Dispute Resolution-arbitration: By S.k.rao
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Dispute resolutionArbitration By S.K.Rao
1
Construction contract-mutual obligations
A construction contract is between two parties-Employer and contractor. The work is executed based on Contract provisions and the rights and obligations of the parties are governed by these documents Both parties have to fulfill their respective obligations under the contract. Non fulfillment of any obligation by one party affects the interests of the other party Long duration of contract-various issues arise during construction Views of one party may not be acceptable to the other resulting in disagreement 2
Unresolved issues result in disputes
Most of the issues are resolved by mutual discussions with the spirit of accommodating each other’s point of view and in the overall interest of work. The Engineer plays an important role in ascertaining the views of both sides. The Engineer, with his professional experience and fairness, endeavours to convince both parties to come to a common understanding and agreement. If there is a disagreement, the Engineer gives his decision/ determination in accordance with the contract. In case the issue can not be resolved, the dispute is precipitated
3
Sources of disputes
Sources of disputes could be:
Inconsistencies/discrepancies in contract provisions Delay in giving possession of site Denial of extension, Liquidated damages Rejection of work, Cancellation of contract, Foreclosure Variations, Fixing rates, Delays and denial of payments, etc. Delays in execution and failure of contractor Non adherence to contract conditions and specifications by contractor
4
Interpretation of contracts in case of discrepancies
The following aspects are to be considered while interpreting contract documents a) Contract to be read as a whole c) Local custom or usage d) Reasonable meaning e) Order of precedence among various documents forming part of contract f) Words versus figures g) Written words versus printed words h) General versus special provisions
5
Inconsistencies in different parts of Contract
In order to resolve apparent inconsistencies or contradictions, in cases where the subject matter is covered several times in different parts of the Contract, the order of precedence to be considered is laid down in the General Conditions of Contract adopted by various organisations There is a sub-clause in FIDIC contract form also (Federation Internationale des Ingenieurs-Conseils) laying down the order of precedence for interpretation
6
Interpretation of contracts-Order of precedence- FIDIC
The contract agreement The letter of acceptance The letter of tender The Particular Conditions The General Conditions The Specification The Drawings The schedule or any other documents 7
Engineer’s clarification
If an ambiguity or discrepancy is found in the documents, the Engineer shall issue necessary clarification or instruction The work will be executed as per the instruction of Engineer Disagreement on any issue may result in claim/dispute which will have to be resolved by various procedures of dispute resolution
8
Lodging claims-notice and substantiation
If contractor intends to claim any additional payment, he shall give notice to Engineer with copy to Employer, immediately on occurrence of an event leading to claim Contractor shall keep contemporary record necessary to support his claim Without necessarily admitting the Employer’s liability, Engineer may inspect the records Contractor shall send detailed particulars and supporting details to substantiate his claim Contractor shall also submit any further particulars, documents or clarifications as desired by the Engineer Copies of the correspondence shall be endorsed to the Employer 9
Engineer’s response to the claim
If the Engineer agrees to the claim, he shall issue a variation order admitting payment
If the Engineer does not agree, he shall state reasons for his disagreement The Contractor may advance further arguments in support of his claim The Engineer may reconsider and give his decision/determination Copies of the correspondence shall be endorsed to the Employer
10
Various stages of resolution of disputes-Domestic/Government contract form Mutual discussion
Decision of Accepting officer Conciliation- provision in the Arbitration and Conciliation Act, 1996 Arbitration as per the Arbitration and Conciliation Act, 1996 Intervention by Court
11
Various stages of resolution of disputes-FIDIC contract
Mutual discussion Decision of the Engineer Dispute review board-or Dispute Resolution Board-(Dispute Adjudication Board in FIDIC 99) Arbitration Intervention of Court
12
Dispute Review Boardappointment
FIDIC contract provides for DRB to settle disputes during execution / completion of project Normally formed by 3 Members experienced with the type of construction A Member should have no financial interest in any party-no previous employment with any party One Member nominated by each party-Third Member nominated by two Members-acts as Chairman Any disputes that cannot be settled may be referred to the DRB 13
DRB proceedings-procedure decided in consultation with DRB calls for Claims statement with details-copy parties to opposite party
On receipt ,calls for Defence statement from the parties DRB visits site along with parties-conducts hearing Full opportunity is given to both parties to present their cases DRB Members have their internal meeting, deliberate the issues among them and make their Recommendations If this is not acceptable to either party, the matter may be referred to Arbitration 14
Dispute Adjudication Board
DRB is replaced by DAB in FIDIC 99 DAB is formed in a similar way and conducts proceedings in similar way While DRB gives ‘Recommendations’, DAB gives its ‘Decision’ which shall be binding on parties Within a specified period, any party may give notice of dissatisfaction to the other party with copy to DAB. The case may be referred to arbitration there after If no such notice is given with the specified period, then the DAB’s decision shall be final and binding on both parties 15
The Arbitration and Conciliation Act, 1996
This is a very recent act formulated and enacted to make it more responsive to contemporary requirements. The old act, The Arbitration Act, 1940 was considered outdated. The new act replaces the old act It was recognized that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms Conciliation, which is getting worldwide recognition as an instrument for settlement of disputes , is included in the act
16
Objectives of the Act
To comprehensively cover international and commercial arbitration and conciliation taking into account the Model Law adopted by United Nations Commission on International Trade Law (UNCITRAL) Also domestic arbitration and conciliation To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of specific arbitration To provide that the arbitral tribunal gives reasons for its award To ensure that the tribunal remains within the limits of its jurisdiction To minimise the supervisory role of courts 17
Other objectives of the Act
To provide that every final award is enforced in the same manner as if it were a decree of the court To provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal To permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes
18
Conciliation
Conciliation is the process by which the parties are facilitated to reach an amicable settlement of their disputes (part III of Arbitration and Conciliation Act,1996) This is adopted prior to Arbitration like DRB for settlement of disputes without resorting to Arbitration Conciliation takes place only if the parties agree to it. Conciliator is appointed as per contract provision He shall be guided by the principles of objectivity, fairness and justice. He facilitates the parties to come together for an agreed settlement When the parties sign settlement agreement ,it shall be final and binding on the parties Conciliator authenticates settlement agreement The settlement agreement shall have the status of arbitral award
19
Arbitration agreement
Arbitration agreement means An agreement by the parties to submit to arbitration All or certain disputes Which have arisen or which may arise between them In respect of a defined legal relationship Whether contractual or not An arbitration agreement shall be in writing May be a clause in a contract agreement
