DISPUTE RESOLUTION

By 

Upali Fernando

(Chartered Quantity Surveyor, Independent Adjudicator/ Arbitrator, Cost Engineer & Chartered Builder)

WHAT IS DISPUTE

Arguments lead to Disagreements

Disagreements lead to Controversies

Controversies lead to Disputes between the parties

WHAT IS RESOLUTION

Act of settling the arose Disputes

WHO ARE PARTIES TO THE CONSTRUCTION CONTRACTS

MAIN CONSTRUCTION CONTRACTOnly The Employer and The Contractor are parties to the

ContractNote1. The Engineer is not a party to the Contract.

The Engineer is appointed by the Employer to administer the Contract impartially.The Employer is liable for the Engineer’s faults vicariously.

2. Vicarious LiabilityMaster is liable for the servant’s faults.

SUBCONTRACTOnly the Contractor and Nominated/Domestic

Subcontractors are parties to the Contract.

SUPPLY CONTRACTOnly the Contractor/ or Employer and Nominated /

Domestic Supplier are parties to the contract.

CONSULTANCY CONTRACTOnly the Employer and the Consultant/the Engineer are

parties to the contract.

FACTORS RELATED TO DISPUTES

• Clauses related to the Conditions of Contract• Technical issues• Parties involved • Biased decisions• Project Conditions• Third Party• Organizational Behavior• Cultural Problems• Magnitude

ADVERSARIAL DISPUTE RESOLUTION

• In Litigation , arbitration, adjudication ,DAB , Minitral are the parties are concern to win their own arguments by skill and ability lies in the arguing and scoring points over each other.

• Generally , these conducts are very little subjective to amicable settlement.

NON-ADVERSARIAL DISPUTE RESOLUTION

• Settle the dispute cordially and amicably.• Parties may try to settle their dispute even

sacrificing some of their entitlements for the settlement. (Mediation ,Conciliation , etc.)

LITIGATION- (Adversarial)

Ultimate legal method for settling controversies or disputes between and among persons, organizations, and the State.

In litigation process, a case (called suit or lawsuit) is brought before a court of law suitably empowered (having the jurisdiction) to hear the case, by the parties involved (the litigants) for resolution (the judgement).

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ALTERNATE DISPUTE RESOLUTION (ADR)

ARBITRATION-(Adversarial)

This is one of the “Alternate Dispute Resolution” (ADR) method . The determination of a dispute by one or more independent third parties (the arbitrators) rather than by a court .

Arbitrators are appointed by the parties in accordance with the arbitration clauses of the relevant conditions of contract . The judgment of an arbitrator is called his award

Dispute Yes Ask for 84 days E gives yes satisfied yes ResolvedExists E's decision decision

Cl.67.1 no 70 no no

days

Ask for E's Give notice of intention toDetermina- commence Arbitration tion- Cl.44.5

time ? 56 attempt s

days amicableDetermines no settlement

Attempted yes satisfied yes Resolvedyes no no Agreeable no Finally settle under the

rules of arbitrationYes If notice of intention to

commence Arbitration is not given within 70 daysResolved then the Engineer's Decision becomes final

and binding on the parties

ARBITRATION (contd)The following chart explain the way of commencing arbitration as indicated in the FIDIC red book

ARBITRATION (CONTD)

Clause 2.3Any communication given by the Engineer’s representative to the contractor…………shall have the same effect as though it had been given by the Engineer . Provided that:a)…………………….b)If the Contractor questions any communication of the Engineer ‘s Representative he may refer the matter to the Engineer who shall confirm , reverse or vary the contents of such communication

ARBITRATION (CONTD)Clause 67.1If a dispute of any kind whatsoever arises between the Employer and the Contractor…………………..including any dispute as to any opinion , instruction ,determination , certificate or valuation of the Engineer ,t he matter in dispute shall ,in the first place be referred in writing to the Engineer with a copy to the other party . Such reference shall state that it is made pursuant to this clause. No later than the eighty –fourth day after the day on which he received such reference the Engineer shall give notice of his decision to the Employer and to the Contractor. Such decision shall state that it is made pursuant to this clause.

