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Settlement of Construction Disputes

- the Gulf Way

by

Dr. Chandana Jayalath

Chartered Quantity Surveyor


Consulting Engineering Group, Doha, Qatar
Gulf Cooperation Council

Oman UAE

Kuwait Qatar

KSA Bahrain
Market Characteristics

Opportunities
 Rapidly growing market
 Construction boom, fuelling
 real estate boom
 increasing demand for more
development and construction
 ‘Magnet’ for property
professionals
 Local regulation
 Need for international standards
Industry Characteristics

 Fast track nature


 Lump sum with re-measurement provisions
 Civil codified law provisions
 Internationally based local versions
 Procedural delays
 Imported design, materials, labor and expertise
 Cut and paste, deletion and silence
 Client’s discretion / Engineer’s upper hand
Local Standard Forms
 Oman – Standard document for Building and Civil
Engineering Works, 1981 issued by Ministry of
Finance
 Qatar – General Conditions of Contract issued by
Ministry of Public Works
 Kuwait – Conditions of Contract for Building Works
 UAE – Municipality Conditions (7 emirates)
 Bahrain – Conditions of Contract for Public Works
 Standalone forms for supply and maintenance
contracts in oil and gas sector
Heads of Claims
 Variations
 Variations exceeding 20%
 Loss of profit
 Unabsorbed overheads
 Time extension
 Prolongation costs
 Suspension
 Acceleration
 Disruption
 Price escalation
Features in Claim Submissions
 Thin, interim and belated submissions
 Lack of contemporary records
 Casual link not established
 Issues inextricably intertwined
 Issues accumulated at final accounting stage
 Tendency to rely on imported case law
 Lack of protocol for claims
Elements of Claim Provisions
 Engineer’s prominence
 Notice of intent, lodgment and disagreement
 Keep working requirement
 Mitigation
 Finality
 Basis of eligibility
 Method of compensation
 Gauntlet in settlement process
Clause 20.1 Contractor’s Claims
(FIDIC Red)
 Notice within 28 days describing circumstances
 Failure to give notice results in loss of right to claim
 Required to keep proper and contemporary records
 Full details and particulars within 42 days
 For on-going events, interim particulars submitted at
monthly intervals with a final claim within 28 days
once the effects cease
Engineer’s Function
 Has the right to request further particulars, but must
give a determination within 42 days after receiving
the claim or further particulars
 Must consult with the parties under Clause 3.5 before
he gives his determination (with reasons)
 However, if the contractor is not happy with the
Engineer’s determination, a dispute arises and the
rest of Clause 20 comes into play
Engineer’s Role
 Due consultation
 Employer’s agent
 Delegated function
 Impartial and neutral role
 Discretion
 Adjudicatory role
 Witness of fact
 Witness in arbitration
Negotiation
 Timing
 Pre conditions
 Postponement
 Salami
 Intimidation
 Cherry picking
 Direct demands
 Controlled Anger
 Bluff
 Threat
 Silence
 Car Mart
 Walk-Out
Why ADR ?
 Clearing court dockets
 Money and time factor
 Control over the process
 Confidentiality and privacy
 Flexibility in the process
 Reputation and relationship
 Availability of alternative solutions
Dispute Boards
 Project specificity
 Access to industrial / multiple exposure
 Dispute prevention and constant follow up
 Independent review and advice
 Favoring timely closure of project
 Non binding recommendations
 Binding decisions
Reference to Arbitration
Invoke through ;
 Scott Avery clause (agreement)
 Voluntary on mutual consent
 Court reference (mandatory)
Using
 Published law
 Precedence
 Customs of Trade
Centered around
chamber of commerce, financial centers, stock exchange, arbitration institutions
Context of Arbitration
 No independent legislation but civil law influenced by Egyptian law
 Agreements must be in writing
 Within the subject defined
 Criminal or Sharia matters are not arbitrable
 Witness in fact and expert witness under oath
 New York Convention 1958 acceded
 Ad-hoc arbitration is often seen
 Court annexed arbitration is popular in government sector
 Subject to discrete validation process in courts prior to enforce awards
Mediation
 Neutral
 Confidential
 Facilitative
 Evaluative
 Non determinative
 Non adversarial
Issues related to Mediation
 Is there party autonomy
 Is there good faith in participation
 Are we ready for equal opportunity
 Can mental stance be maintained towards settlement
 Is there confidentiality
 Should it necessarily take an evaluative orientation
 Will courts intervene
 Is there judicial recognition on without prejudice
 What about mediator’s immunity
Engineering Business Support Approach

 Set out strategic direction


 Interpret intent of parties had in their minds
 Facilitate the conduct of proceedings
 Interact in-house and feedback
 Review commercial and contractual issues
 Establish eligibility on time and/or cost overrun
 Evaluate compensable and excusable components
 Prevent further dispute escalation
 Promote reflective practice
Sub-Clause 20.5 Amicable Settlement
(FIDIC Red)
 Where notice of dissatisfaction has been given under Sub-
Clause 20.4, both parties shall attempt to settle the dispute
amicably before the commencement of arbitration.

 However, unless both parties agree otherwise, arbitration may


be commenced on or after the fifty-sixth day after the day on
which the notice of dissatisfaction was given, even if no
attempt at amicable settlement has been made.
Amicable Settlement
 Structured negotiation
 Employer sponsorship
 Employer representation
 Ex-gratia / Quantum meruit awards
 Interim recommendations
 Temporary binding decisions
 Surgical approach
Court Intervention
 Sponsorship, nomination and supervision
 Review of awards including errors of law
 Enforcement of arbitral awards
 Nullification of arbitral awards
 Interim measures of protection
 Law making function
 Interpretation of issues
 Enhancing social values
 Protecting public interests
The Way Forward
 New local legislation
 Reciprocal agreements
 Institutional arbitration
 Multi party arbitration provisions
 Swift arbitration
 Construction adjudication
 Expert determination
 Claims compensation committees
Queries
 Be short
 Within the subject matter

 Without disclosing names of parties

 Be of common interest