Australia: Fast-track arbitration rules: room for development

I Introduction

Statutory adjudication for construction disputes began in Australia in 1999 with the introduction in New South Wales of the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW SOP Act). Since that time, each Australian State and Territory has enacted legislation providing for its own regime of statutory adjudication, with some differences between the various jurisdictions. Collectively, these 'security of payment' regimes have changed how construction disputes – both big and small – are resolved and constitutes, in a number of ways, a changed paradigm from the position prior to the introduction of these regimes.

Statutory adjudication does not, however, represent a panacea for all construction disputes. As this article explores, there are a number of limitations inherent with its processes. This means that, for a number of disputes, the features of arbitration make it a preferable manner of dispute resolution.

There has been, particularly recently, an increasing number of arbitral rules offering 'expedited' or 'fast-track' processes. However, comparing the features of the NSW SOP Act against a few of these arbitral rules, this article suggests, first, that there is scope for development of arbitral rules which more closely mirror the security of payment model (under a fairly 'fast-tracked' model), and second, that for a number of reasons, arbitration may be the preferable 'fast-track' method of dispute resolution.

The body of this article is in five parts. Following this Introduction (which is Part I), Part II contextualises the emergence of the security of payment regime in Australia with the position that then existed for domestic arbitration in Australia. Part III then, briefly, considers the key features of the NSW SOP Act. Part IV suggests what arbitration can learn from the security of payment model, what advantages arbitration offers for a fast-track model, and what a proposed model, reflecting the statutory security of payment model, may resemble. Part V provides a brief conclusion.

II Background

(a) The prior context

Between 1984 and 1990, each Australian State and Territory enacted legislation that formed part of a uniform regime for commercial arbitration in Australia. For New South Wales, this was the Commercial Arbitration Act 1984 (NSW) (the CAA). While intended to be fast and economical, there were at least four factors that led to the decline of domestic arbitration in the late 1990's.

First, one perceived advantage of arbitration, at least as compared to litigation, was the time and cost savings that could (or 'would') be realised in having a dispute referred to arbitration. This perceived advantage was not always realised. Often, the arbitration would be conducted in a manner which was, in essence, private litigation. Consequently, this would mean the usual costs of litigation, along with the additional costs of the arbitrator's fees and of the arbitral venue.

Second, rightly or wrongly, during this time, it was a criticism of some arbitrators that, while qualified in technical matters, they were unqualified in the law. Often this went hand-in-hand with criticisms about the manner in which legal principles were applied to decide matters in issue. This also raised issues of natural justice and procedural fairness.

Third, there was broad scope for judicial intervention into the arbitral process. Judicial review of arbitral awards was commonplace. As amended in 1990, under the CAA, the Supreme Court had jurisdiction to grant leave to appeal an arbitrator's award on the basis of a question of law which could substantially affect the rights of one or more parties to the arbitration agreement if there was, inter alia, a manifest error of law on the face of the award.1

Among other powers, the Supreme Court could confirm, vary or set aside the award.2 The Supreme Court also had jurisdiction to set aside an award, in whole or in part, where there had been misconduct by the arbitrator, or where the award had been improperly procured.3

Fourth, at the same time, there was, in the late 1990's, a rise in the use of mediation as a method of resolving construction disputes. Part of this was due to Fisher and Ury's Getting to Yes, which popularised the use of 'principled' as opposed to 'positional' negotiation. Generally, clients have benefited enormously through resolving disputes by sophisticated use of negotiation and mediation techniques.

As a result, these factors led to a decline in the use of domestic arbitration during the late 1990's as a method of dispute resolution.

(b) The emergence of statutory adjudication

This is, at least, part of the context in which statutory adjudication emerged in Australia. As foreshadowed in the Introduction, it began in 1999 in New South Wales, with the NSW SOP Act. In 2002, in introducing a Bill to amend this Act, the Minister introducing the Bill said that the NSW SOP Act, in the three years since its introduction, had proved to be 'very successful' in achieving its purpose of ensuring prompt payment, describing cash flow to be 'the lifeblood of the construction industry'.4 Following its introduction in New South Wales, each Australian State and Territory has now enacted its own 'security of payment' statue, albeit with some differences.

