UNIT 9&amp 10&amp 11 Claims &amp Disputes

 

Lecture Notes On Construction Claims & Disputes Table of Contents 1. 2. 3. 4. 5. 6. 7.

Background Construction Cla Claims Causes ffo or Cl Claims Requ equirem rements ents ffo or Cla Claim imss Process of of Cl Claims Const strructio tion Di Dispu sputes Dispute Resolution

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Construction Claims & Disputes 1.

Background  Cl Claim aimss & Const Constru ructi ction on might might be in insep separ arabl able, e, un unles lesss a rel relent entles lesss

attempt has been made by the contracting parties to the Construction Contract to avoid their occurrence.  Un Unres resol olved ved claim claimss are are the basis basis for for the existe existenc ncee of co const nstruc ructio tion n

disputes.  Th Thee basis basis of remedy remedy for the claims claims or dis dispu putes tes ma may y be the the co cont ntrac ractt

and/or the applicable law.  In this part of the Course, we try to address, the definition of claims,

their causes & basis including their process or requirements  With respect to disputes, the definition of construction disputes, the

available mechanisms to resolve the same, will be addressed.  Such mechanisms are:   

Preventive; Amicable settlement; and Judgmental settlement.

 The specific forms of dispute resolution mechanisms are negotiation,

mediation,, conciliation, mediation conciliation, adjudication, adjudication, arbitration arbitration & litigation. 2.

Construction Cla Claims 

Claim is legally defined as an assertion to right.

 The nature nature of right may may relate to time, time, financial,

or other remedies.

 Cl Clai aim m is ther theref efor oree a subs substa tant ntiv ivee dem demand nd,, for for exa exampl ple, e, by the the

Contractor against the Employer.  Th Thee Emplo Employer yer may may have have its own own substa substanti ntive ve deman demand d again against st the

Contrac Contr actor tor.. We ca can n ca call ll th this is a co count unterc erclai laim. m. It is an in indep depen enden dentt demand originated from the same contractual relationship.  Th Thee basis basis of claim claim/co /coun unter tercla claim im is eit eithe herr the co cont ntrac ractt and/o and/orr the

applicable law.

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 There are also other basis of claims ( like extra contractual or tort

clai claims ms,, or in ca case se wher wheree no co cont ntra ract ct ex exis ists ts,, or if on onee ex exis iste ted, d, the the contract is found to be void, or ex gratia claim…).  Claims under the Contract  These are of two types: 

Claims as a result of certain anticipated & specified events & for which a remedy is designated in the contract; and



Claims as a result of an event where a certain term of the contract is breached & for which a remedy is designated in the contract.



For example, in case of  •

Non-performance,

•

Partial performance,

•

Defective performance, or

•

Late performance.



In both cases, the remedy is provided under the contract.



However Howev er,, th thee first first rel relate ated d to non non breac breach h of the co contr ntrac act, t, whereas, the second does.



The

reme emedies

in

both

cases

may

relate

to

financial

compensation, time extension, & other benefits or remedies. 

Il Illu lust stra rati tive ve of re reme medi dies es unde underr the the FIDI FIDIC C Cond Condit itio ions ns of  Contract.



Financial Finan cial compens co mpensatio ation n: •

With respect to Variation;

•

Measurement Changes;

•

Adverse Physical Conditions;

•

The Employer’s Risks;

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

•

Compliance with statutes, regulations, price fluctuations, Compliance fluctuations, currency & other economic causes;

•

Defects & unfulfilled obligations(NB: It relates to breach of the Contract);

•

Failure Failu re to comme commenc nce, e, cr criti itica call or non non cr criti itica call delay delays, s, suspension suspensio n of work, release from performance, performance, default & termination;

•

Delay in certifying payments;

•

Other specified events;

Time Extension •

Delay in supply of documents or drawings; ( see FIDIC Clause 6.3 & 6.4 )

•

Adverse physica Adverse physicall obstruc obstructions tions or physica physicall conditio conditions; ns; ( see FIDIC Clause 12.2)

•

Fossils Fossi ls & artic articles les of value value or antiq antiquit uity; y; ( see FIDI FIDIC C Clause 27.1)

•

Tests required but not provided for; ( see FIDIC Clause 36.5)

•

Suspension of the progress of the works; ( see FIDIC Clause 40.2)

•

Failure Failu re to give give posse possessi ssion on of site; site; ( see FID FIDIC IC Cl Clau ause se 42.2)

•

Other specified events;



Other Benefits or Remedies



Termin Term inat atio ion n of co cont ntra ract ct unde underr the the co cont ntra ract ct an and/o d/orr the the applicable law.



Suspension of the execution of works;



Reduction of the progress of the execution of works;

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 Remedy under the Law  It relates to a claim arising out of the contract contract bas based ed on the groun grounds ds

that a term of contract had been breached but where the remedy is not designated in the contract.  Under this circumstance, if the claim is valid, the remedy lies under the

provisions of the applicable law.  Th This is is sp speci eciall ally y relat related ed to the the assess assessme ment nt of damag damages es or sp speci ecific fic

performance or others.  Wi With th re resp spect ect to assess assessme ment nt of dama damages ges only only courts courts or the the arbit arbitral ral

tribunal or the adjudicator is empowered to assess & determine/decide based on the principles of damages or compensation.  Wi With th respe respect ct to speci specific fic perfo perform rman ance ce only only co cour urts ts or the the arbit arbitra rall

trib tribun unal al is empo empowe were red d to deci decide de or gi give ve an aw awar ard d base based d on the the principles of the applicable law.  In su such ch a si situ tuat atio ion, n, the the Engi Engine neer er is not not em empo powe were red d to asse assess ss &

de dete term rmin inee any dam damag ages es or or orde derr spec specif ific ic perfo erform rman ance ce of the the construction contract under the applicable law.  The remedy remedy would would be sought sought through through adjudica adjudication tion,, arbitra arbitration tion or

litigation unless the claim is settled amicably.  The legal remedy in case case of damages may may extend to the determin determination ation

of liability with respect to the consequential damages & assessment of  quantum of same, termination of contract as provided under the law( in serious cases). 3.

Causes for Claims  Ca Cause usess for for claim claimss may may be the occu occurre rrenc nces es of dev deviat iation ionss fro from m the the prom omis ises es made unde derr the the constru tructio tion contrac tractt du duri rin ng the performance of the Construction Contract.  These deviations( Dr. Wubishet) may reflect themselves in terms of or

in relation to :• completion time; construction cost; • • quality quali ty performance perfo rmance;; and • safety safe ty requirement requi rements. s.

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 The following factors may also cause claims. •

Poor or unclear tender and/or contract documents;

•

Poor or inadequate administration of responsibilities by stakeholders; and

•

Unforeseen or uncertain situations during execution of  the Construction Project;

 The following categories of factors may also contribute to the

emergence of claims. • • •

4.

Changed conditions; Additional works; Delay for cost overruns & time extension;

Requ equirem rements ents ffo or Cla Claim imss  For the claim to be successful, it has to fulfill certain valid

requirements.  These requirements are related to:   

Substantive requirements; Procedural requirements; and Proof requirements;

 Substantive Requirements 

By substanti substantive ve requir requiremen ementt we mea mean n supporti supporting ng or giving  justification  justifica tion for for the claim claim by specif specifical ically ly citing citing or invoking invoking the the provisions: • •

Of the Construction Contract; and/or Of the applicable law.



The provisions provisions of contrac contractt mea mean n the relevant relevant clau clause se in the contract, contrac t, which has been signed between the parties.



