1. TILAK KOLONNE CHARTERED QUANTITY SURVEYOR, ARBITRATOR, ADJUDICATOR TEL: +94 777 957288 EMAIL: tpk@vform.net 25 April 2016 CPD for SLQS OAMN Alternative Dispute Resolution (ADR)in Construction

2. Contents 2  Conflict and dispute  Conflict management  Dispute  Dispute management procedures  Dispute avoidance  Dispute resolution  Alternative Dispute Resolution (ADR)  ADR methods  ADR in Oman Standard Conditions and FIDIC  Real life cases

3. Conflict and Dispute  ‘Conflicts’ occurs when objectives are incompatible and should be expected  Disputes arise when a ‘conflict’ becomes an altercation OR conflicts escalate to disputes  Conflict is a state of mind; dispute is a process  Good side and bad side of conflicts  Conflicts – avoidance/manage  Dispute – avoidance/manage/resolve. 3

4. Conflict Management  Conflict can be managed, possibly to the extent of preventing a dispute resulting from the conflict 4

5. Dispute  Disputes arise not just because people are entering into building contracts but because of a wide variety of interaction between diverse people  People are dispute creators and are different in  Communication  Personality  Interpretation 5

6. Dispute Conditions of Contract for Design, Build and operate projects (Gold Book) First Edition 2008 Sub-Clause 1.1.3.1 “Dispute” means any situation where (a) one Party makes a claim against the other Party; (b) the other Party rejects the claim in whole or in part; and (c) the first Party does not acquiesce, provided however that a failure by the other Party to oppose or respond to the claim, in whole or in part, may constitute a rejection if, in the circumstances, the DAB or the arbitrator(s), as the case may be, deem it reasonable for it to do so. 6

7. Is there a dispute?  Crystallization of dispute ; whether or not there is a dispute  Implications 7

8. Dispute management procedures  Adequacy of site investigation  Accuracy of quantities  Clarity of contract documents  Tender and documents  Letter of acceptance, letter of intent  Formal agreement  Contemporary records  Claims 8

9. Dispute Avoidance  The positive side of conflict  Understanding-valuing- cooperating  Creating a culture that is positive  Partnering 9

10. Dispute Avoidance 10  Provisions for dispute avoidance in FIDIC 1999 (Sub-Clause 20.2; 7 th paragraph) “if any time the Parties so agree, they may jointly refer a matter to the DAB for it to give its opinion” (emphasis added)  No such provision in FIDIC earlier contracts

11. Dispute Avoidance 11 Provisions for dispute avoidance in FIDIC 1999 “if any time the Parties so agree, they may jointly refer a matter to the DAB for it to give its opinion.”

12. Dispute Resolution 12 Ways of achieving a solution in commercial disputes (concerning contracts)  Litigation - A judicial contest to determine and enforce legal rights - ‘Rights based’ - Win – lose situation  Non Litigation (Alternative Dispute Resolution)

13. Alternative Dispute Resolution  "Alternative Dispute Resolution" (ADR) is a term generally used to refer to out-of-court dispute resolution processes in which the parties meet with a professional third party who helps them resolve their dispute in a way that is less formal and often more consensual than is done in the courts  Binding, non-binding, final (Temporarily/permanent)  ADR can be seen as 4 Cs 13

14. Control Confidentiality Continuity Consensus ADR 14

15. ADR Methods  Amicable Settlement  Negotiation  Mediation  Conciliation  Med-arb  Dispute Resolution Adviser (DRA)  Early Neutral Evaluation  Expert Determination  Mini-trial (or executive tribunal)  Adjudication/ DAB/ DRB/ DB  Arbitration 15

16. Amicable Settlement  Settlement between parties themselves  Importance of control within the parties 16

17. Negotiation 17  Normally no third party involvement  Negotiator  Traditional hard-ball style ;win-loose situation

18. Mediation  In mediation, a third party acts as a neutral intervener who assists disputants to reach a mutually acceptable solution. The Mediator does not decide the outcome of the issues; they facilitate the outcome(s)  What if to have a clause in contract for Mediation? 18

19. Conciliation  The Conciliator independently assists both parties to try and reach an agreement  Precipitate an agreement by persuasion and suggestion  Conciliator does not take side, take decision or make judgment 19

20. Med - arb  A combination of mediation and arbitration where the parties agree to mediate but if that fails to achieve a settlement the dispute is referred to arbitration. The same person may act as mediator and arbitrator in this type of arrangement 20

21. Dispute Resolution Adviser  The concept of DRA is the use of an independent intervener. This independent intervener is paid for equally by the employer and the contractor to settle disputes as they emerged 21

