COLLEGE OF ART AND BUILT ENVIRONMENT

DEPARTMENT OF BUILDING TECHNOLOGY

LEGAL ASPECTS OF PROJECT MANAGEMENT

PM 561

Lecture 6 :
Lecture 6 : ALTERNATIVE DISPUTE RESOLUTION
David Nartey Korda
What is Conflict ? 2
 At its most primary level conflicts is a competition of interest
satisfaction.

 Conflict occurs when two opposing parties have interests or

goals that appear to be incompatible.’’
Richard Hughes

 Disputes arise out of conflicts in activities, assignments and

relationships.
What is Dispute ? 3

 According to Oxford online dictionary, the word “dispute”

is defined as a disagreement or argument.

 A dispute is said to arise under Rule 1 of the Institution of

Civil Engineers Arbitration Procedure “where a claim or
assertion made by one party is rejected by the other party
and the rejection is not accepted”.
Construction Disputes 4

 The construction industry is a complex and competitive environment in

which participants with different views, talents and levels of knowledge of
the construction process work together.

 In this complex environment, participants from various professions, each

has its own goals and each expects to make the most of its own benefits.

 Since differences in perceptions among the participants of the project,

conflicts are inevitable. If conflicts are not well managed, they quickly
turn into disputes.
Causes of Disputes on Construction 5

Projects
 Kumaraswamy divided the causes of disputes into two,
root cause and proximate causes.

 The root causes of a dispute are the underlying reasons for

the dispute while the

 proximate causes are the immediately apparent causes

which produces the effects of the dispute
Causes of Disputes on Construction 6

Projects
 Root causes include unfair risk allocation, unreliable
time/quality targets by clients, inappropriate contract type,
lack of competence of projects participants and unrealistic
tender pricing

 Proximate causes, on the other hand, include inadequate

brief, poor communication, personality clashes, inadequate
contract and administration .
Category of Disputes Causes of Disputes
Owner related variations initiated by the owner
change of scope
late giving of possession
acceleration
unrealistic expectations
payment delays
Contractor related delays in work progress
time extensions
financial failure of the contractor
technical inadequacy of the contractor
tendering
quality of works
Category of Disputes Causes of Disputes (Cont’d)
8
Design related design errors

inadequate / incomplete specifications

quality of design

availability of information

Contract related ambiguities in contract documents

different interpretations of the contract provisions

risk allocation

other contractual problems

Category of Disputes Causes of Disputes (Cont’d)
9
Human behavior related adversarial / controversial culture

lack of communication

lack of team spirit

Project related site conditions

unforeseen changes

External factors weather

legal and economic factors

fragmented structure of the sector

Effects of Disputes on Construction Projects
10
 The main goal of all parties involved in a construction
project is that the project be successful

 with success being defined as a project completed within

the original time ,within budget and expected quality.
Effects of Disputes on Construction 11

Projects
 Disputes have also been ranked high as a cause of project time
and cost overruns in the industry.

 Disputes and conflicts in projects that they generally cost

money, take time and destroy relationships, which may have
taken years to develop.

 Therefore the use of ADR (Alternative Dispute Resolution) in

resolving construction disputes cannot be over emphasized.
Alternative Dispute Resolution 12

 Alternative Dispute Resolution provides a mechanism for

the settlement of dispute as an alternative to courtroom
litigation.

 Alternative Dispute Resolution (ADR) is an expression for

the dispute resolution mechanisms, which serve as
alternatives to litigation.
Alternative Dispute Resolution Cont’d 13

 The ADR spectrum covers the following processes:

 Dispute Prevention; Negotiation; Mediation; A mix of

 Mediation/Arbitration or Arbitration/Mediation;

 Private mini-trial ; Judicial mini-trial ; Pre-trial conference;

 Early Neutral Evaluation ; Arbitration etc.

Alternative Dispute Resolution Cont’d 14

Advantages
 Litigation is a stressful undertaking. It is costly, lengthy, public
exhibition of differences, leading to a great deal of ill-feeling between
litigants.

