M006 - Conflict - Avoidance - Management - and - Dispute - Resolution - Jan2017 PDF

Conflict Avoidance, Management and
Dispute Resolution Procedures
By: Yasas Chandradasa MSc, PGCert.(Arb.), BSc(Hons)QS, MRICS, MCIArb

Description of Competency
“This competency covers the quantity surveyor’s involvement with
the avoidance, management and resolution of disputes in
construction projects. Candidates should be aware of the various
processes and techniques commonly used in the industry. They
should have a detailed understanding of how these are applied in
practice.”
(RICS APC Pathway Guide, February 2015 – Quantity Surveying and Construction)
YC, Jan 2017

Mandatory Competency –
Level 1
Level 1
Demonstrate knowledge and understanding of the techniques for conflict
avoidance, conflict management and dispute resolution procedures including
for example adjudication and arbitration, appropriate to your APC pathway.
Level 2
Provide evidence of practical application in your area of practice having
regard to the relevant law.
Level 3
Provide evidence of the application of the above in the context of advising
clients in various circumstances.
YC, Jan 2017

Study Check List
• How standard forms of contract deal with conflict avoidance and dispute
resolution
• Conflict avoidance
• Partnering
• Negotiation
• Mediation
• Conciliation
• Adjudication
• Arbitration
• Pre-action Protocol
• Litigation
• Expert Witness
• Independent Expert Determination

YC, Jan 2017
Conflict Avoidance and Management
What is Conflict?
“1. A situation which people, group or countries are involved in a
serious disagreement or argument,
3. A situation in which there are opposing ideas, opinions feelings or

wishes; a situation in which it is difficult to choose”
(Oxford Advanced Learner’s Dictionary)
Conflict Avoidance in Construction Contract
Pre-Contract Post-Contract
Stage Stage
YC, Jan 2017

Pre-Contract Stage
Have a carefully drawn up set of Contract documents at the
beginning of the project to ensure that there is no or minimum
ambiguity.
• Prepare Tender documents with proper coordination among various trades

(architectural, structural, MEP, etc.)
• Use Standard Methods of Measurement
• Allow sufficient time
• Appoint qualified professionals
• Chose the correct procurement path
• Use standard forms of Contracts (CoC)
• Provide proper answers for tender queries & distribute them to all tenderers
• Provide Correct information at the right time
• Carry out proper tender evaluation
YC, Jan 2017

Post-Contract Stage
Administrate the Contract by fully competent Contract
Administrators, in accordance with the Contract Agreement .
• Properly discharge the obligations and the liabilities in timely manner
• Have a proper knowledge of their rights
How standard forms of contract deal with conflict

avoidance – FIDIC
• Provide clear definitions and interpretations
• Clear explanations of the parties rights and obligations
• Clear explanations of the Engineer’s duties and authorities
• Clear explanations of the procedures; e.g. Variation procedure
• Priority of Contract Document
YC, Jan 2017

What is Dispute?
“An argument or a disagreement between two people, group or
countries”
(Oxford Advanced Learner’s Dictionary)
Litigation
Dispute Resolution
Procedures
Alternative Dispute
Resolution
YC, Jan 2017

Litigation:
The process of resolving disputes by filing or answering
a complaint through the public court system
When to Litigate
• Where negotiations have proved unsuccessful and there is no right of
adjudication (in UK) and/or Arbitration; or
• Where there is no dispute resolution clause in the contract; or
• Where there is a litigation clause in the contract
YC, Jan 2017

Advantages of Litigation:
• judgments of the court are readily enforceable;
• judgments are subject to very limited rights of appeal;
• the quality of judges is usually very high;
• the court and judge's time is free (subject to the payment of court fees);
• an array of interim remedies, such as injunctions, is available to support the
process;
• the process is able to deal easily with third parties;
• judges are usually full-time and are therefore very experienced. Arbitrators in
contrast usually only sit as arbitrators once in a while;
• legal costs are recoverable from the losing party;
• claims can be brought against several defendants in the same action; and
• the processes are detailed, well defined and widely understood.
YC, Jan 2017

