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5.

DISPUTE RESOLUTION

CONTENTS
INTRODUCTION
DISPUTE RESOLUTION METHODS
MERITS OF ALTERNATE DISPUTE RESOLUTION
METHODS
Conciliation
DISPUTE RESOLUTION BOARDS
Arbitration

INTRODUCTION
Many aspects of execution of large Engineering projects have the
potential to lead to disagreements and disputes.
Extra care is required in drafting contract terms and conditions so that
its varying interpretations by different parties can be reduced to be
minimum.

A mechanism for dispute resolution must be identified and stipulated


in the contract documents.
Litigation / Adjudication by a court of law is always costly , time

consuming and both the parties are put to lot of sufferings and hardships.
Litigation should be the last resort in order to settle disputes.

DISPUTE RESOLUTION METHODS


Following methods are commonly used for settling disputes arising from
Engineering Contracts:
1. Negotiation 2. Mediation 3. Conciliation 4. Dispute Resolution Boards
5. Arbitration 6. Litigation
Methods 1 to 4 are known as alternate dispute resolution methods.
These are non-judicial in nature i.e.; unless the agreements reached
by any of these methods are registered with appropriate authorities
they do not become binding on parties and they cannot be legally

enforced.
Awards or settlements given by Arbitration and Litigation are final,
legally binding and mandatory. They are legally enforceable.

1. NEGOTIATION
This is a method of bipartite settlement of disputes without
the help or intervention by any other (i.e. third) parties. In
case of disagreements the parties discuss the problems
among themselves and arrive at a mutually agreed amicable
settlement for the dispute. This requires a great deal of
mutual respect, trust, confidence and a commitment from
both the parties to sort out the problem through mutual
discussions

and

negotiations.

Small

and

routine

disagreements having less financial / technical implications


usually get settled through Negotiation.

2. MEDIATION
This is a method in which passive help is sought from the third party
to resolve the disputes.
Essentially it involves discussion, negotiation between the parties
involved in the dispute in the presence of the third party called the
Mediator. The mediator does not propose any analysis of the dispute or
any settlement to it. The role of the mediator is to interpret the issues
involved in the disputes, understand and clarify the views / assertions
of each of the parties to the dispute , ensure that proceedings are

conducted in a peaceful manner, maintain the tempers cool and keep


the negotiations on track.

Contd
The mediator need not be a professional; he should be

a person in whom the parties to the dispute have lot of


respect, confidence and trust.

Mediation as a means of dispute settlement has


received a lot of support and encouragement from govt.
of Hong Kong. It has framed rules for mediation and
both parties must take part in mediation before other
methods are initiated.

3.Conciliation
Conciliation is a method in which the third party called the
Conciliator who is a professional and an expert in a dispute

resolution plays an active role in the settlement of dispute.


He acts as a facilitator, a counselor and helps, guides the parties
to arrive at settlement of dispute. He presents analysis of the

disputes and suggests possible ways for coming to an amicable


settlement.
The Conciliator does not give any judgment as such and he does

not propose a solution. He conducts the negotiation meetings


between the parties and only guides them to arrive at an
amicable settlement to the dispute.

Contd
Conciliation is popular in Australia. Many countries
like China, Japan, African countries advocate it. It is
recommended in FIDIC reports.

The Indian Govt. has replaced its 1940 Act of


Arbitration with Arbitration and Conciliation Act 1996
to give it sanctity.

4. DISPUTE RESOLUTION BOARDS (DRBs)


This method is more suited for large Engineering projects
involving several contracts.
DRB is constituted by an enabling clause in the contract
document; it includes representative of Principal, Contractor
and Professional and / or Legal experts who are not a part of the
contract under implementation. It starts functioning right from
the beginning of the project to its end. It meets periodically to
review activities related to the project, identifies, discusses the
issues which have the potential to cause disputes before they
actually crop up and suggests measures to prevent disputes.

Contd
If dispute does arise the board hears the views of the

parties

to

the

dispute,

examines

the

relevant

documents witnesses, conducts its own evaluation and

then awards a settlement to the dispute.


World bank has made it mandatory to constitute D R
Bs in all projects financed by its aid.

5. Arbitration
This is a method for dispute resolution in which there is an

agreement among the parties to submit their disputes or


dispute that may arise later to the Arbitrator / s (i.e. either
single person / a panel of 3 to 5). Arbitrator is a professional

expert who is registered with council of arbitrators and


who acts as a judge to decide the disputes.
After hearing the submission of parties to the disputes, he
awards settlement that is with in the spirit of the provision of
laws of the land, in accordance with his own judgement.

Contd
Arbitrators award is final and legally binding on the
parties to the dispute. These wards are legally
enforceable.
Arbitration is the most preferred and commonly
adopted method for dispute resolution in India.

