Alternative Dispute Resolution methods in construction

1. By
Prof. (Mrs) C. Weddikkara , Ph.D (Law)
&
Mahesh Abeynayake
LL.B (Hons) , LL.M, M. Phil, Attorney-at-Law
Lecturer in Law
University of Moratuwa

3. Disputes and Construction Industry
o The delivery of a product in construction can be identified
as a process and not as an event. Harmon(2003)
o Complexities of the construction industry can create
disputes. (Chong & Zin,2012).
o Disputes frequently occur on construction projects.
Mawdesley(1994)
o Disputes in the construction industry are complicated.
Andrew (1986)

4. Reasons for Disputes in the
Sri Lankan Construction Industry
o Breach of conditions of construction contracts
o Delay in issuing of final designs, drawings and instructions as
required by the contractor.
o Delays due to deficiencies in designs.
o Post contract instructions which delay disrupt or suspend work by
the contractor, his site arrangement or his method of construction.
o Inadequate financial strength of any of the parties to the contract.
o Unwillingness or inability to comply with the intent of the contract or
adhere to industrial standards in performance of the work.
o Unforeseen and unusual adverse weather or physical conditions,.
o Site conditions which differ from contract document.
o Price fluctuation.

5. Background of ADR methods
o There are several disadvantages in litigation such
as stressfulness, inflexibility and formality of court
procedure, restricted scope of claims and remedies
as well.
o Construction professionals are faced aforesaid
difficulties for settlement of disputes and started to
find Alternative Dispute Resolution (ADR) methods.
o

6. Litigation
Litigation is mainly used to resolve
disputes.
Mediation, Adjudication, Arbitration,
Conciliation , Mediation and
Negotiation are main types of
Alternative Dispute Resolution
methods.

7. ADR Methods
 Negotiation
 Conciliation
 Médiation
 Adjudication
 Arbitration

8. General Characteristics of ADR
Methods
o Minimum delay
o Settlement achieved in final and fair
o Confidentially
o Flexibility
o Minimum cost

9. Stair Step Model for Dispute Resolution
Process in the Construction industry
Mediation/
Conciliation
Negotiation
Arbitration
Adjudication
Increase cost and
hostility Litigation

10. Negotiation
A third party may bring the
disputing parties to the negotiating
table and he may suggest the
general framework for producing a
settlement.

11. Conciliation
In contrast to mediation,
conciliation involves a more
separated examination of the
situation and the official
presentation of recommendations
which the parties may then adopt
or reject.

12. Adjudication
 Adjudication a process where by, when a dispute
between parties arises, a person who has no
connection with either side is engaged to examine the
arguments of the parties to decide the dispute. The
decision may be temporary binding.
 This is a mandatory pre-step before the final process
may be commenced .

13. Arbitration
 Arbitration is a more formal means of
settling disputes.
 It can be defined as the settlement of a
dispute on the basis of the law by the
binding decision of a arbitral tribunal whose
work is determined by the parties.
 In arbitration some times parties
themselves decide on the law that is to be
applied to the dispute.

14. Mediation In Sri Lanka
 Historically, Sri Lankan administration of
justice revolved a round village level
informal mediation mechanisms, such as,
the teachers & principals and the village
temple and churches playing a mediators
role in Gam Sabha.
 The formal introduction of Conciliation
Board in 1958 was controversial and
eventually turned to be a failure.

15. Mediation In Sri Lanka
The Mediation Boards Act is enacted in
1988 and being in operation since then
is regarded as a comparatively more
successful legislative enactment but
continues to evoke serious debate in
view of its compulsory requirement of
mediation before litigation.

16. Mediation In Sri Lanka
Voluntary commercial and civil
mediation where parties enlist the
assistance of professional
mediators in whom they have trust,
to help to settle their disputes is
fundamentally different from
compulsory mediation.

17. Mediation In Sri Lanka
In civil disputes, the word mediation is
often interchangeably used with the
word conciliation causing some
confusion, even though mediation is
generally regarded as a more practical
facilitation process than conciliation.

18. Mediation In Sri Lanka
 The submission to mediation is generally a voluntary
process even though in certain disputes, such as those
covered by the Mediation Boards Act No. 72 of 1988,
submission to mediation of certain categories of
disputes is made a prior requirement before seeking
redress through courts.


19. Mediation In Sri Lanka
In commercial mediation
law, submission to mediation
does not oust jurisdiction of
courts.

20. Mediation In Sri Lanka
Mediation legislation in many
countries has provided for the
speedy enforcement of mediated
agreements with the minimum of
additional inquiry.

21. Mediation In Sri Lanka
The skill and the prestige of the
mediator and just and fair and
consensual manner in which the
mediation process was conducted are
ingredients that the court would
examine before making judgment on
the enforceability of the mediation
agreement

22. Adjudication and its
Recent History
In 1982 and 1984 British Property
Federation forms of building
agreements included adjudication
as a dispute resolving method.
The aim was to make a quick,
inexpensive solution that parties
can agree at least as a temporary
decision.