Disadvantages of Litigation:
• proceedings are often time-consuming and complex. The process requires the
use of solicitors and/or barristers, and is therefore often expensive;
• the courts are not able to deviate from the Civil Procedure Rules (CPR). They
are relatively inflexible;
• the process is necessarily adversarial. This often leads to conflict and a
destruction of any goodwill between the parties;
• the courts are open to the public and the press; and
• the losing party has to pay the costs of the winning party (subject to any
offers) thus turning the attention of the parties very quickly form an argument
over damages to an argument over who will pay the costs.
Pre-action Protocol
• to agree a pre-requisite procedure before commencing the litigation.
YC, Jan 2017

Alternative Dispute Resolution (ADR):

ADR is a collective description for methods of resolving disputes
without the need to go to court
These include:
Common Advantages of ADR
• Mediation
• Expert Witness  Less adversarial
• Adjudication  Confidentiality
 No or less destruction of any goodwill and
• Arbitration
business relationship between parties
• Dispute Boards
• Expert Determination
(RICS, 2014)
• Negotiation
• Conciliation
YC, Jan 2017

Negotiation:
The principles of negotiation in the context of a dispute are similar to the

principles of negotiation in any other context. Each party has expectations and a
lower limit (usually expressed in monetary terms). Where the lower limits overlap,
it should in theory be possible to negotiate a settlement. However, the situation is
rarely this straightforward.
(http://www.isurv.com, 2013)
Mediation:
Mediation is the name given to a confidential process whereby parties to a dispute

invite a neutral individual to facilitate negotiations between them with a view to
achieving a resolution of their dispute.
Conciliation:
Similar to mediation but the independent third party (conciliator) gives his/her
opinion on the dispute.
YC, Jan 2017

Expert Witness :
A person who is a specialist in a subject, often technical, who may present
his/her expert opinion without having been a witness to any occurrence relatin
g to the lawsuit or criminal case. It is an exception to the rule against
giving an opinion in trial, provided that the expert is qualified by evidence of
his/her expertise, training and special knowledge.
Expert Determination:
An independent expert is appointed jointly by the two parties to give an expert
opinion on the matter to be decided. The expert may have regard to evidence
submitted or may have a hearing and adopt what they consider to be the most
appropriate procedure. The expert's decision is not enforceable directly by the
courts and they are liable for action for negligence.
YC, Jan 2017

Dispute Boards:
An independent board evaluates disputes as similar to the DAB in FIDIC 1999
Red Book.
A dispute board becomes a part of the project administration and thereby
can influence the performance of the contracting parties.
A dispute board acts in ‘real time’ as compared to dealing with events now
which occurred in the far distance past such as in court proceedings and
arbitrations.
YC, Jan 2017

Adjudication:
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.
It is normally used to ensure payment (although most types of dispute can

be adjudicated), “Pay now argue later”.
The Adjudicator must generally decide the dispute in less than 42 days.
The decision is binding and is usually upheld by the Courts in the UK. The
scope of adjudication is set out in the provisions of the Housing Grants,
Construction and Regeneration Act 1996.
However, there is no law provision in UAE law.
No international enforceability
YC, Jan 2017

Arbitration:
“Arbitration is a private form of binding dispute resolution, conducted before
an impartial tribunal, which emanates from the agreement of the parties but
which is regulated and enforced by the state”
(Latham & Watkins (2014), “Guide to International Arbitration”)
The arbitral tribunal can be made up of legal and/or industry experts chosen
by the parties or appointed by a professional body that has been requested
to do so by the parties.
Arbitration is a private and confidential process to a greater degree.
It can provide for the quick, practical and economical settlement of cross-
border disputes.
YC, Jan 2017

