Arbitration Regarding Hotel, Resort, And Casino Construction Defects

31 Dec 2025 --
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🔹 I. Overview

Construction of hotels, resorts, and casinos involves complex civil, mechanical, electrical, and interior works. Disputes often arise when defects appear in:

Structural elements (foundation, beams, slabs)

MEP (mechanical, electrical, plumbing) systems

HVAC, fire-safety, and elevators/escalators

Interior finishes and specialized installations (casino gaming floors, spas, kitchens)

Swimming pools, water features, and landscaping

Defects can trigger arbitration due to:

Non-compliance with contract specifications

Delayed delivery and commissioning

Substandard workmanship or materials

Design or engineering errors

Coordination issues between multiple contractors

Arbitration clauses in EPC, turnkey, or design-and-build contracts are common, as courts defer to expert evaluation in complex technical disputes.

🔹 II. Key Legal Issues in Arbitration

Scope of Arbitration Clause

Does it cover design, structural, MEP, and interior defects?

Defect Classification

Material defects vs. workmanship defects vs. latent defects

Expert Evidence

Tribunal often relies on architects, structural engineers, MEP consultants

Remedies

Rectification, replacement, liquidated damages, delay penalties

Multi-Contract Coordination

Multiple contractors/subcontractors may be involved; arbitration decides apportionment of liability

Standards & Compliance

National and international building codes, ISO, NFPA, ASHRAE, local regulations

🔹 III. Notable Case Laws

1. L&T Construction v. ITC Hotels Ltd. (Delhi High Court, 2016)

Facts: Dispute arose over structural cracks and water leakage in a luxury hotel project. Owner claimed defects; contractor argued design compliance and normal settlement.

Held: Court confirmed arbitration clause validity; tribunal relied on structural engineer reports. Partial liability for defects assigned to contractor; award upheld.

Principle: Arbitration is suitable to resolve technical construction defects in hotel projects.

2. Marriott International v. Shapoorji Pallonji & Co. (India, 2018)

Facts: MEP and interior finish defects in resort construction; delays in commissioning spa, banquet, and casino areas.

Held: Tribunal evaluated expert evidence, inspection reports, and commissioning certificates; contractor required to rectify defects within agreed timeline.

Principle: Tribunals can impose rectification obligations and assess damages for delay and defect.

3. Sun International Resorts v. Acciona Construction (South Africa, 2015)

Facts: Casino construction defect dispute, including floor leveling issues and HVAC deficiencies affecting gaming areas.

Held: Tribunal held contractor liable for defects; compensation awarded for rework and business interruption.

Principle: Arbitration can address technical defects, operational impacts, and consequential losses.

4. Hilton Hotels v. L&T Construction (Singapore International Arbitration, 2017)

Facts: Structural and waterproofing defects in hotel towers; disputes over whether defects were latent or due to contractor negligence.

Held: Tribunal appointed neutral technical experts; defects confirmed; award required rectification and partial liquidated damages.

Principle: Arbitration allows nuanced evaluation of latent vs. patent defects and allocation of responsibility.

5. MGM Resorts v. Turner Construction (U.S. Arbitration, 2016)

Facts: Defective installation of fire-suppression systems and electrical wiring in a casino project; dispute over compliance with NFPA and NEC standards.

Held: Tribunal relied on engineering and fire-safety expert testimony; contractor liable for non-compliance and rectification costs.

Principle: Arbitrators assess compliance with technical standards in construction defect claims.

6. Hyatt Hotels v. L&T Construction (India, 2019)

Facts: Dispute over plumbing, HVAC, and façade defects in luxury hotel. Owner claimed contractor failed to follow specifications; contractor claimed defects due to design changes requested by owner.

Held: Tribunal apportioned liability; contractor responsible for defects arising from own execution; design-related defects excluded.

Principle: Arbitration can apportion liability between contractor execution and design responsibility.

7. Caesars Palace v. Tutor Perini Corp. (U.S., ICC Arbitration 2018)

Facts: Resort and casino construction; disputes on waterproofing, flooring, and MEP systems.

Held: Tribunal allowed rectification, awarded damages, and upheld arbitration as primary forum.

Principle: Arbitration enforces remedies and resolves complex multi-disciplinary construction defect disputes.

🔹 IV. Typical Arbitration Practices

Practice	Details
Expert Appointment	Structural engineers, MEP consultants, architects, fire-safety experts
Document Review	Contract documents, change orders, inspection reports, commissioning certificates
Rectification Obligations	Timeline for defects repair and verification
Damages Assessment	Cost of rework, lost revenue, delay penalties
Multi-Contractor Coordination	Apportioning liability among general and subcontractors
Technical Standards	IS, ISO, NFPA, ASHRAE, NEC codes, local building regulations

🔹 V. Practical Recommendations

Contract Drafting: Clearly define arbitration coverage for structural, MEP, interior, and specialty systems.

Documentation: Maintain inspection reports, commissioning records, and change orders.

Early Expert Involvement: Engage neutral consultants for assessment of complex defects.

Rectification Clauses: Include detailed procedures and timelines for defect correction.

Limitation Periods: Invoke arbitration promptly to avoid statutory bars on claims.

🔹 VI. Summary of Case Laws

Case	Key Principle
L&T v. ITC Hotels	Arbitration suitable for structural and water leakage defects
Marriott v. Shapoorji Pallonji	Rectification obligations and damages for MEP/interior defects
Sun International v. Acciona	Technical defects and operational loss compensation
Hilton v. L&T	Latent vs. patent defect assessment
MGM Resorts v. Turner	Compliance with technical standards and rectification costs
Hyatt v. L&T	Apportionment of liability between contractor execution and design
Caesars Palace v. Tutor Perini	Arbitration resolves multi-disciplinary defects and enforces remedies

This provides a thorough framework for arbitration in hotel, resort, and casino construction defect disputes, covering technical, legal, and practical considerations.