Beruflich Dokumente
Kultur Dokumente
OCTOBER 2009
Seminar outline
While the object of international contracting is to write and manage contracts so as to minimize disputes, some disagreements are inevitable. These can arise from failures by one of the parties, but also often arise from misunderstandings as to obligations under the contract. This programme will look at how claims (and counter claims) arise; how they should be evaluated when received, or prepared when being delivered, and how to resolve disputes arising from such claims. It will also, and most importantly, look at ways of avoiding disputed claims in the first place. Once a dispute starts, it can usually be solved most effectively by negotiation between the parties. However, if this does not prove effective, some sort of third party intervention is required. Traditionally, this has tended to focus on either involving state courts (litigation) or the equivalent private method of getting a third party to make a decision (arbitration). However, there are now many more techniques available in the international market, including expert determination, mini-arbitration, pendulum arbitration, adjudication, and other techniques whereby a third party decides the matter for the parties. In addition, there are also mediation, conciliation, hybrid solutions such as Arb/Med, where a third party facilitates the settlement by the parties themselves, rather than imposing a decision. Many of these techniques rely on looking at the parties interests, rather than their strict legal rights. All of these processes, and indeed, claims and counterclaims generally, become more complicated when placed in an international context. This is particularly the case where a foreign law and/or legal system is involved, with which you may not be familiar, and which may include rules which conflict with those of your own country. The programme will deal with commercial disputes arising from Contracts written in the English language, but will use techniques which have wide application to the resolution of disputes.
Euromatech - Claims and Counterclaims Management 3
DAY TWO
Types of claims and counterclaims DAY THREE Presenting and evaluation claims and counterclaims DAY FOUR Dispute resolution DAY FIVE
Course objectives
Provide an understanding of how and why claims and counterclaims arise Explain the differences between claims and counterclaims Identify common causes of claims and disputes, and how to avoid them Discuss how to develop procedures to avoid disputes over claims and counterclaims, while resisting unjustified claims Enhance understanding of basic negotiation techniques to be used when resolving disputes Provide an understanding of some of the main methods of dispute resolution involving third parties Develop an understanding of Traditional and Alternative Dispute Resolution techniques, including different ways of resolving disputes without recourse to courts or arbitration Provide strategies and tactics for negotiating during disputes Explain how to use contract provisions to reduce the risk of claims and disputes
Counter claims
Poor drafting of requirements 16 Lack of clarity in Scope of Work/Services 17 Misunderstanding of legal or technical obligations 27 Deliberate misunderstanding 33
Rights of set-off 36
Acceleration 55
Types of claims, in construction and other areas - and their distinctive features 81 Re-measure disputes 82 Variations - disputes on valuation 85 Variations - disputes as to whether there is change 89 Breaches of contract 92 Quality of workmanship 96 Re-work 99 Rejection of goods Full rejection 102 Partial rejection 105 Liquidated damages and penalties 107 Warranty claims 112 Special issues with EPC/Turnkey contracts 115 Interface problems - are these always the Contractors responsibility? 116 Tracking change where client involvement is limited 120 Special issues with documentation in EPC and turnkey contracts 122
6
Requirements for claim presentation 124 Notices 125 Timing, and time limits 130
Format 136 Information 146 Supporting documents 147 Defining features of claims evaluation and management 148 Recognising the causes of claims 149 Warning signs of disputes 150 Recording claims 151 Reviewing claims 152
Requesting further information 178 Realistic appraisal 179 When to make admissions - and denials Offers of settlement 184 Independent review 188
Cumulative effects 190 Managing claims quickly and effectively to avoid disputes 193 Managing claims and disputes
Involving lawyers 196 Managing the legal process 197 Setting goals 198 Decision trees 201 Controlling costs - and including them in your thinking 203
What is a dispute? 205 Introduction to dispute resolution methods and techniques 207 Stage negotiation 212 Measures of success - win-win negotiation 235 Negotiating without prejudice 239 Making offers 240 Compromise 241 Bargaining 242 Interest-based negotiations 247 Conflict and its resolution 253 Traditional dispute resolution 257 Litigation 259 Arbitration 267 Issues with evidence and production of documents 272 Differences between alternative dispute resolution methods 274
Ethical concerns 286 Audit trails 288 Avoiding the suspicion of unethical behaviour 289 Problems with settlements based on interests, not rights 290 Applying the same anti-corruption systems to claims as to tendering 291 Avoidance is better than resolution Avoiding claims and counter claims 292 Avoiding disputes 293 Avoiding litigation and arbitration294 Practical application of techniques Opportunities to role play a few straightforward negotiation scenarios involving typical contractual claims, counter claims and disputes 295
296
Opening
Health & Safety
Ground rules
Timings Introductions
Presenter
Peter Foreman
Law Degree, Kings College, London 1972 Admitted as an English Solicitor 1975 (currently non-practising) Lawyer in private practice in London 1972-82 Administration Director of small electronics, property and construction group 1982 3 Legal & Commercial Director, Trafalgar House Offshore & Structural, later Kvaerner Oil & Gas 1983 99 (Executive Vice President 1998 9) Chief Executive of consultancy company 1999 date. Operating in the Middle East as a Senior Consultant with Euromatech Accredited commercial mediator, Member of Chartered Institute of Arbitrators, Supporting Member of the London Maritime Arbitrators Association Member of The Energy Institute, Member of The Law Society, England & Wales, Fellow of the Council on Litigation Management Wide experience as lawyer, project manager and project director in major oil & gas and other engineering and construction projects around the world, including in the Middle East. Former Director of company owning Cleveland Bridge fabrication yard in Jebel Ali. Recently completed work on the largest naval shipbuilding project in Europe Vice Chairman Link Group (major social housing provider), Chairman of East Lothian Education Trust and member of East Lothian Learning Partnership
10
Memory Recall
%
100
75
50
25
time
1 day 1 week 1 month
Euromatech - Claims and Counterclaims Management 11
12
13
obligations
By client By contractor
Deliberate misunderstanding
14
obligations
By client By contractor
Deliberate misunderstanding
15
Work or similar documents Here you are deciding what it is that you actually want from the project if this set of requirements is too vague, or unrealistic, it may lead to conflict later There is no great legal and contractual issue here you just need to be as precise as possible
Euromatech - Claims and Counterclaims Management 16
obligations
By client By contractor
Deliberate misunderstanding
17
detailed Scope document can cause problems What is it you want? How much do you want? When? To what Standard?
