Resolving Disputes in International Construction Contracts
The international nature of the construction sector coupled with the complexity of large projects is a fertile breeding ground for misunderstandings between the parties involved. Resolution of the disputes through the courts can be both time consuming and disruptive to the projects progress.
Alternative dispute resolution methods are available which can be quicker and more cost effective. These alternatives include Arbitration and Adjudication. While Arbitration is an established path to resolve disputes outside of the courts it is also accused of becoming more complex in nature as it develops. Adjudication has become increasingly popular in both its´ forms; Statutory Adjudication and Contractual Adjudication. This is mainly considered to be due to its shorter time frame to reach a decision based on the “pay now, argue later” concept (see The Latham Report -Building the team).
Statutory Adjudication which was introduced in the construction sector in the UK in the 1990´s has now been adopted by numerous countries such as Malaysia, Singapore, Australia, New Zealand and Ireland. While the scope of the legislation in each jurisdiction varies, the intention in each country is the same; a timely and cost-effective means to a decision on a dispute from an independent third party. Statutory Adjudication is confined to the jurisdiction where the legislation is applicable. The decision of the Adjudicator is binding on the parties but may be contested in the courts by the losing party.
Like Statutory Adjudication, Contractual Adjudication seeks to provide a timely and cost- effective means to the parties to a contract to resolve disputes which arise during a project. This type of Adjudication finds its powers from the express wording of the contract as opposed to legislation. This type of dispute resolution has become standard in the FIDIC forms of contract. The body which resolves the dispute is typically referred to as the Dispute Board. This Board can be made up of either a single Adjudicator or a panel of three Adjudicators. The decision taken is binding on the parties unless one of the parties decides to contest the decision in which case the dispute will be referred to Arbitration.
Seán Mc Manamon
Founder – Opal Expert Services SL
Expert Witnesses, Technical Experts, Dispute Boards, Arbitration