6. Litigation / Adjudication by court of law


This is a method for dispute resolution in which a judicial
authority a court of law , a tribunal or a similar body hears the
submissions of the parties to the dispute and awards a
settlement that is strictly in accordance with the provisions of
the laws of the land.
These awards are mandatory , binding on the parties to the
dispute and are legally enforceable.
Litigation or Adjudication by a court of law is always very costly,
extremely time consuming and both the parties are put to lot of
suffering and hardships. Litigation should be the last resort to
settle disputes.

ADVANTAGES OF ALTERNATE DISPUTE RESOLUTION METHODS:1. These are informal and very flexible methods.
- Venue, timings, proceedings of the meetings, who should be present
etc..
2. There are no detailed procedures, documentations etc.. the steps /
procedures to be adopted to resolve the dispute is in accordance with

the discretion of the parties themselves.


3. They are private and confidential affairs of the parties involved. Thus
the reputation an honor of the parties involved remains protected.

contd
4. they are least expensive and delays are very minimal.

- speedy resolution of disputes is possible most economically.


5. the relationship of the parties continue to remain amicable.
Thus they can continue to work together in future contracts also

without any hindrances / drawbacks.

CONCILIATION
Conciliation is a technique of ADR which has been given
recognition in the new amended Act of Arbitration and
Conciliation Act 1996.

This act provides a certain structure and sanctity to the


technique of Conciliation. While at the same time, retaining
its flexibility and informality.

Conciliation
Conciliation can be used to settle contractual dispute or any other
disputes in a legal relationship among the parties without any prior
agreement about dispute resolution method and it can be adopted at
any stage of dispute development and / or its resolution.
This can be initiated by the parties even when Arbitration or

Litigation proceedings are being conducted to resolve the dispute.


Cooperation, mutual trust, confidence and a conscience effort to
resolve the dispute are essential for the success of Conciliation.

APPOINTMENT OF THE CONCILIATOR


Conciliation is an informal, flexible procedure for dispute settlement

adopted by the parties on the mutual understanding to resolve the


dispute through this method.
The parties to the dispute are free to decide the number of
Conciliators that can be one or more.
The parties can themselves appoint the Conciliator on their own or
they may request an appropriate institute or person to recommend
suitable persons to be nominated as Conciliators.

Contd
The person appointed as Conciliator should be impartial,
independent, good negotiator, and a good counselor.
His success depends on his counseling skills, his ability to convince
the advantages of agreement to resolve the dispute than disagreement

/ Arbitration or Litigation, ability to utilize any opportunity to


encourage settlement of dispute in an amicable manner.

Role Of Conciliator
The Conciliators role in dispute resolution is as follows :-

i) to assist and guide the parties in an impartial and independent


manner to amicably settle their dispute.
ii) to follow the principles of objectivity , fairness and natural justice in

giving the consideration to the rights and obligation of the parties to


the dispute and in the evaluation of the circumstances leading to the
dispute.
iii) to conduct the Conciliation proceedings in such a manner as he

considers appropriate, taking into account the circumstances of the


case, the specific requests or views expressed by the parties and
requirements for a speedy and amicable settlement of the dispute.

Contd
iv) To present an analysis of the dispute, consequence of Arbitration /
Litigation and suggest possible options / ways for settling the dispute.
However, he does not give any settlement award.
v) on the request of parties to draw up or assist the parties to draw up

the agreement for settlement of the dispute.


vi) to authenticate the settlement and assist in its registration if
decided by the parties.

Special features of Conciliation


Following are some of the special features of Conciliation which makes
it very desirable, preferred method for dispute resolution even in

complicated / complex commercial or contractual dispute:i) there need not be any prior agreement to settle the disputes through
Conciliation.

ii) this method can be used even when parties have initiated
Arbitration / Litigation to resolve the dispute.
The 1996 act of Arbitration and Conciliation provides that the

Arbitrator / court can prompt the parties to settle dispute through


Conciliation , even when Arbitration / Litigation proceedings are going
on.

Contd
iii) the parties cannot initiate any Arbitration / Litigation proceedings related
to the dispute when the matter is under Conciliation proceedings.
iv) the 1996 act provides that if the parties arrive at an agreement for
settlement of the dispute through Conciliation and the agreement is
registered then it will have same status and effect as if it was Arbitration

award.
v) in case Conciliation fails, the parties resort to Arbitration or Litigation to
resolve the dispute, the views expressed or concessions offered during
Conciliation cannot be used as evidence.
The Conciliator cannot be made a representative, counsel or witness in
any Arbitration or Litigation proceedings.

Contd
vi) the 1996 act also provides for confidentiality in respect of all
matters in Conciliation proceedings. During Conciliation if party feels

certain information shall be kept confidential then it need not be


disclosed to other party by the Conciliation.
The Conciliator can meet the parties individually and all the information
received by him need not be disclosed to other party.
This confidentiality aspect of Conciliation provides for its success, but at
the same time, it demands that the Conciliator should be honest,
dedicated and sensitive to the requirements and sentiments of the
parties.