By Dr. Chandana Jayalath
Literally, a dispute is a conflict of interest or difference of opinion. Contractually, it is an issue disagreed between parties pending settlement in a formal process. However, disputes can no longer be seen as disputes between the contractor and the employer. The reality has many facets. They could be contractor vs engineer, contractor and engineer vs employer, contractor vs engineer’s representative, contractor, engineer and engineer’s representative vs employer etc. More or less the same entity in many projects, particularly public works, operates in capacity of the employer and the engineer, although they are two different personalities in strict contractual sense.
As such, the dispute clause that is available in any typical infrastructure project generally considers both the employer and engineer as a one party to the dispute. This may be why the dispute clause is all about disputes between employer or engineer and contractor. Although the majority of disputes are related to the amounts and/or values and so is the quantity surveyor to first debate in such issues, typically, the dispute clause is silent in terms of quantity surveyor’s input. Of course, the quantity surveyor usually operates under the regime of engineer’s representative, so that any dispute between the contractor and quantity surveyor is a dispute between the contractor and engineer, by definition.
Under circumstances, a tendency was to look for alternatives, one of which is amicable settlement. Parties treated amicable settlement as extra but contractual for the disputants to revisit the issues and arrive at a consensus at the employer’s level, before invoking any dispute clause. This is a resultant concern about the interrupted progress, escalating cost of arbitration, and doubt about the dual role of the engineer, the propensity to obtain interim awards and temporarily-binding decisions and top of all the political concerns. What the parties needed were therefore something that works well, indeed works faster, cheaper, and in a much less contentious manner. Parties strongly believed in a process in which they do not happen to call their employer a disputant, apparently because of the potential of future projects. There is no point believing in loose motion ‘if the patient dies’. The reality is that contracts are not ‘water proofed’ and do not operate in a vacuum. A contract that caters to all eventualities is indeed rare, so that parties will have to turn to another side, willingly or unwillingly, for a settlement. This is why amicable settlement has become a day to day phenomenon.
Amicable settlement is a full of negotiations that help produce an agreement upon courses of action whilst bargaining for both individual and collective advantage. It helps crafting outcomes in satisfying various interests, as long as the participation is in good faith. But parties who come with dirty hands make a settlement impossible, despite of formalities under contract. However, negotiation is free with rational negotiators who can walk away from the negotiating table at will. Constraints that are imposed by a contract essentially form the basis of contract governance, rather than dominating once behavior. Various researches reveal that procedural requirements influence all types of negotiators. This suggests that if negotiators are having concern for both themselves as well as their counterparts, amicable settlement is possible notwithstanding what the contract expressly forbids or provides for. This has resulted in a change in the manner the contracts are formulated also. Many, including bespoken forms, require that parties undertake a process of amicable dispute resolution before issuing proceedings.
Parties prefer amicable settlement compared to other modes of dispute resolution apparently because of inherent advantages, one of which is that the dispute can be treated internally. Amicable settlement as a non adversarial approach is now being developed into a formal process in many standard forms, as mentioned. For instance, once a notice of dissatisfaction has been given under sub clause 20.4 in FIDIC Red book, both parties shall attempt (in a way mandated) to settle the dispute amicably before the commencement of arbitration. However, unless both parties agree otherwise, arbitration may be commenced on or after the fifty-sixth day after the day on which the notice of dissatisfaction was given, even if no attempt at amicable settlement has been made.
Accordingly, the clause 20 provides a gauntlet, starting from the engineer, who makes a determination under sub clause 3.5, referring a dispute to the Dispute Adjudication Board (DAB) for its decision, giving a notice of dissatisfaction in respect of the DAB’s decision, then amicable settlement and finally the arbitration. According to FIDIC’s Guide to the 4th Edition, where this procedure was first appeared, the reason for the relevant sub clause is to give an express right for the parties to enter into negotiations when there is no reference to amicable settlement in a contract. This is important despite of various bargains that would have taken place casually on ad-hoc basis. Again, this suggestion arises from several considerations.
It is unlikely that a party will refer a dispute to the DAB unless and until the dispute has been negotiated for some time without success. The time limits for the DAB operation already foresee up to some three and half months before a DAB determination is received, during which the parties are still free to continue amicable settlement negotiations. It is also possible that the minimum of 56 days for amicable settlement efforts may lead the parties to significantly different views on a fair resolution of the dispute. Top of all, parties might feel fed up with the stereo type process so that a buffer time will eventually result in a stop-over. Although it may not be final and binding forever in all cases, amicable settlement efforts may ease out hardship over the dispute. Parties under circumstances may not invoke the next step in the gauntlet because the issues have been sorted out within the existing contractual machinery itself.
About the Author:
Ch.QS. Dr. Chandana Jayalath (Membership No. 0035)
D.Sc, M.Sc, PG Dip (CM), PG Dip (Int’l Med), B.Sc (QS) Hons, FRICS, MCIArb, AAIQS, AIQSSL