22. Expert Determination  The dispute is resolved by an independent third party who has a particular expertise in the field which the dispute arises 22

23. Early Neutral Evaluation  Services of a High Court judge to examine the legal issues relating to a dispute  or a professional person to examine the technical issues 23

24. Mini Trial  Representatives of the employer’s and contractor’s organizations conduct something like a trial in front of a panel of senior executives from those organizations  The group should have necessary authority to reach and implement decisions  Members should not have been personally involved in the dispute 24

25. Adjudication  Adjudication generally refers to processes of decision making that involve a neutral third party with the authority to determine a binding resolution through some form of judgment 25

26. The ‘Engineer’ as dispute resolver  Role of Engineer: until FIDIC 1987 edition - Question of Impartial role - Paid by Employer affects impartiality? - Knowledge of the Engineer of ADR 26

27. Introduction of DAB/DB 27  FIDIC 1999 suite of contracts - Dispute Adjudication Board (DAB) or Dispute Board (DB) - Allow to obtaining an interim solution to disputes - Use of ADR experts - Paid by both parties - On-the-job dispute resolution

28. Introduction of DAB/DB  Prompt reference of dispute for resolution  ‘Full term’ Vs ‘Ad-hoc’  Periodically site visits enable more awareness of developments of site level  DAB’s opinion at site level 28

29. Adjudication/ DAB 29  Adjudication as against DAB  Adjudication/ DAB agreement  Adjudicative/ inquisitorial procedure  Contractual and on-the-job ADR  Immediate effect to decision  Amicable settlement and arbitration  Statutory adjudication; UK and SL

30. Arbitration  Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators", or “arbitral tribunal"), by whose decision (the “award") they agree to be bound  It is a settlement technique in which a third party reviews the case and imposes a decision (Arbitral Award) that is legally binding for both sides 30

31. Arbitration 31  Adversarial  Contract  Agreement for Arbitration  Arbitration Clause in a contract  Arbitration Act No. 11 of 1995 (Sri Lanka)  Law of Arbitration in Civil and Commercial Disputes ?(June 28, 1997)(Oman)

32. Arbitration 32 Court’s involvement  Varies according to the law of the country  Court’s jurisdiction to hear the dispute  Court’s directions on procedural issues  Enforcement of arbitral award (SL)  Setting aside arbitral award (SL)  Appeal to SC on a question of law (SL)

33. Importance of an amicable settlement during the process  Sub Clause 20.5 of FIDIC 1999 (Construction)& Sub-Clause 67.2 of FIDIC 1987 – Amicable Settlement  Mediation during arbitral proceedings  Amicable settlement at any other point of time 33

34. ADR in Oman Standard Conditions (OSC) & FIDIC 1987 34  Parties are free to adopt any suitable process  Typical steps in OSC (3 rd edition; July 1981)modeled from FIDIC 3 rd ed? (1) Parties’ negotiations (2) Engineer’s Decision (Clause 67)(final??? and binding; should NOT be final but binding) (3) Arbitration

35. ADR in Oman Standard Conditions & FIDIC 1987 35  Typical steps in FIDIC 4 th Edition (1987) Red Book are similar to that of OSC - In contrast to OSC the Contractor and the Employer shall give effect forthwith to every such decision of the Engineer. That means Engineer’s Decision is binding but NOT final (may become Final due to operation of condition)

36. ADR in Oman Conditions & FIDIC 1987 36 - Finality comes if parties agree (Amicable settlement) or by Arbitral award or due to lapse of time - OSC do not provide for ‘Amicable Settlement’. [FIDIC 4 th edition provides; Sub-Clause 67.2 ‘Amicable Settlement’] - OSC Arbitration provides in same Clause 67(final and binding)

37. ADR in FIDIC 1999 (Red Book) 37  Typical steps - Parties’ negotiations - Engineer’s Determination (Sub-Clause 3.5) (Optional) - Obtaining Dispute Adjudication Board’s (DAB) Decision (Sub-Clause 20.4) - Amicable Settlement (Sub-Clause 20.5) - Arbitration (Sub-Clause 20.6)

38. Real Life cases 38 Case 1  Contractor’s claim for entitlement of extension of time (in principle)  Extensive submissions made by parties  Submissions reveled parties were continuing discussions/ correspondence  DAB Decision?

39. Real Life cases 39 Case 2  Contractor’s design element  Later, design task transferred to Engineer (Employer) by agreement  Engineer issued instructions with design  Contractor challenged accuracy of EI  Proceeded works different to EI  Applying ‘facts’ to ‘law’  DAB Decision?

40. 40 End Thank you