18
construct a ditch one metre from the castle wall, to a depth of two metres, running the entire circumference of the castle
19
Exercise
List the items you would want to see in a
Scope of Work for supply of new desktop computers for your offices
20
Exercise
Do the same for the supply of consultancy
services to provide a report on your companys training needs, and recommendations for action
21
an Additional Residential Payment of 23.4% of the price achieved for each Residential Unit in excess of the Minimum Guaranteed Residential Unit Value, less the costs and Incentives Assume the Minimum Guaranteed Residential Unit Value is 100, and the sale price after deductions is 300 Does this mean the landowner gets 46.8 (23.4% of the difference), or 146.8 (the Minimum Value + 23.4% of the excess), or Nil (the amount by which 23.4% of the price exceeds the Minimum) 100 (as the previous version, but with the Minimum being payable) This is a real case (Chartbrook v- Persimmon) which went to the highest court in the UK in 2009. The amount in dispute was around $5m
22
Standards
The contract should
specify the standard to which the work should be performed Remember, the higher the standard, the higher the price so specify what you really need
23
Possible standards
Highest possible standards
standards All new In accordance with [name of industry] best practice To the satisfaction of the Client To the reasonable satisfaction of the Client
Euromatech - Claims and Counterclaims Management 24
Exercise
If the contract is silent as to the standard to
which the work is to be performed, what standard applies? If you cannot agree what a standard means, who decides?
25
required full material traceability on all steel used in an offshore platform This included tertiary steel (handrails, gratings etc) This meant that they could trace any handrail back to the individual ingot of steel from which it was made
Euromatech - Claims and Counterclaims Management 26
obligations
By client By contractor
Deliberate misunderstanding
27
Misunderstanding of obligations
Even where the Scope of Work is reasonably
clear, there may still be genuine misunderstandings These can be by either party (or, sometimes, both!!) They can relate to technical or legal/contractual issues
28
obligations imposed on the Client These may be fairly limited in number, but will include important matters such as:
Access to site Provision of drawings Provision of free issue material or equipment Provision of facilities or support Approval of drawings etc Payment
29
obligations are those set out in the contract Be cautious about concepts like design development Their obligations may be dependent on you performing your obligations What is there are breaches by both parties at the same time? The Contractor may consider something to be a variation, which you consider to be original scope
30
Mistake
Keenan v- Barclays Bank (2009) Ms Keenan worked part-time for Woolwich Building Society,
earning 9,520 a year. Woolwich was taken over by Barclays, who said they would review salaries and that there would be a significant increase Ms Keenan received a letter saying her salary would be 17,000 a year Two years later, Barclays realised that this was the rate for a full-time employee, and it should have been less than half that stated They tried to claw back the overpayment
31
high by x10 Client refused to trade concession Contractor would have traded some claims as a result of the Clients refusal to negotiate, everyone lost
32
obligations
By client By contractor
Deliberate misunderstanding
33
Deliberate misunderstanding
This is where someone
knows exactly what you want, but pretends to misunderstand and then claim extra money for doing what was always intended in the first place
34
Counterclaims
These are claims raised to counter a claim
from the other party In principle, they are the same as a claim, but the real issue is whether they have to be looked at as a separate claim, or set off against the other claim, so that only any net sum remaining falls to be paid
35
Set Off
Sometimes called contra
to reduce his liability under the original claim by the amount of the counterclaim This is very important where one of the parties is insolvent, or may become so before the claims are resolved
36
Bankruptcy issues
Where bankruptcy or similar
laws apply, the company in bankruptcy pursues all claims it is owed However, it only pays out what money it has, divided equally (with some exceptions) among its creditors It set off does not apply, the solvent party may have to pay 100% of the claim against it, but recover only a fraction of their claim
Euromatech - Claims and Counterclaims Management 37
set off in most countries, it makes sense to include a specific clause in the contract authorising this approach
off within the contract 2. It can also cover set off between different contracts between the same parties 3. In rare cases, it may include set off between different contracts between different parties but this is not recommended, not least because it is very complicated!
38
TR refused to pay under an asset transfer agreement because Inveresk were said to owe them money under a Service Agreement The Scottish courts refused to allow this, saying that, by dividing the contract into two distinct documents, there was a presumption of no right of set off
39
2,000 MT of light cycle oil to Shell FOB Coryton (UK) Price to be at published market rates, and payment to be without deduction, counterclaim or set off The shipment was made late, as a result of which the price had risen. Shell said they would pay at the market price when shipment should have been made Petrolplus obtained summary judgment for their claim, on the basis that Shells deduction amounted to a counterclaim, and the contract said that such a deduction could not be made
40
Obligation to perform
While fairly obvious, the contract must set
out, in reasonable detail, what goods, services, etc are to be provided And when And where And to what quality
41
Acceptance
Third party certification
Documentation
Evidence of acceptance Right to reject
42
Risk
When does the risk
of damage to the goods pass to the client? Link with Title (Ownership)
43
Title
Ownership, not
44
Standards
We have already looked at the need to specify
International standards (e.g. ISO, API, EN) National standards (e.g. BS) Company standards Bespoke standards written for the project in question
consultancy or other service contracts) a general statement linked to what is accepted in the business area concerned may be the only practical solution
Euromatech - Claims and Counterclaims Management 45
valves for the Dabhol LNG plant in India To be built to a particular British Standard (an establishe dinternational standard in this area) This specified the length of the actuator column -- but did not say whether you measured from the valve body or the top of the insulation..
Euromatech - Claims and Counterclaims Management 46
around the world, although it actually comes form the English Sale of Goods Act 1896 (no longer in force) It is a fall back solution that a product must actually do what it says it will do This comes into two main types:
Fit for the purpose specified Fit for the usual purpose to which such goods are put
Euromatech - Claims and Counterclaims Management 47
Intended purpose
What if the supplier does not know the
48
heating boilers from Jewson (a well-known builders merchant) The boilers worked perfectly well, but were not efficient, and reduced the energy ratings of the apartments, making them less attractive in the marketplace The court held that they were fit for purpose (heating the apartments), and Mr Kelly had never advised Jewson of any special requirement that meant they had to meet a higher standard
49
a tender for a large quantity of carbon steel pipework for a chemical plant. The pipework was to be fit for purpose. When questioned, the client refused to specify the purpose, stating that this was a State Secret The plant was producing an acidic product, and the pipework should have been stainless steel When the pipework started to leak who was responsible?
