Internationally renowned arbitrator DR NAEL BUNNI speaks to Barry McCall about his experiences over more than four decades of resolving construction disputes.

 

No description can adequately do justice to Dr Nael Bunni’s career as an arbitrator. His experience in construction dispute resolution dates back more than half a century, and he has been acknowledged as one of the world’s leading arbitrators since the 1980s. He recently received the President’s Award from The Society of Construction Law. At the presentation, he was described by Mr Justice David Barniville as ‘the father of construction dispute resolution’.

Father of construction dispute resolution

“I was interested in dispute resolution from the beginning of my career because of my involvement in construction insurance in Iraq in the 1960s,” Dr Bunni recalls. “I was in charge of a construction insurance business, and there were always disputes in relation to whether contractors were entitled to be paid or not.”

Later in his career, he moved to Ireland to work as a consulting engineer but maintained his keen interest in dispute resolution. He attended a lecture on the topic where the speaker mentioned the Chartered Institute of Arbitrators (CIArb), the international centre of excellence for the practice and profession of alternative dispute resolution.

“I didn’t realise such an institute existed, and I joined it straight away,” he says.

Not only did he join it, but he also went on to become its president. There was quite a bit of interest at the time in construction arbitration in Ireland, and he was appointed to arbitrate on a number of disputes here. He says his international arbitration work started almost by accident.

“I was sitting at a table at a wedding with friends from Kuwait,” he explains. “One of them asked for my card and enquired about what CIArb meant. I was asked to take on a big case in Kuwait as a result. It really started from there.”

A leading construction dispute resolution expert

That was followed by an International Chamber of Commerce (ICC) conference in Paris.

“To my surprise, the chair introduced me as a leading construction dispute resolution expert,” he says with characteristic self-deprecation. “The next thing I knew, the ICC approached me to take on work for them. I have been involved in arbitration domestically and internationally since. I enjoyed it and started studying on my own. I am self-taught to a large extent.” In the context of being an auto-didact, he says it was “very interesting to receive the award from the Society of Construction Law.”

Understanding the role of arbitration

People can often misunderstand the role of arbitration and its clear advantages as a dispute resolution mechanism. “It is much more than a lower-cost alternative to the courts,” he explains. “It’s private to begin with. There is no linen washing in public. It can be much cheaper than going to court, but it can also be more expensive in some instances.”

1700 was the earliest recorded use of arbitration in Ireland

That privacy element can be very important to the parties involved in an arbitration process. Indeed, it played a key role in resolving one of the earliest recorded uses of arbitration in a commercial dispute in Ireland. Dr Bunni mentioned it in an article for The Resolver, the journal of the CIArb, back in 2015.

The case concerned the Ouzel, a cargo vessel that sailed for what is now Turkey in 1695. It failed to return when it was expected, and the vessel was given up for lost at sea with all hands, and the insurance underwriters paid up on its hull and cargo. In 1700, however, it arrived in Dublin Port with the captain explaining that it had been captured by pirates but that the crew had eventually managed to regain control of the vessel and sail home laden down with pirate booty.

This naturally led to a dispute relating to the ownership of the cargo. With the parties gearing up for a lengthy and potentially ruinous court action, the wise decision was taken to seek an alternative resolution, and the case was submitted to a panel of fellow merchants for arbitration. That group subsequently became a standing arbitration body for merchants known as the Ouzel Galley Society.

Very interestingly, although it is known that the dispute was settled to the satisfaction of all parties, nothing is known of the actual resolution. This speaks volumes for the importance of privacy in these cases, as no party could be seen as a loser.

Choosing an arbitrator

Another advantage is the ability of the parties to choose the arbitrator. “In court, you can’t choose the judge; in arbitration, you can choose the person or tribunal to hear the case. And you can choose people who should be expert in the areas in dispute. You can also decide on the programme you wish to go through. The parties can influence what should be done and when. In court, you are completely in the hands of the judge.”

There is also room for flexibility in how the parties want the proceedings to be conducted and what they want the tribunal to do.

Dr Bunni explains: “For example, in one case, we had to visit the site. The issue in dispute was the facade of a 27-storey building in Cairo. It was finished in beautiful orange marble from Italy. The architect had been very careful to specify how he wanted it done. When it was finished, he said it wasn’t how he wanted it and demanded that it be taken down. The cost and complexity of that would have been enormous. We had to go to the site to see for ourselves.

“In another example, one of the parties said the merits of their case would be obvious if the tribunal could visit the site for ourselves. The tribunal took them at their word and went to check it out.”

Arbitrator’s prior expertise

Another benefit he points to is the fact that the arbitrator or tribunal has prior expertise to bring to bear.

“You don’t have to educate the judge on the matters in dispute,” Dr Bunni notes. “You can also set the ground rules. The parties can agree between themselves on the most important issue to be resolved first. Sometimes it can be difficult for the arbitrator to decide what’s most important. The parties can decide what should be dealt with first and then on the order of the other issues. In that sense, the parties to the dispute have a very, very important role to play in the arbitration process. This is not true in all cases, but it is one of the advantages. They also have a role to play in conciliation and other forms of alternative dispute resolution.”

Construction is a sector with high potential for dispute

According to Dr Bunni, the construction industry provides fertile ground for disputes.

“The potential for disputes is definitely very high. By its nature, it’s an industry where you are starting from scratch. Drawings and specifications can be incomplete, a draftsperson can be wrong or miss something, and all the words of people can be taken to mean different things.”

He points out that disputes can often arise from a relatively simple disagreement.

“If it is not resolved quickly, it will become a claim. If the claim isn’t accepted, it will become a dispute. Disputes should be resolved as quickly as possible otherwise a lot of time and money can be consumed. And, how you resolve disputes is a very important part of the construction industry.

Minimising costs

“Costs can be minimised by the parties agreeing on the process in advance,” he explains. “For example, it is possible for the parties to an arbitration to agree to a time limit for the process. That puts the onus on them to ensure that witnesses and other participants are available to take part in the hearings, of course.

“The most expensive part of arbitration is the hearing itself. If you can limit the time it takes, you can limit the costs. Arbitrators have a duty to act diligently and quickly, and cases can take a much shorter time than court cases if the parties concerned co-operate.”

PWC arbitration disappointment

Dr Bunni laments changes to the construction landscape in Ireland that have all but put an end to the use of arbitration in public works disputes.

“Arbitration has changed in Ireland, unfortunately, because of various conditions imposed on contractors by public works contract,” he says. “It has been a problem for a few years. It has made contractors bear the costs of arbitration even if they win. This is against all normal legal practices where costs follow the award. This has made arbitration effectively dead in Ireland for public works contracts. Contractors won’t venture into arbitration when they are exposed to potentially very high costs. Arbitration has lost its value in Ireland, and I don’t think it will recover unless the government takes action. I don’t know how this situation was dreamt up and accepted. It is completely unfair that the winner should bear the costs of an arbitration process. This has to be changed.”

Arbitration has lost its glamouring Ireland

And according to Dr Bunni, the use of arbitration for the resolution of private-sector construction disputes is also on the wane.

“In the private sector, conciliation has taken over from arbitration,” he points out. “It suits the Irish mentality. In conciliation, the parties get together to work out a solution. Generally, they work out a solution that is acceptable to both of them and allows them to live with each other afterwards. Arbitration has really lost its glamour as a result.”

 

The 3rd edition of Dr Nael Bunni’s ‘Risk and insurance in Construction’, co-authored with his daughter, Lydia Bunni BL and published by Rutledge is available to purchase from www.taylorandfrancis.com