By Prof. (Mrs) C. Weddikkara , Ph.D (Law)&Mahesh AbeynayakeLL.B (Hons) , LL.M, M. Phil, Attorney-at-LawLecturer in LawUniversity of Moratuwa

Disputes and Construction IndustryThe delivery of a product in construction can be identified as a process and not as an event. Harmon(2003)Complexities of the construction industry can create disputes. (Chong & Zin,2012).Disputes frequently occur on construction projects. Mawdesley(1994)Disputes in the construction industry are complicated. Andrew (1986)

Reasons for Disputes in the Sri Lankan Construction IndustryBreach of conditions of construction contractsDelay in issuing of final designs, drawings and instructions as required by the contractor.Delays due to deficiencies in designs.Post contract instructions which delay disrupt or suspend work by the contractor, his site arrangement or his method of construction.Inadequate financial strength of any of the parties to the contract.Unwillingness or inability to comply with the intent of the contract or adhere to industrial standards in performance of the work.Unforeseen and unusual adverse weather or physical conditions,.Site conditions which differ from contract document.Price fluctuation.

Background of ADR methodsThere are several disadvantages in litigation such as stressfulness, inflexibility and formality of court procedure, restricted scope of claims and remedies as well. Construction professionals are faced aforesaid difficulties for settlement of disputes and started to find Alternative Dispute Resolution (ADR) methods.

Litigation Litigation is mainly used to resolve disputes. Mediation, Adjudication, Arbitration, Conciliation , Mediation and Negotiation are main types of Alternative Dispute Resolution methods.

ADR MethodsNegotiationConciliationMdiationAdjudicationArbitration

General Characteristics of ADR MethodsMinimum delaySettlement achieved in final and fair ConfidentiallyFlexibilityMinimum cost

Stair Step Model for Dispute Resolution Process in the Construction industry

Negotiation

A third party may bring the disputing parties to the negotiating table and he may suggest the general framework for producing a settlement.

Conciliation

In contrast to mediation, conciliation involves a more separated examination of the situation and the official presentation of recommendations which the parties may then adopt or reject.

Adjudication

Adjudication a process where by, when a dispute between parties arises, a person who has no connection with either side is engaged to examine the arguments of the parties to decide the dispute. The decision may be temporary binding. This is a mandatory pre-step before the final process may be commenced .

Arbitration

Arbitration is a more formal means of settling disputes. It can be defined as the settlement of a dispute on the basis of the law by the binding decision of a arbitral tribunal whose work is determined by the parties. In arbitration some times parties themselves decide on the law that is to be applied to the dispute.

Mediation In Sri Lanka

Historically, Sri Lankan administration of justice revolved a round village level informal mediation mechanisms, such as, the teachers & principals and the village temple and churches playing a mediators role in Gam Sabha. The formal introduction of Conciliation Board in 1958 was controversial and eventually turned to be a failure.

Mediation In Sri Lanka

The Mediation Boards Act is enacted in 1988 and being in operation since then is regarded as a comparatively more successful legislative enactment but continues to evoke serious debate in view of its compulsory requirement of mediation before litigation.

Mediation In Sri Lanka

Voluntary commercial and civil mediation where parties enlist the assistance of professional mediators in whom they have trust, to help to settle their disputes is fundamentally different from compulsory mediation.

Mediation In Sri Lanka

In civil disputes, the word mediation is often interchangeably used with the word conciliation causing some confusion, even though mediation is generally regarded as a more practical facilitation process than conciliation.

Mediation In Sri Lanka

The submission to mediation is generally a voluntary process even though in certain disputes, such as those covered by the Mediation Boards Act No. 72 of 1988, submission to mediation of certain categories of disputes is made a prior requirement before seeking redress through courts.

Mediation In Sri Lanka

In commercial mediation law, submission to mediation does not oust jurisdiction of courts.

Mediation In Sri Lanka

Mediation legislation in many countries has provided for the speedy enforcement of mediated agreements with the minimum of additional inquiry.

Mediation In Sri Lanka

The skill and the prestige of the mediator and just and fair and consensual manner in which the mediation process was conducted are ingredients that the court would examine before making judgment on the enforceability of the mediation agreement

Adjudication and its Recent History

In 1982 and 1984 British Property Federation forms of building agreements included adjudication as a dispute resolving method. The aim was to make a quick, inexpensive solution that parties can agree at least as a temporary decision.