Euromatech - Claims and Counterclaims Management 50
Programme
The contract should provide
An end date A start date (not always quite as important) Intermediate milestone dates (on more complex projects In addition, there may be a requirement to develop a detailed programme showing how the Contractor is going to get from one date to the next
Levels of planning
The programme can be developed to a specific level
of detail The common terminology is Level 1 up to 5, with the higher numbers having greater detail Remember that detail costs money, and if the plan is too detailed, it may prove virtually impossible to manage. In addition, you should select the system to be used, ensuring that, wherever possible, it is compatible with the systems of both the client and the contractor, and also any professional consultants or managers involved
Euromatech - Claims and Counterclaims Management 52
Exercise
What level of planning does your company
use? How often do you update programmes? What do you do when the job is moving against the plan?
53
Recovery clauses
When a contractor falls behind, the contract should require them
to recover at their own costs It should also allow the Client to specifically instruct such recovery. BUT - if such instructions are given when the Contractor is not in default, then the Client will have to pay the costs incurred The Client can also give acceleration instructions when the Contractor is not in default, but this is, effectively, a variation, to which we shall return
54
Acceleration
If the cause of any delay is the responsibility of the Contractor, there is a duty to spend money to pull this back
The contract will also usually provide that the Client can order this
If not, if the Contractor is ordered to accelerate, or decides to take reasonable steps to do so, he is entitled to payment
Again, the Client can order this, but then it will be a variation
55
Variation clauses
While changes to the
contract generally require the consent of both parties, Variations clauses allow the Client to make changes within the scope of the clause, and the signature of the contract by the Contractor amounts to consent
Euromatech - Claims and Counterclaims Management 56
training. A single price was quoted for the whole package. During the course of the contract, the parties fell out, and the buyer told the supplier he no longer wanted the training element. He deducted a sum from the invoice which he considered reflected the training The supplier said they were still prepared to do the training, and sued for the whole amount The contract had no variations clause The supplier won the court held that, in the absence of a Variations clause, the client had no right to amend a contract without the consent of the other party
57
the actual contract usually require consent, but may also give rise to a claim for extra money/time. This would normally be seen as a variation, but should be addressed at the same time as the Change itself
58
is usually required
59
What is a Variation?
Change in the Scope,
60
suggestion
Verbal instruction Amended drawing
61
Types of change
Scope increase or decrease
62
63
Causes of Change
Error in definition of
product or service Error in definition of project Value-adding change External event Change of mind
64
Understanding consequences
A developer was building a tower block in New York The architect decided to add a doughnut (torus) shaped mall at the base The developer was delighted, as it increased rents The steel fabricator had already started to erect the structural steel The required removal and replacement, and building a massive cantilever The price rocketed, and the developer lost the extra rent in building costs
65
66
Challenging change
Be prepared to ask why change is needed What has happened since the original decision to require
something different? Is someone just re-opening an argument lost during the original scope preparation? Is this preferential engineering? Even if there has been a change, can you live with the original concept? UNCONTROLLED CHANGE IS ALMOST CERTAINLY THE BIGGEST CAUSE OF PROJECT FAILURE
67
SCOTTISH PARLIAMENT BUILDING Original estimate 34m (c$65m) Contract award 65m (c$120m)
Final out-turn 430m (>c$800m) over two years late Public enquiry revealed almost total lack of change control, or any realisation by the Client of the impact of change on cost and delay
68
Parliament Built at the same time Client did not interfere Only two significant changes (both caused by external factors) On time On budget
69
70
mean that the party who suffers the delay is entitled to an extension of time for the same period as the delay The issue is whether the delay was on the critical path on the plan
71
Critical path
This technique was
originally used by the US Navy for the construction of the George Washington class of missile submarines It was essential to ensure that all of a complex mix of projects came together at the same time
Euromatech - Claims and Counterclaims Management 72
Extensions of time
In what circumstances might a contractor be
entitled to an extension of time that is longer than the actual period of delay complained about?
73
A point to remember
TIME =
MONEY
74
Force Majeure
Outside the control of the
parties and Unanticipated and Prevents performance No formal definition in many countries Suspends obligations possibly with an ultimate right to terminate Extends time Stand-by costs may be paid in some circumstances
75
Terrorism
Riot/civil disturbance Severe adverse weather
76
Epidemics
Strikes Nuclear contamination
77
tanker Tropic Brilliance broke down in the Suez Canal. Tugs were unable to move her, and by 8th November 46 vessels were waiting in the Mediterranean off Port Said, and a further 20 in the Gulf of Suez. Is this force majeure for the waiting vessels?
78
sail from Rotterdam to Kuwait via the Suez Canal The shipowner claims force majeure applies because piracy in the Gulf of Aden means he will not risk his crew or ship
79
Contractors positions
WHEN THEY ARE AT WHEN THE CLIENT IS
80
Types of claims
This section will touch on some of the
practical issues that arise from the legal and contractual points already discussed, together with some additional issues for consideration There are, of course, many other ways in which claims can arise, but this is intended to cover some major areas
81
Re-measure disputes
Some of these are
relatively straightforward, and only involve agreeing on a number (How many bricks were laid? How many cubic metres of soil removed? How many hours were worked?) Others are more subtle
Euromatech - Claims and Counterclaims Management 82
In large bore pipe over long distances, this can make quite a difference
included? What about the time going through security at the site each day? Meal breaks? Holidays? Union meetings? If a day rate is used, how many hours in a day?
83
is not as clear cut as measuring pipe lengths or counting bricks If a room is being painted, how do you measure progress?
84
measure disputes However, there may be more opinion elements where the original contract was no on a re-measure basis, and there is no agreed set of rates
85
Estimates
Wherever possible, ask
the contractor for an estimate, or, better still, a formal quotation, before agreeing to proceed with the work This can convert the variation into a minilump sum contract BUT be careful and be clear what you are actually getting
Euromatech - Claims and Counterclaims Management 87
land. In fact, the job required major excavation, and took much longer than expected, and was much more expensive. The quotation was stated to be for budgetary purposes only, and Megalift said it was not an offer capable of being accepted On the facts, it was held that there WAS a contract. Among the reasons were that the parties had been negotiating for many months; other terms of the contract appeared to contradict the statement that the quotation was budgetary; and when a formal contract was signed later, it incorporated what was called a revised quotation
88
this issue already, but it is not always certain that what has happened DOES amount to a change entitling the contractor to extra money and/or time
89
Exercise
On a fixed price, lump sum contract, are the
1. 2. 3. 4.
following changes (assuming there is a Variation Clause)? If so, would the Contractor get extra time and/or money?: Changing the colour of the paint on a sign Reducing the number of computers supplied from 100 to 98 Delaying the start of the project by a month Moving the position of a fire extinguisher from one wall to another
Euromatech - Claims and Counterclaims Management 90
Contractor gives notice promptly when he considers there is an undocumented change Consider having an independent professional decide whether a change has taken place (at least on an interim basis)
91
Breach of contract
In summary,
them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either (1) arising naturally, i.e. according to the usual course of things, or (2) such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract
93
were delivered late. It was accepted this was Newmans fault, and there was no limit on damages. At the time of the contract, Victoria had just won an order to clean Army uniforms (this took place during World War II). Newmans were not aware of this.