20
Matters that cannot be referred to arbitration
b) c) d) e) f) g) h) i) j)
Broadly the matters involving morality, status and public policy cannot be referred to arbitration, such as Matrimonial matters like divorce, restitution of conjugal rights Matters relating to guardianship of a minor Testamentary matters, like, questions about validity of a will Insolvency matters Criminal proceedings Questions relating to charitable trusts Matters coming within the purview of the Monopolies and restrictive trade practices act Dissolution or winding up of a company And such other matters
21
Arbitral Tribunal Number of arbitrators
There may be a single arbitrator (sole arbitrator) Tribunal may have more than one arbitrator, not even number, as determined by the parties. This may be stipulated in the arbitration agreement Arbitrator may be of any nationality unless otherwise agreed by the parties Arbitration agreement may stipulate certain qualifications for the arbitrators There may be designated appointing authority for appointment of arbitrator as may be provided in the arbitration agreement
22
Appointment of arbitrators by parties-three arbitrators
The parties are free to agree on a procedure for appointing an arbitrator or arbitrators Failing any such agreement, in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator, who shall act as presiding arbitrator., In Government contract form, provision may be made for appointment of arbitrator by a designated authority specified in the arbitration clause/agreement 23
Failure to appoint arbitrator If a party fails to appoint an arbitrator within 30 days from the receipt of request from the other party; or If the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment; the appointment shall be made, upon request of a party, by the Chief Justice of High Court or any person or institution designated by him. 24
Appointment of arbitrator by parties- sole arbitrator
In arbitration by sole arbitrator, if the parties fail to agree on the arbitrator within 30 days from receipt of request by one party from the other party, upon request by a party, the appointment shall be made by Chief Justice or any person or institution designated by him. In Government contract form, provision may be made for appointment of arbitrator by a designated authority specified in the arbitration clause/agreement 25
Interest of both parties
The delays and disagreements can be minimized if sole arbitrator is to be appointed instead of three or more arbitrators If both parties feel that their interest is served by proceeding with the arbitration, the things will move fast. They some how find a commonly acceptable arbitrator, cooperate in early finalisation of the case Otherwise the party who feels that proceeding with the arbitration is detrimental to his interest, finds all excuses to delay the matter 26
Arbitrator to disclose- grounds for challenge
When a person is approached in connection with his possible appointment as arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality If not already done, the arbitrator shall disclose such circumstances during the proceedings at the earliest If the arbitrator fails to disclose such circumstances, his appointment may be challenged He may also be challenged if he does not possess requisite qualifications as per arbitration agreement 27
Decision on challenge
The challenged arbitrator may withdraw from his office The other party may also agree to the challenge If none of the above happens, the arbitral tribunal shall decide on the challenge If the challenge is not successful, the tribunal shall continue the proceedings and make the award The party challenging the arbitrator may make an application for setting aside such an award, as and when made, in accordance with section 34 28
Failure or impossibility to acttermination of mandate of arbitrator The mandate of an arbitrator shall terminate if
He becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay He withdraws from office for any reason or the parties agree to the termination of his mandate
29
Substitution of arbitrator
Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator being replaced Where an arbitrator is replaced, any hearings previously held may be repeated The rulings earlier made by the tribunal prior to replacement of the arbitrator shall not be invalid solely because there has been a change in the composition of tribunal 30
The arbitration clause is independent of rest of the An arbitration clause which forms part of a contract contract
shall be treated as an agreement independent of other terms of the contract For example, even if a contract is cancelled for contractor’s default, the arbitration clause survives based on which arbitrator can be appointed If arbitral tribunal rules that a contract is null and void, this shall not entail ipso jure the invalidity of arbitration agreement
31
Ruling on the jurisdiction of arbitral tribunal
Parties may question the jurisdiction of arbitral tribunal Arbitral tribunal is competent
to rule on its own jurisdiction To rule on the validity of arbitration clause or arbitration agreement
32
Objections on jurisdiction or exceeding the scope of authority
Objection not later than submission of statement of defence If any matter raised by a party is considered to be beyond the scope of the arbitrator’s authority by the opposite party, the opposite party may raise objection but this shall be raised immediately without delay The arbitral tribunal may admit if it considers delay justified
33
Decision of arbitral tribunal
If the arbitral tribunal considers that the objections are not valid and rejects the plea, the tribunal shall continue with the proceedings and publish the award The party aggrieved by such an award may make an application to the court for setting aside the award under section 34
34
Conduct of arbitral proceedingsEqual treatment of parties
The parties shall be treated with equality Each party shall be given a full opportunity to present his case All the correspondence is addressed to both parties All the discussions are held only during presence of both parties
35
Parties are free to agree
Many sections (clauses) start with the provision ‘parties are free to agree’ ‘Failing an agreement’ the arbitral tribunal takes decision Many sections start with the provision ‘unless otherwise agreed by the parties’. That means that the rest of the provision in the section shall be operative only if the parties have not agreed otherwise 36
Agreement between the parties is given the highest importance
The whole purpose of arbitration is resolve disputes between the parties If both parties agree on an issue, that means there is no dispute as far as that issue is concerned When the issue is not disputed, where is the need for an arbitrator or any body to interfere? Arbitrator comes in picture only in respect of the issues which continue to be under dispute 37
Determination of rules of procedure
The parties are free to agree on a procedure to be followed by the arbitral tribunal in conducting its proceedings If the parties fail to agree, the arbitral tribunal decides the procedure The tribunal has also got power to determine the admissibility, relevance, materiality, and weight of any evidence The arbitral tribunal shall not be bound by
The Code of civil procedure, 1908(5 of 1908) The Indian evidence act ,1872(1 of 1872) 38
Place of arbitration
The parties are free to agree on the place of arbitration If they fail to agree, the arbitral tribunal shall determine the venue having regard to the circumstances and convenience of the parties The arbitral tribunal may meet at any place it considers appropriate, for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property Normally, venue is fixed after consulting all concerned 39
Commencement of arbitral proceedings
The arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent Time for making award is counted from this date Language: as agreed by the parties. If not arbitral tribunal shall determine
40
Statement of claim and defence