As is common ground, there are, broadly, two separate models of statutory adjudication in Australia: the 'East Coast' model, adopted by New South Wales, Victoria, Queensland, Tasmania, South Australia and the Australian Capital Territory, and the 'West Coast' model, adopted by Western Australia and the Northern Territory. The East Coast model, being the dominant security of payment model in Australia, will be the focus of this article, with a particular focus on the NSW SOP Act.

III Key Features of the Security of Payment Regimes

(a) Overview

The NSW SOP Act, and its equivalent schemes, establish what is often described as being a 'fast-track' system to resolving construction payment disputes. This is done through establishing an expedited procedure, conducted largely on the papers, under which a dispute as to a progress payment is referred to an adjudicator, who makes a determination on the dispute, with the determination being subject to limited grounds of review and able to be enforced as a judgment. As these features are well-known, this article only considers each one briefly.

(b) A 'fast-track' system

Perhaps the most notable feature of the various security of payment regimes is the speed of these regimes. To take the NSW SOP Act as an example, if a claimant serves a payment claim on a respondent, and the respondent 'schedules' a lesser amount as being payable, if the claimant elects to proceed to adjudication, subject to the parties granting the adjudicator additional time by consent to make his or her determination, the claimant will have a determination on the dispute within 35 business days.5

The deadlines under the security of payment regimes are also mostly inflexible. Consequently, the regime places an emphasis on speed over other competing values, such as absolute precision in the determination of a party's entitlement. This has given rise to the NSW SOP Act, for example, being described as a 'somewhat rough and ready' process.6

(c) On the papers

The NSW SOP Act establishes a dispute-resolution procedure which is conducted predominately on the papers. First, this is done by the exchange of the 'payment claim' and 'payment schedule', which have the function of determining the scope of the dispute.7 Then, the parties' respective cases in an adjudication are primarily made by the written 'adjudication application' and the 'adjudication response'.8

There may be additional steps, though these will be limited. Under the NSW SOP Act, while the appointed adjudicator may, inter alia, call a conference of the parties and may carry out an inspection of any matter to which the claim relates, there is no procedure for a hearing on the matters in dispute.9 Indeed, if the adjudicator calls a conference, it must be conducted informally and the parties are not entitled to legal representation.10

(d) Interim only

While the procedure under the NSW SOP Act is 'fast-track' in nature, this is, however, tempered by it being only a determination of a party's interim entitlement to a progress payment. This is because, under the NSW SOP Act, an adjudicator's determination does not affect any rights that a party to a construction contract may have under that contract.11 It is from this characteristic that the NSW SOP Act has been described as a 'pay now, argue later' regime.12

(e) Limited grounds of review

Consistent with both the 'fast-track' nature of the scheme, and with determinations being only 'interim' in nature, under the NSW SOP Act, there are limited grounds to review an adjudicator's determination. Indeed, under the NSW SOP Act, it has recently been confirmed that a party is not able to obtain an order setting aside an adjudicator's determination merely for a non-jurisdictional error of law that appears on the face of the record.13 Something more is required to be established. Commonly, this will be establishing the presence of jurisdictional error.14

(f) Enforceability

Finally, for the NSW SOP Act, despite an adjudication being a determination as to an interim entitlement only, there is a procedure for a claimant who obtains a successful determination to enforce the determination as a judgment.15 This brings with it the availability of enforcement proceedings.

IV What Arbitration Can Learn and its advantages

(a) Overview

Since inception, the NSW SOP Act, and the equivalent schemes across Australia, have been widely used. A high volume of construction disputes proceed annually through one of these various statutory adjudication schemes across Australia.