23. Recent History
In 1997 adjudication was introduced
in to various forms of sub contracts
in UK.
Under the new engineering
construction contracts
adjudication is a mandatory first
step prior to arbitration. Normally
most of the disputes do not
continue after adjudication.

24. What is adjudication?
It’s the legal process by which an
arbitrator or adjudicator reviews
evidence and argumentation
including legal reasoning set forth
by opposing parties to come to a
decision which determines rights
and obligations between the parties
involved.

25. Powers of an adjudicator
Adjudicator has given some powers
to succeed in his process.
Freedom in conducting
adjudication – Adjudicator can
make his own standard according to
the complexity and nature of the
dispute.

26. Powers of an adjudicator
 Adjudicator is allowed to visit the site, examine the
factors and collect information.
 Adjudicator is allowed to question the engaged
parties and any third party if needed.
 Adjudicator is allowed to get advises from any
expert that which satisfy his own intention.

27. Adjudication in Sri Lankan construction
field
 In Sri Lankan construction field, adjudication
procedure.
It is according to the ICTAD
conditions of contract (SBD 01 of
2002).

28. Adjudication in Sri Lankan construction
field
 Adjudication is a statutory procedure by which any
party to a construction contract has a right to have a
dispute decided by an adjudicator
 It is intended to be quicker and more cost effective
than litigation or arbitration

29. ADVANTAGES AND DISADVANTAGES OF
ADJUDICATION
 Those advantages and disadvantages are as follows.

30. Advantages in adjudication
The advantages of adjudication
comparison to other alternative
dispute solving methods are listed
bellow.
Less time consuming – The
adjudication process would be
completed in 28 days.

31. Advantages in adjudication
 Less expensive – the only cost is adjudicators payment
 No legal representation (lawyer) is needed – the party
involved in the contract can represent himself and
answer for his own self if adjudicator asks. No need of
hiring lawyers.

32. Advantages in adjudication
 Adjudication can be done when the work is in progress
- delays and wastage according to disturbance would
be minimized
 Adjudication has the full backing of arbitration
and litigation – if one party disagree about the
decision they can go further to the court.

33. Advantages in adjudication
Parties can talk and discuss
within the adjudication process
– parties can make a decision
themselves while the
adjudication process go through

34. Advantages in adjudication
 Reduce the load of cases in litigation and
arbitration – most of the disputes doesn’t remain
after adjudication.
 Adjudicator can be selected by the parties – normally
the adjudicator is named in the contract after both
parties agree.

35. Advantages
 Experienced experts in the field could be used as the
adjudicator – engineers, architects, Quantity
Surveyors could be used.
 More than one adjudicator could be selected / named
– according to the dispute the suitable adjudicator
could be chosen.

36. Disadvantages in adjudication
 Adjudication also has some disadvantages
comparison to other alternative dispute solving
methods.
 If the decision is not satisfactory parties have
to use courts and adjudication becomes another
waste of money and time.
 There is a third party involved in adjudication –
some times the dispute may not clearly
understand by the third party.

37. Disadvantages in adjudication
 Decision depends on the adjudicator – there is no
exact standard or procedure so the process and the
decision could differ according to the adjudicator.
 The decision may only cause a short term resolution –
parties can disagree and same dispute could arise again
after short period of time.

38. Adjudication agreement
The agreement follows a
similar format to that of the
other agreements ,
arbitration etc.

39. Adjudication agreement
The rules can be incorporated
into any contract and become
operative when any party under
the contract gives written notice
of dispute requiring
adjudication.

40. Adjudication agreement
 Some adjudicators guidance notes suggest the
following wording.
‘Any dispute arising under this
agreement shall in the first
instance be referred to
adjudication in accordance with
the Adjudication Rules’

41. Scope, purpose and conduct of
adjudication
 The adjudicator can limit the length of any written or
oral submission,
 Specialist / expert advice may be obtained but only one
party need constant or request such help

42. Arbitration
Arbitration is the reference of a
dispute or difference between
not less than two persons for
determination after hearing
both sides in judicial manner by
another person or persons,
other than court competent
jurisdiction.

43. Sri Lanka construction industry arbitration
 In Sri Lanka, the construction industry is a major part
of Sri Lankan economy.
 It will be directly affected to the economic growth.

44. Sri Lanka construction industry arbitration
 Disputes in the construction industry in Sri Lanka
were normally those that arise under contracts for the
procurement of supplies & services and the
installation of equipment, sub contractors etc.