What damages are due? Did they have to pay the profit lost on the Army contract?
94
country on your countrys banned list Not using the same staff to do the consultancy as attended the tender presentation
95
Quality of workmanship
We have looked at the
issue of the appropriate Standards, but how do you address the quality of what has to be produced? Can you tolerate a certain number of nonconformances, or must everything be perfect? Will you test every item, or only a sample?
Euromatech - Claims and Counterclaims Management 96
Perfection?
Some jobs do have to
be 100% right, but that costs money (and takes time) It could be cheaper to order 105% of what you want, and accept a small failure rate However, you need to be clear what that rate is likely to be!
Euromatech - Claims and Counterclaims Management 97
Failure rates
What level of failure
Cheap pens for office use Stitching on T-shirts Nails Mobile phones Audits of quality systems Welding on a nuclear power station
Euromatech - Claims and Counterclaims Management 98
Rework/re-performance
What has to be done How quickly At whose cost Who bears the knockon costs Impact on schedule
99
Exercise
Consider what changes you would want to the rework clause on the next slide if you were:
a) b)
100
Rework clause
Notwithstanding approval by the Engineer of drawings, samples, patterns, models or information submitted by the Contractor, the Contractor shall be responsible for all errors, omissions or discrepancies therein unless they are due to incorrect drawings, samples, patterns, models or information supplied by the Purchaser or the Engineer. The Contractor shall bear any costs he may incur as a result of the delay in providing such drawings, samples, patterns, models or information or as a result of errors omissions or discrepancies therein, for which the Contractor is responsible. The Contractor shall at its own expense carry out, or bear the reasonable cost of, any alterations or remedial work necessitated by such errors, omissions or discrepancies for which he is responsible and modify the drawings, samples, patterns or information accordingly.
101
Tests to be passed
What is sufficient failure to
reject
rectify?
102
103
Exercise
When should you have a right to reject, and what should be the consequences in each of these cases? An office building Chemicals for use in a blending process Database software A report on your procurement process A Suezmax tanker
104
Partial rejection
If you reject part of a consignment, the
Reduction in invoice Replacement of defective goods? Time for replacement? Damages? What happens if the goods are not replaced, or are again defective?
105
the new national football stadium in London, and is one of very many disputes on this project! The issue was how you valued the reduction in value where defective steelwork was supplied to the main contractor You cannot value a bit of a stadium under construction The only way to look at this was that the abatement in price was the same as the cost of repairs
106
Liquidated Damages
Genuine pre-estimate
of loss Often a protection, not a penalty Check the actual triggers Can you get an extension of time? Caps
107
$1,000 per day for each day the goods are late. Delivery is to be on 1st June. How much can be claimed if actual delivery is at:
23:00 on 1st June 00:01 on 2nd June 17:00 on 2nd June 09:00 on 3rd June
108
Penalties
Not permitted under
English/Scots Law Quite acceptable in most other jurisdictions if clearly stated May be limited to a reasonable sum (e.g. Egypt) Risk of double-dips Penal and exemplary damages US jury trials
109
bonds etc. Are interim penalties repayable if final date is met? Caps on periodic penalties Overall caps
110
Exercise
Consider in what circumstances
111
Warranty
When does it start? When does it end? What parts of the work are Are there any exclusions?
112
Possible exclusions
X Fair wear and tear X Operational spares X Misuse
113
when an express train derailed at speed because of fatigue cracking of the track As a result of the accident (which did not involve Midland Mainline) rail services in the country were subject to severe speed restrictions, which caused loss to Midland Mainline, which they claimed on their insurance The insurance had a standard exclusion (see below for wording) including wear and tear The court ruled that the speed restrictions were caused by the fatigue cracking, which was itself wear and tear, and there was, therefore, no cover
114
similar contractual structures (EPIC, EPCM etc) and turnkey contracts work on the principle of a one stop shop The contract may be with one contractor, or a joint venture of several contractors In either case, there is a single contract with the client
115
Engineer/ designer
Fabricator/ manufacturer
Installer
Commissioning contractor
116
EPC CONTRACTOR
Engineer/ designer
Fabricator/ manufacturer
Installer
Commissioning contractor
117
CONSORTIUM
All members are jointly and severally liable All are responsible for 100% of claims arising from their share of the work AND 100% of the total claims
Members do not have joint and several liability All are responsible for 100% of claims arising from their share of the work, but no more
NOTE THAT THESE ARE NOT FORMAL LEGAL DEFINITIONS IN ALL COUNTRIES, AND THE TERMS GET USED INTERCHANGEABLY. ALWAYS CHECK WHAT THE CONTRACT SAYS
Euromatech - Claims and Counterclaims Management 118
arrangement is that the interface issues within the contract are all the responsibility of the Contractor(s) In what circumstances might interface issues not be their responsibility?
119
Client is closely involved with the project as it progresses However, in EPC, and particularly, in true Turnkey, the Contractor is sometimes just allowed to get on with things This can mean the Client loses the ability to spot problems as they arise
120
here, but probably more one for the Contractor If changes are made, the question that needs to be asked is whether they remain within the original scope (Contractors problem) or are something new (a Client variation)
Euromatech - Claims and Counterclaims Management 121
Documentation on EPC/Turnkey
As with any contract, the requirements for
documentation should be clearly stated In reality, the issues are much the same as for any lump sum contract, however, when we come to look at the Format of a claim, this area probably needs to have a section stating why any claim arises from an issue that is not within the responsibility of the Contractor
122
Example
An EPC contract is awarded covering (among other
things) the design and construction of an offshore oil platform The job is running late The design office of company X writes to the Client to say they are sorry for the delay, but the fabrication yard dont know what they are doing The fabrication yard of company X writes to the Client to say they are sorry that they are late, but the designers are running behind schedule The Client puts both letters on the table and says not my problem
Euromatech - Claims and Counterclaims Management 123
we require the claim in the following format if this was not made a contractual term It is not possible to impose such terms after the event without agreement from the other party
124
Notices
The contract should
specify timing and method of service These clauses are often not read, but need to be understood, and complied with to the letter
125
Issues on notices
Is the method proposed
possible?
126
Notices
How many days?
What is a day?
