DISPUTES RESOLUTION

Disputes have their origins in disagreements between individuals. Given the infinite complexities
of delivering a building or infrastructure project, the multiplicity of organizations and individuals
involved, and the magnitude of the dollars at risk, it is perhaps not surprising that the
construction industry has been characterized by an adversarial operating environment that
generates disputes and claims. Serious disputes arise on construction projects these can be as a
result of schedule targets, performance guarantees, or deviations from the original contract terms.

Claims typically fall into two categories: (1) contractor requests for compensation not anticipated
in the terms of the original contract, and (2) owner requests for compensation for the contractor’s
failure to meet contractual terms.

The dispute resolution processes offer parties varying degrees of control over in the outcome. At
one end there is negotiation and mediation, in which the parties retain control and must
voluntarily agree to the settlement. At the other end is arbitration and litigation in which the
parties essentially give up control and request a third-person (the arbitrator or judge) to impose a
decision to resolve the dispute. There also exist combinations of these methods.

The following methods are used for resolving disputes

 ARBITRATION

Arbitration is a process of conciliation and is a time honoured system of settling disputes. Parties
refer any disputes arising in the course of a contract to an agreed third party to be resolved. If
both parties in a contract have signed the standard forms of contract containing an arbitration
clause they will have entered into a binding agreement to arbitrate. Arbitration is a principal
binding method of settling disputes in a contract.

For arbitration to be considered

 There should be a dispute
 One part should make a claim and the other part should be in disagreement
 There should be reference to arbitration
Parties in dispute agree between themselves to have an independent party to settle the matters
between them and they agree to abide by the decision

Arbitration is governed by the Arbitration Act

The Act requires Arbitration to be carried out in a judicial manner, and at the conclusion of a
hearing the Arbitrator must provide reasons for any award made. The decision of the Arbitrator
in relation to findings of fact is conclusive; there is no route for appeal. However, appeals can be
made to the courts on points of law, but only with the approval of the court hearing the appeal.
The award of an Arbitrator is legally binding.
The Act sets out the principles which are the basis under which the Act is interpreted. The
following are considered when interpreting the Act
  The object is to obtain the fair resolution of disputes by an impartial tribunal without
unnecessary delay or expense
 The parties should be free to agree on how their disputes are resolved subject only to the
public interest
 The courts should not intervene except where the Act makes such provisions.
However many of the provisions of the Act are not mandatory which means that the parties can
exclude them if they so agree, but this need to be in writing for it to be effective. Parties should
decide carefully as to which of the non mandatory provisions if any are not going to be adopted

The Acts consider the following roles of an arbitrator

The arbitrator must Act fairly and impartially

The arbitrator must decide how Arbitration is to be run, that is the manner in which evidence will
be submitted. If the Arbitrator thinks fit he can adopt an inquisitional role and take a lead in
asking questions to find out the facts.
The Arbitrator may order inspection or do anything to obtain information
The Act now put a positive obligation on the parties to pursue the claim without delay and to
attend hearings
The Arbitrator can order the parties to do things and order them to perform their side of contract.

Procedures in Arbitration
The party seeking arbitration must write and give the other party a notice of reference to
arbitration

Advantages of arbitration

1Cost – arbitration is generally much cheaper. However, the costs of arbitration are significant,
and it is widely felt that the cost benefit has been eroded over time.
2 Speed – arbitration is generally much quicker.
3 Flexibility – the parties have more control over the timing and the format of the proceedings.
Mutually agreeable arrangements can be made to cause minimum disturbance to normal
business.
4 Technical expertise of the arbitrator – the Arbitrator will be selected by the parties on the basis
of technical expertise and suitability to resolve the dispute in question. Decisions should,
therefore, tend to be more in keeping with actual practice in the area under dispute. In litigation,
a judge lacking detailed technical knowledge may be appointed.
5 Privacy – arbitration hearings are normally held behind closed doors. Sensitive business
information is therefore kept private, and the harm that can result from damaging publicity is
avoided. Once the parties to a contract have agreed to settle a dispute by

Procedure in Arbitration

The process is very close to judicial determination and parties adopt an adversarial stance.
Arbitration is typically an out-of-court method for resolving a dispute. The arbitrator controls the
process, will listen to both sides and make a decision. Like a trial, only one side will prevail.
Unlike a trial, appeal rights are limited.
The main differences between arbitration and litigation are that arbitration proceedings and
decisions are private, and the arbitrator is a third party expert specifically chosen by the parties.

Arbitral decisions (also known as awards) may be registered at a court to give them the effect of
a court order for the purposes of enforcement.

In a more formal setting, the arbitrator will conduct a hearing where all of the parties present
evidence through documents, exhibits and testimony. The parties may agree to, in some instances
establish their own procedure, or an administrating organization may provide procedures. There
can be either one arbitrator or a panel of three arbitrators. An arbitration hearing is usually held
in offices or other meeting rooms.