Within the time agreed upon by the parties, or Determined by the arbitral tribunal, The claimant shall state the facts supporting his claim, The points at issue and the relief or remedy sought The respondent shall state his defence in respect of these particulars Parties may also submit all documents they consider relevant with their statements Either party may amend or supplement his claim or defence as may be allowed by the arbitrator 41
Hearing or written proceedings
Arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or oral argument or whether the proceedings shall be conducted on the basis of documents or other materials In practice, in most of the cases oral hearings will be conducted The parties shall be given sufficient advance notice Copies of all communications made by one party to the arbitrator shall be sent to the other party. Similarly, the communications made by the presiding arbitrator shall be sent to both parties as well as other arbitrators Any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties
42
Default of a party
Unless otherwise agreed by the parties; If claimant fails to submit his statement within the stipulated time with out showing sufficient cause, the arbitral tribunal shall terminate the proceedings If the respondent fails to submit his defence within stipulated time without showing sufficient cause, the arbitral tribunal shall continue the proceedings, without treating that the failure in itself as an admission of the allegations by the claimant If a party fails to appear at an oral hearing or to produce documentary evidence, the tribunal may continue the proceedings and make the award on the evidence before it 43
Expert appointed by arbitral tribunal
Unless otherwise agreed by the parties, The arbitral tribunal may appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and Require a party to give the expert any relevant information or to produce access to,
Any relevant documents, goods or any other property for his inspection 44
Participation of expert in the hearing
The expert shall submit his report to the tribunal copies of which will be made available to the parties There after he shall participate in the hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue If requested by a party, the expert shall make available for examination of the party, the documents, goods or other property in his possession (which were provided to him for making his report) 45
Making arbitral award by panel of arbitrators
Any decision by arbitral tribunal shall be made by majority of all its members Questions of procedure may be decided by presiding arbitrator if authorised by parties or all arbitrators
46
Form and contents of arbitral award- signature, date and place
Shall be made in writing Shall be signed by the members of the tribunal Signatures of majority of members is sufficient if the reason for omitted signature is stated Shall state the date and place of award Signed copy shall be delivered to each party
47
Form and contents of awardreasons upon which it is based
Shall state the reasons upon which it is based This is obligatory unless
The parties have agreed that no reasons are to be given The award is on agreed terms where settlement is reached by parties
48
Form and contents of awardinterim award
Arbitral tribunal may make interim award Any time during proceedings This is subject to final award Normally this may be needed to give interim relief to the affected party
49
Form and contents of awardinterest up to the date of award
Where the award is for payment of money The tribunal may award interest At the rate considered reasonable by tribunal On the whole or part of the money awarded For the whole or any part of the period Between the date on which the cause of action arose and the date on which the award is made
50
Form and contents of awardinterest from the date of award to the date of payment
Unless the award otherwise directs, The sum directed to be paid by the award shall carry interest at the rate of 18% per annum From the date of award to the date of payment
51
Form and contents of award‘Costs’ of an arbitration
‘costs’ means reasonable costs relating to
The fees and expenses of the arbitrators and the witnesses, Legal fees and expenses, Any administration fees of the institution supervising the arbitration and Any other expenses incurred in connection with the proceedings and the award
52
Form and contents of awardaward of costs
Unless otherwise agreed by the parties The costs of an arbitration shall be fixed by the arbitral tribunal The tribunal shall specify
The party entitled to costs The party who shall pay the costs The amount of costs or method of determining the amount and The manner in which the costs shall be paid
53
Termination of proceedings
The arbitral proceedings shall be terminated by the final arbitral award or By an order for termination by arbitral tribunal
54
Application to court under Sec. 34 contesting the award
After receipt of award, if a party is not satisfied with the award, recourse to a court against the award may be made only by an application for setting aside such award The new Act, with the objective of minimising the supervisory role of courts in arbitral process, provided for limited grounds for setting aside the award
55
Grounds for setting aside award
(b)
(c)
An arbitral award may be set aside by the court only if The party making application must furnish proof of certain procedural irregularities. (The court does not interfere with the arbitral tribunal’s analysis of a claim and the assessment of the awarded amount out of the claimed amount) The court finds some other legal grounds 56
Grounds for setting aside award – (a) proof to be The award may set aside by the court only furnished bybe party-(I) if (a) The party making application furnishes proof that
(i) A party was under some incapacity, or (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication there on, under the law for the time being in force; or
57
Grounds for setting aside award – (a) proof to be furnished by a Only if the party furnishes proof that (iii) The party making application was not party-(II) given proper notice of the appointment of arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
58
Grounds for setting aside award (a) proof to be furnished by if the party furnishes proof that aOnly party-III
(iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. Provided that, if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters beyond not submitted to arbitration may be set aside; or
59
Grounds for setting aside award Onlyproof if the party proof that (a) tofurnishes be furnished by a (v) the composition of the arbitral tribunal or the party-(IV)
arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part
60
Grounds for setting aside award(b) award if themay court that The be setfinds aside by the court only if (b) The court finds that (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India
61
Time for making application for setting aside award
An application for setting aside award may not be made After 3 months from the date on which the party making that application had received the arbitral award or, If a request had been made under section 33 (correction and interpretation of award, additional award), from the date on which that request had been disposed of by the tribunal
62
court may consider extension
If the court is satisfied that an applicant was prevented by sufficient cause from making the application within the said period of THREE months, it may entertain the application within a further period of THIRTY days And not there after
63
The court may give opportunity to the arbitral tribunal
On receipt of application from the party for setting aside the award, the court may, Where it is considered appropriate and it is so requested by a party, Adjourn the proceedings for a period of time as determined by it In order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the tribunal will eliminate the grounds for setting aside the arbitral award
64
Enforcement of award-Award final and binding
The arbitration award shall be final and binding on the parties and persons claiming under them respectively If both parties are satisfied with the award, it can be implemented. However, if any party is not satisfied with the award and they find that there are grounds for getting the award set aside as per section 34, the party may file application in the court.