Recent HistoryIn 1997 adjudication was introduced in to various forms of sub contracts in UK. Under the new engineering construction contracts adjudication is a mandatory first step prior to arbitration. Normally most of the disputes do not continue after adjudication.

What is adjudication?

Its the legal process by which an arbitrator or adjudicator reviews evidence and argumentation including legal reasoning set forth by opposing parties to come to a decision which determines rights and obligations between the parties involved.

Powers of an adjudicator

Adjudicator has given some powers to succeed in his process.Freedom in conducting adjudication Adjudicator can make his own standard according to the complexity and nature of the dispute.

Powers of an adjudicator

Adjudicator is allowed to visit the site, examine the factors and collect information.Adjudicator is allowed to question the engaged parties and any third party if needed.Adjudicator is allowed to get advises from any expert that which satisfy his own intention.

Adjudication in Sri Lankan construction field

In Sri Lankan construction field, adjudication procedure. It is according to the ICTAD conditions of contract (SBD 01 of 2002).

Adjudication in Sri Lankan construction field

Adjudication is a statutory procedure by which any party to a construction contract has a right to have a dispute decided by an adjudicator It is intended to be quicker and more cost effective than litigation or arbitration

ADVANTAGES AND DISADVANTAGES OF ADJUDICATION

Those advantages and disadvantages are as follows.

Advantages in adjudicationThe advantages of adjudication comparison to other alternative dispute solving methods are listed bellow.Less time consuming The adjudication process would be completed in 28 days.

Advantages in adjudicationLess expensive the only cost is adjudicators paymentNo legal representation (lawyer) is needed the party involved in the contract can represent himself and answer for his own self if adjudicator asks. No need of hiring lawyers.

Advantages in adjudicationAdjudication can be done when the work is in progress - delays and wastage according to disturbance would be minimized Adjudication has the full backing of arbitration and litigation if one party disagree about the decision they can go further to the court.

Advantages in adjudicationParties can talk and discuss within the adjudication process parties can make a decision themselves while the adjudication process go through

Advantages in adjudicationReduce the load of cases in litigation and arbitration most of the disputes doesnt remain after adjudication.Adjudicator can be selected by the parties normally the adjudicator is named in the contract after both parties agree.

AdvantagesExperienced experts in the field could be used as the adjudicator engineers, architects, Quantity Surveyors could be used.More than one adjudicator could be selected / named according to the dispute the suitable adjudicator could be chosen.

Disadvantages in adjudicationAdjudication also has some disadvantages comparison to other alternative dispute solving methods.If the decision is not satisfactory parties have to use courts and adjudication becomes another waste of money and time.There is a third party involved in adjudication some times the dispute may not clearly understand by the third party.

Disadvantages in adjudicationDecision depends on the adjudicator there is no exact standard or procedure so the process and the decision could differ according to the adjudicator.The decision may only cause a short term resolution parties can disagree and same dispute could arise again after short period of time.

Adjudication agreement

The agreement follows a similar format to that of the other agreements , arbitration etc.

Adjudication agreementThe rules can be incorporated into any contract and become operative when any party under the contract gives written notice of dispute requiring adjudication.

Adjudication agreementSome adjudicators guidance notes suggest the following wording.Any dispute arising under this agreement shall in the first instance be referred to adjudication in accordance with the Adjudication Rules

Scope, purpose and conduct of adjudication

The adjudicator can limit the length of any written or oral submission,Specialist / expert advice may be obtained but only one party need constant or request such help

ArbitrationArbitration is the reference of a dispute or difference between not less than two persons for determination after hearing both sides in judicial manner by another person or persons, other than court competent jurisdiction.

Sri Lanka construction industry arbitration

In Sri Lanka, the construction industry is a major part of Sri Lankan economy. It will be directly affected to the economic growth.

Sri Lanka construction industry arbitration

Disputes in the construction industry in Sri Lanka were normally those that arise under contracts for the procurement of supplies & services and the installation of equipment, sub contractors etc.