127
Contract shall be written in the Arabic language, and delivered to the other party at the location indicated in the Contract with acknowledgement of receipt given thereto. Formal notices may, however, be sent to the said address by registered mail, fax, cable or telex as appropriate
128
Continued
provided that confirmation of such notice is
received. Change of Consultants local address stated in the contract shall not be accepted unless the new address is in the Kingdom of Saudi Arabia and the Employer is so notified at least 15 days prior to the change of address.
129
Exercise - Timing
The Contract requires a notice to be given within 7 days of the
happening of an event Is this working or calendar days? If working, what happens is one of the days is:
A Friday (in an Islamic country) A Sunday (in a Non-Islamic country) A Saturday in (i) Dubai (ii) Saudi Arabia A usual public holiday in the Clients country A usual public holiday in the Contractors country A special holiday in the Clients country (e.g for the death of a ruler) A day when the Contractors business is usually closed for annual works holidays
130
Service of notices
All notices should be required to be in writing, however, the
physical method of service needs to be defined: By hand By post By special type of post (recorded/registered etc) By fax By e mail By telex (which still appears in many contracts) Note that the majority of contracts do NOT allow service by e mail, and a significant number do not allow service by fax
131
company contracted with a Dutch company to supply services in South Africa. They subcontracted part of the work to a South African company, who in turn contracted with a Qatari company for the supply of labour from India. The same notice clause was passed down through the contracts. When it reached the South African/Qatari contract, it required notices to be served in a manner which was impossible in either country.
132
make a claim to give notice within a fairly limited period The contract often goes on to say that, if this is not done, the right to present a claim is lost Since this clause is usually directed against the contractor/supplier, it is a frequent cause of dispute
133
Time limits
Make sure that any limit
imposed is realistic Distinguish between warning of a claim (with outline details) and actually presenting full financial amounts and back-up
134
The contract states no claim will be accepted by the Client unless it is received within 14 days of the date on which the Contractor should reasonably have been aware that a claim for additional cost and/or time would be made What would you do if:
1.
2.
The document is delivered 15 days after the relevant date The document is delivered within 14 days of the date when the Contractor was aware there would be a claim, but 20 days after he should have been aware
135
Format of claim
While there is no
perfect format, it is suggested that the following slide gives a good basis as to what needs to be included
136
A possible format
Brief summary of the contract Statement of the facts leading to the claim Statement as to which contractual provisions
(or breach of which provisions) are stated to give rise to the claim Details of the time and/or cost claimed A summary of any correspondence, especially notices served A schedule of back-up information, crossreferenced in the earlier sections
Euromatech - Claims and Counterclaims Management 137
A possible format
Brief summary of the contract
138
A possible format
Statement of the facts leading to the claim
should explain why the claimant considers that there is any claim in the first place It is helpful if this is kept in an un-emotive language as possible, but this is not always the case!
139
A possible format
Statement as to which contractual provisions
(or breach of which provisions) are stated to give rise to the claim This is the heart of the claim, and a point that is not always included. Too many claims are along the lines of something terrible happened, it is all your fault, please send lots of money They should specify why a claim is permitted
Euromatech - Claims and Counterclaims Management 140
Examples
The claim is presented on the basis that the
Client failed to provide access to the Site on the agreed date, as provided by Clause 14.3 The claim arises from a change in the operational specification for the computer system as set out in Notice 125H6 dated 14th June 2008. Such a change entitles the Contractor to a Variation in accordance with Clause 21.1, but the Client refuses to issue a Variation Notice as provided by Clause 21.3, in breach of contract
Euromatech - Claims and Counterclaims Management 141
A possible format
Details of the time and/or cost claimed While time and cost are clearly related (and one
tends to produce the other), it helps to keep them separate It may assist to present a bat chart illustrating time claims, and a schedule of the costs incurred In English court cases, use is made of what is called a Scott Schedule, which lists each sum claimed, with details of what it is for, and why it is claimed. This enable the judge to agree or strike out claims item by item While not a requirement for many claims, it is, nonetheless, a helpful tool in many cases
Euromatech - Claims and Counterclaims Management 142
A possible format
A summary of any correspondence,
especially notices served A timeline is useful, together with a narrative of the important correspondence, explaining how the matter has developed. This should quote relevant extracts from the more important parts of letters etc
143
A possible format
A schedule of back-up information, cross-
referenced in the earlier sections By using cross-references in the claim document, perhaps by footnotes, the reader can flip to the schedule and review the document in question. Back up should be sufficient, but should not drown the other party in paper
144
Our financial director has returned this application and is not willing to process the amount due to insufficient supporting information. Please note that our company policy is such that each sub-contractor valuation must be presented in a standard format, copy attached, and authorised by the appropriate site manager before your application can be processed. Could you kindly resubmit your application with the correct supporting information.
sub-contractor was allowed to proceed to claim their money without amending the paperwork
Euromatech - Claims and Counterclaims Management 145
Supporting information
While it reasonable to
require supporting information, do not demand more than you actually need Remember that everything costs money to produce money that will be included in the price that you pay
146
you want to see originals or copies? Would you want any authenticated, and, if so, by whom? What about translations of anything in foreign languages?
147
Brief summary of the contract Statement of the facts leading to the claim
Statement as to which contractual provisions (or breach of which provisions) are stated to give rise to the claim
Are these correct? Have correct notices been served? In the correct time? Are there other relevant provisions? Are these mathematically correct? Do they relate to the facts relied on? What is their breakdown Is this accurate? Has anything important been missed out? Is anything else needed?
148
obligations
By client By contractor
Deliberate misunderstanding
149
expended Cost = value Manning below plan Quality nonconformances Changes in project management
offices Weekly reports unchanging Parent company has cash problems Discussions not open
150
received?
151
Reviewing claims
We will now look at some of the processes
152
Direct Indirect
Fixed
Overhead
Truly fixed Variable fixed Variable To convert to a Price or a sum claimed add
153
Pricing models
There are numerous models, but can include:
Simple lump sum for a product Rate per hour Rate per unit Risk and reward Fixed sum for a period of time Payment for results (performance based)
154
155
Back-up
Make-up of rates and lump sums
Allocated costs
Overhead recovery methods Variation rates volume related Dayworks
Euromatech - Claims and Counterclaims Management 156
Exercise
Your supplier is going to use all of his Abu Dhabi
plant to supply products to your company He sells for $100 a unit, made up of
157
subcontract pricing Analysing direct labour costs Determining and evaluating other direct costs
158
Analysis - Direct
Material costs
Materials,
include consumables
159
Identifying direct materials and subcontract pricing Current quotes Historical quotes Inventory pricing
Euromatech - Claims and Counterclaims Management 160
used for each grade Labour rates for each classification (with details)
161
plan Volume necessary to complete Relevant skills? Classifications same as for rest of company? Appropriate classifications
Overlap on tasks
Overlap on current
162
Possible Questions #2
Direct/indirect comparisons Industry/regional norms Overtimes and shifts Premium rates Comparable rates
163
Preservation, packing
164
Analysis - Indirect
May include elements such
as Material overhead Manufacturing overhead Engineering overhead Field service overhead Site overhead
166
staff Overhead costs of head office Legal, accounting, PR, HR etc Selling and marketing Transfer pricing
167
168
169
170
171
Exercise - profit
What is a reasonable %
172
Profit motive
Contractor stays in business
173
industry norms Assessment of resources employed and risks taken On a claim or variation, what was in the original contract (if known)
174
Time
1. 2. 3.