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ALTERNATE DISPUTE RESOLUTION(CONTD) ARBITRATION (Contd)

Clause 67.1 (contd)If either the Employer or the Contractor be dissatisfied with any decision of the Engineer ,or if the Engineer fails to give notice of his decision on or before the eighty –fourth day………………,then either the Employer or the Contractor may,on or before the seventieth day ……………give notice to the other party with a copy for information to the Engineer,of his intention to commence arbitration…………no arbitration……………may be commenced unless such notice is given.

If the Engineer has given notice of his decision ….…….and no notice of intention to commence arbitration………..has been given…………..on or before the seventieth day ………….the said decision shall become final and binding upon the Employer and the Contractor.

ARBITRATION (contd.)Clause 67.2Where notice of intention to commence arbitration as to a dispute has been given………………..the parties shall attempt to settle such dispute amicably before the commencement of arbitration . Provided that unless the parties otherwise agree,arbitration may be commenced on or after the fifty sixth day ……….even if no attempt at amicable settlement thereof has been madeClause 67.3Any dispute in respect of which:a)the decision ,if any of the Engineer has not become final and binding pursuant to Sub-Clause 67.1,andb)amicable settlement has not been reached within the period stated in Sub-Clause 67.2,Shall be finally settled……..under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed under such Rules

Procedure in Arbitrationa)Appoint according to prior arrangement

i) Institutional Arbitration agreement Use institutional procedures/monitoring ii) Ad-hoc arbitration agreement

Based on the parties agreementb) Forward issue to Arbitratorc) Exchange information/evidenced) Proceed with the hearing according to the suitable method chosen by

the Arbitrator as follows: (i) Full-Process

* Fairly resemble Litigation model and procedure and used for major disputes

(ii)Documents-only* Reach decision based on documents only. Mainly to interpret the Contract Clauses

LAW RELATED TO ARBITRATION

Refer• Arbitration Act 1996 (United Kingdom)• Construction Industry Model Arbitration Rules (CIMAR)• Institute of Civil Engineers arbitration procedure 2006• Arbitration Act 1995 (Sri Lanka)• Arbitration Act 2001(Sri Lanka)• FIDIC conditions• JCT conditions• NEC conditions• ICTAD condition• Related Texts and Webs

ADJUDICATION-(Adversarial) Adjudication is an “Alternative Dispute Resolution”(ADR) process within the construction industry has taken off with many disputes now being resolved using the Adjudication process as set out in the standard forms of contract, sub-contract and consultant agreements. It is intended to be quicker and more cost effective than litigation or arbitration. It is normally used to ensure payment (although most types of dispute can be adjudicated)

.The Adjudicator must generally decide the dispute in less than 42 days. Dispute shall be adjudicated by a recognized Dispute Adjudications Board (DAB)

Procedure in adjudication

*Notice of reference to for adjudication to the other party in dispute*Appointing/invoking the adjudication to prior agreement*Submission of the written claim*Giving the defending party a chance to answer the complaintObtaining evidence/submission*Once heard the parties to the dispute Adjudicator will issue the decision (after performing site visit If necessary)

DAB (Dispute Adjudication Board)

Is a “job site” Dispute Adjudication process, typically comprising three independent and an impartial persons selected by the contracting parites.

Procedure in DAB

Similar to Adjudication.

A COMPARISON OF DISPUTE RESOLUTION BOARDS AND ADJUDICATION

The construction industry has always had a special need for mechanisms to resolve construction project disputes promptly. The two newest and most promising devices for providing “real time” dispute resolution on construction projects are the Dispute Resolution Board, developed in the United States, and the adjudication process, developed in England.