The provisions of the applicable applicable law means the relevant article of the law, which is applicable to the contract, for ex. The Civil Code.

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

The su The subst bstan antiv tivee requir requirem ement ent is also also ca calle lled d the the legiti legitima macy cy requirement.



Submitting a claim, without first establishing its legitimacy, under the Contract and/or under the applicable law is a futile exercise with no guaranteed return.



Pursuing claims costs money & also corporate time.

 Procedural Requirements 

By proc proced edur ural al re requ quir irem emen entt we mean mean the the serv servin ing g of the the required requ ired prior written written notice notice to the designa designated ted party under under the contract.



This is called intention to claim.



This Th is prio priorr writ writte ten n noti notice ce shal shalll al also so be gi give ven n wi with thin in the the contractually contrac tually designated designated time scale.



The time scale might be specific or reasonable.



The contract under consideration may specify such time scale in either way.



Clause 53 of FIDIC is illustrative in this instance. There are also other clauses, which specify other (lesser or subjective) time scales depending up on the specific type of claims.



The non observance of the procedural procedural requirement may result whole or partial loss of the substantive claim.

 Proof Requirements 

By proof requirement we mean the submission of the relevant documentation, docum entation, which supports/corrobora supports/corroborates tes the claims under consideration.



The relevant documentation may relate, for example, to:• time (delay & disruption) claims; • cost (additional payment) & profit claims; • variations claims; and • Other construction claims;

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

They may contain a form of letters, notices or otherwise.



In case of disputes the proof requirement, in addition to the relevant documentation, may also include:• • • •

5.

Factual Witnesses; Expert Opinion; Site Visit or Inspection; Other mode of proof, if any;

Process of of Cl Claims  The claims process process generally classified in to the following three pha phases: ses:

(Dr. Wubishet)   

Claim Submittal; Claim Processing; Claim Enforcement;

 Claim Submittal 

This is a process by which the claimant is obliged to claim wi with thin in a re reas ason onab able le peri period od of time time ( 28 28-3 -30 0 days days in most most co contr ntrac acts)f ts)foll ollow owed ed by the claim claiman ant’s t’s prepa preparat ration ion for all subs substa tant ntia iall doc documen uments ts & legal egal as aspe peccts supp suppo ortin rting g it itss entitlements entitlemen ts for an official submittal. submittal.



This constit tituted ted tha that a cla laim im has been een fil filed for for its its co cons nsid ider erat atio ion n if all all the the thre threee subsub-pr proc oces esse sess ca call lled ed Clai Claim m Notification, Notificatio n, Claim Preparation Preparation & Claim Submitta Submittall are fully undertaken by the claimant.

 Claim Processing 

This phase is classified further in to the following three subprocesses, • Claim Handling; • Dispute Resolution; Claim Approval; •



The Claim Handling , this sub-process initiates checking of the claim whether, it is legally or contractually supported or not, documents are toeral substantiate the clai claim m for for provided co cons nsid ider erat atio ion nvalid or and not, not, reliable an and d ov over alll proc procedu edura rall

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requirements have been followed or not. After verifying the validity of the claim proper computations & evaluations will be carried out to present the proposed compensation for the contractual contrac tual parties the claim is applicable to. 

Dispute Resolution, the contractual parties will pass through diff differ eren entt disp disput utee re reso solu luti tion on syst system em depe depend ndin ing g on thei theirr acceptance over the proposed compensation varying from the simple sim plest st media mediatio tion n by the co consu nsulti lting ng engine engineer er to the the fin final al court ruling in the form of litigation. Three types of dispute resolution systems are well recognized. These are, •

Preve Preventi ntive ve Dispu Dispute te Resol Resoluti ution on Syste System; m; ( by use use of  partnering, partnerin g, dispute resolution advisors, facilitators, …)

•

Amicable Amica ble Dispu Dispute te Res Resol oluti ution on Syste System; m; ( thro through ugh negotiation, negotiatio n, mediation, mediation, conciliatio conciliation, n, mini-trial, …)

•

Judgm Judgment ental al

Dispu Dispute te

Resol Resoluti ution on

Syste System; m;

(throu (through gh

Dispute Adjudication Board, Arbitration, Arbitration, Litigation…) Where dispute was handled in any form of its resolution System, it is termed as Dispute Resolution. 

Claim Approv Claim Approval al, once once the contrac contractual tual parties parties agree agree on the final outcome of the claim process, then they have reached in to a stage where the claim is approved.

 Claim Enforcement 

This phase is sub-divided in to the following two subprocesses. • Claim Enforcement; • Claim Closure;



The claim enforcement sub-process will entertain the inclusion of the approved claim in to payment certificates where their enforcement is due.



Once this compensation or entitlement is due in accordance with the approved claim and its enforcement requirements, then it is concluded concluded for its closure.

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

6.

In or orde derr to ac acco coun untt for for such such an ad admi mini nist stra rati tion on proc proces esss contrac con tracts ts provide provide claim clauses clauses with in their provision provisionss in their conditions of contract.

Const strructio tion Di Dispu sputes  Construction dispute may take different forms: dispute in relation to

time or cost, time & cost or otherwise.  Disputes relative to Time  With respect to dispute relative to time or delay the following aspects

shall be considered.  With respect to delay the contractor or the employer may have their

own respective claims.  The employer’s claim is related to liquidated damages.  Th Thee

cont contra racctor’ tor’ss clai claim m mos ostl tly y rela relate ted d to prol prolon onga gati tion on and/o nd/orr disruption claims.

 Prolongation may be defined as a critical delay which results when the

time time nece necess ssar ary y to co comp mple lete te a cr crit itic ical al acti activi vity ty is prol prolon onge ged, d, thus thus extending the time for completion of the whole of the works.  Delays in completion of the works might result in a number of added

costs to the contractor & if such delay is determined by the engineer to be th thee respo responsi nsibil bility ity of th thee empl employe oyer, r, then then a numb number er of claim claimss for financial compensation can be pursued by the contractor.  These time claims may include: 

Direct costs in relation to plant, equipment & labour;



On-site Establishment costs:



These are referred to as site over heads & consist of the costs of of an administrative & supervisory staff including but not limited to: • • •

Site staff; Trades foremen; Plant & tools;

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• • • •

• • • •

Welfare including cleaning…; Lighting & power; Storage, workshops, temporary works; Contrac Con tractor’s tor’s site office office incl includin uding g its equipme equipment nt & communication charges; Accommodation for the employer’s representatives; Sanitary accommodation; Scaffolding; Transport;



Off-site Offsite Overhead Overhe ad:



The off-si The off-site te overh overhea eads ds co cover ver co contr ntribu ibutio tions ns by in indiv dividu idual al co contr ntrac acts ts to the co cost st of ma maint intain aining ing the the co cont ntrac ractor tor’s ’s head head office. They are difficult to establish & especially in respect of  a period of delay & disruption or prolongation of a particular contrac con tract, t, where where a specific specific allocation allocation of time time to the variou variouss contracts contrac ts is difficult to assess.



Adverse weather conditions : A claim may arise if as a result of  a change in the the tim timing ing of the the exe xeccutio ion n of the works attributable to the employer, adverse weather conditions are encountered.     