The history of these statutory adjudication schemes since their enactment suggests that there is a larger role that can be played by expedited arbitration as a method of resolving construction disputes than is presently the case. In particular, while there are a number of arbitral rules offering 'expedited' or 'fast-track' processes, this article suggests that there is scope for further development, for arbitral rules which, at least as a default process, more closely mirror the security of payment model.

The security of payment model should not, however, be adopted wholesale. One of the particular comparative advantages that arbitration offers is its flexibility, and can change depending on the circumstances of a particular dispute. The particular benefits of this are discussed below.

(b) The use of 'fast-track' models

To say that the security of payment regimes around Australia have been widely used since their inception should be of no surprise.

To roughly illustrate the volume of matters, each financial year the Queensland Building and Construction Commission (QBCC) publishes a range of statistics in relation to adjudications in Queensland under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA). For example, the QBCC reported that a total of 614 adjudication applications were lodged for the 2016-2017 financial year.16 This is somewhat of a decline from previous years, from (for instance) a total of 999 adjudication applications lodged for the 2009-2010 financial year,17 and a total of 887 for the 2010-2011 financial year.18

There are, however, two qualifiers to these numbers. The first is that these numbers represent disputes of any quantum, including a large number of low-value disputes. The second is that these figures do not truly reflect the market's preferences on both sides of the dispute, as respondents under BCIPA, and under other security of payment models (such as the NSW SOP Act), are not strictly parties to an adjudication by their own choice, as it is, under these regimes, the claimant's election as to whether to commence adjudication on a payment claim. Nonetheless, the figures illustrate the volume of matters being determined under the security of payment regimes.

There is also, however, a second part to these figures. While it will of course vary in each particular dispute, experience has shown that, in a number of cases, the parties to the dispute are often prepared to accept the adjudicator's findings as a final determination of the issue. In other words, despite being only interim in nature, the parties in such cases are willing to accept what has been described as being 'approximate justice',19 with there being a trade-off between speed and cost on one hand, and 'perfect' justice on the other.

This illustrates that there is a significant role that can be played by fairly expedited arbitration procedures as a method of resolving construction disputes.

(c) Advantages of 'fast-track' arbitration

Without intending to be exhaustive, arbitration as a fast-track model offers the parties a number of advantages, not present under the statutory security of payment system.

First, arbitration does not have the same strict limitations present in statutory adjudication as to the claims which may be brought. One large limitation of statutory adjudication is that it is only a determination of an entitlement to a progress payment under a construction contract and does not include, for example, a claim to damages.20 Damages claims can be the subject of an arbitration. Arbitration also, unlike for example the NSW SOP Act, allows claims and counterclaims to be heard and determined together.

Second, arbitration, on balance, offers greater confidentiality. Adjudicators' determinations under BCIPA in Queensland, for example, are published on a public database. While this is not the case Australia-wide, challenges to adjudicators' determinations commonly come before the courts, resulting in details of the dispute also coming into the public domain, by way of published judgments or in affidavit material filed with the court registry.

Third, rather than merely a determination of a party's interim entitlement to a progress payment, as is the case for statutory adjudication, arbitration may be a determination of a party's final entitlement.

Fourth, arbitration offers greater flexibility to tailor its procedures for the characteristics of each particular dispute, to the extent that the parties can reach agreement on such matters. This is in contrast to the strict and inflexible nature of the statutory security of payment procedures.

Overall, these matters mean that, for a number of disputes, 'fast-track' arbitration may be a preferable forum.

(d) Current expedited arbitration rules

Accepting then, that there is a real role to play for fairly 'fast-track' arbitration, the next step is considering to what extent this is currently provided for under existing arbitration rules. There are a number of 'fast-track' arbitration rules, offering expedited procedures. These include the:

  1. ACICA Expedited Arbitration Rules
  2. ICC Expedited Procedure Rules
  3. SIAC Rules Expedited Procedure, and
  4. AIAC Fast Track Arbitration Rules (formerly the KLRCA Fast Track Arbitration Rules).