 ADR processes are usually faster, less expensive, less time-

consuming , choice and expertise of impartial neutrals, informality and
flexibility, privacy, recognition of the needs of the parties, retention of
beneficial business and personal relationships etc.
Alternative Dispute Resolution Cont’d 15

Disadvantages
No right of appeal
ADR has no procedural protections for the parties
The consensual nature of the process means that both parties can walk
away from the negotiation table at any time before the conclusion and thus
frustrate the ADR process.
ADR has the potential for enabling the strong and powerful party to bully
the other into result which may not necessarily be fair or just.

No precedent is established by ADR solution which can bind parties in

future disputes.
Alternative Dispute Resolution Cont’d 16

Disputes not suitable for resolution by ADR

 Act 798,s 1 provides that:
 This Act applies to matters other than those that relate to
 The national or public interest
 The environment
 The enforcement and interpretation of the Constitution; or any
matter that by law cannot be settled by an alternative dispute
resolution method.
Alternative Dispute Resolution Cont’d 17

 The major dispute resolution methods of the industry are,

conciliation, mediation, arbitration, adjudication and
negotiation.

 The choice of any one of these methods in a particular

project ultimately depends on how the construction
contract was procured, the complexity of the project and
the relationship between the parties involved in the
project.
Negotiation 18

 Negotiation is any form of communication between two or more

people for the purpose of arriving at a mutually agreeable solution.

 The parties involved in the negotiation, maintain control over the

negotiation process.

 In the context of negotiation in ADR, there are certain terms such as

competitive bargaining, co-operative bargaining and principled
negotiation.
Negotiation Cont’d 19

 In competitive bargaining, the negotiators are so concerned with

substantive results that they may advocate extreme positions.

 On the other hand, co-operative negotiators focus on building a

relationship of trust and co-operation.

 Principled negotiation, the negotiators focus on the interests of each

of the disputants, with the goal of creating satisfactory and elegant
options.
Mediation 20

 Mediation is a non-binding process in which an impartial third party,

called the mediator, facilitates the negotiation process between the
disputants.

 As the mediator has no decision making power, the parties maintain

control over the substantive outcome of the mediation.
Mediation Cont’d 21

 With the consent of the disputants, the mediator sets and enforces
the ground rules for the mediation process.

 Mediation can be ‘interests-based’ or ‘rights-based’.

 In an interests-based mediation, the parties are encouraged to focus

on the underlying interests, goals and needs rather than on the
perceived outcome of litigation.
Mediation Cont’d 22

 In a rights-based mediation, the mediator provides an option on

the parties legal rights and encourages resolution of the dispute
in accordance with the law in the view of the mediator.

 Sometimes, the mediator may meet with the parties separately

in a ‘caucus’ to explore various options designed to lead the
parties to a settlement.
Consensus building 23

 Consensus building may be thought of as an extended

mediation, with large groups, which involves a number of
conflicts.

 Unlike traditional mediation which is, by design, usually a one

time, the consensus building process takes place over a more
extended period of time.
PRE-TRIAL CONFERENCE 24

 Typically, counsel for the parties present an overview of their

respective clients’ cases and may refer to the evidence upon which
they would rely at trial.

 The pre-trial judge often provides a non-binding opinion as to how the

case would likely be resolved at trial.

 Pre-trial conference combines an attempt to resolve a dispute prior to

trial and preparation for trial.
EARLY NEUTRAL EVALUATION 25

 If the parties cannot agree as to which one of them would be successful

at arbitration or trial
 They may retain a neutral third party to provide them with an early
neutral evaluation (ENE)
 The evaluator, who then provides an opinion about the likely outcome of
the case were it to proceed to arbitration or trial.
 This opinion may be presented to the parties jointly or, instead, privately
to each party
ARBITRATION 26

 Arbitration is a process in which a neutral third party, or an

odd-numbered panel of neutral parties, renders a decision
based on the merits of the case.

 The parties to arbitration can maintain some control over the

design of the arbitration process.

 In some situations, the scope of the rules for arbitration process

are set out by statute or by contract.
ARBITRATION Cont’d 27

 Once the parties have set the parameters for the arbitration, the
arbitrator assumes full control the process.

