choose from a number of institutions, such as the American Arbitration Association (AAA), JAMS, the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the International Institution for Conflict Prevention and Resolution (CPR) and the International Commercial Arbitration Court (ICAC). However, as a point of reference for this article, the AAA and the ICC are used to highlight the variations in international arbitrations.

The AAA provides administrative services for dispute resolution throughout the United States, as well as abroad through its International Centre for Dispute Resolution (ICDR). The AAA rules and procedures are a good representation of the processes followed during typical domestic arbitration.

The ICC, which is one of the leading international arbitral institutions, is based in France and has members in more than 120 countries. The International Court of Arbitration (ICC Court) is the administrative body attached to the ICC that organizes and supervises arbitrations. We have recently seen an insistence by many multinational E&C firms for the inclusion of an ICC arbitration dispute resolution provision in construction contracts.


The arbitration processes set forth in the AAA’s Commercial Arbitration Rules (the AAA Rules) are, in general, typical for arbitration in the United States. Under the AAA Rules, once a case is initiated and the parties have selected an arbitrator (which in and of itself is a key strategic step), a preliminary hearing is held among the parties and the arbitrator to establish a schedule for the exchange of information, witness lists, exhibits and, depending on the complexity of the matter, pre-hearing briefs. The parties then exchange information in accordance with the schedule and proceed to a hearing — which is similar to, but less formal than, a trial — to present evidence and testimony. The parties will present closing arguments in the nature of oral argument or post-hearing briefs. The arbitrator then has 30 days to issue his or her award.

While the AAA Rules set forth this basic framework for the arbitration process, the AAA Rules contain few mandates and give both the parties and the arbitrators the flexibility and discretion to alter the arbitration procedure either by contract or other informal agreement. For example, if the parties wish to amend their claims, they can generally do so freely, and the rules of evidence are far more relaxed than in court.

In contrast, under the ICC, the process is much more rigid. The ICC Court retains a large oversight role during the arbitration by way of a case management team known as the “Court Secretariat,” which is responsible for handling communications between the parties and the arbitrator, preparing the documentation required by the ICC Court, and providing information about ICC arbitration practice.

In terms of the procedure under the ICC, an arbitrator is first selected to sit on a tribunal to adjudicate the claim. The tribunal then conducts a case management conference and drafts a key document, known as the “Terms of Reference.” The Terms of Reference set forth a summary of the parties’ respective claims and the relief sought by each party, including the amount of each claim, a list of issues to be determined, and the procedural timetable for the parties to follow for the conduct of the arbitration. Once the Terms of Reference have been drafted, the parties cannot add additional claims, unless authorized by the tribunal, and it is unclear whether an increase in the amount of existing claims is considered a new claim. While the arbitration schedule under AAA tends to have more flexibility, the tribunal takes measures to comply strictly with the schedule set forth in the Terms of Reference, though the schedule can be amended in the tribunal’s discretion.

The ICC arbitration proceeding consists of extensive briefings, the submission of additional documentary evidence and expert witness statements setting forth the expert’s opinions and the grounds therefore. Unlike AAA arbitration, the hearing is not the focus of the arbitration. In fact, the tribunal may and often will decide the case on documents alone. When there is a hearing, there is no direct testimony, only cross-examination based on the briefs, evidence and expert witness statements. Expert witness testimony in an ICC arbitration is extremely truncated, and the same expert that would testify in an AAA arbitration for several days may only testify for 10 minutes in an ICC arbitration.

The Award

The process of issuing an arbitration award by the ICC also differs significantly from the AAA. Awards under the AAA Rules in complex construction matters are usually issued in the form of a reasoned opinion and generally consist of a brief direction to the parties from the arbitrator with a determination of the fees, expenses and compensation for the arbitration. The AAA does little to adjust the award.

Arbitration awards under the ICC must be approved by the ICC Court before the award is issued.


The cost of an ICC arbitration also differs from an AAA arbitration. In an AAA arbitration, the price is based on a daily or hourly rate proposed by the arbitrators in addition to the AAA administrative fees.

In an ICC arbitration, the price of each arbitrator is fixed by the ICC using a prescribed cost scale. Each level of the cost scale has a maximum and minimum fee for an arbitrator, but the ICC Court may fix the fees at a higher or lower level than that indicated on the scale in exceptional circumstances. The ICC administrative fees, which are also fixed on the basis of a prescribed cost scale, are separate from the arbitrator fees.


As the construction industry continues to evolve into a more global marketplace, construction contracts are evolving as well, including with respect to dispute resolution clauses, to reflect the international influence. When international arbitration is mandated by the contract, contractors should give careful consideration to the arbitral institution that is selected to ensure that it is a proper fit for the project and also to ensure that the contractors’ expectations and understanding of the arbitration process reflect the true intent of the parties to the contract.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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