Remember that the person making the claim has to demonstrate that the delay: Is not something for which they are responsible Entitles them to an extension of time HAS ACTUALLY CAUSED the delay claimed The last point is very much related to the question of critical path analysis
175
that is, that it caused a delay on the critical path Conversely, if the delay is on the critical path, the impact may be disproportionate. For example, a delay of one week could push the work out of a weather window, and cause a delay of several months BUT if there is float in the plan, this may belong to the Contractor, enabling him to claim an extension of time, even though he may be able to absorb the delay
176
critical path?
177
you only ask for the information you actually need However, you should also be careful to ask for further information quickly and logically Drip-feeding requests can sour a negotiation
178
Realistic appraisals
It is worth making the point that it is not
helpful to ignore genuine claims THIS DOES NOT MEAN YOU SHOULD PAY SUMS THAT ARE NOT DUE!!!!! However, where the point is small, it may simply not be worth arguing over something trivial Be realistic many things are not 100% black and white, much of the world is shades of grey (gray if you are American)
Euromatech - Claims and Counterclaims Management 179
Global claims
Commonly used in
180
matter complained of (e.g. a variation or breach) and the damage suffered. Global claims do not do this. The problem is that large projects are so complex that the general rule is virtually impossible to apply in practice Global claims say it is all down to the Client, so all the impacts are payable The risk for the Contractor is that if any element is found to have been the Contractors responsibility, the whole claim may fail
181
demonstrate cause and effect If they decline, ask them to list all causes, and to confirm that their case is that the combination of these causes caused the costs Identify any individual cause where some or all of the responsibility rests with the Contractor Be realistic they may be right, and time and cost will be saved by a little horse trading
182
Payments on account
If it is clear that money is owed,
an interim payment has the effect of Demonstrating good faith Assisting the Contractors cash flow Reducing any claim for interest/cost of money BUT, these can also be seen as a sign of weakness
183
rarely any harm in agreeing them If the claim goes into dispute, you will lose on this point anyway, so save cost and time with a concession This also gives more credibility to your denials
denial brings matters to a head Merely saying you are thinking about matters, when the reality is that the answer is no helps nobody
184
Offers of settlement
If offering to settle a claim, it may be necessary to
use certain specific legal terms to prevent the offer being used against you A common term is without prejudice This means I still think you are not due any money, but, without prejudice to that position, I will offer you 100,000 rials to get rid of this problem If this is accepted, there is no problem. If it is rejected, the claimant cannot produce the offer in court as evidence that the Client admits that 100,000 rials is due, which is simply not the case
Euromatech - Claims and Counterclaims Management 185
Legal costs
In those countries where the loser pays all or sum of
the costs of a court case or arbitration (and this is not the position everywhere), the fact that a without prejudice or similar offer has been made can sometimes be disclosed to the judge or arbitrator after the case is over, solely on the basis of demonstrating that, had the offer been accepted, the case would not have been needed In such cases, courts may either not award costs, or even order the winner to pay all or part of the costs wasted
Euromatech - Claims and Counterclaims Management 186
Does it settle everything (full and final settlement)? Does it include disruption from the extra work? (See comments on cumulative effect later) Does it include rate increases? Can the rates agreed be used on any other claims in the future?
Euromatech - Claims and Counterclaims Management 187
Independent review
Where the claim is of
some complexity, or there are major disagreements, consider a cold eyes review This can be internal or external, but should be by someone who understands the issues, but has had no involvement in the project
Euromatech - Claims and Counterclaims Management 188
After you have reviewed the claim, whether with external help or not, advise the Contractor of your position If the you are rejecting all or part of the claim, tell them why This is often best handled face to face, but, in such a case, have clear notes of what you are going to say, and record what you actually said
189
Cumulative effects
Where the project is
complex (and this is particularly the case in construction and engineering), the impact of a series of changes or delays may be to produce a disruptive effect over and above the extra work itself In other words 1 + 1 may equal >2
Euromatech - Claims and Counterclaims Management 190
Disruption -issues
The usual analysis by a Contractor is based on reduced
productivity. Since this is a common effect of extra work, this is not unreasonable in itself.
However, it fails to assess:
The extent to which the original productivity norm was optimistic Whether the correct norms were used in the tender Whether some or all of the loss of productivity was going to happen in any event, or for other reasons
191
Exercise
You have received a claim from a
192
issues until the end of the job, and sort them out then However, dealing with problems as they arise means: The facts are clear People do not have time to harden attitudes Individual problems can be picked off involving relatively small sums, and, therefore, can often be dealt with at a lower level in the organisation
Euromatech - Claims and Counterclaims Management 193
where there is a dispute, work must continue while the dispute is resolved Without this, the Contractor has a very strong negotiating lever to use to force a favourable settelement
194
195
Managing disputes
Involve lawyers early BUT manage them Agree strategy and tactics Do what you can yourselves, or with cheaper support Dont be greedy Feed costs into your calculations
196
asset, but just another adviser Make sure they are managed, and that costs are controlled Many international disputes lawyers are VERY expensive and they employ a number of expensive assistants for whom you pay in addition
197
Setting goals
Be realistic
best you could achieve What is your expectation What is the worst you could accept (the line in the sand) When you get what you are looking for, take it and move on
Euromatech - Claims and Counterclaims Management 198
Dont be greedy
Dispute over Australian
Submarines HMAS Orion and Otama Case was 11 years old Only one witness was still around Strategy
199
This was all profit The Client thought the shipyard was commercially weak, and did not realise they had left at least 1m on the table There was another bid to the Client pending
200
Decision trees
In complex disputes,
consider drawing up a decision tree This way, you know what you will do depending on the reaction of the other party Be flexible the decision tree will need updating but use it as a tool
Euromatech - Claims and Counterclaims Management 201
developing a decision tree based on a claim from the other party for an extension of time and extra costs
202
Controlling costs
Keep a regular check on
what you are spending Include internal costs where appropriate Feed costs into your calculations Include the deflationary effect of time on any money you are going to receive (and the cost of interest, if appropriate, on anything you are going to pay out)
203
Success!