Advantages of Arbitration:
• Usually a confidential process;
• More flexible in terms of procedure than litigation;
• Allows the parties to choose the tribunal;
• Can be a neutral forum (for international disputes);
• Award is final and binding; and
• Relatively easy to enforce the award internationally.
Main factors to be considered when drafting an arbitration clause or

agreement;
• Seat of Arbitration - The Arbitration Act 1996 (UK) defines the seat of the arbitration
as its judicial seat. The seat of the arbitration determines the procedural rules that
govern the arbitration
• Governing Law of Arbitration Agreement
• Language of Arbitration
• Number of Arbitrators
The seat of the arbitration (judicial seat)
• Scope of Disputes Covered
 Existence of a suitable legal environment
• Institutional or Ad Hoc
 Enforceability of the award
• Enforcement
YC, Jan 2017

Arbitration Under UAE Law:
• Arbitration agreements are currently governed by the UAE Civil Procedure Law
No.11 of 1992 (the Civil Procedure Code).
• Article 203 of the Civil Procedure Code allows parties to provide in their
contract or by subsequent agreement that any dispute between them in relation
to the contract shall be referred to arbitration for resolution.
• The same article also makes it mandatory that any such agreement for
arbitration must be in writing in order for the arbitration provision to be
enforceable.
UAE Arbitration Centres;

• Abu Dhabi Commercial Conciliation and Arbitration Centre – ADCCAC
• Dubai Chamber of Commerce and Industry Conciliation and Arbitration Centre
(known as Dubai International Arbitration Centre – DIAC)
• Dubai International Financial Centre – DIFC
YC, Jan 2017

Challenging an Award:
• The arbitrator's decision is final and binding on both parties (unless they
otherwise agree) and can be challenged only on the basis of serious
irregularity, lack of jurisdiction, or on a point of law. Where the award is
incomplete or contains an error, the correct course of action is to apply to the
arbitral tribunal and the tribunal can correct the award or make an additional
award as appropriate.
New York Convention (also known as New York Arbitration

Convention):
• The Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
• UAE made entry into force on 19 November 2006.
• The two basic actions contemplated by the New York Convention are
the recognition and enforcement of foreign arbitral awards and the referral by a
court to arbitration.
• The party seeking enforcement of a foreign award shall, at the time of the
application, supply to the court (a) the arbitral award and (b) the arbitration
agreement.
YC, Jan 2017
Enforcement Of Foreign Arbitration Awards in the UAE:
• The Old Approach:
Prior to the UAE's accession to the New York Convention, the enforcement of
foreign awards before the UAE courts was, save the application of relevant bi-
lateral or other multilateral conventions , subject to the application of Article
235 of Federal Law No.11 of 1992 (the UAE Civil Procedures Code), which
governs the enforcement of foreign judgments in the UAE.
Pursuant to Article 235, UAE courts were empowered to, and in practice did
refuse, the enforcement of foreign awards on grounds such as:
 the lack of proper jurisdiction of the tribunal
 the deficient issuance of the arbitral award

 the improper summoning or representation of one of the parties in foreign
arbitration proceedings
 the contradiction of the foreign award with a previous UAE judgment or its
violation of public policy in the UAE.
(Gordon Blanke (2012), “Enforcement Of New York Convention Awards: Are The UAE Courts
Coming Of Age?”)
YC, Jan 2017
• The New Approach - Relevant Cases:
Fujairah Federal Court of First Instance ruling - Case No. 35/2010;
In a ruling dated 27 April 2010 , the Fujairah Federal Court of First Instance
enforced two awards, one on the merits of the case and the other on costs,
issued by a Sole Arbitrator in London under the Rules of the London Maritime
Arbitration Association (LMAA) following an application for enforcement by the
award creditor under the terms of the New York Convention.
• Maxtel International FZE v. Airmec Dubai LLC - Court of First Instance

Commercial Action No. 268/2010;
In a ruling dated 12 January 2011, the Dubai Court of First Instance enforced
two arbitration awards, one on the merits of the case and one on costs, issued
by a Sole Arbitrator in London under the DIFC-LCIA Arbitration Rules following
an application for enforcement by the award creditor under the New York
Convention.
YC, Jan 2017

