Alternative Dispute Resolution

Introduction to Alternative Dispute Resolution (ADR)

Key Information

Alternative Dispute Resolution or "ADR" as it is often referred to, includes Mediation, Dispute Adjudication Boards ("DAB's), Expert Determination, and Amicable Settlement (and possibly minor Tribunals).

Contracts, both standard and bespoke, now introduce alternative and generally mandatory, earlier and cheaper methods of dispute resolution other than arbitation and Litigation.

The procedures can therefore arise contractually but they can also arise consensually by agreement between the parties.

Arbitration and Litigation should be considered to be a final resort in what is often a series of dispute resolution procedures either set down in the contract or agreed to by the parties post contact after the dispute has arisen. It is not unusual for arbitration to take over two years and litigation in the courts even longer. DIFC in Dubai may be the exception to the rule in that there are only two levels of judgment, First Instance and Appeal, whereas Dubai courts add a third layer of the Court of Cassation.

"Others" is not considered in detail, it is mentioned only in that it applies to the UK but there are Tribunals here in the Middle East and RERA is one of them for domestic property disputes.

Module Review

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Amicable Settlement

Overview

  • Amicable Settlement can be Contractual or Voluntary post dispute (Contractual often involves meeting senior staff).
  • There is no FIDIC sanction if Amicable Settlement has not been attempted, it only causes delay to other procedures.
  • If successful then the settlement agreement should be engrossed and signed by parties at that time.
  • Are discussions "without prejudice"
  • There is no formal process, procedures or rules - entirely ad-hoc.

Module Review

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Dispute Adjudication Boards

Overview

The Dispute Adjudication Boards (DAB) were introduced into the FIDIC suite of contracts in 1999. The progression is a series of steps set down in FIDIC to initially ask for an Engineer's decision; and if you dissent from the Engineer's Decision then the dispute is referred to the DAB to adjudicate; if the DAB decision is disputed then Notice of Dissatisfaction must be issued by the dissenting party within a defined period (usually 28 days) or the DAB decision becomes final and binding; if such a notice is issued the parties must attempt an amicable settlement and if unsuccessful then an arbitration can be commenced.

In what year did the Dispute Adjudication Boards become introduced into the FIDIC suite of contracts?

  • 1999
  • 1979
  • 2009

If the DAB decision is disputed, what is the usual period of time that the dissenting party has to issue a Notice of Dissatisfaction?

  • 28 days
  • 10 days
  • 90 days

General Considerations

The DAB can arise as a contractual obligation but can also be consensual whereby parties introduce it post contract.

The decision can be final and binding if the contract says so, subject to the possibility of a Notice of Dissatisfaction as mentioned earlier. It is critical when drawing up bespoke provisions that it is clear whether the decision is to be finally binding. 

If not intended to be binding and merely persuasive, the board is sometimes referred to as a Dispute Review Board.

The parties can pre-arrange and include in the contract the number of persons to form the Tribunal who will decide the matter. It can be a single person but is often three persons. If three, then there is one nominee from each party who is described as the Chairman.

The most sensible arrangement is to have the Board in place on day one of the contract, and while this is rarely obtained, it should be formed as soon as possible to hear any disputes arising during the construction. This is a major difference from arbitration and litigation.

The DAB can include a Hearing or it can be reviewed on documents only.

The aim is to prevent the parties from letting disputes affect the completion of the works. The DAB will sit as often as necessary with a view to maintaining progress and cash flow for the project. This has on occasion brought criticism that DAB's favour the contractor during the course of construction to ensure that the contractor completes the work (but we have no authority that suggests that the allegation is true).

TRUE OR FALSE

  • The DAB can only arise as a contractual obligation, it cannot be introduced post contract.
  • The DAB can include a Hearing or it can be reviewed on documents only.
  • The Tribunal is only ever formed by one person, The Chairman, who will decide the matter.

Typical Process for a DAB

The process is usually commenced by the issue of a Notice stating that the Engineer's or Project Manager's decision is disputed. The Tribunal then set a timetable (if the contract does not already set one). FIDIC sets down 84 days for publication of the "reasoned" decision from the date of the initial notice.

The procedure is usually as follows:

  1. Referral from Claimant
  2. Response from the Respondent
  3. Reply to the Response from the Claimant
  4. Rejoinder from the Respondent
  5. Various other submissions with permission from the Tribunal
  6. Tribunal's "reasoned" Decision

All supporting evidence must be submitted with each document but particularly with the Referral and the Response. The Contract or the Tribunal may limit the number of submissions allowed.