65
Enforcement of awardCourt’s decision on application
The section 34 provides very limited grounds for setting aside the award The court may find that there are no valid grounds to set aside the award and pass a decree in terms of award With the decree, the award can be enforced as per law
66
Enforcement of award-Court’s decision to give opportunity to tribunal The court may give opportunity to the arbitral
tribunal under section 34(4) and tribunal may take action to eliminate the grounds for setting aside the award The court may, there after, be satisfied that no grounds exist for setting aside the award and pass decree which can be enforced as per law
67
Enforcement of awardaward as if it were a decree
Time for making application to the court for setting aside an award is 3 months from the date of receipt of receipt of arbitral award (or within the period as may be extended by the court-not exceeding thirty days) Once the period expires, the arbitral award shall be enforced under the Code of Civil Procedure, 1908(5 of 1908) in the same manner as if it were a decree of a court
68
Enforcement of awardImprovement in new act
As per old act, separate application was to be filed in a court and decree obtained for enforcing the award even if the award was not contested. This involved prolonged litigation and delay in enforcement of award In the new act, once the period for contesting the award expires, the award shall be enforced as if it were a decree and there is no need to go to the court for a decree
69
Setting aside an award
If the court is fully satisfied that reasonable grounds exist for setting aside an award and accordingly sets aside an award, the arbitration process has to be commenced again by appointing fresh arbitral tribunal
70
Settlement of disputes in Arbitration
Sole arbitrator/Arbitral tribunal is appointed as stipulated in the Arbitration agreement An arbitrator shall be independent, impartial and shall possess the qualification stipulated in the agreement The arbitrator shall not be bound by Code of Civil Procedure or the Indian Evidence Act. The parties shall be treated with equality and each party shall be given full opportunity to present his case Claimant submits claims statement; respondent submits counter claims with copies to the opposite party On receipt, Arbitrator asks both parties to submit their pleadings in defense with copy to the opposite party On receipt, the Arbitrator fixes hearing in consultation with both parties Claims and counter claims are heard in the hearing; both parties given full opportunity Award published with in the stipulated time
71
Statement of claims
Description of claim Amount Relevant contract provisions Facts supporting the claim The points at issue Remedy sought Detailed calculations Relevant documents/other evidence 72
Pleadings in Defence
Description of claim Relevant contract provisions against the claim Facts against the claim The points at issue- Respondent's point of view Refuting the claim Scrutiny of detailed calculations and amount as corrected (without prejudice to disagreement to the claimant’s arguments) Comments on documents/ evidence submitted by the claimant Corresponding documents refuting claimant’s documents to disprove the claim 73
Counter to Pleadings
This may be submitted as reply to the Pleadings in Defence Counter arguments given in the Pleadings in Defence Any further clarifications on calculations Any further documents relevant to documents submitted by Respondent
74
Engagement of advocate or consultant by either party
If either party intends to present their claims/ defence through an advocate or a consultant, the party has to intimate the details to the Arbitral Tribunal well in advance with copy to the other party This will give ample time for the opposite party who may also decide to engage an advocate or a consultant and intimate the details to the Arbitral Tribunal with copy to the other party 75
Hearing
Place of hearing, date and time will be fixed by the Arbitrator in consultation with the parties Sufficient advance notice will be given to the parties All documents submitted to the Arbitrator by either party shall be endorsed to the other party Similarly, all communications made by the Arbitrator shall be addressed to both parties All inspections and discussions shall be made by the Arbitrator in presence of both parties
76
Application to Court for setting aside an Arbitral Award
Time limit is THREE months from the date of receipt of the Award by the party This may be extended by maximum of thirty days by the Court considering the justification Where the time for making an application to set aside an award has expired, or where such application has been refused by the Court, the award shall be enforced as if it were a decree of a Court. This is a great improvement from old act As per old Arbitration Act, obtaining a court decree was compulsory for enforcement of award. This resulted in prolonged litigation and delay in enforcement 77
Conclusion
As Construction Managers, our primary task is to achieve efficient and trouble free execution of the project. Our efforts are to avoid/ minimize disputes as far as possible; resolve them amicably The procedures are devised for speedy settlement without hurting the project completion and to avoid prolonged litigation Hope this will be appreciated by all those in charge of projects
78
GOOD WISHES
Thank you
79
1
Construction contract-mutual obligations
A construction contract is between two parties-Employer and contractor. The work is executed based on Contract provisions and the rights and obligations of the parties are governed by these documents Both parties have to fulfill their respective obligations under the contract. Non fulfillment of any obligation by one party affects the interests of the other party Long duration of contract-various issues arise during construction Views of one party may not be acceptable to the other resulting in disagreement 2
Unresolved issues result in disputes
Most of the issues are resolved by mutual discussions with the spirit of accommodating each other’s point of view and in the overall interest of work. The Engineer plays an important role in ascertaining the views of both sides. The Engineer, with his professional experience and fairness, endeavours to convince both parties to come to a common understanding and agreement. If there is a disagreement, the Engineer gives his decision/ determination in accordance with the contract. In case the issue can not be resolved, the dispute is precipitated
3
Sources of disputes
Sources of disputes could be:
Inconsistencies/discrepancies in contract provisions Delay in giving possession of site Denial of extension, Liquidated damages Rejection of work, Cancellation of contract, Foreclosure Variations, Fixing rates, Delays and denial of payments, etc. Delays in execution and failure of contractor Non adherence to contract conditions and specifications by contractor
4
Interpretation of contracts in case of discrepancies
The following aspects are to be considered while interpreting contract documents a) Contract to be read as a whole c) Local custom or usage d) Reasonable meaning e) Order of precedence among various documents forming part of contract f) Words versus figures g) Written words versus printed words h) General versus special provisions
5
Inconsistencies in different parts of Contract
