Arbitration,conciliation,ADR

S.K.Rao

Construction contract-mutual
obligations
A construction contract is between two partiesEmployer 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
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Unresolved issues result in

disputes
Most of the issues are resolved by mutual
discussions with the spirit of accommodating each
others 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
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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
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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
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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 IngenieursConseils) laying down the order of precedence
for interpretation
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Interpretation of contractsOrder of precedence- FIDIC

The
The
The
The
The
The
The
The

contract agreement
letter of acceptance
letter of tender
Particular Conditions
General Conditions
Specification
Drawings
schedule or any other documents
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Engineers 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
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Notice for claim and

substantiation
If the contractor wishes to claim for 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 Employers 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

Engineers 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
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Dispute Resolution-ADR
Disagreement between the Employer and the
Contractor results in dispute
Going to Court for resolving disputes involves
lengthy litigation which is tedious and time
taking
Various alternative methods of dispute
resolution are, therefore, devised for
settlement of disputes-ADR
Arbitration and conciliation are governed by
The Arbitration and Conciliation Act,1996
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Claims and counter claims

The party making claims is called Claimant
The claimant submits his Statement of Claims,
substantiating his claims
The opposite party who responds and defends the
claims is called Respondent or Defendant
The respondent submits arguments against the claims,
called Pleadings in defence or defence statement
The opposite party may submit his own claims called
counter claims
The first party submits defence statement against the
claims of opposite party
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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

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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
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Dispute Review Board-FIDIC

contract
FIDIC contract provides for DRB to settle
disputes during execution / completion of
project
Any disputes that cannot be settled by mutual
discussion and decision of Engineer may be
referred to the DRB
Procedure for appointment of DRB,
qualifications and experience required of the
Board members, conducting proceedings etc, is
laid down in the contract
The board members need not be legal experts
and they need not follow strict court procedure.
However, they should be impartial, reasonable
and objective
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Dispute Review Boardappointment

Normally formed by 3 Members experienced with
the type of construction and acceptable to both
parties
A Member should have no financial interest in any
party
There should not be any previous employment with
any party
This should be confirmed by each member before
accepting the appointment
One Member is nominated by each party
The other party has to agree to the nomination
Third Member is nominated by the two Members
already nominated as above and he should be
acceptable to both parties
The third member acts as chairman
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DRB proceedings-commencement
DRB proceedings are commenced from the date
the chairman accepts his appointment
DRB chairman calls for Claims statement from
both parties with details within a specified date
He shall endorse copy to the other members
The parties are asked to endorse copies to
opposite party as well as other members
On receipt, the chairman calls for Defence
statement from the opposite parties by a
specific date
Copies to be endorsed to the parties as well as
other members
Parties may request for extension of time for
submission which may be considered by the DRB
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DRB proceedings-hearing
On receipt of all the documents from both
parties, each member studies the case in detail
The chairman fixes the date for site visit and
hearing of the case in consultation with all
concerned
The procedure for conducting the proceedings
will be decided by DRB in consultation with the
parties
On the appointed date, DRB visits site along with
parties
The hearing of the case is conducted at a
convenient location
Full opportunity is given to both parties to
present their cases during site visit as well as
during the hearing
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DRB proceedingsrecommendations
DRB Members make their own notes during site
visit and the hearing
They may ask for any clarifications from the
parties
The hearing will be closed after both parties are
satisfied that they are given full opportunity to
present their case
There after, the DRB will have their internal
meeting, deliberate the issues among them and
make their Recommendations
This will be signed by the members and chairman
The copies will be sent to both parties and the
members
If this is not acceptable to either party, the matter
may be referred to Arbitration
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Dispute Adjudication Board

DRB is replaced by DAB in FIDIC 99
DAB is formed in a similar way and conducts
proceedings in a 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 DABs decision shall be final and
binding on both parties
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Resolution of disputes-ADR
Mutual discussion
Decision of Engineer/ Accepting
officer
Dispute review board- provision in
FIDIC contract form
Conciliation- provision in the
Arbitration and Conciliation Act, 1996
Arbitration as per the Arbitration and
Conciliation Act, 1996
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Powers vested with Engineer/Accepting

officer
As per contract, Engineer/Accepting officer is vested
with powers to act as quasi-arbitrator to decide on
disputed issues
Order of precedence among various documents of
contract agreement to be considered
Contractor submits his claim with supporting details
Dept. submits their point of view giving the basis and
details
Engineer/Accepting officer examines documents/details
and consults both sides
Effort for mutual agreement
If not possible, he gives his unbiased decision
If this is not acceptable to either party, reference is
made to DRB/conciliation/arbitration as the case may be
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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 Indian 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
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The United Nations Commission on

International Trade Law
UNCITRAL adopted the Model Law on International
Commercial Arbitration
An important feature of the Model Law is that the
concepts of different legal systems of the world are
harmonised in it.
Thus, contains provisions which are designed for
universal application
The General Assembly of United Nations
recommended that all countries give due consideration
to the said Model Law in view of the desirability of
uniformity of law of arbitration procedures and the
specific needs of international commercial arbitration
practice
The Arbitration and Conciliation Act, 1996 was enacted
keeping this aspect in view
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Objectives of the Act

To comprehensively cover international and
commercial arbitration and conciliation
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
To permit an arbitral tribunal to use mediation,
conciliation or other procedures during the arbitral
proceedings to encourage settlement of disputes
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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 provide that, for purpose of enforcement of foreign
awards, every arbitral award made in a country to
which one of the two international Conventions
relating to foreign awards to which India is a party
applies, will be treated as foreign award

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Contents of the Act

Part I Arbitration- consisting of TEN
chapters
Part II Enforcement of certain foreign
awards- consisting of TWO chapters
Part III Conciliation
Part IV Supplementary provisions
The First Schedule
The Second Schedule
The Third Schedule
Notes on Sections
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Part I Arbitration

Chapter I General provisions

Chapter II Arbitration agreement
Chapter III Composition of arbitral tribunal
Chapter IV Jurisdiction of arbitral tribunals
Chapter V Conduct of arbitral proceedings
Chapter VI Making of arbitral award and termination
of proceedings
Chapter VII Recourse against arbitral award
Chapter VIII Finality and enforcement of arbitral
awards
Chapter IX Appeals
Chapter X Miscellaneous
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