Increased costs of labour, materials or equipment; Finance charges & interest; Profit on direct costs; Loss of profit; Interest on late payment;

 Disr Disrupti uption on may be defined defined as the effect of an event or a number number of 

events on the events the effici efficienc ency y of execu executio tion n of the the works works,, irr irresp espect ective ive of  whether or not there had been a delay to a critical activity.  Continuous, extensive & cumulative disruption, however, may end in

critical delay & prolongation of the time for completion.  In Inef effi fici cien ency cy,, loss loss of prod produc ucti tivi vity ty of la labo bour ur & unec unecon onom omic ic use use of 

equipment comes under the heading of disruption when they are caused by an event which is not the responsibility responsibility of the contractor. contractor.  A proper evaluation of a claim for disruption requires the following

pre-requisites.

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

An identification & analysis of each of the operations claimed to have been disrupted. It is not sufficient simply to state that the execution of the works has been disrupted.



The cause & the manner in which which disrupti disruption on has occurr occurred ed should be established.



The figures for the anticipated output. The resources planned & the time required to achieve the completion of the disrupted operations as calculated in the tender have to be shown to be achievable. Thee effect Th effect of any any ineffi inefficie cienc ncy y on the part part of the disrupt disrupted ed party in carrying out the works should be properly calculated & its effect included in the calculations of disruption suffered.





The number of hours actually logged in the time sheets for the disrupted operation has to be shown to be accurate.

 When records are available & are correct, then the cost of disruption

can be simply calculated as the number of hours actually worked less that that or orig igin inal ally ly an anti tici cipa pate ted d in the the tend tender er,, wi with th the the re resu sult lt bein being g multiplied by the cost of the particular resources disrupted per hour.

 When acceleration of the progress of the works is required, the cost

may include the expense of,    

Working additional hour; Providing additional labour; Providing additional or different equipment; Advancing the date of delivery of manufactured elements;

 Programming  In relation to monitoring the progress of the works, program is an

indispensable indispensab le guiding tool.  Program Programming ming involves introducing the parameters parameters of time & resources resources

into the work activities & ultimately into the project itself.  The traditional method of presenting a programme for the construction

contract has been through a bar chart.  The bar chart gives an outline plan of the time scale of a project broken

down into a relatively small number of components, each made up of a

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collection of many activities. Each component may have its own bar chart.  The bar chart also provides the start date & completion date for each

of the component or activities shown.  For the purpose of project control, the bar chart can show the progress

actually achieved at any particular time but it is only useful at the lower level of management.  The bar chart does not show how the various activities are connected

except through sequence of listing & therefore the constraint imposed by the completion of one activity on the start of another can not be accurately indicated or assessed.  As delay is costly to both the employer & the contractor, a more

sophisticated method which can handle various details of each activity & the interrelationships between them should be used in all but the simplest of civil engineering engineering projects.  Network planning & control is such a method.  A project network analysis should be carried out in at least eight

phases. 

Planning phase where a network of all activities necessary for the completion of a project is planned & drawn up. An activity is an operation where time & resources are consumed.



Project timing where estimates of duration of activities are calculated to determine as accurately as possible the project duration & to identify the activities which may prove to be critical.



Resourcee allocati Resourc allocation on where where informa information tion is added added to each each activity duration to show the resources required to complete that activity within the projected duration.



Allocation Allocati on of work work to sub-con sub-contrac tractors tors & a program programme me of  appointment to be followed with a schedule for production & approval of sub-contractors’ design, if any, and drawings.

 

Pricing of the various elements of the works. Procurement of materials.



Commencement Commence ment of works on site. site .

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

Proj Projec ectt cont contro roll wher here the the ac actu tual al prog progre ress ss on si site te is periodically measured against the network plan. The network  must then be updated in accordance with the actions taken, and a report report can be periodic periodically ally compiled compiled to highlight highlight the status of each activity at the particular time.



The report may show:



7.

•

Delay in an activity & its effect on other activities & on the time for completion;

•

New activities due to variation variati on & the effect on others & on the time for completion;

•

Resources which must be drafted to redress any new situations;

•

Any other change in the critical path network;

Network analysis analysis is, therefore, critical in delay claims of the contractor.

Dispute Resolution  Background 

Dispute resolution may have the following aspects/ dimensions, namely, • • •

Preventive dimension; Amicable settlement dimension; and Judgmental dimension;



In relation to this there is also the concept of ADR: Alternative Dispute Resolution. Alternative to what?



The concept of ADR is related to alternative to litigation or sometimes sometim es alternative to all binding decision making process (including the decision of the arbitrator arbitrator & adjudica adjudicator). tor).



Both preventive & amicable dispute resolution systems may be ca categ tegori orized zed under under Al Alter terna nativ tivee Dispu Dispute te Reso Resolut lution ion (ADR (ADR). ). There is no any binding or imposed decision by a third party in them.

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

In this respect, except with respect to the preventive aspect, the the Ethi Ethiop opia ian n law law re reco cogn gniz izes es both both the the am amic icab able le & the the  judgmen  judg mental tal aspec aspectt of dispu dispute te resolu resolution tion syste systems. ms.



The scope of the Ethiopian law may be limited in this regard. Beca Be cause use not not all all amica amicable ble & judgm judgment ental al forms forms of dispu dispute te resolution systems are recognized.



From the amicable settlement both:• Negotiation (Compromise: See Article 3307-Article 3317 of the Civil Code); and • Conciliation: Concilia tion: See Article 3318-Article 3324 of the Civil Code); are recognized.



From the judgmental forms of dispute resolution both:Litigation Litigati on ( the Court System or the Judiciary Judiciary Syste System: m: See Artic Article le 78-Ar 78-Artic ticle le 82 of the the FDR FDRE E Constitution); and Arbi Ar bitra tratio tion n (See (See Ar Arbi bitra trall Submi Submissi ssion on:: Ar Artic ticle le • 3325-Article 3346 of the Civil Code & Article 315Arti Ar ticl clee 31 319, 9, Arti Articl clee 35 3500-Ar Arti ticl clee 35 357 7 & Arti Articl clee 46 461( 1(fo forr fore foreig ign n arbi arbitr tral al awar awards ds)) of the the Ci Civi vill Procedure Code) Are recognized. •

 Preventive Aspect 

To prevent construction disputes, there are a host of factors to be considered.



The following following aspects aspects may may contribu contribute te to the prevent prevention ion of  construction disputes. To mention few of them:•

To have a well planned project;

•

To have a well studied project;

•

To have a well designed project;

•

To have a clear, accurate accurate & complete complete tender dossier dossier & document;

•

To have a clear, accurate & complete contract document;

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•

To have a balanced (in terms of allocation & distribution of risks, rights & obligations) contract document;

•

To disc discha harg rgee the the exp expecte ected d cont contra ract ctua uall obligations by the contracting parties;

•

To have a good project governance;

•

To have a well thought & suitable dispute prevention system;

& le lega gall



The following following are some some of the inter internati nationa onally lly recogniz recognized ed dispute prevention systems. • Disputes Potential Index (DPI); • Intelligent Allocation of Project Risks; • Incentives to Encourage Cooperation; • Partnering; • Others;



Dispute Potential Index •

•

The Construction Industry Institute, as the result of a study stu dy into into the the ca cause usess of co const nstruc ructio tion n dispu disputes tes & the the charact cha racteristi eristics cs of construc construction tion project projectss tha thatt are more more likely than others to generate disputes, has developed a predictive tool called the Dispute Potential Index or DPI. DPI identifies the presence of dispute-prone characteristics on a project, evaluates them, and reports the results to project team members so they can take actio action n to co corr rrect ect them them befor beforee the they y actua actually lly genera generate te problems.