DAB's are generally required by the Contract to provide reasons for their Decision.

The Contract sets down the jurisdiction of the Tribunal to allow party's costs or  costs in the case, such as the cost of the Tribunal. Standing Tribunals are often paid a monthly retainer and the costs shared between the parties.

It is usual to accept that the Tribunal can use the slip rule such that errors in arithmetic can be corrected if brought to the Tribunal's attention within a short period after publication of the decision.

The typical process for a DAB is...

  • Referral from Claimant
  • Response from the Respondent
  • Reply to the Respondent from the Claimant
  • Rejoinder from the Respondent
  • Various other submissions with permission from the Tribunal
  • Tribunal's "reasoned" Decision

Dispute Review Board - The ABC Explanation!

 

Expert Determination

General Considerations

This dispute resolution method may similarly be set down as a process that must be attempted prior to arbitration or litigation. If the contract makes it mandatory, then a court is likely to support the contract provision. Sometimes the result of an agreement after the dispute has arisen, is to refer the dispute to someone with specialist knowledge so it can be a consensual process. Some contracts introduce it as a mandatory step in the dispute process only if the dispute is on a specialist matter and if not then this step can be by-passed.

What constitutes a specialist matter is based on opinion and not fact. As an example: a change to a process in a processing plant which one party alleges requires a complete recalculation and redesign of the system would qualify as a specialist matter whereas interpretation of a contract clause may not.

In practice if contractual and not consensual it is often made difficult by the parties being unable to agree on a nominee once the dispute has arisen.

Another problem is that until the dispute crystallises, the nature of the expert required is not known e.g. is it an argument on geotechnical matters or a dispute on structural design? A different expert is required from different construction disciplines for these two matters.

Experts normally expect to work under their own drafted terms and conditions and this often includes an immunity clause that prevents you suing them for negligence.

Fees are generally set down in the construction contract whereby each party is to pay half, usually in advance or as a deposit against the final invoice.

The Determination will not be released without prior receipt of payment.

Process for Expert Determination

The process is generally initiated by a notice from the "injured" party.

The Expert will probably insist on using his/her standard terms of appointment including immunity from suit. Working could be "I will not be liable for any act or omission (including negligent acts and omissions) in the discharge of my functions as an expert".

The process involves the Claimant and the Respondent each making a submission on the subject. If the Expert's Determination has been agreed as "final and binding" then it will be treated as such, but often the intention is to make it final and binding only to the extent that if a party dissents, it can issue a notice of dissatisfaction and continue the dispute in another method of resolution. 

However, there is usually a stated time limit on the issue of the notice. If the time limit is reached the Determination then does become final and binding.

The Expert can ask for further submissions if they believe that a Determination cannot be made on the submissions from the parties.

Parties can limit whether or not the Expert can ask for further information but an experienced Expert will threaten to resign unless they can satisfy and ratify the Decision with sufficient evidence.

The Expert usually has to publish the Determination within a set period. Often it is 28 days from the date of the last submission from the parties and the Expert declares the proceedings closed.

Knowledge Check

1. The process is generally initiated by a notice from the "" party.

2. The process involves the  and the  each making a submission on the subject.

3.  The  usually has to publish the Determination within a set period. Often it is  days from the date of the last submission from the parties and the  declares proceedings closed.

 

 

Further Considerations

This process is rarely satisfactory unless the Expert is literally an expert in the particular field and he/she is asked the correct questions. With consent, the Expert can employ an Expert on a particular point outside his/her skill set.

It is best avoided other than for very specialist matters.

Each party generally agrees to pay half the Expert's cost with each party to meet its own costs but the Expert will not generally commence without full payment in advance so one party pays and recovers half from the other.

Expert is functus officio once he has published save for the slip rule.

Expert is generally required by the contract and the terms of the appointment to give reasons for the Determination.

Mediation

Considerations

Mediation can be set down in and arise from the Contract and it may be mandatory or optional. It can also be a consensual agreement between the parties when the dispute arises. The Contract or the consensual agreement will set down how the Mediator is to be appointed.

The Mediator is solely a Facilitator. Unlike an Adjudicator in a DAB or an Expert Determination, the Mediator has no power to make decisions to bind the parties in any respect, they are solely to assist and encourage the parties to reach a settlement of the dispute.  

Either party can leave the mediation at any time, and the Mediator has not power to prevent either party calling the mediation to a close and leaving.