In order to resolve apparent inconsistencies or contradictions, in cases where the subject matter is covered several times in different parts of the Contract, the order of precedence to be considered is laid down in the General Conditions of Contract adopted by various organisations There is a sub-clause in FIDIC contract form also (Federation Internationale des Ingenieurs-Conseils) laying down the order of precedence for interpretation
6
Interpretation of contracts-Order of precedence- FIDIC
The contract agreement The letter of acceptance The letter of tender The Particular Conditions The General Conditions The Specification The Drawings The schedule or any other documents 7
Engineer’s clarification
If an ambiguity or discrepancy is found in the documents, the Engineer shall issue necessary clarification or instruction The work will be executed as per the instruction of Engineer Disagreement on any issue may result in claim/dispute which will have to be resolved by various procedures of dispute resolution
8
Lodging claims-notice and substantiation
If contractor intends to claim any additional payment, he shall give notice to Engineer with copy to Employer, immediately on occurrence of an event leading to claim Contractor shall keep contemporary record necessary to support his claim Without necessarily admitting the Employer’s liability, Engineer may inspect the records Contractor shall send detailed particulars and supporting details to substantiate his claim Contractor shall also submit any further particulars, documents or clarifications as desired by the Engineer Copies of the correspondence shall be endorsed to the Employer 9
Engineer’s response to the claim
If the Engineer agrees to the claim, he shall issue a variation order admitting payment
If the Engineer does not agree, he shall state reasons for his disagreement The Contractor may advance further arguments in support of his claim The Engineer may reconsider and give his decision/determination Copies of the correspondence shall be endorsed to the Employer
10
Various stages of resolution of disputes-Domestic/Government contract form Mutual discussion
Decision of Accepting officer Conciliation- provision in the Arbitration and Conciliation Act, 1996 Arbitration as per the Arbitration and Conciliation Act, 1996 Intervention by Court
11
Various stages of resolution of disputes-FIDIC contract
Mutual discussion Decision of the Engineer Dispute review board-or Dispute Resolution Board-(Dispute Adjudication Board in FIDIC 99) Arbitration Intervention of Court
12
Dispute Review Boardappointment
FIDIC contract provides for DRB to settle disputes during execution / completion of project Normally formed by 3 Members experienced with the type of construction A Member should have no financial interest in any party-no previous employment with any party One Member nominated by each party-Third Member nominated by two Members-acts as Chairman Any disputes that cannot be settled may be referred to the DRB 13
DRB proceedings-procedure decided in consultation with DRB calls for Claims statement with details-copy parties to opposite party
On receipt ,calls for Defence statement from the parties DRB visits site along with parties-conducts hearing Full opportunity is given to both parties to present their cases DRB Members have their internal meeting, deliberate the issues among them and make their Recommendations If this is not acceptable to either party, the matter may be referred to Arbitration 14
Dispute Adjudication Board
DRB is replaced by DAB in FIDIC 99 DAB is formed in a similar way and conducts proceedings in similar way While DRB gives ‘Recommendations’, DAB gives its ‘Decision’ which shall be binding on parties Within a specified period, any party may give notice of dissatisfaction to the other party with copy to DAB. The case may be referred to arbitration there after If no such notice is given with the specified period, then the DAB’s decision shall be final and binding on both parties 15
The Arbitration and Conciliation Act, 1996
This is a very recent act formulated and enacted to make it more responsive to contemporary requirements. The old act, The Arbitration Act, 1940 was considered outdated. The new act replaces the old act It was recognized that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms Conciliation, which is getting worldwide recognition as an instrument for settlement of disputes , is included in the act
16
Objectives of the Act
To comprehensively cover international and commercial arbitration and conciliation taking into account the Model Law adopted by United Nations Commission on International Trade Law (UNCITRAL) Also domestic arbitration and conciliation To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of specific arbitration To provide that the arbitral tribunal gives reasons for its award To ensure that the tribunal remains within the limits of its jurisdiction To minimise the supervisory role of courts 17
Other objectives of the Act
To provide that every final award is enforced in the same manner as if it were a decree of the court To provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal To permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes
18
Conciliation
Conciliation is the process by which the parties are facilitated to reach an amicable settlement of their disputes (part III of Arbitration and Conciliation Act,1996) This is adopted prior to Arbitration like DRB for settlement of disputes without resorting to Arbitration Conciliation takes place only if the parties agree to it. Conciliator is appointed as per contract provision He shall be guided by the principles of objectivity, fairness and justice. He facilitates the parties to come together for an agreed settlement When the parties sign settlement agreement ,it shall be final and binding on the parties Conciliator authenticates settlement agreement The settlement agreement shall have the status of arbitral award
19
Arbitration agreement
Arbitration agreement means An agreement by the parties to submit to arbitration All or certain disputes Which have arisen or which may arise between them In respect of a defined legal relationship Whether contractual or not An arbitration agreement shall be in writing May be a clause in a contract agreement
20
Matters that cannot be referred to arbitration
b) c) d) e) f) g) h) i) j)
Broadly the matters involving morality, status and public policy cannot be referred to arbitration, such as Matrimonial matters like divorce, restitution of conjugal rights Matters relating to guardianship of a minor Testamentary matters, like, questions about validity of a will Insolvency matters Criminal proceedings Questions relating to charitable trusts Matters coming within the purview of the Monopolies and restrictive trade practices act Dissolution or winding up of a company And such other matters
21
Arbitral Tribunal Number of arbitrators
There may be a single arbitrator (sole arbitrator) Tribunal may have more than one arbitrator, not even number, as determined by the parties. This may be stipulated in the arbitration agreement Arbitrator may be of any nationality unless otherwise agreed by the parties Arbitration agreement may stipulate certain qualifications for the arbitrators There may be designated appointing authority for appointment of arbitrator as may be provided in the arbitration agreement
22
Appointment of arbitrators by parties-three arbitrators
The parties are free to agree on a procedure for appointing an arbitrator or arbitrators Failing any such agreement, in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator, who shall act as presiding arbitrator., In Government contract form, provision may be made for appointment of arbitrator by a designated authority specified in the arbitration clause/agreement 23
