Assesment of istanbul arbitration centre by its potential and advantages on infrastructure projects

Globalization is defined as a result in which political borders become increasingly more irrelevant; and international commercial activities spread out of borders. Globalization first emerged in construction sector with the infrastructure investment contracts as a vehicle for attracting foreign capital to developing countries. As Flyvbjerg (2002) observes, the risks characterizing a mega-project can be clustered in four areas: • Risks of cost (construction, maintenance, management); • Risks of demand (income and estimated demand); • Financial risks and market (lack of funds, financial sustainability, interest rates); • Political risks (regulatory, public investment parallel). The breakdown of risks into areas or sources or typology and so on, as proposed by literature and actually applied by companies, is very useful to define mitigation actions. The study reviews the literature with the headings of transportation infrastructure project, mega project, risk, risk analysis, risk management, standard contract forms, claims, disputes, dispute resolution methods and arbitration procedures. These subjects forms a framework for a governance mechanism in a project cycle. Large infrastructure construction projects are more prone to risks. Risk is defined as, "An uncertain event or set of circumstances that, should it occur, will have an effect on the achievement of the project's objectives". The survey participants considered the most important risk factor in local and international projects as design errors and delays by the contractor/public administration. Dispute is, "In general, disagreements arising between the parties relevant to the issues-the complexity and size of the work, number of parties adhered to the main contract, financial issues, design errors/delays, improper planning and scheduling, communication problems, and so on". The survey participants emphasized that conflicts are inevitable in large-scale transportation projects but stated that dispute is associated with distinct justiciable issues that means they require resolution. This means that they can be managed: the process of dispute resolution lends itself to third party's intervention and jurisdiction. The study is reviewing all benefits include strategies for robust process risk and dispute management and successful project delivery, while the disadvantages expose barriers of implementation that must be overcome. Turkey construction industry, is developing and improving constantly and globally. This study brings up to date a new arbitration institution ISTAC-an independent, neutral and impartial institution-that opened its doors in 2016 with the ambition of providing efficient dispute resolution services not only for domestic, but also for international parties. The ISTAC consists of a Board and a Secretariat, comprised of internationally prominent and leading experts in the area of arbitration law. The role of the Board is to assist parties and arbitrators in ensuring that disputes are resolved as efficiently as possible. The ISTAC arbitral awards are binding and subject to enforcement anywhere in the world. The arbitral tribunal validates as an official method since the changes in the regulations of Public Procurement Law and Its standard form of contracts to increase the use of the public and private sector according to the complexity and scope of the work, and to resolve the disputes. Moreover, İstanbul Arbitration Center has published its set of arbitration and mediation rules, along with emergency arbitrator and Fast Track Arbitration rules. The Rules were developed carefully to be consistent with internationally accepted sets of arbitration and mediation rules utilized by established international arbitration institutions. Making the Rules easy to understand for alternative dispute resolution community was a priority in drafting the Rules, and many prominent international practitioners participated. ISTAC is anticipated prior to fulfill needs in Eastern Europe, Central Asia, Middle East and North Africa, while still attracting applications from elsewhere. But, Center's first priority is increasing the awareness and knowledge of international and domestic arbitration in Turkey. In this study, a non-random questionnaire sample was conducted to the senior managers of construction and consultant companies and public authorities. Owners, contractors, and consultants with sizable experience on transportation-related projects were surveyed to identify differences in the perception of risk management, dispute resolution methods and arbitration processes. The perceived benefits and disadvantages regarding schedule, cost and collaboration/flexibility are discussed during field researches. Following these issues, comments and suggestions of the participants about the establishment of the Istanbul Arbitration Center were received. The questionnaires were presented as statistical data, the comments and subjective evaluations of the questionnaire participants were presented as a text. According to the survey assesments, preferred dispute resolution methods of Turkish construction industry are negotiation and litigation. Currently, public administrations and local contractors have stated that they prefer to solve the disputes with negotiation in order to prevent the loss of time and money. However, the participants stated that arbitration and mediation methods were used as a dispute resolution method in contracts with foreign contractors and/or foreign investment companies. The key findings of the evaluations of survey evaluations: • The literature showing that optimistic estimation is a common mistake in the planning phase of mega projects. • Market seems to impose a high risk premium on loans to countries with high inflation, and to projects in the transportation sector. • Participants demonstrate an understanding of the principles of good practice and procedure in interneational arbitration and an ability to organise and present information in a clear and logical manner • In large-scale projects, collaboration is an essential key for the success of projects. • ISTAC and Rules have already been adopted for major projects. For example, the contract to construct İstanbul's third airport-set to be the biggest in the world-contains an ISTAC arbitration clause. Similarly, a new water supply agreement between Turkey and Northern Cyprus formed in March 2016 includes such a clause. • Furthermore, it is found that the results on potential conflicts are helpful for the selection of delivery methods. • Dispute resolution method is crucial for both the project resources and for the commercial relations to be intact. According to the the participants recommendations, ISTAC (İstanbul Arbitration Centre) should take more attention to advertisement or periodical introduction meetings. Also, As a result, in this study, the issues of risk and dispute for a successful project delivery were also analyzed in detail with both literature review and field studies. It has been determined how the project parties evaluate the dispute processes to minimize their conflicts and claims during the construction process, and the benefit analysis of the establishment of the Istanbul Arbitration Center was conducted. Thus, it is aimed to form a framework that will enable the parties to cooperate more effectively and to manage the project process in an optimum manner. Ultimately, this research identifies differences in how project members value resolution methods processes with regard to minimizing construction process disputes, thus enabling project parties to more effectively facilitate unity and strengthen the project management process.