ALTERNATIVE DISPUTE RESOLUTION AND THE DIFFERENT FORMS
Alternative Dispute Resolution(ADR) is a form of Dispute Resolution where parties resolve disputes without recourse to Court. The most common forms of ADR include; negotiation, mediation, adjudication and arbitration.
Negotiation: Amicable resolution of disputes by parties mutually without the intervention of a third party.
Mediation: Resolution of disputes between parties as guided by a neutral third party known as a Mediator. To note that the decision of the Mediator is not binding.
Adjudication: a form of dispute resolution, peculiar to construction contracts, where parties submit their disputes to an individual or a tribunal(DAB/DAAB)which renders a decision within a contractually stipulated time. Adjudication is final and binding in the interim until a party dissatisfied with the decision proceeds to submit the same to Arbitration where it is heard de novo.
Adjudicators are appointed either by agreement of the parties or by Adjudicator Nominating Bodies which include FIDIC, CIArb and in Uganda; Construction Law Institute. All Adjudicator Nominating Bodies have rules governing the Adjudication process and parties are free to adopt those rules even in instances where the Adjudicators are appointed in an adhoc manner.
The Jury is still out as to whether an Adjudication decision is enforceable seeing that most construction contracts provide for Arbitration if parties are dissatisfied with the decision of the Adjudicator(s).
In the case of Uganda National Roads Authority V TK Engineers Ltd V Bank of Uganda Misc. Application No. 750 of 2019[Arising from EMA 689 of 2019], the Court set aside the garnishee order that had been issued attaching the Applicant’s funds in the 2nd Respondent holding that the garnishee order was illegally issued because arbitration proceedings had commenced .
In contrast however, in the case of Debswana Diamond Company(PTY) Ltd V Liftoff Investments(PTY) Ltd(Court of Appeal Civil Appeal No. CACGG-292-23) the Court of Appeal of Botswana enforced the decision of the DAB. It stated thus: “I conclude therefore that in proper circumstances, DAB Awards may be referred to the High Court for enforcement. To that, I must add the caveat that courts should, as a general rule, be slow to enforce such awards and that judicial interference should be resorted to in exceptional circumstances only, such as where the contractual imperatives relating to resolution of disputes are found wanting.” In this case unlike the UNRA case, nearly one and a half years after the decision of the DAB, no arbitrator had been agreed upon.
ALTERNATIVE DISPUTE RESOLUTION IN CONSTRUCTION CONTRACTS
Construction contracts commonly contain a hybrid dispute resolution clause that is; providing for more than one form of dispute resolution.
PPDA: Adjudication as second resort when a party is dissatisfied with a decision of the Project Manager. Adjudicator required to give a decision in writing within 28 days after the referral. A dissatisfied party may then elect for Arbitration which is final and binding. If no Arbitral proceedings are commenced within 28 days from the date of rendering of the Adjudication decision, then the decision shall be final and binding(GCC 1.32).
FIDIC suite 1999(GCC 20.4): Adjudication as second resort when a party is dissatisfied with a determination of the Engineer. To note that before making a determination, the Engineer is required to consult with each party in an endeavor to reach an agreement. Adjudication carried out by a DAB which is jointly appointed by the date stated in the contract and in accordance with the procedure laid out in GCC 20.2 & 20.3 respectively. DAB to render a decision within 84 days(Or such other time as it proposes and the same is accepted by the parties). A party dissatisfied with the decision of the DAB is required to issued a Notice of Dissatisfaction(NOD) within 28 days. Where no NOD has been issued, then the decision becomes final and binding.
Where a NOD has been issued, the parties are required to amicably settle the dispute within 56 days, failure of which the same shall be referred to arbitration which is final and binding.
FIDIC Suite 2017(GCC 21.1): Introduction of a DAAB is the major difference in respect to dispute resolution.
As part of their mandate which is to avoid disputes, the DAAB is required to informally settle disputes which are brought to their attention if they are jointly requested to do so by both parties. To note that these informal proceedings are not binding on the parties.
Parties required to refer dispute to DAAB within 42 days from the date of giving or receiving a NOD failure of which the NOD is deemed invalid.
DAAB to render its decision within 84 days unless its fees have not been paid in full.
A party dissatisfied with the decision of the DAAB is required to issued a Notice of Dissatisfaction(NOD) within 28 days. Where no NOD has been issued, then the decision becomes final and binding.
Where a NOD has been issued, the parties are required to amicably settle the dispute within 28 days from issuance of the NOD, failure of which the dispute shall be referred to arbitration which is final and binding.
ARBITRATION
Arbitration is a mode of Alternative Dispute Resolution where two parties agree to submit their dispute to a neutral third party or Tribunal for determination. The decision of the Arbitrator is final, binding and not appealable(Unless parties explicitly agree); with very limited grounds to set it aside.
The notable international arbitration centers include the London Court of International Arbitration (LCIA), the International Centre for Settlement of Investment Disputes (ICSID) under the auspices of the World Bank), the International Chamber of Commerce (ICC), the Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC). In Uganda the arbitration centers are Center For Arbitration and Dispute Resolution(CADER) and International Center for Arbitration and Mediation in Kampala(ICAMEK).
In Uganda, the governing law is the Arbitration and Conciliation Act Cap 5 which mirrored the UNCITRAL Model Law on Arbitration.
The Arbitration and Conciliation Act, Cap 5 (Laws of Uganda 2024) domesticated the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”). It also domesticated the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States 1966 (“ICSID Convention”). Having ratified and subsequently domesticated both Conventions, Uganda is thus obliged to enforce awards presented to its courts for enforcement by States that have adopted both conventions, in accordance with the relevant terms of the respective conventions.
To note that Arbitration is founded on agreement of the parties and it therefore should be included in the Construction Contract. Even where parties have not included an Arbitration Clause in the contract, they are free to adopt Arbitration and execute an agreement to that effect in the event that a dispute arises. The Arbitration Clause is taken as a stand alone agreement within the contract by virtue of the principle of separability.
THE ROLE OF ADR
Ensure that works on a project are not disrupted even when a dispute has arisen. Most construction contracts provide for continuity of works even when parties commence ADR Proceedings and the advantage of this is that there is minimal disruption of works despite the dispute.
Maintain Relationships between the parties and confidentiality of their business transactions.
Quick Resolution of disputes: 2,588 cases classified as backlog according to the Judiciary’s 4th Annual Performance Report. In contrast, with ADR, parties are able to resolve disputes speedily; especially with a multi tiered ADR Clause. For example; according to the 2024 Report published by Kings College London, The level of party compliance with adjudication decisions is high. As per a survey carried out, 52% of questionnaire respondents stated that, in the past year, not a single adjudicated dispute was referred to litigation or arbitration.
Ensures that disputes are resolved by persons with expertise in construction law.
Ensures that disputes are resolved in a flexible manner since ADR is premised on party autonomy.
CONCLUSION
Because of the critical role ADR plays in resolving disputes, it is most pertinent to provide for it as a mode of dispute resolution in every construction contract.
The most preferred is a multi tiered clause that provides for mediation, adjudication and arbitration being an ADR form of last resort.
Ann Namara Musinguzi; MCIArb
Managing Partner, Namara Musinguzi & Co. Advocates
info@namaralaw.com
December 16, 2024