Failure to appoint arbitrator If a party fails to appoint an arbitrator within 30 days from the receipt of request from the other party; or If the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment; the appointment shall be made, upon request of a party, by the Chief Justice of High Court or any person or institution designated by him. 24
Appointment of arbitrator by parties- sole arbitrator
In arbitration by sole arbitrator, if the parties fail to agree on the arbitrator within 30 days from receipt of request by one party from the other party, upon request by a party, the appointment shall be made by Chief Justice or any person or institution designated by him. In Government contract form, provision may be made for appointment of arbitrator by a designated authority specified in the arbitration clause/agreement 25
Interest of both parties
The delays and disagreements can be minimized if sole arbitrator is to be appointed instead of three or more arbitrators If both parties feel that their interest is served by proceeding with the arbitration, the things will move fast. They some how find a commonly acceptable arbitrator, cooperate in early finalisation of the case Otherwise the party who feels that proceeding with the arbitration is detrimental to his interest, finds all excuses to delay the matter 26
Arbitrator to disclose- grounds for challenge
When a person is approached in connection with his possible appointment as arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality If not already done, the arbitrator shall disclose such circumstances during the proceedings at the earliest If the arbitrator fails to disclose such circumstances, his appointment may be challenged He may also be challenged if he does not possess requisite qualifications as per arbitration agreement 27
Decision on challenge
The challenged arbitrator may withdraw from his office The other party may also agree to the challenge If none of the above happens, the arbitral tribunal shall decide on the challenge If the challenge is not successful, the tribunal shall continue the proceedings and make the award The party challenging the arbitrator may make an application for setting aside such an award, as and when made, in accordance with section 34 28
Failure or impossibility to acttermination of mandate of arbitrator The mandate of an arbitrator shall terminate if
He becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay He withdraws from office for any reason or the parties agree to the termination of his mandate
29
Substitution of arbitrator
Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator being replaced Where an arbitrator is replaced, any hearings previously held may be repeated The rulings earlier made by the tribunal prior to replacement of the arbitrator shall not be invalid solely because there has been a change in the composition of tribunal 30
The arbitration clause is independent of rest of the An arbitration clause which forms part of a contract contract
shall be treated as an agreement independent of other terms of the contract For example, even if a contract is cancelled for contractor’s default, the arbitration clause survives based on which arbitrator can be appointed If arbitral tribunal rules that a contract is null and void, this shall not entail ipso jure the invalidity of arbitration agreement
31
Ruling on the jurisdiction of arbitral tribunal
Parties may question the jurisdiction of arbitral tribunal Arbitral tribunal is competent
to rule on its own jurisdiction To rule on the validity of arbitration clause or arbitration agreement
32
Objections on jurisdiction or exceeding the scope of authority
Objection not later than submission of statement of defence If any matter raised by a party is considered to be beyond the scope of the arbitrator’s authority by the opposite party, the opposite party may raise objection but this shall be raised immediately without delay The arbitral tribunal may admit if it considers delay justified
33
Decision of arbitral tribunal
If the arbitral tribunal considers that the objections are not valid and rejects the plea, the tribunal shall continue with the proceedings and publish the award The party aggrieved by such an award may make an application to the court for setting aside the award under section 34
34
Conduct of arbitral proceedingsEqual treatment of parties
The parties shall be treated with equality Each party shall be given a full opportunity to present his case All the correspondence is addressed to both parties All the discussions are held only during presence of both parties
35
Parties are free to agree
Many sections (clauses) start with the provision ‘parties are free to agree’ ‘Failing an agreement’ the arbitral tribunal takes decision Many sections start with the provision ‘unless otherwise agreed by the parties’. That means that the rest of the provision in the section shall be operative only if the parties have not agreed otherwise 36
Agreement between the parties is given the highest importance
The whole purpose of arbitration is resolve disputes between the parties If both parties agree on an issue, that means there is no dispute as far as that issue is concerned When the issue is not disputed, where is the need for an arbitrator or any body to interfere? Arbitrator comes in picture only in respect of the issues which continue to be under dispute 37
Determination of rules of procedure
The parties are free to agree on a procedure to be followed by the arbitral tribunal in conducting its proceedings If the parties fail to agree, the arbitral tribunal decides the procedure The tribunal has also got power to determine the admissibility, relevance, materiality, and weight of any evidence The arbitral tribunal shall not be bound by
The Code of civil procedure, 1908(5 of 1908) The Indian evidence act ,1872(1 of 1872) 38
Place of arbitration
The parties are free to agree on the place of arbitration If they fail to agree, the arbitral tribunal shall determine the venue having regard to the circumstances and convenience of the parties The arbitral tribunal may meet at any place it considers appropriate, for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property Normally, venue is fixed after consulting all concerned 39
Commencement of arbitral proceedings
The arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent Time for making award is counted from this date Language: as agreed by the parties. If not arbitral tribunal shall determine
40
Statement of claim and defence
Within the time agreed upon by the parties, or Determined by the arbitral tribunal, The claimant shall state the facts supporting his claim, The points at issue and the relief or remedy sought The respondent shall state his defence in respect of these particulars Parties may also submit all documents they consider relevant with their statements Either party may amend or supplement his claim or defence as may be allowed by the arbitrator 41
Hearing or written proceedings
Arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or oral argument or whether the proceedings shall be conducted on the basis of documents or other materials In practice, in most of the cases oral hearings will be conducted The parties shall be given sufficient advance notice Copies of all communications made by one party to the arbitrator shall be sent to the other party. Similarly, the communications made by the presiding arbitrator shall be sent to both parties as well as other arbitrators Any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties
