2D Arbitration for 3D Construction Projects?

Layered Construction Projects and Layered Dispute Resolution for Standard Arbitration Clauses in Sweden

Construction disputes in Sweden commonly arise from projects structured through multiple, interlinked contracts. Employers contract with main contractors. Main contractors contract with subcontractors. Employers separately appoint designers and consultants. Each of these relationships is typically governed by a different agreement, often incorporating standard forms such as AB 04 or ABT 06.

Despite this multi-contract environment, Swedish standard construction contracts have traditionally provided for ad hoc arbitration under the Swedish Arbitration Act rather than arbitration administered by an institution.

This has been a long-standing preference for party autonomy and procedural flexibility in Nordic countries. However, it is necessary to consider whether a single, purely ad hoc arbitral process remains well suited to disputes arising from contemporary construction projects.

Multi-party construction disputes do not involve one set of procedural interests. Employers, contractors, subcontractors and consultants may have different views on tribunal composition, consolidation of related disputes, sequencing of claims and procedural timetables.

In this setting, party autonomy would no longer operate as a black and white, single unified preference between two parties. It becomes as a collection of competing procedural positions between a multitude of stakeholders. Pure ad hoc arbitration provides no default mechanisms for reconciling those positions. Questions of joinder, consolidation, and multi-party tribunal appointment must be resolved through agreement or, failing that through court involvement.

Institutional arbitration rules address these issues through predefined provisions on consolidation, joinder, and appointment of arbitrators in multi-party cases. This reduces transaction costs by supplying a baseline procedural framework where agreement is absent.

A study published by the SCC comparing ad hoc and SCC-administered construction arbitrations in Sweden found that ad hoc arbitrations were, on average, longer and more costly than comparable SCC cases. Three-member tribunal cases showed an average duration of approximately 18.1 months in ad hoc proceedings compared to 15.8 months in SCC-administered proceedings. Average costs in the studied ad hoc cases were also higher than in SCC-administered cases.

The sample size in the study was relatively small, counsel fees were not included and claim sizes varied between cases. The data suggest that in Swedish construction disputes, ad hoc arbitration is not reliably cheaper or faster than SCC-administered arbitration.

The traditional view of ad hoc arbitration as a lower-cost and faster option does not uniformly hold in Swedish construction disputes. This suggests that the choice between ad hoc and institutional frameworks should be guided by the characteristics of the project and dispute, rather than by an assumption that one model is inherently faster or cheaper.

Construction projects also differ from many other commercial contexts in that disputes often arise while performance continues. Cashflow, interim payments, and ongoing cooperation remain critical. In such circumstances, early resolution of discrete issues can be commercially more valuable than waiting for a final award.

Mediation is well suited to disputes where commercial settlement remains possible. Arbitration continues to play a central role where binding and enforceable determination is required. A dispute-resolution clause that recognises both functions is more likely to reflect the realities of construction projects than a clause built around a single procedural endpoint.

Hybrid clauses organise when different mechanisms are used and for what purpose, and increasingly do so with some level of institutional support. From a Swedish perspective, the issue is whether ad hoc arbitration should remain the default expression of dispute-resolution design in projects that are inherently multi-party and multi-contract.

Updating standard construction clauses to incorporate institutional or hybrid features would constitute a modest adjustment. Party autonomy would continue to lead the process, flexibility would remain available. The only difference would be that contracts themselves would provide clearer procedural structure where disputes extend beyond a single contractual relationship. Such an approach would align dispute-resolution design more closely with project structure and with the empirical data that ad hoc arbitration does not reliably deliver cost or duration advantages in Swedish construction disputes.