Failure!
204
Disputes
Parties need to present
their respective positions There is not a dispute where, for example, one party presents a claim, but the other party has not yet replied
205
Exercise
A contractor sends a letter to a client stating We have
completed the project, but it is clear that costs will be vastly in excess of our estimate. We consider this is because you have failed in your duties to review changes properly and also to provide answers to site queries on time. We, therefore, claim an additional $1,346,229. If this is not paid within 7 days, we shall proceed to arbitration Is there a dispute? How would you reply if: You agree with what they say, but not the amount claimed? You do not agree with any of what they say?
206
What is negotiation?
The first essential is that
there needs to be a dispute or difference between two or more parties Negotiation is the way to resolve such differences by discussion, without a third party (such as a judge or arbitrator) making a decision
208
Types of Negotiation
Communication between
two parties to reach a mutually satisfactory solution Adversarial relationship between parties who have to work together Win-Win
Often conducted by
agents Can be the start of a long term relationship Both analytical and psychological Verbal, written, and nonverbal
209
Exercise
What are the things that you need to consider when planning and preparing for a negotiation?
What do you need to consider during a negotiation to create a win / win outcome? Think of people who you feel are effective negotiators, and what makes them so good at it? (i.e. skills they use)
Euromatech - Claims and Counterclaims Management 210
circumstances in which it is appropriate to refuse to negotiate? What happens if you take this position?
211
Stage Negotiation
Multi-stage approach
212
213
214
Deltas
There will almost always be
a gap between positions However, if the gap is too large at the beginning, neither side may see any point in continuing the discussion If it is too close, you may have given too much away!
215
216
Preparation
Understanding goals
Skills
Self Confidence
217
Preparation
Who are you meeting? Who is on your team? What will be discussed? What papers are needed? Why?
Where?
When?
218
outcome Best case Worst acceptable case Agree a line beyond which you will not go AND STICK TO IT Clear your authority limits
219
220
Roles
Negotiator Scribe
Not necessarily the leader Technical expert Subject specialist Commercial Financial Decision maker Disclosed or undisclosed Level of authority
attendees and documents needed Write down what you want to achieve
222
Agenda
Not always relevant to brief
meetings? Try and control Agree with other party Include timings Include breaks State what is to be discussed; by whom; and with reference to which documents
Outsourcing meeting
07/02/01 9:00 Thistle Street
Meeting called by: Facilitator: Timekeeper: Attendees: Please read: Please bring: Type of meeting: Note taker:
Other Information
Observers: Resource persons: Special notes:
223
Arrival
Location Take account of disabilities Get there first If possible, set the room the
way you want it Small talk good or bad? Setting the agenda
224
225
Multiple issues
Just as it is important to
set your opening position so as to allow some room for negotiation, so it is also useful to have a number of issues to discuss; some of which you may be prepared to give away
226
BATNA
Best Alternative To No Agreement
What is the best that
can happen if no deal is struck If this is still better than what you are being offered, you might as well walk away However, if it is not.
227
228
LISTEN
Use breaks for updates
229
Non-verbal Communication
Of information
communicated
10% through words 40% through paralanguage (nuance, emphasis, irony etc.) 50% through body language
230
have been addressed Run through points of agreement or dispute Agree process Agree timetable Allocate actions Format for deliverables
231
What to record
Decisions, actions and
deliverables Times for action Who is responsible for action? Basis on which decisions were reached Agreed facts Outstanding issues Process
232
Questions
Ask open questions to elicit information
233
Interruptions
Avoid them
234
Win - Win
What is a win?
to win How to promote win-win thinking Is win-win always the right answer?
235
What is a win?
Discuss some examples of what might be a
win for you, or the other party, that does not involve paying, or not paying, money
236
Mirror negotiation
Assess what the other
side wants Can you give them something without loss? What are their walkaway points?
237
Red Teams
On complex disputes
(and also on complicated tenders), it may be worth assigning one or two of your staff to think like the other party This is imperfect, but can help to assess the best approach
238
this is intended as a reminder that it is usually possible to make an offer than exceeds your view of the strict legal position, in order to dispose of a problem, without exposing yourself
239
Making offers
Someone has to make
the first move.. Try testing the water make a small offer and see if you get a response Be bold, but be prepared to pull back if the other side do not respond Do not negotiate with yourself
Euromatech - Claims and Counterclaims Management 240
Compromise
Not the same as surrender
settle Test the water Be bold Document any settlement properly Timings for action
241
Bargaining
The usual way a
negotiation works is that the parties bargain towards a range that they can both live with The problem arises when (as already discussed) the delta is too large
242
than you need them? Do they think they need you more than you need them? Can you get leverage by being helpful?
243
Technology
Only one party available
or keeping out competitors The position is not always what it appears on the surface
244
aggrieved Every effort is taken to recover their position Lack of sympathy for future problems Overall relationship damaged
245
Walking away
Set authority limits Be prepared to walk, but
understand the consequences What effect will walking away have? Reputation management Keeping the door open
246
legally entitled to
require or want
247
Rights
Clearly it is always possible
to insist on 100% of your rights Sometimes that is the correct solution. However, it does create some issues: You may think you have certain rights, others may disagree If the other side are not prepared to agree (and they may not believe you are correct), a dispute is inevitable The law may not be able to give you the remedy you actually seek
Euromatech - Claims and Counterclaims Management 248
smaller by putting them in a larger context Think laterally Can you solve other problems as well as those being negotiated?
249
use in a claim or dispute that did not involve extensions of time or payment of money?
250
have a long term relationship with the other party, consider how resolving the dispute could enhance, rather than damage that relationship
251
KUALA LUMPUR Plane breaks down Airline provide an alternative via Singapore Total delay about 4 hours Bag routed direct to hotel about 12 hours after arrival
Plane snowed in at
London Replacement promised but did not arrive After about 8 hours, told to make own arrangements to get back This was the day before Eid
252
Conflict
Any dispute is, in a
sense, a conflict The trick is to stop the dispute becoming personal Remember IT IS USUALLY ONLY ABOUT MONEY
253
Defusing conflict
Avoid personal
comments Reframe criticism Remain calm Do not respond to provocation Take breaks if matters get heated Apologise if you say something you regret
254
Personality clashes
What do you do when it
is clear that there is a personality clash with the negotiator on the other side?