The parties to a mediation should only attend if they are intending to reach a commercial settlement. They must want to agree the dispute. Mediation is not about contractual entitlement, it is always about a commercial settlement. It requires both parties to compromise.

It is not unusual to exclude the parties' lawyers from the mediation and to only allow their input into drafting the settlement agreement if an agreement is achieved. This prevents arguments on legal and contractual matters preventing the settlement.

The Mediator's task is to lower both parties' expectations to assist in the compromise.

The parties' of the contract generally sets down that each party pays half the Mediator's fees and each party meets its own costs in the mediation.

True or False

  • The Mediator has the same power to make decisions as an Adjudicator has in a DAB.
  • Both parties must have their lawyers present throughout the mediation, in order to argue on legal and contractual issues
  • The role of the Mediator is solely to assist and encourage the parties to reach a settlement agreement of the dispute.
  • In order to call the mediation to a close, a settlement of the dispute must have been reached, or both parties must be in agreement to leave.
  • Each party pays half the Mediator's fees and each party meets its own costs in the mediation.

Mediation Typical Procedure

1. The Mediator sends the parties a suggested programme for the Mediation.

2. The Mediator invites the parties to submit a skeleton argument in writing, which is limited to either a number of words or phrases.

3. The period of time and location is agreed by both Parties. Generally this will be a single day but it can be longer.

4. A Confidentiality Agreement is signed by everyone present. This is to try to avoid any compromises being repeated in subsequent dispute resolution.

5. There is a single spokesman for each party when in concert. This prevents chaos and numerous sub-meetings taking place. In caucus all present can state their opinion.

6. Each spokesman makes an opening statement setting out their party's position. A time limit is set although this is rarely necessary, it can be as short as two minutes.

7. The Mediator attempts to state and commit to writing what is agreed and what is disagreed between the parties.

8. The Parties then separate and go into caucus.

9. The Mediator travels between the two camps and attempts to lower expectations and seek compromises.

10. The Mediator is only allowed to repeat those matters/offers/compromises that he/she has been given permission to convey to the opposing party.

11. Mediation continues until the time limit expires or there is a settlement.

12. If the parties settle then an Agreement should be engrossed and signed at the mediation.

Fill in the blanks

Who is responsible for sending a suggested programme for the Mediation? 

The Mediator invites the parties to submit a skeleton argument in writing, which is limited to what?  or  

To assist in avoiding any compromises being repeated in subsequent dispute resolutions, what document needs to be signed by all present?  

Mediator is only allowed to repeat those / /  that he/she has been given permission to covey to the opposing party.

Mediation continues until the   or there is a .

Pro's and Con's

Dispute Boards

 

Good for large and international contracts.

It can require a permanent legal presence for each party to ensure that no "ambush" occurs.

Expert Determination

 

Good on single, one point references to an expert in a single specialist field.

Often has contractual implications so needs a lawyer and a specialist.

Mediation

Excellent if the parties are open minded to compromise.

If parties are not open minded to compromise, it can be a waste of time and money.

Module Review

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  • NO
I confirm I have read and understood the information in this module:

Knowledge Check

Match the statement to the correct resolution

  • Dispute Adjudication Boards (DAB)
    The decision can be final and binding if the contract says so, subject to the possibility of a Notice of Dissatisfaction.
  • Amicable Settlement
    Are discussions 'without prejudice'
  • Expert Determination
    Further submissions can be requested if he/she believes that a Determination cannot be made on the submissions from the parties.
  • Mediation
    It can be set down in and arise from the Contract and it may be mandatory or optional. It can also be a consensual agreement between the parties when the dispute arises.

Match the statement to the correct resolution

  • Amicable Settlement
    There are no formal process, procedures or rules - entirely ad-hoc
  • Dispute Adjudication Boards
    The intention is to settle disputes as they arise during construction - maintaining programmes and cash flow
  • Expert Determination
    Best avoided other than for very specialist matters.
  • Mediation
    Their task is to lower both parties' expectations to assist in the compromise.

Match the statement to the correct resolution

  • Dispute Adjudication Boards
    Pro's: Good for large and international contracts. Con's: Can require a permanent legal presence for each party to ensure that no "ambush" occurs.
  • Expert Determination
    Pro's: Good on single one point references to an expert in a specialist field. Con's: Often has contractual implications so needs a lawyer and a specialist.
  • Mediation
    Pro's: Excellent if the parties are open minded to compromise. Con's: If parties are not open minded to compromise, it can be a waste of time and money.

Know your abbreviations

DAB =   

DRB =   

ADR =