The result can be binding if all parties have previously agreed to be bound by the decision. In
that case, the right to appeal the arbitrator's decision is very limited. An arbitrator's award can be
reduced to judgment in a court and thus be enforceable. In non-binding arbitration, a decision
may become final if all parties agree to accept it or it may serve to help evaluate the case and be
a starting point for settlement talks.

The Award

The Arbitrator’s award is the equivalent of the judgment of courts. The award must be made
within the terms of reference, otherwise will be invalid and therefore enforceable, the essentials
of a valid award can be summarized as follows

 It must be made within the prescribed time limits that has been set by the parties

 It should comply with any special agreements regarding its form or method of publication
that has been laid down in arbitration agreement.

 It must be legal and capable of enforcement at law

 It must cover all matters which were referred to the proceedings

 It must be final in that it settles all the disputes which were referred under the
arbitration

 It must be consistent and not contradictory or ambiguous , its meaning must be clear

 It must be confined solely to the matters in question, and not matters outside the scope
of dispute

 The award should be generally in writing, in order to overcome any problem of enforcing
it in practice.
Setting aside an arbitration award

When the courts set aside an award it becomes null and void. The situations where the courts
will do this are similar to those for referring back an award, but which more serious

 Where the award is void for example if the arbitrator directs an illegal action

 The discovery of evidence of evidence that was not available at the time the
arbitration proceedings were held

 Where the arbitrator has made an error on some point of law

 Misconduct on part of the arbitrator by permitting irregularities in the proceedings

 Where the award has been obtained improperly, for example, through fraud or bribery.

 Where the essentials of a valid award are lacking, for example, the award is
inconsistent or impossible of performance

How and When Arbitration Is Used:

Many contracts have clauses which require that disputes arising out of that contract be arbitrated.
If one agrees to arbitrate or sign a contract with an arbitration clause, one should understand that
the arbitrator may make the final decision and that one may be waiving his or her right to a trial
in court. The process is often long and expensive, and can be damaging to business relationships.

 LITIGATION (Going To Court)

Definition: Litigation is the use of the courts and civil justice system to resolve legal
controversies.

The Process:

This involves one party issuing a writ against another. The parties are required to prepare case in
support of their argument and this is heard in court. The operation of litigation is governed by
statutes. Decisions is based on evidence presented together with application of relevant
legislations and precedents

Specific rules of procedure, discovery and presentation of evidence must be followed. There can
be a number of court appearances by you and the lawyer. If the parties cannot agree how to settle
the case, either the judge or a jury will come up with a decision through a trial.

A trial is a formal judicial proceeding allowing full examination and determination of all the
issues between the parties with each side presenting its case to either a jury or a judge. The
decision is made by applying the facts of the case to the applicable law. That verdict or decision
can conclude the litigation process and be enforceable; however, if appropriate, the loser can
appeal the decision to a higher court. In some cases, the losing party may have to pay the costs of
the law suit and may have to pay the other party's attorney fees.

Characteristics of Litigation:

Involuntary - a defendant must participate (no choice)

Formal and structured rules of evidence and procedure

Each party has the opportunity to present its evidence and argument and cross-examine the other
side - there are procedural safeguards

Public - court proceedings and records are open

The decision is based on the law

The decision can be final and binding

Right of appeal exists

Losing party may pay costs

 ADJUDICATION

Adjudication is a dispute resolution method which first originated in the UK construction

industry. Its application was mainly restricted to disputes that occurred between the main
contractor and directly employed domestic subcontractors

The process involves using an independent third party to help resolve a dispute that had arisen
that relate to the contract. The adjudicator and the type of disputes that will be referred to
adjudication will be stated in the contract. Adjudication provides speedy resolution to a
dispute, thus allowing parties to proceed with minimal delay and damage to the
relationships and the project

Adjudication reduces number of cases which can be referred to Arbitration and Litigation. The
process is aimed at giving a quicker solution to a dispute

The decision given by an adjudicator is binding although the parties had the right to take the
dispute to a higher authority.

In reaching out the decision the adjudicator should set out the procedure in ascertaining the facts
and the law. However the adjudicator is not obliged to give reasons for the decision. The
decision of the adjudicator remains valid until the decision is determined by Arbitration or legal
proceedings

Powers of an adjudicator
  Using the adjudicator’s own knowledge and expertise

 Opening up, reviewing and revising certificates, opinions, decision or notices

 Requiring the parties to provide to carry out tests or open work

 Visiting the site and workshops

 Obtaining information from employees of the parties concerned

 Obtaining information from other third parties

 Determining the payment of any interest within the terms of the contract

The parties are normally responsible for their own costs, but the adjudicator may direct that, in
fairness, the unsuccessful party can recover their costs from the successful party

Advantages of using adjudication in preference to other methods

 It seeks to eliminate conflicts as quickly as possible by resolving disputes as they rise

 It recognizes that the adjudicator’s decision will be provided in the fastest possible way

 It is intended to be the least expensive process for settling disputes, by reducing lawyer’s
charges

 It can act as a referral system, proceeding Arbitration or litigation where the disputes is
not resolved at this stage

 It is anticipated that many disputes will be resolved and terminated at this stage rather
than proceedings towards more litigious actions

Disadvantage

This process can be used as a temporary solution.