255
issues until the end of the job, and sort them out then However, dealing with problems as they arise means: The facts are clear People do not have time to harden attitudes Individual problems can be picked off involving relatively small sums, and, therefore, can often be dealt with at a lower level in the organisation
Euromatech - Claims and Counterclaims Management 256
Dispute resolution
We now look at what
257
258
Litigation
Formal proceedings through a state court
is to apply (not always the same) should be stated in the contract. If not, there are complicated international rules, but this may not give you the result you desired.
259
260
Jurisdiction
Novus Aviation v- Onur Air (2009) Onur are a Turkish airline, and Novus (a company based in the
Bahamas) agreed to try and help them lease aircraft to Saudi Arabian Airlines The agreement was stated to be governed by English Law, but did not say where disputes should be heard A dispute arose as to whether the contract had been extended, and whether Onur had breached it by dealing with Saudia direct Proceedings were issued in England, but permission was needed to serve in Turkey, and this would only be granted if there was a reasonable chance of success, and that England is the proper place for the hearing The appeal court approached the question on a wide basis of where the case should be heard, and said the position was finely balanced but the judge had been entitled to find that England was the appropriate venue
261
interpreted in accordance with the laws of the State of Kuwait, and any dispute shall be referred to the Kuwaiti Courts
262
the laws of the State of Kuwait, and any dispute shall be referred to the Kuwaiti Courts The Parties hereby consent to the sole and exclusive jurisdiction of the Kuwaiti Courts, and the Contractor hereby irrevocably appoints the law firm of Ibn Battutah of 1, Coast Road, Kuwait City to accept service of all proceedings on its behalf
263
proceedings Do the other party have to submit to jurisdiction? Enforcement Cost Time
fairly? Language Are there processes (e.g. awards of interest) that may be a problem for you?
264
Enforcement
The orders of a court are generally only
directly enforceable in the jurisdiction of that court Enforcement in another jurisdiction tends to follow two routes:
Treaty (either a direct bilateral arrangement, or a wider regional deal) The judgment becomes evidence in a new court case
Euromatech - Claims and Counterclaims Management 265
266
Arbitration
In effect, privatised litigation
three) arbitrators, sitting in private Awards can be enforced through the local courts in many countries (especially those who have signed the New York Convention, 1958), but there are a few gaps in the Middle East (e.g. Yemen, Iraq, Turkmenistan), Central Africa and the Pacific Islands
267
Arbitration
Advantages over litigation
Disadvantages
Privacy But not total in Australia, Sweden and Texas Choice of arbitrators Arbitrators can have industry knowledge and experience Language Location and timing of hearings
Often as costly Often as slow Enforcement can be more difficult Many remedies not available (e.g. injunctions) Cannot get law established (except in Australia, Sweden and Texas?)
268
Comparison
Litigation
Arbitration
Good range of remedies Reasonably certain Public Usually expensive Often slow Risk of bias in some foreign courts Lack of specialist expertise in field
May need support of courts for some remedies Reasonably certain, but no precedent system Private Can still be expensive, and, sometimes, slow Some ability to select arbitrators, to increase specialist knowledge, and reduce national bias
269
Arbitration
DOMESTIC Within the country INTERNATIONAL Either between parties
concerned, and between two parties within that country No foreign involvement Local arbitration law applies
from different countries, or involving work in different countries There must be a foreign element Often international rules (e.g. UNCITRAL Model Law) applies
270
Single or panel
Arbitrations are sometimes
heard by a single arbitrator, and sometimes a panel (most commonly three) If the parties do not agree, an outside body is generally nominated to appoint On three person panels, the parties may appoint a wingman each, and these two appoint a chairman
271
to what is needed to prove a case In particular, the rules was to what documents HAVE to be provided to the court and the other side vary greatly
Whatever you want Everything that supports your case Everything that supports OR CONTRADICTS your case Everything
Euromatech - Claims and Counterclaims Management 272
273
Mediation Med/Arb and Arb/Med Adjudication Expert Determination Early Neutral Evaluation Mini-arbitration Dispute Review Boards Pendulum arbitration
274
Mediation
Non-binding
interests, not rights Emphasis on future relationships Quick and (relatively) cheap
275
276
Dunnett v- Railtrack
Cable & Wireless vIBM
enforceable
will follow shortly, but with less compulsion, but enthusiasm appears limited to smaller cases South Africa has recently taken the same line as England No great history yet in Middle East, although the concept is well established in noncommercial areas
Euromatech - Claims and Counterclaims Management 277
Conciliation
Similar to mediation, but the conciliator takes
a more proactive approach, and seeks to promote particular settlements The disadvantage is that this goes some way towards taking the decision-making out of the hands of the parties
278
Expert determination
Particularly good for
technical issues The parties allow an expert third party to make a decision for them Need to agree whether this is to be final and binding, or not.
279
review, often by a judge (possibly retired) Quite successful in USA (notably California) Tried in England, very low take-up
280
Pendulum arbitration
Single arbitrator
281
Underground Line
Engineer Mediation or arbitration Engineer (10 days) Project director (20) Dispute review board Arbitration
Main airport
282
283
284
strongest case, then by who has the best records, and has served all the necessary contractual notices
285
Ethical concerns
Concerns in relation to business ethics tend
to be focused on tendering and the award of contracts However, identical issues can arise where claims are settled at inflated sums
286
Examples
Pay me $500,000 and I will sign off all of
your Variation requests (a true story) Bid low, we will allow you to make it up in inflated claims later Expenses claimed several times for the same thing, or with false back up (A KPMG director in London, now in jail) Allow me to claim overtime that was never worked, and I will build you a swimming pool
Euromatech - Claims and Counterclaims Management 287
Audit trails
This type of unethical behaviour is made
more difficult if you maintain good records and a proper audit trail on all decisions Decisions in major areas should be approved by more than one manager
288
Avoiding suspicion
Be open
Be transparent
Do not do side deals Keep good records
289
settlements based on interests, rather than rights It is relatively easy to say our lawyers said we would lose, so we settled It is more difficult to say our lawyers said we would probably win, but we paid out in our long-term business interests
290
Anti-corruption practices
What processes do you use to reduce the risk
291
292
doing and why Be open with other parties Understand the contract requirements Serve notices Keep records
293
and develop a BATNA Remember winning will always cost you money and time Only fight on principle when it is really important
Euromatech - Claims and Counterclaims Management 294
Negotiation exercises
We will now try out
some simple exercises looking at some of the different issues that have been raised There are no prizes Just have some fun you can behave in any way you like!
295
Open forum
To complete the programme; do you have any questions or clarifications?
296
OCTOBER 2009
297