 A binding arbitration is usually agreed to voluntarily by the

parties, prior to the occurrence of the dispute.
ARBITRATION CLAUSES
GENERAL FORM OF ARBITRATION CLAUSE

Any dispute or difference arising out of or in connection with this

contract shall be determined by the arbitration of A single arbitrator who
failing agreement shall be appointed by the president or a Vice-President
of the [chartered Institute of Arbitrators]

Any dispute arising out of or in connection with this contract shall be

referred to and finally resolved by arbitration under the Rules of the
Chartered Institute of Arbitrators, which Rules are deemed to be
incorporated by reference into this clause.
ARBITRATION
UNDER ADR ACT
2010,ACT 798
Written arbitration agreement 31

 Section 2 of the Act provides for an arbitration agreement in writing

as the call for arbitration.

 Section 2 (2) provides that a provision to submit a dispute to

arbitration may be in the form of an arbitration clause in the
agreement or in the form of a separate agreement.

 However the Section describes writing to include letters, telex, fax,

e-mail or other means of communication which provide a record of
the agreement.
Separability of arbitration agreement 32

 Section 3(1) reads “Unless otherwise agreed by the parties, an

arbitration agreement which forms or is intended to form part
of another agreement shall not be regarded as invalid,
nonexistent or ineffective because that other agreement is
invalid or did not come into existence or has become
ineffective and shall for that purpose be treated as a distinct
agreement.”
Separability of arbitration agreement Cont’d 33

 By Separability, is meant whether the arbitration clause within

a contract may be regarded as an agreement separate from the
other contractual provisions,

 So that the disputes between the parties may be arbitrated

pursuant to the clause, notwithstanding that the existence of the
contract itself may be null and void ab initio.
Reference to arbitration 34

 Section 6 makes provision for a reference back to arbitration where

there is an arbitration agreement and a party commences an action in
a court.

 This provision together with others, enhance arbitration for the

achievement of the objectives of the Act – to provide a speedy, cost-
effective, non adversarial system of dispute resolution.
Reference to arbitration Cont’d 35

 The court under Section 7 may refer a matter to arbitration if the

court is of the view that the action or part of the action can be
resolved through arbitration even where there is no arbitration
agreement.

 Cases that readily come to mind include those where relationships

have been built and the need to maintain same is high.
Power of the arbitrator 36

 Section 24 which grants the arbitral tribunal power to rule on

its own jurisdiction particularly in respect of the existence,
scope or validity of the arbitration agreement.

 This empowers the arbitral tribunal to assert its independence

without reference to a court to determine the jurisdiction of a
tribunal once it is constituted.
Party process 37

 Under the Act, a party with a dispute in respect of which there

is an arbitration agreement may subject to the terms of the
arbitration agreement, refer the dispute to a person, or
institution for arbitration or the ADR Centre .

 Again, in Section 14, parties are at liberty to agree on the

procedure for appointing an arbitrator.
Party process Cont’d 38

 Under Section 16, parties are free to agree on a procedure for

challenging the appointment of an arbitrator, and may agree
also on the circumstances under which the appointment of an
arbitrator may be revoked.

 Parties are also free to agree on the language to be used in the

arbitral proceedings under Section 32.
Arbitral Processes 39

 The arbitrator shall within fourteen days after the arbitral tribunal has
been constituted and upon giving seven days written notice to the
parties,

 Conduct an arbitration management conference with the parties or their

representatives personally or through electronic or telecommunication
media.

 The arbitration management conference enables the parties and the

tribunal to decide on the procedure for the arbitration proceedings
Finality of Award 40

 Under Section 52 of Act 798, an arbitration award is final and

binding as between the parties and any person claiming
through or under them.

 Subject however, to the right of a party to set aside an award

under the Act.
Enforcement of domestic Award 41

 An award made by an arbitrator pursuant to an arbitration agreement

may, by leave of the High Court, be enforced in the same manner as
a judgment or order of the Court to the same effect.

 A foreign award will be enforced if made by a competent authority

under the laws of the country in which the award was made, or a
reciprocal arrangement exists between Ghana and the country in
which the award was made.
MEDIATION
UNDER ADR ACT
MEDIATION UNDER THE ADR ACT

 Submission to mediation

 63. (1) A party to any agreement may with the consent of the

other party submit any dispute arising out of that agreement to
mediation by an institution or a person agreed on by the
parties.
 MEDIATION UNDER ADR ACT
 Reference to mediation by court
 64. (1) A court before which an action is pending may at any stage in the
proceedings, if it is of the view that mediation will facilitate the resolution of
the matter or a part of the matter in dispute, refer the matter or that part of the
matter to mediation.

