Dispute resolution procedure in Construction
It is unlikely for a project to run from start to finish without a dispute arising. There are primarily four main methods in resolving contractual construction disputes, as illustrated below.
1) Negotiation: This involves direct discussions between the parties involved to reach a resolution.
2) Mediation: This involves a neutral third party (the mediator) who facilitates discussions between the parties to help them reach a resolution.
3) Arbitration: This involves a neutral third party (the arbitrator) who hears both sides of the dispute and makes a binding decision.
4) Litigation: This involves resolving the dispute in court.
Dispute Resolution Procedure Under FIDIC
As per FIDIC 2010, the claims and disputes are not the same. A claim which is not settled amicably eventually converts into dispute. A claim is a request made by either party for entitlement under the contract, while a dispute arise if the claim is rejected or ignored.
As per the FIDIC 2010, Conditions of Contract, the claim submission procedure is separate from the dispute resolution process. After submission of claim the dispute resolution process is divided into three parts, i.e.
(i) Engineer’s determination, (Sub clause 3.5)
(ii) Obtaining Dispute Board's decision, (Sub clause 20.2, 20.3 & 20.4)
(iii) Arbitration (Sub clause 20.6)
FIDIC 2010 also provides an opportunity for the parties for the amicable settlement before approaching to arbitration as per clause 20.5.
➨A claim must be made before a dispute can arise. The claim is made as per the clause no. 20.1 of general conditions of contract.
As per sub clause 20.1, If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment, under any Clause of these Conditions or otherwise in connection with the Contract, the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.
➨Within the defined period of 42 days, the Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) the extension (if any) of the Time for Completion (before or after its expiry) in accordance with Sub-Clause 8.4 [ Extension of Time for Completion ], and/or (ii) the additional payment (if any) to which the Contractor is entitled under the Contract. If the Engineer does not respond within the timeframe defined in this Clause, either Party may consider that the claim is rejected by the Engineer and any of the Parties may refer to the Dispute Board in accordance with Sub-Clause 20.4 [ Obtaining Dispute Board’s Decision ].
➨The dispute resolution procedure is detailed in clause 20, ‘Claims, Disputes and Arbitration’. As per the sub- clause 20.2, ‘Appointment of the Dispute Board’, there is a provision to appoint members of DB by the date stated in the contract data.
The Parties shall jointly appoint the member(s) of the DB within the time stated in the Contract Data (if not stated, 28 days) after the date the Contractor receives the Letter of Acceptance either one or three suitably qualified persons.
If the Parties have not jointly appointed the DB 21 days before the date stated in the Contract Data and the DB is to comprise three persons, each Party shall nominate one member for the approval of the other Party. The first two members shall recommend and the Parties shall agree upon the third member, who shall act as chairman.
➨According to sub- clause 20.4, ‘Obtaining DB’s Decision’, either Party may refer the dispute to the DB for its decision. The DB shall complete and give its decision within 84 days after receiving the reference or such period as may be proposed by the DB and agreed by both Parties.
The DB’s decision is binding on the parties in the sense that the parties (and the Engineer) must promptly comply with the DB’s decision whether or not a party gives a NOD with respect to such decision. This is often referred to as the DB’s “binding, but not final” decision.
If a party does not agree with the DB’s decision, then it can prevent it becoming the final decision by giving a NOD ‘Notice of Dissatisfaction’, within 28 days. If no party gives NOD to the decision of DB, then the decision of DB becomes final and binding on both the parties.
If either party gives NOD to the decision of DB, then the dispute is finally referred to arbitration for settlement.
➨There is a provision of amicable settlement in by the parties before going to arbitration. This provision is stipulated in sub- clause 20.5, ‘Amicable Settlement’. If the amicable settlement is not made, then the arbitration may be commenced on or after the 56th day after the day on which NOD is given.
The detailed procedure for arbitration is stipulated in sub- clause 20.6, ‘Arbitration’.
➨As per Sub clause 20.6 Arbitration shall be conducted as follows.
a) if the Contract is with foreign contractors,
(1) arbitration institution designated in the Contract Data,
(2) or by United Nations Commission on International Trade Law (UNCITRAL)
(3) or International Chamber of Commerce (ICC)
(4) Singapore International Arbitration Centre (SIAC)
b) if the Contract is with domestic contractors, arbitration with proceedings conducted in accordance with the laws of the Employer’s country.
References:
1) FIDIC 2010 Conditions of Contract for Construction MDB Harmonized Ed. June 2010
2) https://fidic.org/
Disclaimer:
1) The description of sub- clauses given in this article is only a part of the whole clause which is relevant to the Dispute Resolution. For whole provision under the sub clauses refer to respective FIDIC Condition of Contract.
2) The content of this article is only for education purpose and it cannot be used as a legal advice. For any legal issue a suitable professional may be consulted.
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