Aaratrika Bal
We already know how arbitration can be an effective method of dispute resolution. Some basic features of this method are as follows: the process should be consensual and confidential, the arbitrator should be unbiased, and the decision of the arbitrator is usually final. There are some other characteristics as well, but we will not focus on those in this article. Here, we will primarily talk about mid-project disputes. We will see how arbitration can be useful in dealing with disputes arising mid-project. The way a project manager handles an end-of-the-project dispute is different from a mid-project dispute. The article will also briefly deal with how arbitration can come in handy when it comes to construction disputes.
Let’s dive into the article.
Introduction
To begin with, let’s learn what actually is arbitration. It is a popular ADR method. It is very useful when the parties want to settle the matter after court. When it comes to international business, arbitration is one of the most preferred methods. This is mainly because it is cost efficient and is not time consuming like litigation. Another significant reason behind parties choosing arbitration is that it is comparatively more flexible than any other dispute resolution techniques. Arbitration in construction disputes is different to the procedure in case of general cases. This article will focus on arbitration in such disputes, and not on the generic one. Construction disputes, in most cases, are quite complicated. In the next segment, we will know more about construction disputes and the parties involved in such cases. Usually, these disputes involve many stakeholders and high stakes too. This is why the arbitration procedure involved in solving construction disputes is different from generic procedure.
What Are Construction Disputes?
When we are talking about construction disputes, it is important to know what are construction contracts. The main purpose of a construction agreement is to lay out the terms and conditions related to the construction project. The accounting of these agreements is related to the “Accounting Standard 7” (AS 7). The most traditional form of disputes that arise in the construction industry is lack of coordination, delays, tender, and design-related issues. These disputes are mostly technical in nature and can take place during any phase of the project. They can arise before the project begins, or can happen to post the project finishes. These disputes can also take place when the project is ongoing. Errors in contracts and agreements can be a significant reason behind various disputes in the construction industry. Most of these contracts contain specific clauses which mention the particular dispute resolution procedure that is to be followed in case certain situations arise. In most cases, litigation takes more time to reach a judgment or a decision. This is why most big businesses often prefer switching to arbitration, and other dispute resolution techniques to make the process simpler. In the next segment, we will study how the process of arbitration works in cases of construction disputes.
Arbitration in Construction Disputes Arising Mid-Project
Renowned art historian Herbert Read once said-
“I can imagine no society which does not embody some method of arbitration.”
The construction industry is booming recently, as there are tons of infrastructural developments, and new projects taking place.
Any construction project is usually a huge task. Many parties and agreements are involved in these projects. Therefore, there are higher chances of uncertainties and qualms arising now and then. These uncertainties can take place as a result of cost fluctuation, economic instability in the market, lack of raw materials, adverse climate, etc. These give rise to maximum mid-project disputes.
Some direct parties in these contracts are employers, contractors, designers, etc. Some indirect stakeholders are lenders and suppliers. Often government bodies are also involved in various construction projects. You can clearly conclude how complex these agreements usually are. Hence, ADR methods are often chosen as the method of dispute resolution. The arbitrator can pass neutral arbitral award, and it is usually considered final.
Most mid-project disputes happen between contractor and employer and are usually solved by arbitration.
What Disputes Can Arise Mid-Project?
These disputes can be related to any of the following:
- Payment issues
- Alteration in availability of human resources
- Design issues
- Construction work getting halted due to weather issues
In most cases, these lead to violation of terms in construction contracts, thus giving birth of disputes and clashes. This is when the process of arbitration becomes most helpful to solve the issues.
Conclusion
It can be concluded by now, that arbitration is a useful and popular form of dispute resolution process when it comes to construction disputes. As had been mentioned before, most mid-project disputes arise as a result of sudden market instabilities, and some alteration in the availability of human resources. Often construction work can get impacted due to adverse weather conditions. These lead to most mid-project problems, which usually get solved using the process of arbitration.
In Empire Jute Co. Ltd. and others vs. The Jute Corporation of India, the Supreme Court explained the importance of the ADR techniques. We can also conclude how ADR techniques are becoming so much popular these days. Not only arbitration, but we have negotiation, mediation, and conciliation too. They have their own pros and cons, but mostly they are more time-efficient as compared to litigation. Since the construction industry is a huge industry, it is inconvenient for the parties to approach the courts after each and every dispute and disagreement. Therefore, they prefer arbitration during all stages of the project, be it before the project starts, when the project is in progress, or when it is over.