Aceris Law has secured another decisive win in a large international arbitration, successfully representing an Emirates-based client in a complex construction dispute governed by Indonesian law. The ICC arbitration, seated in Paris and governed by the ICC Rules, concerned breaches and termination of a subcontract for a major housing development project in North Africa. The dispute centred around key issues frequently encountered in cross-border construction arbitrations, including back-to-back payment clauses, liquidated damages, and claims involving delays and project performance.
The Tribunal ultimately ruled in favour of Aceris Law's client, awarding full compensation for the unpaid contractual amount, VAT, interest, and all arbitration costs, while dismissing the opposing party's counterclaims in their entirety. True to form, Aceris Law went head-to-head with a major international corporate firm – proving once more that agility, expertise, and dedication can triumph over sheer size.
The Dispute: Back-to-Back Payments, Delay Allegations, and Termination
The ICC arbitration, initiated with the assistance of Aceris Law in March 2023, concerned the breach of a subcontract agreement for the construction of a housing project. A central issue in the case was whether the Claimant's right to receive payment was contingent – or "back-to-back" – on the Respondent first receiving funds from the ultimate Owner of the Project. The Respondent argued that it owed nothing unless it was paid by the Owner. Aceris Law convincingly demonstrated that its client was entitled to payment and, crucially, that the Respondent had indeed received full compensation for the subcontracted work.
Rejection of the Counterclaims
Further complications arose when the Respondent sought to justify withholding payment by claiming significant delays and breaches by the Claimant. The Respondent's counterclaims included a claim for liquidated damages and unfounded deductions for alleged performance issues. However, Aceris Law carefully dissected each allegation.
The Sole Arbitrator found that deductions made by the Owner from the Respondent's final payment under the main contract were unrelated to the Claimant's performance. Even if they were, the Respondent's attempt to claim such deductions as damages – while also using them to avoid paying Aceris Law's client – amounted to a double recovery, which the Sole Arbitrator rightly rejected.
Full Compensation: Damages, VAT, Interest, and Costs
In its final award, the Sole Arbitrator ordered the Respondent to pay the full claimed amount. Interest was granted until the date of full payment.
Aceris Law also secured the full recovery of arbitration costs, including legal fees. The Sole Arbitrator underscored that the Claimant had prevailed on all material issues, while the Respondent's counterclaims lacked merit.
Upholding Principles of Good Faith and Due Process under Indonesian Law
One notable aspect of this case was the Sole Arbitrator's focus on good faith. When the Respondent attempted to rely on contractual clauses to refuse payment – despite having accepted work and received compensation – the Sole Arbitrator invoked the Indonesian Civil Code to reject this as a bad-faith interpretation.
The Tribunal's meticulous analysis, spanning over 100 pages, reflects a deep commitment to fairness, legal integrity, and a clear understanding of international construction disputes.
Common Issues in International Construction Arbitrations
Construction disputes are often among the most technically and procedurally complex forms of commercial arbitration. This case involved many issues that are typical in large-scale construction claims, including:
- Back-to-back payment structures: Whether a subcontractor is entitled to payment independently of the contractor being paid by the employer.
- Delays and disruption:[1] Allocation of responsibility for delays in project execution and whether penalties or extensions of time apply.[2]
- Termination provisions: Consequences of Contract termination and final accounting between the parties.[3]
- Liquidated damages: Entitlement to and enforceability of pre-agreed sums for delay.
- Proof of performance: Evaluation of progress reports, invoices, and testimony to establish completion of works.
Aceris Law's ability to navigate these legal and factual complexities was key to the successful outcome in this arbitration.
A Proven Track Record in Complex Construction Arbitrations
The result of this ICC arbitration adds to Aceris Law's growing list of victories in international construction arbitrations. The firm's lawyers – including William Kirtley and Nina Jankovic, who served as lead counsel, along with other members of Aceris Law's team, brought deep legal knowledge and unwavering dedication to securing justice for their client.
Aceris Law has extensive experience as counsel in complex construction arbitrations such as this one and is known for its outstanding track record, unwavering commitment to its clients, and always reasonable legal fees for the highest quality international arbitration legal representation.
With over two decades of international arbitration experience, its arbitration lawyers serve clients globally under nearly all laws.
Footnotes
1. For more information, please refer to the following note on Aceris Law's website: Disruption Claims in Construction Arbitration.
2. For more information, please refer to the following note on Aceris Law's website: Global Claims in Construction Arbitration.
3. For more information, please refer to the following note on Aceris Law's website: Termination of Construction Contracts.
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.