1. Over one hundred years ago the construction industries in both the United States and the United Kingdom, because of the need to keep construction projects moving, and because of the vast potential for disputes and conflict on projects, developed a two-step process for resolving disputes at the project site: whenever a problem arose that the parties could not immediately resolve they would call on the project architect or engineer to make an objective ruling on the issue. If that ruling did not resolve the problem, the parties could then refer the issue to a relatively informal ad hoc arbitration process whereby an arbitrator promptly held a hearing and issued a binding decision. These two processes were designed to enable the parties to put problems behind them and move forward with the project.

2. Although the combination of these traditional job site dispute resolution methods served the construction industry reasonably well for several generations, unfortunately during the past 30 years they have ceased to be as effective as they once were. The architect/engineer (“A/E”) decisions are no longer given the weight that have traditionally been accorded to them; and prompt, informal ad hoc arbitrations to resolve discrete disputes are now practically unheard of. Instead, arbitrations today tend to be massive post-project proceedings that involve a host of disputes that have.

ALTERNATE DISPUTE RESOLUTION (Contd)

MINITRIAL-(Adversarial)

The minitrial is an “Alternative Dispute Resolution” (ADR) procedure that is used by businesses and the federal government to resolve legal issues without incurring the expense and delay associated with court litigation. The mini-trial does not result in a formal adjudication but is a vehicle for the parties to arrive at a solution through a structured settlement process.

Procedure in Minitrial

As per the organizational procedures

MEDIATION – (Non-adversarial)This is an “Alternate Dispute Resolution” (ADR)method in which an independent third party (mediator) assists the parties involved in a dispute or negotiation to achieve a mutually acceptable resolution of the points of conflict .The mediator who may be a lawyer or a specially trained non-lawyer ,has no decision-making powers and cannot force the parties to accept a settlement. Mediation is widely used in all sorts of disputes, ranging from divorces to civil lawsuits to very complex public policy problems to international conflicts. Many disputes that have not responded to an initial attempt at negotiation can still be settled through mediation. Mediation is of particular importance in long-running, deep-rooted conflicts, as this type of conflict is rarely resolved without such outside assistance. Even if the full range of grievances cannot be resolved, mediation is often useful for dealing with particular limited aspects of the wider conflict.

Procedure in MediationThere is no hard and fast procedure for this method.

Ad-hoc procedures may adopt after negotiating with the parties

Conciliation- (Non-adversarial)Conciliation is an “Alternative Dispute Resolution” (ADR) process whereby the parties to a dispute (including future interest disputes) agree to utilize the services of a conciliator, who then meets with the parties separately in an attempt to resolve their differences. He does this by lowering tensions, improving communications, interpreting issues, providing technical assistance, exploring potential solutions and bringing about a negotiated settlement.Procedure of peaceful settlement of international disputes . The matter of dispute is referred to a standing or ad-hoc commission of conciliation ,appointed with the parties’ agreement. The eventual report is expected to contain concrete proposal for a settlement , which , however , the parties are under no legal obligation to accept.

Procedure in Conciliation

There is no hard and fast procedure for this method.Ad-hoc procedures may adopt after negotiating with the parties

QUANTITY SURVEYORS ROLE IN ALTERNATIVE DISPUTE RESOLUTION PROCESS

Quantity Surveyor is the Cost and Contract specialist in Construction Industry.His expertise and capabilities in Contract Administration , ConstructionCost , Construction Technology , Contract and Construction Law, Conditionsof Contract , Arbitration Acts, Project Management etc. , He is suitable and entitleto perform any of the following roles in Alternative Dispute Resolution processes.

He can be:a) an Arbitrator or Adjudicator or a member of arbitration tribunal,b) a member of DAB,c) a Consiliator or Mediater,b) an expert witness in a Alternative Dispute Resolution process,e) representing a party,f) advice the Arbitrator , Adjudicator, tribunal or boardg) an independent expert to the dispute

ANY QUESTIONS

THANK YOU