•



The DPI is in effect a “cholesterol test” of the health of a construction project. The results of such analysis can be used to take action to eliminate potential problems & to design dispute resolution systems that will be suited to resolve particular kinds of problems that are likely to occur.

Intelligent Allocation of Risks

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•

The most The most effici efficient ent & co cost-e st-effe ffect ctive ive way way to struc structur turee project relationship is to assign each risk to the party who is best able to manage or control the risk.

•

Unrealistic shifting of risks to a party who Unrealistic who is unable unable to manage the risk can increase bid prices, sow the seeds of  countles tlesss potenti entia al dis isp putes, es, create eate di dist stru russt & resentm rese ntment, ent, and establish establish adversa adversarial rial relation relationship ship that can interfere with the success of the project.

•

The sp The speci ecific fic studie studiess ma made de in relati relation on to the the sub subjec jectt conclude the following. o

o

Owners Owne rs shou should ld av avoi oid d di dicctati tating ng pref prefer eren enti tial al contrac con tractt languag languagee thro through ugh superio superiorr bargaini bargaining ng power; Ownerss shoul Owner should d not not attem attempt pt to sh shift ift ino inordi rdina nate te risks to the contractor through one-sided contract language;

o

o

o



The ideal contract is one that assigns each risk to the the part party y that that is best best eq equi uipp pped ed to ma mana nage ge & minim inimiz izee that that ri risk sk,, re reco cogn gniz izin ing g the the uniq unique ue circumstances of the project; Some owners believe that the best contract is one that that forc forces es the the co cont ntra ract ctor or to hold hold the the ow owne nerr harmless harm less against against all possible possible risks. The owner ultim ultimat ately ely must must pay pay the the co costs sts of proje project ct riskriskeith either er by assu assumi ming ng them them or by re requ quir irin ing g the the contractor to include the insurance costs in the bid. If the partic ticul ular ar ri risk sk is one that the the contractor is ill-equipped to avoid or manage, the insurance cost may be excessive. Proje Project ct co cost st benef benefit it ca can n be realiz realized ed when when risk  risk  allocation is tailored to the circumstances of the individu indi vidual al pro project. ject. Own Owners ers who rou routinel tinely y forc forcee maximum assumption of risk on the contractor are likely to incur incur higher higher pro project ject costs. Con Contrac tractt preparat prep aration ion that that alloc allocates ates risk with a balanced balanced input from all parties will be most cost-effective.

Incentive to Encourage Cooperation

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•

Ince Incent ntiv ivee tech techni niqu ques es ar aree av avai aila labl blee to enco encou urage rage cooperation among all participants in the construction project.

•

By temporarily subordinating their individual interests to th thee legiti legitima mate te needs needs & su succ ccess ess of the project project as a whole wh ole,, they they achie achieve ve a great greater er ul ultim timate ate benefi benefitt for for all project participants, including themselv themselves. es.

•

An example of such an incentive is the establishment by a construction manager or general contractor of a bonus pool. Upon attainment of specific project goals, the bonus will be shared among all sub-contractors on the project.

•



Partnering

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Partneri Partn ering ng is a team-b team-bui uildi lding ng effor effortt in which which the the parti parties es esta establ blis ish h co coop oper erat ativ ivee work workin ing g re rela lati tion onsh ship ipss thro throug ugh h a mutua mu tually lly develo developed ped,, forma formall strat strategy egy of co comm mmitm itment ent and and communication.

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It ca can n be used used for for long long-t -ter erm m re rela latio tions nshi hips ps or on proj projec ecttspecific basis.

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When used on a project-specific basis, partnering is usually instituted at the beginning of the construction process after the contractor has been selected, by holding a retreat among all proj projec ectt pers person onne nell who who have have le lead ader ersh ship ip & man anag agem emen entt responsibilities.

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The part The partic icip ipan ants ts,, as assi sist sted ed by an in inde depe pend nden entt faci facili lita tato tor, r, become acquainted with & understand each other’s project objectiv obje ctives es & expectat expectations ions reco recogniz gnizee com common mon aims, aims, initi initiate ate open communications, and establish nonadversarial processes for resolving potential problems.

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The basic premise premise of partnering partnering is that the succ success ess of every proje project ct relies relies upon upon good good faith faith,, not not leg legal al enfor enforcem cement ent.. It therefore, seeks to create an environment of good faith, where open & free communication, communication, mutual trust & respect, and team work take the place of adversarial, competitive relations.

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The first irst cornerst ersto one of partner tnerin ing g is reco ecogniz gnizin ing g & developing common goals.

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The second corners cornerstone tone of partner partnering ing is issue issue resolutio resolution. n. Of  course, partnering first aims to prevent conflict.

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T he third throughout cornerstonethe olife f of pathe rtneproject. ring is improvement

continuous

 Amicable Aspect 

The very feature of amicable settlement is that the disputing parti parties es sh shall all have have full full co contr ntrol ol both both ove overr the process process & the the outcome.

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There is no third party imposition of solution on the parties to the dispute.

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The follow The following ing are are so some me of the highly highly recog recogniz nized ed amica amicable ble settlement methods. • • •

Negotiation; Mediation; Conciliation;

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Negotiation

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Negotiation is a give & take process, a serious attempt to reach a settlement agreement.

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Negotiation Negotiatio n could be:• •

Direct negotiation; or Assisted negotiation;

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Direct negotiation is held directly between the very parties to the dispute. The parties may, of course, be assisted by their own internal advisors.

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In case of assisted negotiation, mediation & conciliation come in to picture.

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Negotiation Negotiatio n requires two qualities or skills:

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knowledge on substance or the subject matter to be negotiated; and knowledg ledgee on the the art & ski killl or proc rocess ess of  negotiation.

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There are two types of negotiation: • •

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Interest based negotiation; and Rights based (positional) negotiation; negotiation;

Alternatively they may also be called: •

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Competitive or hard-bargaining (for rights based); and Cooperative or soft-bargaining (for interest based) negotiation;

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Both types of negotiation may have their own advantages & disadvantages.

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In an attempt attempt to avoid avoid the disadvantag disadvantages es whi while le gaining gaining the benefits of competitive & cooperative bargaining techniques, principl prin cipled ed negotiat negotiation ion has been developed developed at Har Harvard vard Law School by certain professiona professionals. ls.

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The principled negotiation has seven elements.

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These are: • Alternatives; • Interests; • Options; • Legitimacy; Communication; • • Relationship; and • Commitment;

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A good deal in negotiation negotiation is, therefore:•

One that One that is bett better er than than yo your ur Be Best st Al Alte tern rnat ativ ivee to a Negotiated Agreement(BATNA);

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One that satisfies satisfies your interests interests & the other person’s person’s interests;

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One that has been achieved after you have brainstormed & explored numerous options;

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Based on a standard of legitimacy that is fair, persuasive for you, and the other negotiator;

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O ne that haswhere beenyouachave hieveinteractively d through listened effect ectivtoe communication, the other negotiator;

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One where the relationship has been maintained, if not improved, and certainly not destroyed; and

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One where the appropriate level of commitment is made at the end of the negotiation, not at the beginning;

Negotia Nego tiatio tion n helps helps to sa save ve time time & money money for the parties parties in dispute. It maintains also relationship between the parties. It cr crea eates tes a win-wi win-win-s n-situ ituati ation. on. The The settle settleme ment nt is al also so easily easily implement able.

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Mediation

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Mediation describes the process of a neutral & disinterested person pers on helping helping disputin disputing g parties parties to nego negotiat tiatee a reso resolutio lution n to their dispute.