Contained at the Annexure is a table comparing, briefly, these rules in respect of six separate issues, namely: the application of these rules, the procedures for pleadings or written submissions, to what extent the rules provide for a hearing, to what extent there is discovery, the arrangements for the arbitrator's fees and the timing of the final award.

On the timing of the final award in particular, this comparison illustrates that there is an appreciable and substantial difference between the timing under these rules and the timing under the NSW SOP Act, or its equivalents. For example, under the ACICA Expedited Arbitration Rules the final award is to be made within 4 months of the arbitrator's appointment, where there is no counterclaim or set-off, or otherwise, within 5 months.21 There is a slightly longer timetable for the final award under the ICC Expedited Procedure Rules and the SIAC Rules Expedited Procedure.

These examples thus contain somewhat longer procedures than the regimes under either the NSW SOP Act, or its equivalents. To be sure though, this is in part due to the nature of these regimes. Statutory adjudication may be a 'somewhat rough and ready' process because it determines a party's entitlement only on an interim basis. It is different, of course, where what is in issue is a determination of a party's final entitlement. That said, the experience of statutory adjudication has shown that parties may be willing in particular cases to accept a different balance than the 'perfect' justice of full pleadings, comprehensive discovery and substantive oral hearings, with the trade-off being time and cost savings.

(e) A proposed model

Accordingly, this article suggests that there is scope for expedited arbitration rules which more closely mirror the security of payment model, to give the parties the freedom to adopt such models in arbitration. Alongside the comparison of four current expedited arbitration rules, the Annexure sets out the core of a proposed model for fairly 'fast-tracked' arbitration rules, which could be structured to apply to disputes below a certain quantum (e.g. $750,000), or as otherwise agreed. The key features of this model are that:

  1. there are two rounds of written submissions by each party, being primary and responsive submissions;
  2. it is a documents-only arbitration, unless otherwise agreed;
  3. there is no discovery, but the arbitrator has a power to order the production of specific documents;
  4. the arbitrator's fees are capped at a percentage of the amount in dispute;
  5. there is also a cap on the amount a party may recover for its costs, also as a percentage of the amount in dispute; and
  6. the final award must be given within two months of the appointment of the arbitrator, or within four months where there is a hearing.

Recognising, of course, that not all disputes are the same, a basic 'security of payment' model will not be the best model for all disputes. On a number of occasions, the parties may wish to have the full suite of pleadings, complete disclosure of documents and oral hearings. This variability is not, however, a bad thing. One of the main downfalls of security of payment as a manner of resolving disputes is the inherent inflexibility of the statutory schemes. This is where arbitration has a fair bit to offer, as it can be tailored to match the particular characteristics of each dispute, and the parties' needs. This is recognised by the case management procedures which feature commonly in arbitral rules.

As a result, even accepting that there is a real role to play for expedited arbitral rules which mirror the security of payment experience, this proposed 'default' model can ultimately be amended or added to by consent if, for example, the nature of the dispute means that an oral hearing is preferable. This may be the case where, for example, the dispute turns on one or more persons' recollection of alleged facts, rather than on documentary evidence. In contrast, where a dispute turns upon the existence or proper construction of particular written documents, then orders for the production of documents may be appropriate.

dispute resolution clause, and the rules to be adopted for arbitration, if it is to be a step in the dispute resolution process. Additionally, if a dispute should arise, the parties (and their advisers) should consider, in the first instance, whether or not to adopt a 'fast-track' model and, if appropriate, what characteristics of the arbitration may be required. Of course, whether or not this will require further agreement (if it is possible to reach) will depend on the scope of the rules adopted.

V Conclusion

The discussion in the preceding Part suggests that there is a significant role for the use of expedited arbitration procedures, and moreover, scope for the development of arbitral rules which more closely mirror the security of payment model.

