Regulation and Adjudication in Construction Contracts

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1 Regulation and Adjudication in Construction Contracts Jidesh Kumar Advocate & Managing Partner King Stubb & Kasiva Advocates New Delhi I Bangalore I Mumbai I Chennai

2 Why do Disputes Arise? Planning the work and working the plan Causes of failure Unrealistic & inadequate planning or Poor Execution Poorly contracted terms, Misaligned expectations Loosely defined scope/ High degree of change Bad or lack of understanding the nature of conflict and the ability to handle grievances and emotional stress

3 Source of conflict/ disputes Project Conception Priorities, Procedure, Schedule, Manpower Project Definition technical, missing info, lost info, no info, late info, inappropriate info Project Execution expectation and deliverables, insufficient detail, impracticable designs, differing site conditions, etc Project Closure Interests & Values of Parties and stakeholders Breakdown of personal relationships Polarisation of views into static positions Breaking the conventional conflict handling styles avoiding, compromise, competition, accommodation, collaboration

4 Conflict Resolution in India Unfortunately, the global economic crisis has had an impact on India as well Construction disputes are on the rise since 2007 Disputes between developers and contractors (on unfinished projects) Disputes between developers and financiers (on non performance of conditions) Disputes between developers and investors (non hand over of the projects/ properties) Traditionally litigation is the common used method of dispute resolution Arbitration and Private Adjudication can be of immense help in risk mitigation

5 Adjudication of Disputes other alternatives to litigation Private adjudication Private Arbitration Institutional Arbitration (FICCI, CONSTRUCTION INDUSTRY ARBITRATION COUNCIL) Mediation Negotiation Mini trials Fast track Courts Tribunals Ombudsman Lok Adalats Fast track arbitration

6 What is Arbitration & What are the basis steps Private adjudication Impartial third party/panel By written agreement, usually Parties can select arbitrators, specify desired expertise and background Parties can design and customize process Parties can select rules Parties to decide whether it is binding or non binding BASIC STEPS Making an agreement to arbitrate Initiate process/demand for arbitration Appoint arbitrator(s) Pre-arbitration scheduling meeting Arbitration hearing Post arbitration memorandum (optional) Decision and award

7 Types of Arbitration Ad-hoc Arbitration Institutional Arbitration Statutory Arbitration Domestic Arbitration International Arbitration

8 Finding the right Arbitrator Determine qualifications and experience desired for your case Review resume and written qualifications Interview the arbitrator Get recommendations and referrals, comments on judgment, fairness, fair hearing and enforceable award Obtain and carefully review written disclosure of all potential conflicts Up to date training and ethics code Legally trained arbitrator must be preferred Most importantly, please examine if he is busy

9 Arbitration pros and cons Advantages Choice of decision maker with expertise Speed Lower-cost Flexible Private Less formal than court Fewer grounds for appeal Enforceability of award Disadvantages Cost: parties pay for arbitrator and agency Limited rights of appeal, fewer means to delay and challenge award Not desirable when you want slower, costlier court procedure They cannot be treated as precedents Extra cost when arbitration nor successful

10 Forms of Arbitration Traditional: arbitrator hears witnesses, considers evidence and renders decision Fast track: accelerated and simplified procedures for prompt decision Baseball: each site submits final offer, arbitrator picks most reasonable High-low: arbitrator s decision to be adjusted within range set by parties - Have liability insurance policies reviewed to confirm defense and coverage in mediation, arbitration and/or litigation - Confirm whether available insurance satisfies requirements of construction contracts, especially non- standard, with regard to indemnity, primary insurance and defense obligations

11 Mediation Mediation is a voluntary and non statutory dispute resolution mechanism Bangalore Mediation Centre and Delhi Mediation Centre have been very successful when people accept the order Non binding process in which a third party called Mediator helps the disputed parties to reach a settlement. REASONS FOR FAILURE OF MEDIATION Where parties are adamant Egos are larger than the practical or economic issues Where parties wanted a judicial determination Where one party wanted to delay Where parties lacked authority Where parties distrusted the mediator s authority to enforce a solution

12 Quick Summary Be proactive Involve the arbitrator early Develop focus as early as possible Take advantage of the flexibility to shape and customize arbitration Watch out for standard clauses Best to review upfront

13 THANK YOU ANY QUESTIONS?? JIDESH KUMAR King Stubb & Kasiva /222/333

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