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Mediation Mediatio n is simply simply a facilita facilitated ted or assi assisted sted negotiation. negotiation. To agree or not to agree is left to the decision of the parties.

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Thee media Th mediator tor helps helps dispu disputin ting g parti parties es to under understa stand nd the the dispute in a way that will maximize their chances to reach a mutually acceptable & lasting solution.

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A mediator facilitates the discussion or negotiation. He will never propose a solution for the settlement of the dispute. He is a mere facilitator.

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He simpl simply y perfo perform rmss the task task of per persua suadin ding g the parti parties es in dispu dis pute te to change change th their eir respec respectiv tivee posit position ionss in the hope hope of  reach rea ching ing a point point where where those those posit position ionss co coinc incide ide,, wi with thout out actively initiating any ideas as to how the dispute might be settled.

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The advantages advantages of mediati mediation on include include informa informality, lity, speed speed & economy, but more importantly perhaps, it often leads to an agreed settlement between the parties rather than an imposed award or judgment.

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The process of mediation is described as follows. • • • • • • •

Setting the Table; Story Telling; Determining Determ ining Interests; Setting out the Issues; Brainstorming Options; Selecting the Durable Options; and Closure;

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Setting the Table

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Setting the Table is the first step in mediation.

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Under this step the following actions are undertaken by the mediator. The mediator shall:• intr introd oduc ucee him himself self to the the part partie ies( s(if if no nott don done previously); • introduce to the parties about the process of the mediation; explains his role as mediator; • • remind rem indss the partie partiess as to their their decisiv decisivee role in re reso solv lvin ing g thei theirr di disp sput utes es,, that that the the part partie iess shal shalll endeavor to persuade each other not the mediator; • explain expl ain their their right to use use their own own advisor advisor (ex. Legal advisor); • explain to the parties to follow certain procedures during the mediation; • explain that the process is confidential; confidential; explain that he can not appear as a witness nor the • documentation kept by the mediator be admitted as evidenc evid encee in the possible possible next(arb next(arbitral itral or judicial) judicial) proceeding; • explain to the parties as to the possibility of holding discussions separately(caucusing); • explain the right of the parties to walk out from the mediation process at any stage of the mediation;

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explain the objective of the mediation being to save time & cost by reaching settlement by their own, and and the role role of the media mediator tor being being assis assistin ting g the parties to reach such settlement;

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Story Telling

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At this stage the parties are encouraged directly to tell to the mediato medi atorr about about the backgro background und & content contentss of the dispute. The mediator is advised not to interrupt the parties about the tel tellin ling g of th their eir sto story. ry. In co const nstruc ructio tion n media mediatio tion n a wr writt itten en summary of the dispute shall be sent to the mediator, before the mediator meets the parties.

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Determining Interest,

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At this stage the mediator asks the parties more about the contents of their dispute to determine determine their interests.

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Without Witho ut deter determi minin ning g their their in inter terest estss the media mediato torr ca can n not not frame the issues nor seek legitimate & durable solutions.

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Setting out the Issue,

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After the interests of the parties have been figured out, issues shall be framed to deliberate on.

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The role of the mediator is carefully framing the very issues to the dispute.

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The issues so framed framed help parties parties to conduc conductt a pur purpose poseful ful discussion & to recommend solution in respect thereof.

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Brainstorming Options,

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At this stage of the mediation process the parties to the dispute brainstorming possible options to resolve the dispute.

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The mediator may, according to the circumstances, assist the part partie iess by su sugg gges esti ting ng som some poss possib ible le solu soluti tion on ei eith ther er by discussing with the parties jointly or separately.

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Selecting the Durable Durable Solution(s),

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At this stage the mediator, on the basis of the brainstormed poten potentia tiall so solut lution ions, s, help help the the parti parties es by in indic dicati ating ng wh which ich solution is legitimate & durable to resolve the dispute under consideration.

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Closure,

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Closure is the last stage in the mediation proc process. ess.

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The mediation process may be culminated either by resolving or not resolving the very dispute between the parties.

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If the mediation process is successful, there is a settlement agreement reached between the parties.

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The medi The mediat ator or has has to make make sure sure that that the the co cont nten ents ts of the the settlement reached by the parties have been fully understood by same.

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The med The edia iato torr is not not ex expe pect cted ed to draf draftt or form formul ulat atee the the settlement agreement.

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It is advisable to leave such task to the parties or to their respective advisors.

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The role of the mediator still may be needed in modifying or concretizing concretizin g the contents of the settlement already reached.

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If th thee media mediatio tion n proc process ess cu culm lmina inated ted by not not re resol solvin ving g the the disp disput ute, e, the the media ediato torr dec declare laress that that hi hiss role role has has been een terminated here.

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Construction Mediation

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The co The cons nstr truc ucti tion on sect sector or/in /indu dust stry ry full fully y shar shares es the the basi basicc framework of the mediation process.

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The construction mediation has its own peculiarities, however.

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The peculiarity may emerge due to:•

multitude of stakeholders;

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the multi-dimensionality multi-dimensionality of the issues involved;

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the specificity of the legal & contractual framework  & the industry practice & norms being unique;

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that the contractual relationship between the Contracting Contrac ting parties to the construction contract being a long term, complex, involving high financial stake & risky;

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Conciliation

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Similarr to media Simila mediatio tion, n, co conci ncilia liatio tion n is a volun voluntar tary y form form of  dispute resolution where a neutral party, the Conciliator, is appoi appointe nted d to facili facilitat tatee negot negotiat iation ion betwe between en the parti parties es in dispute & to act as a catalyst for them to reach a resolution of  their dispute.

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Unlike the mediato Unlike mediator, r, the conciliato conciliatorr under under the concilia conciliation tion process, pro cess, takes takes a more more active active role probing probing the strength strengthss & weaknesses of the parties’ case, Making suggestions; • • Giving advice; • Finding persuasive arguments for & against each of the parties’ positions; and • Creating new ideas which might induce them to settle their dispute;

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This is the difference between mediation & conciliation.

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Under the Under the media mediatio tion n metho method d of dispu dispute te resolu resolutio tion, n, if the parti parties es to the dispu dispute te fail fail to re reac ach h agree agreeme ment, nt, the the neu neutra trall party himself is then required to draw up & propose a solution which wh ich repres represent entss what what,, in his view, view, is a fair fair & reason reasonab able le compromise of the dispute.

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The conciliator can not decide the dispute for the parties. This is the difference difference between conciliation conciliation & arbitration.

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Conciliation is sometimes called evaluative mediation.

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Conciliation is a more formal process than mediation & it general gen erally ly involves involves the engagem engagement ent of lega legall represen representati tatives, ves, thus making it a more expensive process than mediation.

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The conciliation process may contain the following:

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During the conciliation process, it is necessary for each party ca caref refull ully y to prepa prepare re a docum document ent co conta ntaini ining ng the the follo followin wing g material. •

Thee Fact Th Factss:

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The facts mean the factual narrative of the events leading to the issues in the conciliation conciliation..

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One of the One the part partie ies, s, usua usuall lly y the the part party y in init itia iati ting ng the the process, should prepare a bundle containing documents which can be submitted jointly, such as o o o

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The Iss Issues ues :

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It is necessary to identify the issues between the parties as clearly as possible. The possible issues could be:Technical issues; and o Legal issues; o

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The Legal Le gal Princip Pr inciple le: The legal basis supporting the case made by each of the part partie iess sh shou ould ld be set set ou outt in as cl clea earr a la lang ngua uage ge as possible.