Commercial Action No. 268/2010 (cont…);
The case involved two Dubai based companies, one licensed as a free zone
company and the other an LLC. The award debtor objected to the enforcement
of the awards, seeking nullification on a number of procedural grounds.
However, the Dubai Court of First Instance held:
"The court's supervisory role when looking to recognize and enforce a foreign
arbitral award is strictly to ensure that it does not conflict with the Federal
Decree under which the UAE acceded to the New York Convention on the
recognition and enforcement of foreign arbitral awards and satisfied the
requirement of Articles IV and V of the Decree in terms of being duly
authenticated".
Importantly, the Dubai Court of First Instance expressly discarded the

application of Articles 235 and 236 of the UAE Civil Code on the enforcement of
foreign awards in the UAE.
YC, Jan 2017

Commercial Action No. 268/2010 (cont…);
Once the award debtor appealed this ruling before the Dubai Court of Appeal
arguing that the "judgment is vitiated by the error in the application of the Law
and insufficient reasoning". The Court of Appeal confirmed that it was satisfied
with the reasoning of the Court of First Instance.
After referring to the Dubai Court of Cassation (Commercial Appeal No. 132 of
2012 ) it upheld the lower courts’ decision enforcing a foreign arbitral award .
The Court held, among other things, that:
“The effect of Federal Decree No. 43 of 2006 (under which the UAE acceded to
the New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards) is that all UAE Courts shall recognize and enforce such awards
in the territory where the award is relied upon.”
(Gordon Blanke (2012), “Enforcement Of New York Convention Awards: Are The UAE Courts
Coming Of Age?”)
YC, Jan 2017

Bear in mind that the UAE is a Civil Law country and no

doctrine of judicial precedent
YC, Jan 2017

How standard forms of contract deal with Dispute

Resolution
Relevant Clauses in FIDIC 87 - Red Book 4th Edition:
• Sub-Clause 67.1 – Engineer’s Decision
• Sub-Clause 67.2 – Amicable Settlement
• Sub-Clause 67.3 – Arbitration
Relevant Clauses in FIDIC 99 - New Red Book:

• Sub-Clause 3.5 – Determinations
“…..If agreement is not achieved, the Engineer shall make a fair
determination in accordance with the Contract, taking due regard of all
relevant circumstances…”
YC, Jan 2017


Resolution
Relevant Clauses in FIDIC 99 - New Red Book (cont…):
• Sub-Clause 20.2 – Appointment of the Dispute Adjudication Board (DAB)
 Appointment date of the DAB, number of members (one or three) shall be

stated in the Appendix to Tender.
 If the number is not stated and the Parties do not agree otherwise, the DAB
shall comprise three persons.
 If the DAB is to comprise three persons, each Party shall nominate one
member for the approval of the other Party.
 The Parties shall consult both these members and shall agree upon the third
member, who shall be appointed to act as chairman.
 If a list of potential members is included in the Contract, the members shall

be selected from those on the list.
 Cost of the DAB shall be equally shared between the Parties.

YC, Jan 2017

Resolution
• Sub-Clause 20.3 – Failure to Agree Dispute Adjudication Board
 Appointing entity or official for the appointment of DAB in the event of

Parties frailer to agree upon the appointment of DAB shall be named in
the Appendix to Tender.
 Upon the request of either or both the Parties and after due
consultation with both Parties, this entity or the official shall appoint
the DAB.
 This appointment shall be final and conclusive.
YC, Jan 2017


Resolution
• Sub-Clause 20.4 – Obtaining Dispute Adjudication Board’s Decision
Decision
Decision become final
and binding
Reference of Evaluation
dispute by (84 days or as
either Party approved) Notice of
DAB fails to dissatisfaction
give a within 28 days
decision
Dispute shall be resolved

through an amicable
settlement or an arbitration
YC, Jan 2017


Resolution
• Sub-Clause 20.7 – Failure to Comply with Dispute Adjudication Board’s Decision