The main reasons for disputes in Sri Lankas construction industry are

The main reasons for disputes in Sri Lankas construction industry areBreach of construction contract by any party in a project.Tax and cost variations due to economic changesInsufficient administration of responsibilities by the client or contractor.Drawing, Plans that contain errors and confusions.

The arbitratorThe arbitrator was almost always an individual with a wealth of experience in the relevant industry or somebody with a background relevant to the technical issues in disputes.

ArbitrationThe Arbitration Act of Sri Lanka No 11 of 1995 stated how to resolve disputes arise in any industry. The Act provides that an arbitration agreement shall be in writing.

ArbitrationCharacteristics of ArbitrationEconomical Arbitration is cheaper than a court action.Simplicity- Procedure is simple.Mutual agreement- Meetings can be conducted anywhere and at any time which is suitable for the parties. Parties do not have to wait for the courts free dates.

ArbitrationPrivate- The entire hearing takes place in private.Speedily- Arbitration is speedier. A court action will take at least one or two but in arbitration can be agreed to settle the disputes within 6 months.Expertise- Arbitrator is normally selected for his expert knowledge but the judge will not have the knowledge of technical side of each field.

Example for Clause,Recommended Arbitration Clause by ICLP arbitration centre

Example for Clause,Recommended Arbitration Clause by ICLP arbitration centre Any doubt, difference, dispute, controversy or claim arising from, out of or in connection with this contract, or on the interpretation thereof or on the rights, duties, obligation, or liabilities of any parties thereto or on the operation, breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Rules of the Arbitration Centre of the Institute for the Development of Commercial Law and Practice.

ArbitrationAn arbitration clause should be in writing to meet the requirements of the Sri Lankan Arbitration Act No 11 of 1995, Section 3(2) of this Act recognizes arbitration clauses as deemed to be in writing if contained in a document signed by the parties or in an exchange of letters, telexes, telegrams or other means of telecommunication which provides a record of the agreement

Advantages of Arbitration.

The process can be speedier than a court case.There can be a saving in costs.Unwanted publicity can be avoided.The arbitrator can view the subject in dispute at any reasonable time.

Advantages of Arbitration.

ExpertiseWhen the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed PrivacyArbitral proceedings and an arbitral award are generally privateConvenienceThe arbitral process enjoys a greater degree of flexibility than the courts ExpeditionArbitration is often faster than litigation in court

Advantages & Disadvantages of Domestic Arbitration practice.Advantages of Arbitration.

CostArbitration can be cheaper.AdvocacyThe right to appear for parties in the arbitral tribunal is limited to attorneys-at-law, who in turn have to be instructed by solicitors. At arbitration anyone can appear for the parties.

Advantages & Disadvantages of Domestic Arbitration practice.Advantages of Arbitration.

Relationship of the partiesit is generally possible with arbitration to resolve disputes between two parties who wish to go on doing business together in a friendly way.EnforcementArbitration awards are generally easier to enforce abroad than court judgments

Advantages of Arbitration.

Arbitration is considered as an effective and efficient alternative method of solving any disputes. It consists of following advantages beyond the litigation procedure.Arbitration proceedings are speedier than litigation.Arbitration is cheaper than litigation in courts.Party autonomy is encouraged throughout the procedure.Ability to appoint an expert in the field as arbitrators.Arbitration proceedings are confidential.

Alternative Dispute Resolution Methods in the Construction Industry in Sri Lanka

Dispute Resolution methods in the Construction IndustryThe construction industry has been renowned over the years, which is in ripe with conflict -Prof.(Mrs.) Weddikkara, 2007.

The process of a construction project generates a number of situations where disputes may arise. (Sunil Abeyratne, 2006) Therefore the construction industry today needs dispute resolutions.

Reasons for Disputes in Sri Lanka Construction IndustryBreaches of Contract by any party to the Contract.Inadequate administration of responsibilities by the owner/contractor/sub Contractor.Plans and specifications that contain errors, omissionsSudden tax and cost increases.

Advantages of ADR methodsMinimum delaySettlement achieved in final and fair ConfidentiallyFlexibilityMinimum cost

Advantages The desirable features of ADR methods are,FastInexpensiveFairSimple and economical process

Construction industry needs..Fast and cost effective dispute resolution method.

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