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The Remedy or Remedies

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What to demand from the other party at the end of the process.

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The contract document; The Technical Specification; any drawings drawings necessar necessary y for understa understandin nding g the issues involved, And other relevant documentation;

The Time Frame: That is within which the conciliation process may or should be conducted.

There are internat There internationa ionally lly recogni recognized zed spec specific ific Concilia Conciliation tion Rules. Like

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Inte Intern rnat atio iona nall Cham Chambe berr of Co Com mmerc erce Conciliation Conciliatio n Rules; The UNCITRAL Conciliation Rules; The ICE Conciliation Procedure; Others;

(ICC (ICC))

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Thee co Th conc ncili iliati ation on servic servicee is regula regulated ted by sp speci ecific fic co contr ntrac actt ag agre reem emen entt si sign gned ed betw betwee een n the the part partie iess in di disp sput utee & the the conciliator.

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There is also a fee to be paid by the parties to the Conciliator.

 Judgmental Dimension  The very feature of judgmental form of dispute resolution is that the

third party known as the court judge, the arbitrator or the adjudicator decides the case before him for the parties.  Th Thee parti parties es to the the dispu dispute te shall shall have have no co contr ntrol ol over over the proc process ess

(especially in case of the court system) and/or the outcome of same in all the three cases.  Under the judgmental forms of dispute resolution the following are

recognized.   

Adjudication ; Arbitration; and Litigation;

 Adjudication 

Adj djud udic icat atio ion n can be defi define ned d as a proc proces esss wh wher ereb eby y an appointed neutral & impartial party is entrusted to take the initia initiativ tivee in ascert ascertain aining ing the the fac facts ts & the law relat relating ing to a dispute & to reach a decision within a short period of time.

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Under the FIDIC Under FIDIC Conditio Conditions ns of Con Contrac tractt Disp Dispute ute Board Board is suggested.

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Dispute Dispu te Board Board can, can, acco accordi rding ng to ICC, ICC, namely, • •

be of three three typ types, es,

Dispute Review Board (DRB); Dispute Adjudication Board (DAB);

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Combined Dispute Board(CDB);

Dispute Review Board (DRB) Thee DRB Th DRB issue issuess ‘Reco ‘Recomm mmend endat ation ions’ s’ wi with th re resp spect ect to any any dispute disp ute referred referred to it & constitu constitutes tes a rela relatively tively consensual consensual approach to dispute resolution.

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If no party expresses dissatisfaction with a recommendation within a stated time period, the parties contractually agree to comply with the Recommendation.

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If a party expresses dissatisfaction with the Recommendation within such time period, that party may submit the dispute to ar arbi bitr trat atio ion, n, if the the part partie iess have have so ag agre reed ed,, or the the co cour urts ts.. Pendin Pen ding g a ru rulin ling g by the the arbi arbitra trall tri tribun bunal al or the the co court urt,, the the parties may voluntarily comply with the Recommendation Recommendation but are not bound to do so.

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Dispute Adjudication Board (DAB)

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The DAB The DAB issu issues es ‘Dec ‘Decis isio ions ns’’ wi with th re resp spec ectt to an any y di disp sput utee referr ref erred ed to it & co const nstitu itutes tes a les lesss co conse nsensu nsual al appro approac ach h to dispute resolution.

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By contrac contractual tual agreem agreement, ent, the parties parties must must com comply ply with a Decision without delay as soon as they receive it.

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If a party expresses dissatisfaction with a Decision within a st stat ated ed tim time perio eriod, d, it may subm submit it the the di disp spu ute to fina finall resolution by arbitration, if the parties have so agreed, or the courts, but the parties meanwhile remain contractually bound to co comp mply ly wi with th the the Deci Decisi sion on unle unless ss & un unti till the the ar arbi bitr tral al tribunal or the court rules otherwise.

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If no party expresses dissatisfaction with a Decision within the stated time period, the parties contractually agree to remain bound by it.

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Combined Dispute Board (CDB)

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The CDB normally issues Recommendation Recommendationss with respect to any dispute referred to it but may issue a Decision if a party so requests & no other party objects.

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In the event of an objection, the CDB will decide whether to issue a Recommendation or a Decision on the basis of the criteria set forth in the Dispute Board Rules.

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The CDB thus offers an intermediate approach between the DRB & the DAB.

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The essential difference between a Decision & a Recommendation is that the parties are required to comply wi with th the former former wi with thout out delay delay as so soon on as they they rec receiv eivee it, whereas a Recommendation must be complied with only if no party expresses dissatisfaction within a stated time limit.

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The DB’s DB’s determ determinati ination on (Rec (Recomm ommenda endation tion or Decision Decision)) is ad adm missi issibl blee in an any y su such ch furt furthe herr proc procee eedi ding ngs, s, ar arbi bitr tral al or  judicial  judi cial..

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Types of Adjudication

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Adjudication could be:• permanent adjudication; or • ad hoc adjudication;

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The perm The perman anent ent one one is norm normall ally y set up at the cour course se of the the contract & remains in place & the members are remunerated throughout its duration.

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An ad hoc one only only estab establis lishe hed d aft after er the the dis dispu pute te has has bee been n arise risen n & its its exis existe tenc ncee com comes to an end end afte afterr it gi give vess is determination, Recommendation or Decision.

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The Adjudication could also be composed of:• sole member; or • three members;

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In case of single or sole member DB, the member may be ca calle lled d a Di Dispu spute te Revi Review ew Exper Expert. t. Su Such ch memb member er only only gi gives ves Recommendation & not a Decision.

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The parties to the dispute & the member(s) of the DB shall  jointly  join tly sign a common common cont contract ract document, document, called Three Party Party Agreement.

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The professional fee & the costs of the members of the DB shall be shared & paid equally by the parties to the dispute, i.e. the employer & the contractor.

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Features

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The key distinguishing features of the DB are as follows: •

Formation of a review panel before the construction proc proces esss begi begins ns,, usua usuall lly y shor shortl tly y afte afterr co cont ntra ract ct award;

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Selection of board members highly qualified in the particularr type of construction; particula construction;

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The boar The board’s d’s abili ability ty to monit monitor or co cons nstru tructi ction on as it progresses, progresse s, including periodic site visit;

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The board’s awareness of & readiness to review a dispu dis pute te at th thee time time it arise arises, s, wh when en wi witne tnesse ssess are are present & memories are fresh, rather than months or years latter;

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A keen keen awar awaren enes esss by al alll part partie iess that that a hi high ghly ly qualified DRB is monitoring their actions closely & that serious claims or deliberate delays will be both unsuccessful & potentially embarrassing;

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Information submittals to the board that are mostly documentary with only a short “meeting” for oral presentation of claims & questions by the panel, in lieu of such traditional but protracted processes as witness examination & cross-examination.

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Procedure

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Each DB shall have its own rules of procedure for submittal of  claims & conduct of claims presentations at the meetings.

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It is important that these ground rules expedite the process butt re bu rema main in flexib flexible le enough enough to be re respo sponsi nsive ve to ch chan angin ging g circumstances that characterize most construction projects.

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The following is the general procedure of a DB.

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Notice of intention to submit a claim & the manner & form of submission.

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All participants at DB meetings should be identified in advance with notification sent to all parties.

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Discussions meetings should be informal & focus on the during issues inDB dispute.

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Partic Part icip ipan ants ts in DB mee eeti ting ngss shou should ld be li limi mite ted d to indivi ind ividua duals ls direct directly ly in invol volved ved in the the dispu dispute te or their their immediate supervisors.

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During Durin g a meeti meeting ng,, ea each ch party party should should be given given a fair fair opportu opp ortunity nity to explain explain its claim claim or defen defense se with without out interruption by the opposing party.

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If a co cons nstr truc ucti tion on si site te re revi view ew is dete determ rmin ined ed to be bene benefi fici cial al by the the DB, DB, it shou should ld be co cond nduc ucte ted d wi with th advance notice & with all parties present.

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Stenogr Steno graph aphic ic transc transcrip riptio tion n of procee proceedin dings gs doe doess not not oc occu curr but but meeti eeting ng min inut utes es ar aree ke kept pt by the the DB chairperson, in writing, and distributed to the parties promptly following each meeting.

The DB shall always inform itself about every development of  the project in terms of : • • • • •

Contract documentation; Correspondences; Progress project reports; Project site visit; Periodic meetings;

 Arbitration 

Definition

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Arbitration is a process whereby parties in dispute agree to su subm bmit it the the matte matterr in dispu dispute te to the the dec decisi ision on of a perso person n or persons in whom they have confidence & trust & undertake undertake to abide by that decision.

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According Accordin g to Article 3325(1) of the Civil Code:-

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The arbitral submission is the contract whereby the parties to a dispute entrust its solution to a third party, the arbitrator, who undertakes to settle the dispute in accordance with the principles of law.

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Thee very Th very natur naturee of arbit arbitrat ration ion is that that it is fun fundam dament entall ally y co cons nsens ensual ual. . Arbi Ar bitra tratio tion n iscontract based based & onthe co contr ntrac actt betw between een the parties to the construction dispute:

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The contract to resolve a construction dispute is known as agreement to arbitrate.

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Agreem Agre emen entt to ar arbi bitr trat atee or the the “A “Arb rbit itra rati tion on Clau Clause se” ” is inde indepe pend nden entt from from the the subs substa tant ntiv ivee co cont ntra ract ct.. It is ca call lled ed severab seve rability ility or auto autonom nomy y of the arbi arbitrati tration on agr agreeme eement nt from the rest of the construction contract.

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The construction dispute shall also be arbitrable.

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Arbitrabilit Arbitra bility y is a matter matter of pub public lic policy. policy. For examp example, le, tax matters are not not arbitrable. Administrative Administrative contracts contracts are “not arbitrable”. Please, see Article 315(2) of the Civil Procedure Code of Ethiopia relative to Administrative Contracts.

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The parti The parties es to the dispute dispute co cont ntrol rol the process process bu butt not not the outcomee i.e. the decision called the award. outcom

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The pre-requisite to a valid arbitration are the following: • The existence existence of of a dispute; dispute; • Agreeme Agr eement nt to refer the disp dispute ute to arb arbitra itration tion when the dispute arises; •

Agreement to be bound by the award; Initiation of the arbitration; arbitration;

•

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The arbitration agreement could be:• •

an ad hoc agreement; or an existing agreement;

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An ad hoc agreement agreement is an agreement agreement where the parties parties in dispute agree to refer already existing disputes to arbitration.

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An existing existing agreemen agreementt is one where where the parties parties to a certain certain contract, usually called the substantive contract, have already

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agreed to refer any & all of their future disputes to arbitration (Arbitration Clause). 

Advantages of Arbitration

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In relative terms, the following may be taken as advantages of  arbitration. Neutrality; (of the arbitrators) arbitrators) Confidentiality; (no publicity of both the process & the outcome) Proce Pro cedur dural al flexib flexibili ility; ty; (th (thee parti parties es in dispu dispute te are are capable of designing their own process) Expert arbitrators; Speed & cost; Finality of awards; (no appeal, if not always) Enforcement of awards; (recognition of the award by national courts)

• •

•

• • • •

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Limited powers arbitrators; ( no power) Multi-party dispof disputes; utes; (no joinder &coercive no consolida consolidation tion of third parties without their express consent) Awards not binding on third parties; Others;

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• •

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Types of Arbitration

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Arbitration Arbitra tion could could be voluntar voluntary y or com compulso pulsory, ry, bin binding ding or non-binding, non-bindin g, international or domestic, domestic, institutional or ad hoc, and so forth.

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The most known types of arbitration are:• •

institutional arbitration; and ad hoc arbitration;

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Institutio nal arbitration is an administered type of arbitration. Institutional arbitratio n. Thee proces Th processs of arbit arbitrat ration ion is backed backed by the the ma manag nageme ement nt supp suppor ortt of a give given n inst instit itut utio ion. n. It has has it itss ow own n Rule Ruless of  Arbitration & institution.

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The followin following g institut institutions ions are, for example, example, internati international onally ly recognized in administering international arbitrations.

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In Inte tern rnat atio iona nall Cour Courtt of Arbi Arbitr trat atio ion n of the the Intern Int ernati ation onal al Cham Chamber ber of Comm Commerc ercee (IC (ICC) C) Paris;

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The London Court of Arbitration(LCIA) London;

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The American Arbitration Association (AAA) New York;

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The Intern Internati ation onal al Center Center for Set Settle tleme ment nt of  Investment Disputes (ICSID) Washington. DC;

International

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Ad hoc type of arbitration arbitration has no administering institution behind the arbitration process. Both the management of the case including financial issues has been left to the arbitrators & the parties.

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In case of disagreement between the parties on:• the setting in motion of the arbitration process; the appointment of the arbitrators; • • the challenge of arbitrators; and • othe otherr issu issues es the the ro role le of the the co cour urtt is al also so hi high ghly ly essential.

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Ad hoc arbitration could be managed by the following Rules: By devising special arbitration rules prepared prepared by • the parties to the dispute to that effect; or •

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By adoption of the UNCITRAL Arbitration Rules;

Some Some inter interna natio tiona nall arbi arbitra tratio tion n instit instituti ution onss provi provide de som somee services in case of ad hoc arbitration. Thee Arbit Th Arbitrat ration ion In Insti stitu tute te of the Sto Stockh ckholm olm Cham Chamber ber of  Commerce may also provide services to the parties to an ad hoc hoc type type of ar arbi bitr trat atio ion n ag agai ains nstt paym paymen entt of co cost stss for for its its services. The possible possible services are provided provided under the UNI UNICTR CTRAL AL Arbitration Arbitratio n Rules since 1 April 1999. The Institute has its own Rules to regulate the provision of the services. The services are;• Services as an Appointing Authority; and •

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Administrative Services; Services as an Appointing Authority

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The services are:• Appointment Appoint ment of sole or presiding arbitrator; Art. 1; • Appo Ap point intme ment nt of a “Se “Seco cond” nd” arbi arbitra trator tor in threethreearbitration cases; Art. 2; • Decisionss on challenges Decision challenges to arbitrator arbitrators; s; Art. 3; • Appointment Appoint ment of substitute arbitrators; Art. 4; •

Consulta Consu ltatio tion n on fee feess of arbit arbitrat rator orss & depos deposit it of  costs; Art. 5;

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Administrative Services

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The services are:• Prov Provid idin ing, g, or ar arra rang ngin ing g for, for, meet meetin ing g ro room omss for for hearings or deliberations of the arbitral tribunal; • Providing secretarial or clerical assistance; • Forwarding of written communications of a party or the arbitrators; • Arra Ar rang ngin ing g for for sten stenog ogra raph phic ic tra transcr nscrip ipti tion onss of  • •

