5. DISPUTE RESOLUTION

CONTENTS

INTRODUCTION

DISPUTE RESOLUTION METHODS

MERITS OF ALTERNATE DISPUTE RESOLUTION

METHODS

Conciliation

DISPUTE RESOLUTION BOARDS

Arbitration

INTRODUCTION Many aspects of execution of large Engineering projects have the

potential to lead to disagreements and disputes.

Extra care is required in drafting contract terms and conditions so that

its varying interpretations by different parties can be reduced to be

minimum.

A mechanism for dispute resolution must be identified and stipulated

in the contract documents.

Litigation / Adjudication by a court of law is always costly , time

consuming and both the parties are put to lot of sufferings and hardships.

Litigation should be the last resort in order to settle disputes.

DISPUTE RESOLUTION METHODS

Following methods are commonly used for settling disputes arising from

Engineering Contracts:

1. Negotiation 2. Mediation 3. Conciliation 4. Dispute Resolution Boards

5. Arbitration 6. Litigation

Methods 1 to 4 are known as alternate dispute resolution methods.

These are non-judicial in nature i.e.; unless the agreements reached

by any of these methods are registered with appropriate authorities

they do not become binding on parties and they cannot be legally

enforced.

Awards or settlements given by Arbitration and Litigation are final,

legally binding and mandatory. They are legally enforceable.

1. NEGOTIATION

This is a method of bipartite settlement of disputes without

the help or intervention by any other (i.e. third) parties. In

case of disagreements the parties discuss the problems

among themselves and arrive at a mutually agreed amicable

settlement for the dispute. This requires a great deal of

mutual respect, trust, confidence and a commitment from

both the parties to sort out the problem through mutual

discussions and negotiations. Small and routine

disagreements having less financial / technical implications

usually get settled through Negotiation.

2. MEDIATION

This is a method in which passive help is sought from the third party

to resolve the disputes.

Essentially it involves discussion, negotiation between the parties

involved in the dispute in the presence of the third party called the

Mediator. The mediator does not propose any analysis of the dispute or

any settlement to it. The role of the mediator is to interpret the issues

involved in the disputes, understand and clarify the views / assertions

of each of the parties to the dispute , ensure that proceedings are

conducted in a peaceful manner, maintain the tempers cool and keep

the negotiations on track.

Contd

The mediator need not be a professional; he should be

a person in whom the parties to the dispute have lot of

respect, confidence and trust.

Mediation as a means of dispute settlement has

received a lot of support and encouragement from govt.

of Hong Kong. It has framed rules for mediation and

both parties must take part in mediation before other

methods are initiated.

3.Conciliation

Conciliation is a method in which the third party called the

Conciliator who is a professional and an expert in a dispute

resolution plays an active role in the settlement of dispute.

He acts as a facilitator, a counselor and helps, guides the parties

to arrive at settlement of dispute. He presents analysis of the

disputes and suggests possible ways for coming to an amicable

settlement.

The Conciliator does not give any judgment as such and he does

not propose a solution. He conducts the negotiation meetings

between the parties and only guides them to arrive at an

amicable settlement to the dispute.

Contd

Conciliation is popular in Australia. Many countries

like China, Japan, African countries advocate it. It is

recommended in FIDIC reports.

The Indian Govt. has replaced its 1940 Act of

Arbitration with Arbitration and Conciliation Act 1996

to give it sanctity.

4. DISPUTE RESOLUTION BOARDS (DRBs)

This method is more suited for large Engineering projects

involving several contracts.

DRB is constituted by an enabling clause in the contract

document; it includes representative of Principal, Contractor

and Professional and / or Legal experts who are not a part of the

contract under implementation. It starts functioning right from

the beginning of the project to its end. It meets periodically to

review activities related to the project, identifies, discusses the

issues which have the potential to cause disputes before they

actually crop up and suggests measures to prevent disputes.

Contd

If dispute does arise the board hears the views of the

parties to the dispute, examines the relevant

documents witnesses, conducts its own evaluation and

then awards a settlement to the dispute.

World bank has made it mandatory to constitute D R

Bs in all projects financed by its aid.

5. Arbitration

This is a method for dispute resolution in which there is an

agreement among the parties to submit their disputes or

dispute that may arise later to the Arbitrator / s (i.e. either

single person / a panel of 3 to 5). Arbitrator is a professional

expert who is registered with council of arbitrators and

who acts as a judge to decide the disputes.

After hearing the submission of parties to the disputes, he

awards settlement that is with in the spirit of the provision of

laws of the land, in accordance with his own judgement.

Contd

Arbitrators award is final and legally binding on the

parties to the dispute. These wards are legally

enforceable.

Arbitration is the most preferred and commonly

adopted method for dispute resolution in India.

6. Litigation / Adjudication by court of law

This is a method for dispute resolution in which a judicial

authority a court of law , a tribunal or a similar body hears the

submissions of the parties to the dispute and awards a

settlement that is strictly in accordance with the provisions of

the laws of the land.

