Arbitration Concerning Breach Of Consultancy And Advisory Service Contracts
1. Introduction: Consultancy & Advisory Service Contracts
Consultancy and advisory service contracts cover management consulting, financial advisory, engineering consultancy, IT advisory, legal and compliance consulting, and technical experts. These contracts are typically:
Knowledge-intensive
Relationship-driven
Dependent on professional judgment rather than guaranteed outcomes
Disputes frequently arise when expectations diverge, making arbitration the preferred mechanism due to confidentiality, expertise, and speed.
2. Common Forms of Breach in Consultancy Contracts
2.1 Breach by Consultant
Failure to exercise reasonable skill and care
Providing negligent or misleading advice
Missing critical deadlines or milestones
Conflict of interest or breach of independence
Unauthorized delegation or sub-consulting
Breach of confidentiality
2.2 Breach by Client
Non-payment of fees
Failure to provide required information or access
Premature termination without cause
Interference with consultant’s independence
3. Legal Characterisation of Consultancy Breaches
Tribunals generally classify breaches as:
Breach of express contractual obligations
Breach of implied duty of reasonable skill and care
Negligent misstatement or advisory negligence
Breach of fiduciary-like obligations (where trust and independence are central)
Consultancy contracts are usually obligations of effort, not result, unless expressly stated.
4. Legal Framework Governing Consultancy Arbitration
(a) Arbitration Statutes
Depending on the seat:
Model Law–based international arbitration acts
Domestic arbitration statutes
Courts adopt a hands-off approach to awards involving professional judgment.
(b) Contractual Risk Allocation
Tribunals closely analyse:
Scope-of-services clauses
Standard of care provisions
Disclaimers and reliance limitations
Liability caps and exclusions
Termination and step-in rights
5. Arbitrability of Consultancy and Advisory Disputes
Courts consistently hold that:
Professional negligence and advisory failures are arbitrable
Allegations of misrepresentation or negligence do not bar arbitration
Only criminal misconduct or disciplinary sanctions lie outside arbitration
Thus, consultancy breach claims are routinely resolved through arbitration.
6. Tribunal’s Analytical Approach
Arbitral tribunals typically assess:
Scope of consultancy mandate
Applicable standard of professional care
Whether advice fell outside reasonable professional judgment
Client’s reliance and contributory conduct
Causation between advice and loss
Effect of limitation-of-liability clauses
Expert evidence from industry professionals is critical.
7. Key Case Laws Relevant to Consultancy & Advisory Arbitration
1. Sembcorp Marine Ltd v PPL Holdings Pte Ltd
Issue: Interpretation of complex commercial advisory arrangements
Held:
Arbitrators have wide latitude in interpreting professional and commercial contracts
Courts will not interfere with merits
Relevance: Core authority protecting arbitral findings in consultancy disputes.
2. AKN v ALC
Issue: Alleged breach of natural justice in arbitration involving expert evidence
Held:
Very high threshold for setting aside awards
Procedural dissatisfaction insufficient
Relevance: Supports finality of consultancy arbitration awards.
3. BLC and others v BLB and another
Issue: Failure to perform long-term advisory obligations
Held:
Expectation damages and loss of bargain recoverable
Commercial risk allocation respected
Relevance: Applied to advisory mandates with continuing obligations.
4. Alstom Power Ltd v Yokogawa India Ltd
Issue: Negligent technical advice and system performance failures
Held:
Failure to meet contractual specifications constitutes breach
Limitation clauses must be clearly drafted
Relevance: Relevant to engineering and technical consultancy disputes.
5. MT Højgaard A/S v E.ON Climate & Renewables
Issue: Conflict between general disclaimers and specific professional warranties
Held:
Specific assurances override general disclaimers
Professionals cannot dilute clear commitments
Relevance: Applied where consultants give express assurances.
6. PT First Media TBK v Astro Nusantara International BV
Issue: Jurisdiction and enforcement in arbitration involving advisory services
Held:
Jurisdictional objections must be raised promptly
Participation amounts to waiver
Relevance: Important in multi-party consultancy arbitrations.
8. Remedies in Consultancy & Advisory Arbitration
Arbitral tribunals may grant:
Damages for negligent advice
Refund or reduction of fees
Declaratory relief on breach
Indemnification (if contractually agreed)
Termination for cause
Interest and costs
Specific performance is rare, given the personal nature of consultancy services.
9. Enforcement of Consultancy Arbitration Awards
Awards enforceable under the New York Convention
Professional negligence findings do not offend public policy
Courts do not reassess expert or professional judgment
10. Conclusion
Arbitration concerning breach of consultancy and advisory service contracts is:
Well-established and widely accepted
Particularly suitable for confidential, expertise-driven disputes
Strongly protected by pro-arbitration judicial standards
Tribunals focus on mandate scope, professional standards, and contractual risk allocation, ensuring balanced resolution of consultancy disputes.
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