The experience of the security of payment model suggests that its particular model can be an effective model of dispute resolution for use in arbitration, which, given the flexibilities of arbitration, the parties can adapt or tailor, for the particular characteristics of the dispute.


Comparison of fast-track arbitral rules

Item ACICA Expedited Arbitration Rules ICC Expedited Procedure Rules SIAC Rules Expedited Procedure AIAC Fast Track Arbitration Rules Proposed Model
Application of the rules Where the parties agree in writing that disputes shall be referred to arbitration under the ACICA Expedited Arbitration Rules (Article 2.1). Either if the parties agree or if the amount in dispute does not exceed US$2,000,000 (Article 1; see also Article 30 of the ICC Arbitration Rules). On application by a party, if:
  • the amount in dispute does not exceed S$6,000,000;
  • the parties so agree; or
  • in cases of exceptional urgency (Rule 5.1).
Where the parties have agreed that the AIAC Fast Track Arbitration Rules will apply (Rule 1(1)). If the amount in dispute does not exceed $750,000, or as otherwise agreed by the parties.
Pleadings or written submissions
  • The Statement of Claim is contained in the Notice of Arbitration (Article 17.1).
  • The Statement of Defence must be communicated within 28 days of service of the Notice of Arbitration (Article 18.1).
  • Where the Statement of Defence makes a counterclaim, the claimant must communicate a Defence to Counterclaim within 14 days (Article 18.5).
Under the ICC Rules:
  • a party wishing to have recourse to arbitration under the ICC Rules must submit its Request for Arbitration (Article 4(1));
  • the respondent must submit an Answer to the Request for Arbitration within 30 days (Article 5(1));
  • any counterclaims must be submitted with the Answer (Article 5(5));
  • the claimant must submit a reply to any counterclaim within 30 days from receipt (Article 5(6)). Under the ICC Expedited Procedure Rules, the arbitral tribunal has a discretion to impose limits on the number, length and scope of written submissions and written witness evidence (Article 3(4)).
Under the SIAC Rules, the Tribunal is to determine the period of time for the:
  • Statement of Claim;
  • Statement of Defence;
  • Statement of Counterclaim;
  • Statement of Defence to Counterclaim. The SIAC Rules Expedited Procedure makes no specific amendment to these steps. If the Expedited Procedure applies, the Registrar may abbreviate time limits under the SIAC Rules (Rule 5.2(a)).
  • The Statement of Claim is served within 14 days from notice of commencement of the arbitration (Rule 21(1)(c)).
  • The Statement of Defence is served within 28 days from notice of commencement of the arbitration (Rule 21(1)(d)).
Two rounds of written submissions by each party, comprised of primary submissions (e.g. claim or counterclaim) and responsive submissions (e.g. defence or defence to counterclaim).
Hearing No hearing, unless either the Arbitrator determines that exceptional circumstances exist or unless either the Arbitrator or the parties require a hearing to take place (Article 13.3). Whether or not there will be a hearing is a matter decided by the arbitral tribunal, after consulting the parties (Article 3(5)). Whether or not there is a hearing is a matter decided by the Tribunal, in consultation with the parties (Rule 5.2(c)). The arbitration will be a documents-only arbitration where the parties have agreed in writing (Rule 16(1)). The arbitration will also be a documents-only arbitration where, unless the arbitral tribunal deems it necessary for a substantive oral hearing upon consultation with the parties, the aggregate amount in dispute is less than or unlikely to exceed:
  • USD$75,000 for an international arbitration; or
  • RM$150,000 for a domestic arbitration (Rule 16(2)).
A documents-only arbitration, unless otherwise agreed by the parties.
Discovery No discovery (Article 23.4). Though, the Arbitrator may order a party to produce documents (Article 23.5). The arbitral tribunal may, after consultation with the parties, decide not to allow requests for document production (Article 3(4)). Under the SIAC Rules, the Tribunal has the power to order a party to produce documents in their possession or control which the Tribunal considers relevant to the case and material to its outcome (Rule 27(f)). The SIAC Rules Expedited Procedure makes no specific amendments for discovery. The arbitral tribunal may order a party to produce any documents in its possession or control which the arbitral tribunal deems relevant to the case (Rule 7(4)(e)). Similar to the ACICA Expedited Arbitration Rules, no discovery, but with a power for the arbitrator to order the production of specific documents.
Fees Unless otherwise agreed, the Arbitrator is remunerated on the basis of an hourly rate (Article 35.1). The fees of the arbitral tribunal are fixed according to a range which is set by the amount in dispute (Article 4(2)). Unless otherwise agreed, the arbitrator's fees are calculated by reference to the Schedule of Fees, which provides for a maximum amount payable, determined by reference to the sum in dispute. Unless otherwise agreed, the fees of the arbitral tribunal are fixed in accordance with Schedule 1, which provides for a specific fee, determined by reference to the amount in dispute (Rule 24(2)). The arbitrator's fees are capped at a percentage of the amount in dispute (e.g. 5%). There is also a cap on the amount a party may recover for its costs, also as a percentage of the amount in dispute.
Time for final award Within 4 months of appointment of the Arbitrator, if there is no counterclaim or set-off or, otherwise, within 5 months (Article 27). Within six months of the case management conference (Article 4(1)). There is a power to extend time. The case management conference must take place no later than 15 days 'after the date on which the file was transmitted to the arbitral tribunal' (Article 3(3)). Within six months from the date when the Tribunal is constituted. The Tribunal may extend time in exceptional circumstances (Rule 5.2(d)). Within 90 days from the date when the proceedings were declared closed (Rule 21(1)(g)). Within two months of appointment of the arbitrator if there is no hearing. Within four months of appointment of the arbitrator if there is a hearing.