These awards are mandatory , binding on the parties to the

dispute and are legally enforceable.

Litigation or Adjudication by a court of law is always very costly,

extremely time consuming and both the parties are put to lot of

suffering and hardships. Litigation should be the last resort to

settle disputes.

ADVANTAGES OF ALTERNATE DISPUTE RESOLUTION METHODS:-

1. These are informal and very flexible methods.

- Venue, timings, proceedings of the meetings, who should be present

etc..

2. There are no detailed procedures, documentations etc.. the steps /

procedures to be adopted to resolve the dispute is in accordance with

the discretion of the parties themselves.

3. They are private and confidential affairs of the parties involved. Thus

the reputation an honor of the parties involved remains protected.

contd

4. they are least expensive and delays are very minimal.

- speedy resolution of disputes is possible most economically.

5. the relationship of the parties continue to remain amicable.

Thus they can continue to work together in future contracts also

without any hindrances / drawbacks.

CONCILIATION

Conciliation is a technique of ADR which has been given

recognition in the new amended Act of Arbitration and

Conciliation Act 1996.

This act provides a certain structure and sanctity to the

technique of Conciliation. While at the same time, retaining

its flexibility and informality.

Conciliation

Conciliation can be used to settle contractual dispute or any other

disputes in a legal relationship among the parties without any prior

agreement about dispute resolution method and it can be adopted at

any stage of dispute development and / or its resolution.

This can be initiated by the parties even when Arbitration or

Litigation proceedings are being conducted to resolve the dispute.

Cooperation, mutual trust, confidence and a conscience effort to

resolve the dispute are essential for the success of Conciliation.

APPOINTMENT OF THE CONCILIATOR

Conciliation is an informal, flexible procedure for dispute settlement

adopted by the parties on the mutual understanding to resolve the

dispute through this method.

The parties to the dispute are free to decide the number of

Conciliators that can be one or more.

The parties can themselves appoint the Conciliator on their own or

they may request an appropriate institute or person to recommend

suitable persons to be nominated as Conciliators.

Contd

The person appointed as Conciliator should be impartial,

independent, good negotiator, and a good counselor.

His success depends on his counseling skills, his ability to convince

the advantages of agreement to resolve the dispute than disagreement

/ Arbitration or Litigation, ability to utilize any opportunity to

encourage settlement of dispute in an amicable manner.

Role Of Conciliator

The Conciliators role in dispute resolution is as follows :-

i) to assist and guide the parties in an impartial and independent

manner to amicably settle their dispute.

ii) to follow the principles of objectivity , fairness and natural justice in

giving the consideration to the rights and obligation of the parties to

the dispute and in the evaluation of the circumstances leading to the

dispute.

iii) to conduct the Conciliation proceedings in such a manner as he

considers appropriate, taking into account the circumstances of the

case, the specific requests or views expressed by the parties and

requirements for a speedy and amicable settlement of the dispute.

Contd

iv) To present an analysis of the dispute, consequence of Arbitration /

Litigation and suggest possible options / ways for settling the dispute.

However, he does not give any settlement award.

v) on the request of parties to draw up or assist the parties to draw up

the agreement for settlement of the dispute.

vi) to authenticate the settlement and assist in its registration if

decided by the parties.

Special features of Conciliation

Following are some of the special features of Conciliation which makes

it very desirable, preferred method for dispute resolution even in

complicated / complex commercial or contractual dispute:-

i) there need not be any prior agreement to settle the disputes through

Conciliation.

ii) this method can be used even when parties have initiated

Arbitration / Litigation to resolve the dispute.

The 1996 act of Arbitration and Conciliation provides that the

Arbitrator / court can prompt the parties to settle dispute through

Conciliation , even when Arbitration / Litigation proceedings are going

on.

Contd

iii) the parties cannot initiate any Arbitration / Litigation proceedings related

to the dispute when the matter is under Conciliation proceedings.

iv) the 1996 act provides that if the parties arrive at an agreement for

settlement of the dispute through Conciliation and the agreement is

registered then it will have same status and effect as if it was Arbitration

award.

v) in case Conciliation fails, the parties resort to Arbitration or Litigation to

resolve the dispute, the views expressed or concessions offered during

Conciliation cannot be used as evidence.

The Conciliator cannot be made a representative, counsel or witness in

any Arbitration or Litigation proceedings.

Contd

vi) the 1996 act also provides for confidentiality in respect of all

matters in Conciliation proceedings. During Conciliation if party feels

certain information shall be kept confidential then it need not be

disclosed to other party by the Conciliation.

The Conciliator can meet the parties individually and all the information

received by him need not be disclosed to other party.

This confidentiality aspect of Conciliation provides for its success, but at

the same time, it demands that the Conciliator should be honest,

dedicated and sensitive to the requirements and sentiments of the

parties.