“In the event that:
…(c) a Party fails to comply with this decision,
then the other Party may, without prejudice to any other rights it may have,
refer the failure itself to arbitration under Sub-Clause 20.6 [Arbitration]. Sub-
Clause 20.4 [Obtaining Dispute Adjudication Board’s Decision] and Sub-Clause
20.5 [Amicable Settlement] shall not apply to this reference.”
• Sub-Clause 20.8 – Expiry of Dispute Adjudication Board’s Appointment
 When a dispute arises and there is no DAB in place, whether by reason of the
expiry of the DAB’s appointment or otherwise, Sub-Clause 20.4 and Sub-
Clause 20.5 shall not apply. The dispute may be referred directly to
arbitration under Sub-Clause 20.6
YC, Jan 2017


Resolution
 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, arbitration may be commence on or before 56th day after the

day on which notice of dissatisfaction was given, even if no attempt at
amicable settlement has been given.

 Unless settled amicably, any dispute in respect of which the DAB’s
decision (if any) has not become final and binding shall be finally
settled by international arbitration.
YC, Jan 2017

Study Check List
• How standard forms of contract deal with conflict avoidance and
dispute resolution
• Conflict avoidance
• Partnering
• Negotiation
• Mediation
• Conciliation
• Adjudication
• Arbitration
• Pre-action Protocol
• Litigation
• Expert Witness
• Independent Expert Determination

YC, Jan 2017
Questions ?
YC, Jan 2017

Many Thanks !
YC, Jan 2017

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Conflict Avoidance, Management and

Dispute Resolution Procedures

By: Yasas Chandradasa MSc, PGCert.(Arb.), BSc(Hons)QS, MRICS, MCIArb

YC, Jan 2017

YC, Jan 2017

• Independent Expert Determination

3. A situation in which there are opposing ideas, opinions feelings or

Conflict Avoidance in Construction Contract

YC, Jan 2017

• Prepare Tender documents with proper coordination among various trades

• Use Standard Methods of Measurement

• Allow sufficient time

• Appoint qualified professionals

• Chose the correct procurement path

• Use standard forms of Contracts (CoC)

• Provide Correct information at the right time

• Carry out proper tender evaluation

YC, Jan 2017

• Properly discharge the obligations and the liabilities in timely manner

• Have a proper knowledge of their rights

How standard forms of contract deal with conflict

• Clear explanations of the parties rights and obligations

• Clear explanations of the Engineer’s duties and authorities

• Clear explanations of the procedures; e.g. Variation procedure

• Priority of Contract Document

YC, Jan 2017

YC, Jan 2017

• Where there is no dispute resolution clause in the contract; or

• Where there is a litigation clause in the contract

YC, Jan 2017

YC, Jan 2017

YC, Jan 2017

Alternative Dispute Resolution (ADR):

• Expert Witness  Less adversarial

YC, Jan 2017

The principles of negotiation in the context of a dispute are similar to the

Mediation is the name given to a confidential process whereby parties to a dispute

YC, Jan 2017

YC, Jan 2017

YC, Jan 2017

It is normally used to ensure payment (although most types of dispute can

However, there is no law provision in UAE law.

YC, Jan 2017

Arbitration is a private and confidential process to a greater degree.

YC, Jan 2017

Main factors to be considered when drafting an arbitration clause or

YC, Jan 2017

UAE Arbitration Centres;

YC, Jan 2017

New York Convention (also known as New York Arbitration

 the lack of proper jurisdiction of the tribunal

 the deficient issuance of the arbitral award

Fujairah Federal Court of First Instance ruling - Case No. 35/2010;

• Maxtel International FZE v. Airmec Dubai LLC - Court of First Instance

YC, Jan 2017

However, the Dubai Court of First Instance held:

Importantly, the Dubai Court of First Instance expressly discarded the

YC, Jan 2017

YC, Jan 2017

Bear in mind that the UAE is a Civil Law country and no

YC, Jan 2017

How standard forms of contract deal with Dispute

Relevant Clauses in FIDIC 99 - New Red Book: