Staying out of court

Aziz Karim

Gasco's Aziz Karim explains how multi-tiered dispute resolutions could minimise the possibility of referring a dispute to arbitration or litigation.

In major construction projects, the approach of multi-tiered dispute resolutions (MTDR) are being adopted, which has proved to be of help in solving problems/disputes while works is progressing.

The MTDR may include the following:

1. Negotiation by authorised representatives of the parties to the contract.
2. Mediation
3. Non-binding independent expert appraisal
4. Adjudication
5. Expert determination (binding, or non-binding)
6. Arbitration or litigation

The above may be binding before arbitration or litigation, under some jurisdictions such as Australia. However, drafting a MTDR to guide the parties through a structured process, including a good team of professionals, will lead to positive results by minimising the possibility of referring the dispute to arbitration or litigation.

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The risk involved though is the enforceability that is usually not binding except with arbitration, which is well established in practices worldwide, and in the case of international arbitration, it is supported by conventions like the New York Convention of 1958, signed by 136 states.

The UAE was the last one to sign in 2006 but it has acceded formally to the Convention. The Fidic 1987 form of Civil Engineering Contract, (4th Edition) adopted arbitration as the only method of dispute resolution, following the failure of attempting an amicable solution.

But, the new suite of 1999 has adapted an MTDR approach through having a Dispute Adjudication Board (DAB) under Article 20; one adjudicator in the case of small work to consider disputes; an amicable settlement in the case of dissatisfaction with a DAB decision and then arbitration if the attempts of an amicable solution did not succeed. 
 

It is noteworthy to highlight that arbitration agreements under many jurisdictions, like under common law, is separable from the agreement to which it relates. Thus, it does not become invalid, non existent or ineffective, when the
agreement to which it relates, become invalid or ineffective, or does not come into existence.

So to avoid arguments in the post-contract stage, it is vital to provide a provision in the  contract stating that arbitration shall be surviving when the contract become invalid or terminated for any reason. If this issue is overlooked or ignored, the question of validity of the arbitration survival becomes doubtful.

In this regard it is worth noting that under Sharia’a Law (law of Islam) if a contract become ineffective for a valid reason then all provisions become ineffective too, based on the rule that “if the principle abates, that which is incidental to it shall also abate,” but in reality this is changing in most Middle Eastern countries, to suite the international understanding and practice.

In the case of arbitration, such a provision has to survive and be treated as separable. In fact, the UAE is expected to issue a new arbitration law where reparability is likely to be covered.

Who is Aziz Karim?
Karim is currently employed as a construction contract consultant with Abu Dhabi-based Gasco and is an accredited arbitrator. He has a Bachelor’s degree in engineering along with a BSc(QS) and a FRICS, MCIArb. He is also the author of a book entitled Contracting Strategies & Management in Construction.