 (2) A party to an action before a court may, with the agreement of the other
party and at any time before final judgment is given, apply to the court on
notice to have the whole action or part of the action referred to mediation.
 45
 Appointment of mediator
 66. (1) The parties to a mediation may appoint any person or institution the
parties consider acceptable to serve as a mediator.

 (2) Parties may request the assistance of a suitable institution or person in the

appointment of a mediator and may in so doing request the institution or person
MEDIATION UNDER ADR ACT
 Mediator with interest
 67. (1) In recommending a person to be a mediator, an institution
or person shall have regard to the independence and impartiality of
that person, and take into consideration the background of the
parties.

 (2) An institution or person that is requested to recommend a

mediator shall not recommend a person to serve as a mediator if
that person has a financial or personal interest in the outcome of
the dispute.
MEDIATION UNDER ADR ACT 47

 Disclosure by mediator
 68. (1) A person appointed a mediator shall before accepting the
appointment, disclose any circumstance relating to that person that may
 (a) create a likelihood of bias; or
 (b) affect the conduct of the mediation.
 (2) A mediator shall promptly disclose to the parties any circumstances
that arises during the mediation which is likely to affect the
 (a) impartiality of the mediator; or
 (b) conduct of the mediation.
MEDIATION UNDER ADR ACT
 Representation in mediation
 71. (1) A party to a mediation may be represented by a lawyer,
an expert or any other person chosen by the party.
 (2) A party shall communicate in writing to the mediator and
the other parties the name, address and the extent of the
authority of any representative within seven days of the
representative’s appointment.
MEDIATION UNDER ADR ACT
 Powers of mediator
 74. (1) A mediator shall in an independent and impartial manner do
everything necessary to help the parties to satisfactorily resolve
their dispute.

 (2) A mediator may conduct joint or separate meetings with the

parties and make suggestions to facilitate settlement.
MEDIATION UNDER ADR ACT

 Confidentiality of mediation

 79. (1) A record, a report, the settlement agreement, except where its

disclosure is necessary for the purpose of implementation and
enforcement, and other documents required in the course of mediation
shall be confidential and shall not be used as evidence or be subject to
discovery in any court proceedings.
MEDIATION UNDER ADR ACT
 End of mediation
 80. (1) A mediation ends when
 (a) the parties execute a settlement agreement;
 (b) the mediator terminates the mediation proceedings for non-payment
of a deposit under section 88.
 (c) the mediator after consultation with the parties makes a declaration to
the effect that further mediation is not worthwhile;
MEDIATION UNDER ADR ACT 52

 Settlement agreement
 81. (1) Where it appears to the mediator that there exist elements of a
settlement which may be acceptable to the parties, the mediator may
formulate the terms of a possible settlement and submit them to the parties
for their considerations and after receiving the observations of the parties,
the mediator may reformulate the terms of a possible settlement in the light
of the observations.
 (2) If the parties reach agreement on a settlement of the dispute, they may
draw up and sign a written settlement agreement and if requested by the
parties, the mediator may draw up, or assist the parties in drawing up, the
settlement agreement.
MEDIATION UNDER ADR ACT 53

 Status and effect of settlement agreement

 82. Where the parties agree that a settlement is binding, the
settlement agreement has the same effect as if it is an arbitral award
under section 52.
 Resort to arbitral or judicial proceedings
 83. The parties shall not initiate, during the mediation proceedings,
any arbitral or judicial proceedings in respect of a dispute that is the
subject-matter of the mediation proceedings.
 Admissibility of evidence in other proceedings

 85. The parties shall not rely on or introduce as evidence in arbitral or

judicial proceedings, whether or not the proceedings relate to the dispute
that is the subject of the mediation proceedings,
 (a) views expressed or suggestions made by the other party in the
mediation in respect of a possible settlement of the dispute;
 (b) admissions made by the other party in the course of the mediation
proceedings; or
 (c) the fact that the other party had indicated that party’s
willingness to accept a proposal for settlement made by the
mediator.
THANKS FOR YOUR
ATTENTION
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