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Practical applications of
Dispute Avoidance and
Resolution
03 January 2024
Presenter : Nagarajan Velappen MBA., MRICS
Senior Contracts & Claim Expert - Dubai
© 2018 RICS
MAJOR CAUSES
Disputes on major global construction projects increased
due to the following:
• Picking Wrong partner
• Unrealistic Risk Allocation
• Incomplete / Conflicts / discrepancies Documents
• Unilateral changes
• Variations beyond the scope boundary
• Misinterpretation of Clauses
• Authority Comments / Approvals
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Picking Wrong Partner
Technical incapability
Lowest in Quote
Claim Oriented
Payment Delays
UNREALISTIC RISK ALLOCATION
Lump Sum Contract with re-measurable terms and conditions
No Escalation
Geo-technical report with disclaimer
Subsurface / Underground utility
Authority Verbal comments at the time of Handover
Approval duration of Authority
Un realistic schedule
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Incomplete / Conflicts / discrepancies Documents
Incomplete Design documents
Conflicts within the Document
Discrepancies within the Document
Misinterpretation of Scope
Misinterpretation of Terms and Condition
Unilateral Decision on changes
Often introduce the changes
Instruct to complete within the duration
Delay in agreeing and closing the Variation for Payment
Unrealistic substantiation
Variations are issued under Clause 3.3 (Engineer Instruction)
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Variation Beyond the Scope Boundary
Any Variation within the limit of the Scope
Proof of burden
Substantiation Documents
Reasonable satisfaction of the Engineer
No Approval duration for the Variation
Misinterpretation of Contract Clauses
Subclause 3.3 Instruction of the Engineer (additional or modified
drawings)
Subclause 13.1 Right to Vary
(Either by an Instruction or by a request)
The Contractor shall not make any alteration and /or modification to
the Permanent Works
13.3 Variation Procedure
The Contractor shall not delay any work whilst awaiting a response
20.1 Contractor’s Claim
Predominantly for Time and its associated Cost (Additional Payments)
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Authority Approval / Comments
In absence of standard duration for Authority approval
In absence of Written Comments
Dispute Resolution
DAB – Dispute Adjudication Board
Expert Determination
Mediation
Amicable Settlement
Arbitration
Litigation
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DISPUTE ADJUDICATION BOARD
Background.
Contractual process: not statutory.
Short timescale to decision – issues resolved in “real time”.
May be binding or advisory.
Independent and impartial.
Interim: Step prior to reference to arbitration.
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DISPUTE ADJUDICATION BOARD
•Dispute boards offer a good means for avoiding, resolving and managing
disputes in international projects.
•Under either the DAB or DRB process, the effectiveness will depend on the
goodwill of the parties throughout process.
•Appointment/procedure needs to be tailored to take into account project
needs.
•A proportionate approach is required.
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DISPUTE ADJUDICATION BOARD
•Dispute boards offer a good means for avoiding, resolving and managing
disputes in international projects.
•Under either the DAB or DRB process, the effectiveness will depend on the
goodwill of the parties throughout process.
•Appointment/procedure needs to be tailored to take into account project
needs.
•A proportionate approach is required.
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Expert Determination
Expert determination is a binding form of dispute resolution that is often used
in matters of a technical nature. In addition to technical expertise, expert
determination can provide for a quicker and more cost effective means of
determining a dispute than a court or arbitral process.
Expert determination is a mechanism used in a number of commercial
agreements. For example, it may be used in share purchase agreements to
resolve disputes in relation to completion accounts. In the joint venture
context, it may be used, particularly in forced sale situations, where it is
necessary to determine the value of shares but the shareholders cannot reach
agreement between themselves. Such expert determination mechanisms are
employed for specific purposes and are additional to an overall dispute
resolution regime which ultimately provides for arbitration or litigation in
relation to other disputes. There are important factors that parties need to
consider when electing for expert determination (and the form that this should
take), which we consider below.
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Expert Determination
When to use expert determination?
Expert determination is best suited for disputes concerning valuation or
defined technical issues, where the relevant facts are not significantly
contested and can be ascertained from documentary evidence. For example,
expert determination may be used to value shares in a private company or to
determine disputed items in completion accounts on the sale of a company.
Expert determination is unlikely to be appropriate for situations involving
significant disputed facts and disputed legal issues. Experts usually do not
have formal legal expertise (as opposed to technical expertise) and expert
determination processes are generally not designed to deal with a significant
amount of disputed evidence, hear witnesses, etc. Equally, expert
determination mechanisms do not typically lend themselves to situations
where the parties to a joint venture agreement disagree or are in deadlock
over key commercial decisions to be taken by the company.
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MEDIATION
The main characteristics of mediation are that it provides; a voluntary, non-
binding, confidential and interest-based procedure. Parties are free to
terminate mediation at any time after the first meeting. No decision can be
imposed on the parties involved, and they may or may not agree upon a
negotiated settlement. The confidentiality principle assures that any options
the parties discuss will not have consequences beyond the mediation
process. Interest-based procedure means that the criteria established to reach
resolution does not solely adhere to the law, instead it can include
considerations concerning financial, business and personal interests as well.
The role of the mediator is to assist the parties in reaching a negotiated
agreement. Unlike an arbitrator, the mediator is not a decision-maker. In a
facilitative mediation, the mediator merely assists the parties in their
communication and negotiations. In an evaluative mediation, the mediator
also provides a non-binding assessment of the dispute.
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MEDIATION
In general, mediation can be applied to all sorts of disputes. One of the
main benefits of mediation is that the parties can agree to take into
account a broad range of aspects, especially concerning commercial
and business interests. The process is flexible and can be tailored to
the individual needs of parties.
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ARBITRATION
Arbitration is a form of alternative dispute resolution (ADR) that
provides a final solution to a construction dispute. Arbitration is private,
with the aim to resolve disputes fairly, keeping costs and delays to a
minimum. Disputes are resolved based on material facts, documents,
and relevant construction law principles.
The parties must first opt into the use of Arbitration in construction, a
written clause is required in the construction contract, with the
agreement stipulating the procedure to be adopted. The Arbitration
process includes required elements from the Arbitration Act 1996, such
as certain components which are required when drafting an Arbitration
agreement.
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ARBITRATION
Different Bodies for Arbitration
ICC
UNICETRAL
DIFC
QIFC
ADHOC
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LITIGATION
The construction litigation process is more than just filing a lawsuit.
Some cases may be resolved with a letter of intent to sue. This is a
warning that you intend to go to court if the matter cannot be resolved.
A letter from your attorney often goes a long way in getting you what
you expect.
When it cannot be settled out of court, a lawsuit can be filed on your
behalf. You will work with a dedicated construction attorney to file your
claim with a document called a petition. This sets out the basic facts of
the case and your allegations. After this, the discovery process begins
where the parties exchange relevant information, learn about what
occurred in the transaction, and prepare for trial.
Throughout the case, the parties may negotiate an agreed settlement.
This is a contract to pay a certain amount for the dismissal of the
lawsuit.
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THANK YOU
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