42
Default of a party
Unless otherwise agreed by the parties; If claimant fails to submit his statement within the stipulated time with out showing sufficient cause, the arbitral tribunal shall terminate the proceedings If the respondent fails to submit his defence within stipulated time without showing sufficient cause, the arbitral tribunal shall continue the proceedings, without treating that the failure in itself as an admission of the allegations by the claimant If a party fails to appear at an oral hearing or to produce documentary evidence, the tribunal may continue the proceedings and make the award on the evidence before it 43
Expert appointed by arbitral tribunal
Unless otherwise agreed by the parties, The arbitral tribunal may appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and Require a party to give the expert any relevant information or to produce access to,
Any relevant documents, goods or any other property for his inspection 44
Participation of expert in the hearing
The expert shall submit his report to the tribunal copies of which will be made available to the parties There after he shall participate in the hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue If requested by a party, the expert shall make available for examination of the party, the documents, goods or other property in his possession (which were provided to him for making his report) 45
Making arbitral award by panel of arbitrators
Any decision by arbitral tribunal shall be made by majority of all its members Questions of procedure may be decided by presiding arbitrator if authorised by parties or all arbitrators
46
Form and contents of arbitral award- signature, date and place
Shall be made in writing Shall be signed by the members of the tribunal Signatures of majority of members is sufficient if the reason for omitted signature is stated Shall state the date and place of award Signed copy shall be delivered to each party
47
Form and contents of awardreasons upon which it is based
Shall state the reasons upon which it is based This is obligatory unless
The parties have agreed that no reasons are to be given The award is on agreed terms where settlement is reached by parties
48
Form and contents of awardinterim award
Arbitral tribunal may make interim award Any time during proceedings This is subject to final award Normally this may be needed to give interim relief to the affected party
49
Form and contents of awardinterest up to the date of award
Where the award is for payment of money The tribunal may award interest At the rate considered reasonable by tribunal On the whole or part of the money awarded For the whole or any part of the period Between the date on which the cause of action arose and the date on which the award is made
50
Form and contents of awardinterest from the date of award to the date of payment
Unless the award otherwise directs, The sum directed to be paid by the award shall carry interest at the rate of 18% per annum From the date of award to the date of payment
51
Form and contents of award‘Costs’ of an arbitration
‘costs’ means reasonable costs relating to
The fees and expenses of the arbitrators and the witnesses, Legal fees and expenses, Any administration fees of the institution supervising the arbitration and Any other expenses incurred in connection with the proceedings and the award
52
Form and contents of awardaward of costs
Unless otherwise agreed by the parties The costs of an arbitration shall be fixed by the arbitral tribunal The tribunal shall specify
The party entitled to costs The party who shall pay the costs The amount of costs or method of determining the amount and The manner in which the costs shall be paid
53
Termination of proceedings
The arbitral proceedings shall be terminated by the final arbitral award or By an order for termination by arbitral tribunal
54
Application to court under Sec. 34 contesting the award
After receipt of award, if a party is not satisfied with the award, recourse to a court against the award may be made only by an application for setting aside such award The new Act, with the objective of minimising the supervisory role of courts in arbitral process, provided for limited grounds for setting aside the award
55
Grounds for setting aside award
(b)
(c)
An arbitral award may be set aside by the court only if The party making application must furnish proof of certain procedural irregularities. (The court does not interfere with the arbitral tribunal’s analysis of a claim and the assessment of the awarded amount out of the claimed amount) The court finds some other legal grounds 56
Grounds for setting aside award – (a) proof to be The award may set aside by the court only furnished bybe party-(I) if (a) The party making application furnishes proof that
(i) A party was under some incapacity, or (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication there on, under the law for the time being in force; or
57
Grounds for setting aside award – (a) proof to be furnished by a Only if the party furnishes proof that (iii) The party making application was not party-(II) given proper notice of the appointment of arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
58
Grounds for setting aside award (a) proof to be furnished by if the party furnishes proof that aOnly party-III
(iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. Provided that, if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters beyond not submitted to arbitration may be set aside; or
59
Grounds for setting aside award Onlyproof if the party proof that (a) tofurnishes be furnished by a (v) the composition of the arbitral tribunal or the party-(IV)
arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part
60
Grounds for setting aside award(b) award if themay court that The be setfinds aside by the court only if (b) The court finds that (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India
61
Time for making application for setting aside award
An application for setting aside award may not be made After 3 months from the date on which the party making that application had received the arbitral award or, If a request had been made under section 33 (correction and interpretation of award, additional award), from the date on which that request had been disposed of by the tribunal
62
court may consider extension
If the court is satisfied that an applicant was prevented by sufficient cause from making the application within the said period of THREE months, it may entertain the application within a further period of THIRTY days And not there after
63
The court may give opportunity to the arbitral tribunal
On receipt of application from the party for setting aside the award, the court may, Where it is considered appropriate and it is so requested by a party, Adjourn the proceedings for a period of time as determined by it In order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the tribunal will eliminate the grounds for setting aside the arbitral award
64
Enforcement of award-Award final and binding
The arbitration award shall be final and binding on the parties and persons claiming under them respectively If both parties are satisfied with the award, it can be implemented. However, if any party is not satisfied with the award and they find that there are grounds for getting the award set aside as per section 34, the party may file application in the court.