45. The main reasons for disputes in Sri Lanka’s
construction industry are
 The main reasons for disputes in Sri Lanka’s
construction industry are
 Breach of construction contract by any party in a
project.
 Tax and cost variations due to economic changes
 Insufficient administration of responsibilities by
the client or contractor.
 Drawing, Plans that contain errors and confusions.

46. The arbitrator
 The arbitrator was almost always an individual with a
wealth of experience in the relevant industry or
somebody with a background relevant to the technical
issues in disputes.

47. Arbitration
 The Arbitration Act of Sri Lanka No 11 of 1995 stated
how to resolve disputes arise in any industry.
 The Act provides that an arbitration agreement shall
be in writing.

48. Arbitration
 Characteristics of Arbitration
 Economical – Arbitration is cheaper than a court
action.
 Simplicity- Procedure is simple.
 Mutual agreement- Meetings can be conducted
anywhere and at any time which is suitable for the
parties. Parties do not have to wait for the court’s free
dates.

49. Arbitration
 Private- The entire hearing takes place in private.
 Speedily- Arbitration is speedier. A court action
will take at least one or two but in arbitration can
be agreed to settle the disputes within 6 months.
 Expertise- Arbitrator is normally selected for his
expert knowledge but the judge will not have the
knowledge of technical side of each field.

50. Example for Clause,
Recommended Arbitration Clause by ICLP
arbitration centre
 Example for Clause,
 Recommended Arbitration Clause by ICLP arbitration
centre
 “Any doubt, difference, dispute, controversy or claim
arising from, out of or in connection with this
contract, or on the interpretation thereof or on the
rights, duties, obligation, or liabilities of any parties
thereto or on the operation, breach, termination or
invalidity thereof, shall be settled by arbitration in
accordance with the Rules of the Arbitration Centre of
the Institute for the Development of Commercial Law
and Practice”
 .

51. Arbitration
 An arbitration clause should be in writing to meet the
requirements of the Sri Lankan Arbitration Act No 11
of 1995, Section 3(2) of this Act recognizes arbitration
clauses as deemed to be in writing if contained in a
document signed by the parties or in an exchange of
letters, telexes, telegrams or other means of
telecommunication which provides a record of the
agreement

52. Advantages of Arbitration.
 The process can be speedier than a court case.
 There can be a saving in costs.
 Unwanted publicity can be avoided.
 The arbitrator can view the subject in dispute at any
reasonable time.

53. Advantages of Arbitration.
 Expertise
 When the subject matter of the dispute is highly technical,
arbitrators with an appropriate degree of expertise can be
appointed
 Privacy
 Arbitral proceedings and an arbitral award are generally
private
 Convenience
 The arbitral process enjoys a greater degree of flexibility
than the courts
 Expedition
 Arbitration is often faster than litigation in court

54. Advantages & Disadvantages of Domestic
Arbitration practice.
Advantages of Arbitration.
 Cost
 Arbitration can be cheaper.
 Advocacy
 The right to appear for parties in the arbitral tribunal
is limited to attorneys-at-law, who in turn have to be
instructed by solicitors. At arbitration anyone can
appear for the parties.

55. Advantages & Disadvantages of Domestic
Arbitration practice.
Advantages of Arbitration.
 Relationship of the parties
 it is generally possible with arbitration to resolve
disputes between two parties who wish to go on doing
business together in a friendly way.
 Enforcement
 Arbitration awards are generally easier to enforce
abroad than court judgments

56. Advantages of Arbitration.
 Arbitration is considered as an effective and efficient
alternative method of solving any disputes.
 It consists of following advantages beyond the litigation
procedure.
 Arbitration proceedings are speedier than litigation.
 Arbitration is cheaper than litigation in courts.
 Party autonomy is encouraged throughout the procedure.
 Ability to appoint an expert in the field as arbitrators.
 Arbitration proceedings are confidential.

57. Alternative Dispute Resolution Methods in
the Construction Industry in Sri Lanka

58. Dispute Resolution methods in the
Construction Industry
 The construction industry has been renowned over
the years, which is in ripe with conflict -
Prof.(Mrs.) Weddikkara, 2007.
 The process of a construction project generates a
number of situations where disputes may arise. (Sunil
Abeyratne, 2006)
 Therefore the construction industry today needs
dispute resolutions.

59. Reasons for Disputes in Sri Lanka
Construction Industry
 Breaches of Contract by any party to the Contract.
 Inadequate administration of responsibilities by the
owner/contractor/sub Contractor.
 Plans and specifications that contain errors, omissions
 Sudden tax and cost increases.

60. Advantages of ADR methods
 Minimum delay
 Settlement achieved in final and fair
 Confidentially
 Flexibility
 Minimum cost

61. Advantages……
The desirable features of ADR methods are,
 Fast
 Inexpensive
 Fair
 Simple and economical process

62. Construction industry needs…..
 Fast and cost effective dispute resolution method.