 ALTERNATIVE DISPUTE RESOLUTION METHODS

This is a term used to describe a number of formal, non-adversarial methods of resolving

disputes without resorting to the courts or arbitration. The process was developed in USA but has
also been widely used elsewhere in the world. As with arbitration and litigation, the processes
involve a third party. However the role of the third party is not to sit in judgment, but to act as a
neutral facilitator to a negotiated settlement between the parties.
 It is claimed to be cheap and a faster way of resolving disputes the method is said to be
effective and less threatening and stressing
  Parties in dispute are also given opportunity to participate in the process there by
encouraging them to solve their difference in the most amicable way.

The advantages of alternative dispute resolution are often referred to as the four Cs. These are
1 Consensus – this approach requires the agreement of all parties to a resolution of the dispute.
The emphasis is on finding a business, rather than a legal or adversarial, solution to the dispute.
2 Continuity of business relations – the processes are concerned with resolving disputes within
the context of, and without permanently damaging, ongoing business relations.
3 Control – resolution of the dispute remains in the control of the parties to it. The parties can
concentrate on forging a settlement, which focuses on commercial issues rather than the letter of
the law and may thus be less damaging for all parties.
Once a dispute is referred to the courts or to arbitration, the parties effectively lose control of the
process.
4 Confidentiality – the proceedings are not published, and therefore the damage resulting from
adverse publicity is avoided.

Disadvantages
Alternative Dispute Resolution methods are non-binding

Procedure

Before commencement of ADR negotiations, the parties in disputes should have genuine desire
to settle their difference without recourse to either litigation or arbitration

Procedures are non- binding until a mutually agreed settlement is achieved

Either party can resort to arbitration or litigation if ADR procedure fails.

COMMON FORMS OF ADR

Mediation

Mediation is a process whereby parties are assisted in their negotiations by a neutral third party
(mediator) to identify the issues in dispute, generate options around these issues, and consider
alternatives and to attempt to reach agreement that will meet the underlying needs and interests
of both or all parties to the dispute.

Mediators do not make decisions about who is right or wrong or what the best outcome should
be. A key advantage to mediation is that the parties have significant control over the end result.
Decision-making power stays in the parties' hands, and is not passed on to a judge or arbitrator.
Instead, a mediator helps bring the parties together by establishing a framework for the
negotiation within which all parties agree to participate.

The mediator has no determinative power (i.e. cannot make a decision for the parties) and most
commonly, mediators do not offer substantive advice during the mediation. The mediator
however controls the process of the mediation, that is the steps and stages of the meeting, and the
parties themselves reach any agreement that is made.

Agreements can be creative. A solution may be reached that might not be available from a court
of law. For example, if you owe someone money but don't have the cash, rather than be sued and
get a judgment against you, settlement options could include trading something as a way of
payment

If an agreement is reached, it will generally be reduced to writing. Most people uphold a

mediated agreement because they were a part of making it. It can become a contract and be
enforceable. If there is no agreement, one would not have lost any of the rights and it means one
can pursue other options such as arbitration or going to trial.

When and How Mediation Is Used:

When parties are in a dispute and are unable to negotiate a resolution to a dispute by themselves,
they may seek the assistance of a mediator who will help in exploring ways of resolving the
differences. Mediation can be done with or without a lawyer depending upon the type of
problem faced.

Characteristics of Mediation:

Promotes communication and cooperation

Provides a basis for resolving disputes on your own

Voluntary, informal and flexible

Gives parties an opportunity to choose own mediator

Private and confidential, avoiding public disclosure of personal or business problems

Conciliation

The method is almost similar to mediation; the distinction is that the conciliator will actively
participate in the discussion between the parties offering views on the cases put forward

No private meetings are held between the conciliator and the individual parties to the dispute

It is more informal than mediation

The conciliator can recommend on how disputes can be resolved

Negotiations

Negotiation is one of the most common processes in the world. People negotiate almost
constantly from the three year old children “sharing” their toys to neighbours discussing the
erection of a dividing fence, to a consumer returning goods to a department store, to multi
national corporations discussing trade obligations.

It is a process whereby parties to a dispute attempt to settle that dispute on their own and without
the assistance or intervention of a third party. Parties may either be represented by professional
negotiators or conduct the negotiation themselves.

There is no set process for this method of dispute resolution (although obviously some methods
work better than others) and parties’ approach can range from extremely combative to extremely
facilitative depending on them and on the nature of the dispute.

Where no third party is involved there is no agreement or decision reached unless the parties
reach it themselves.

Mini trial

A tribunal, usually comprising senior management from the various parties and chaired by an
independent adviser
The parties to dispute maybe represented by lawyers. Witnesses and experts may be called to
give evidence.
After negotiations the senior management enter into negotiations with the objective of reaching
an agreed settlement
The chair’s role is to facilitate negotiations, adding suggestions and advice as appropriate to
encourage agreement.
The chair should have the necessary technical and legal experience particular to the dispute,
together with the skills necessary to facilitate a negotiated settlement. The chair can give a non
binding opinion