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hearings; Arranging Arrangin g for services of interpreters at hearing; Op on request, other services;

The following points are important in formulating or drafting an arbitration clause. •

The type of arbitration; o o o

Institutio nal vs. ad hoc; Institutional International Internatio nal vs. national/domestic national/domestic;; Binding vs. non-binding;

o

Based onetthe strict of law vs. ex aequo bono (orprinciples based on equity) •

•

•

•

•

The applicable law; Substantive & procedural o The place of arbitration; o Neutral vs. home The language of the arbitration; o One or two, if two, ruling language The applicable rules of the arbitration; arbitration; o The place of arbitration or otherwise The number of arbitrators; o

Sole or three,

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Appoin Appo inti ting ng au auth thor orit ity, y, in case case of  di disa sagr gree eeme ment nt & in ca case se of ad hoc hoc arbitration; The place of enforcement o Home or neutral or otherwise, if to be agreed; o

•

•

Rules of evidence o o

o o o

•

factual witness; expert witness;(party and/or tribunal appointed) documentary proof; project site visit or inspection; Other sources of evidence, if any;

Special power of the arbitrators o Tribunal’s own jurisdiction; Assessment of special damages; o o o o o

Award on interest; Award on costs of arbitration; Granting injunctive relief; Other issues;

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Number & Appointment of Arbitrators

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The number of arbitrators could be one or three.

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In case of one arbitrator the arbitrator being called as sole arbitrator.

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In case of three arbitrators, they are called collegiate.

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In both cases the organ, if constituted, is called the Arbitral Tribunal.

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The following may have a role in the selection, appointment appointment or confirmation of arbitrators. • • • •

The parties to the dispute; An agreed arbitration arbitration institution; A designated appointing authority; A competent court;

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This may This may depen depend d on the type type of arbit arbitra ratio tion n being being eit eithe herr institutional or ad hoc and/or the number of arbitrators being either sole or collegiate.

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In case of institutional arbitration both the parties & the arbitration institution have a direct role to play.

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In case of ad hoc arbitration the parties, and, if they fail to agree, the appointing appointing authority, authority, if any any , or the pa parties, rties, and, if  they fail fail to agree, the court, court, if no appointing appointing author authority ity has been designated, play a direct role in the appointment process. For example, example, in case of instituti institutiona onall arbitra arbitration tion under the Arbitration Rules of the Ethiopian Arbitration & Conciliation Center, the appointment process resembles as follows.

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The Arbitral Proceeding

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Introduction

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The arbitr bitra al proceedi eedin ng cover vers the the perio eriod d from rom the constitution of the arbitral tribunal up to the rendition of the final award by the arbitral tribunal.  The arbitral proceeding is at the heart of the arbitration process.  Thee arbi Th arbitra trall proc proceedi eeding ng is the proc process ess by wh which ich the ar arbi bitr tral al trib tribun unal al disc discha harg rges es its its func functi tion on for for wh whic ich h it is established.  The form of arbitral proceeding may be dependent upon the type of arbitration being either institutional or ad hoc, or being international or domestic.  The arbitral proceeding is specifically designed both by

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the parties & the arbitral tribunal without prejudice to the mandatory provisions of the law. Procedure The following is the procedure under Clause 67(Settlement of  Disputes) of FIDIC for international construction arbitration. •

Claims made but rejected;

•

Construction dispute arises;

•

Dispute referred referred to the Engineer’s Engineer’s decision; decision;

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•

Decision of the Engineer becomes becomes final unless referred to arbitration;

•

Notice of intention to commence arbitration; arbitratio n;

•

Introduction

of

procedure

for

amic ica able

settlement before arbitration but after notice in respect thereof; •

Amicable settlement becomes unsuccessful;

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The Framework of Arbitration

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The fo The foll llow owin ing g si six x poin points ts co cons nsti titu tute te the the fram framew ewor ork k of (int (inter erna nati tion onal al & institutional) arbitration. arbitration. These are: • The arbitration agreement;

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• • • • •

The The arbitration Arbitrationrules; institution; The arbitration law; The arbitration treaty; The court;

 Litigation  Litigation takes place at the court of law having jurisdiction over the

case.  The courts play here their dispute resolution role.  Liti Litiga gati tion on is the the most most seri seriou ouss & ad adve vers rsar aria iall meth method od of di disp sput utee

resolution.  The procedure before the court is so rigid & not tailor made to the

construction constructio n dispute resolution.  The courts are following the standard procedure established under the

civil procedure code, which applies for all types of disputes brought to them.  The advantages of arbitration are all missing under litigation.

Thee clear clear disad disadvan vantag tagee of litiga litigatio tion n is that that it being being the most most tim timee  Th consuming.

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 The clear advantage of litigation is that the court itself enforces its own

orders & judgments.  The role of courts, however, very important in terms of:

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Enforcing an agreement to arbitrate;

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Recognizing & enforcing domestic arbitral award;

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Recognizing & enforcing foreign arbitral award;

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Rendering judicial assistance to the arbitration process or to Rendering the settlement agreement;

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Hearing appeals against the arbitral award, if not final & appealable; and

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Setting aside of an arbitral award, if, legally legall y qualified to be set aside;

 For details, please, refer to the section of the Course entitled: “Law

Enforcement”

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Reference Materials On Construction Claims & Disputes 1.

The The Con Const stit itut utio ion n of of tthe he FDRE FDRE

2.

The Civ Civil il Code of of Eth Ethio iop pia

3.

The The Civ Civil il Proc Proced edur uree C Cod odee of of Eth Ethio iopi pia a

4.

The The FIDI FIDIC C Form Form of C Con ontra tract ct,, Sec Secon ond d Editi Edition on,, 199 1997, 7, by N Nael ael G. Bunn Bunnii

5.

Const Constru ructi ction on Dispu Dispute te Resolu Resolutio tion n Form B Boo ook, k, 1997, 1997, by Rob Robert ert F. Cushm Cushman an,, James J. Myers, Stephen D. Butler & Lawrence N. Fisher

6.

The The Fres Freshf hfie ield ldss Gu Guid idee to Arbi Arbitr trat atio ion n & ADR, DR, Cla lau uses ses in Inte Intern rnat atio iona nall Contracts, Contrac ts, Second revised edition, edition, 1997, by Jan Paulsson, Paulsson, Nigel Raw Rawding, ding, Lucy Reed & Eric Schwartz

7.

Cl Claim aimss in Loca Locall Cons Constru tructi ction on Proje Project ctss: Pro Proble blems ms & Pr Prosp ospect ects, s, by Dr. Wubis Wu bishet het Jekal Jekale, e, Proc Proceed eedin ings gs of Works Worksho hop p on Claim Claimss in Const Constru ructi ction on Projects: Problems & Prospects Held On March 12, 2005. Organized by the Ethi Ethiop opia ian n Asso Associ ciat atio ion n of Ci Civi vill Engi Engine neer erss in Coll Collab abor orat atio ion n with with the the Technology Faculty of the Addis Ababa University

8.

The 4th FIDIC Conditions of Contract for Civil Engineering Contracts

9.

The The IC ICC Rule Ruless of of Arb Arbit itra rati tion on

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10. 10. The The ICC ICC Disp Dispute ute Boar Board dR Rule uless 11. The The UNCI UNCITR TRAL AL Rule Ruless of Arbit Arbitra ratio tion n 12. The The UNCIT UNCITRA RAL L Rules Rules of Conc Concili iliati ation on;;

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