1Commercial Arbitration Act 1984 (NSW), section 38(5)(b)(i).

2 Commercial Arbitration Act 1984 (NSW), section 38(3)(a).

3 Commercial Arbitration Act 1984 (NSW), section 42(1).

4 New South Wales, Parliamentary Debates, Legislative Assembly, 12 November 2002, 6542 (Morris Iemma, Minister for Public Works and Services).

5 This time frame may also be extended if the adjudicator delays in issuing his or her notice of acceptance. See section 20(1) of the NSW SOP Act for example. From experience however, this is a rare event.

6 Musico v Davenport [2003] NSWSC 977, [107] (McDougall J).

7 See sections 13 and 14 of the NSW SOP Act.

8 See sections 17 and 20 of the NSW SOP Act.

9 See section 21(4) of the NSW SOP Act.

10 See section 21(4A) of the NSW SOP Act.

11 Section 32(1)(a) of the NSW SOP Act.

12 See e.g. Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140, [96] (Palmer J).

13 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4, [53] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

14 See Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4.

15 See section 25(1) of the NSW SOP Act.

16 Queensland Building and Construction Commission, Monthly Adjudication Statistics – June 2017, < HTTP://WWW.QBCC.QLD.GOV.AU/SITES/DEFAULT/FILES/MONTHLY_ADJUDICATION_STATS_JUNE_2017.PDF > .

17 Queensland Building and Construction Commission, Overall Statistics – June 2010, < HTTP://WWW.QBCC.QLD.GOV.AU/SITES/DEFAULT/FILES/OVERALL_STATISTICS_-_JUNE_2010.PDF >.

18 Queensland Building and Construction Commission, Overall Statistics – June 2011, < HTTP://WWW.QBCC.QLD.GOV.AU/SITES/DEFAULT/FILES/OVERALL_STATISTICS_-_JUNE_2011.PDF >.

19 John Sharkey, 'The resolution of construction law disputes in the 21st century: A view from the other side of the bar table' (2015) 31 Building and Construction Law Journal 351, 360.

20 See e.g. section 8(1) of the NSW SOP Act.

21 ACICA Expedited Arbitration Rules, Article 27.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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