65
Enforcement of awardCourt’s decision on application
The section 34 provides very limited grounds for setting aside the award The court may find that there are no valid grounds to set aside the award and pass a decree in terms of award With the decree, the award can be enforced as per law
66
Enforcement of award-Court’s decision to give opportunity to tribunal The court may give opportunity to the arbitral
tribunal under section 34(4) and tribunal may take action to eliminate the grounds for setting aside the award The court may, there after, be satisfied that no grounds exist for setting aside the award and pass decree which can be enforced as per law
67
Enforcement of awardaward as if it were a decree
Time for making application to the court for setting aside an award is 3 months from the date of receipt of receipt of arbitral award (or within the period as may be extended by the court-not exceeding thirty days) Once the period expires, the arbitral award shall be enforced under the Code of Civil Procedure, 1908(5 of 1908) in the same manner as if it were a decree of a court
68
Enforcement of awardImprovement in new act
As per old act, separate application was to be filed in a court and decree obtained for enforcing the award even if the award was not contested. This involved prolonged litigation and delay in enforcement of award In the new act, once the period for contesting the award expires, the award shall be enforced as if it were a decree and there is no need to go to the court for a decree
69
Setting aside an award
If the court is fully satisfied that reasonable grounds exist for setting aside an award and accordingly sets aside an award, the arbitration process has to be commenced again by appointing fresh arbitral tribunal
70
Settlement of disputes in Arbitration
Sole arbitrator/Arbitral tribunal is appointed as stipulated in the Arbitration agreement An arbitrator shall be independent, impartial and shall possess the qualification stipulated in the agreement The arbitrator shall not be bound by Code of Civil Procedure or the Indian Evidence Act. The parties shall be treated with equality and each party shall be given full opportunity to present his case Claimant submits claims statement; respondent submits counter claims with copies to the opposite party On receipt, Arbitrator asks both parties to submit their pleadings in defense with copy to the opposite party On receipt, the Arbitrator fixes hearing in consultation with both parties Claims and counter claims are heard in the hearing; both parties given full opportunity Award published with in the stipulated time
71
Statement of claims
Description of claim Amount Relevant contract provisions Facts supporting the claim The points at issue Remedy sought Detailed calculations Relevant documents/other evidence 72
Pleadings in Defence
Description of claim Relevant contract provisions against the claim Facts against the claim The points at issue- Respondent's point of view Refuting the claim Scrutiny of detailed calculations and amount as corrected (without prejudice to disagreement to the claimant’s arguments) Comments on documents/ evidence submitted by the claimant Corresponding documents refuting claimant’s documents to disprove the claim 73
Counter to Pleadings
This may be submitted as reply to the Pleadings in Defence Counter arguments given in the Pleadings in Defence Any further clarifications on calculations Any further documents relevant to documents submitted by Respondent
74
Engagement of advocate or consultant by either party
If either party intends to present their claims/ defence through an advocate or a consultant, the party has to intimate the details to the Arbitral Tribunal well in advance with copy to the other party This will give ample time for the opposite party who may also decide to engage an advocate or a consultant and intimate the details to the Arbitral Tribunal with copy to the other party 75
Hearing
Place of hearing, date and time will be fixed by the Arbitrator in consultation with the parties Sufficient advance notice will be given to the parties All documents submitted to the Arbitrator by either party shall be endorsed to the other party Similarly, all communications made by the Arbitrator shall be addressed to both parties All inspections and discussions shall be made by the Arbitrator in presence of both parties
76
Application to Court for setting aside an Arbitral Award
Time limit is THREE months from the date of receipt of the Award by the party This may be extended by maximum of thirty days by the Court considering the justification Where the time for making an application to set aside an award has expired, or where such application has been refused by the Court, the award shall be enforced as if it were a decree of a Court. This is a great improvement from old act As per old Arbitration Act, obtaining a court decree was compulsory for enforcement of award. This resulted in prolonged litigation and delay in enforcement 77
Conclusion
As Construction Managers, our primary task is to achieve efficient and trouble free execution of the project. Our efforts are to avoid/ minimize disputes as far as possible; resolve them amicably The procedures are devised for speedy settlement without hurting the project completion and to avoid prolonged litigation Hope this will be appreciated by all those in charge of projects
78
GOOD WISHES
Thank you
79
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