ARBITRATIONINCONSTRUCTIONINDUSRTY ABSTRACT Theconstructionprojectsvolumeisgrowingrapidlyallaroundtheglobemajorlyincountries likeIndia

ARBITRATIONINCONSTRUCTIONINDUSRTY
ABSTRACT
Theconstructionprojectsvolumeisgrowingrapidlyallaroundtheglobemajorlyincountries
likeIndia,ChinaandUS.ThisindustryiscontributingmuchtowardstheGDPofthecountry
becausethisindustryislinkedwithotherindustriesinvolvingpeoplewithvariousskills.In
thisarticleIhavelaidmyemphasisonthebenefitsofarbitrationoverlitigationsincethe
needofthehouristhespeedydisposalofthecases.Noneofthenationscanaffordthe
casesrelatedtotheconstructionindustrybecomestagnantsinceitwouldleadtoastagnant
economy,Thereasonsandcausesforthedisputesarenumerous.InIndia,Arbitrationis
governedbytheArbitrationandConciliationAct1996whichhasbeenamendedintheyear
2005.Theamendmenthasledtoaremarkabledevelopmentintheadjudicationof
constructionrelateddisputes.TheConstructionIndustryDevelopmentCouncil,India(CIDC)
incollaborationwiththeSingaporeInternationalArbitrationCentre(SIAC)hassetupan
ArbitrationCentre,”TheConstructionIndustryArbitrationCouncil”,withanobjectiveof
providinganinstitutionalmechanismforresolutionofconstructionandinfrastructurerelated
disputes.ArecentdevelopmentbytheCabinetCommitteeoneconomicaffairsregarding
approvalofcertaininitiativesbytheNITIAayoghasbeenwelcomed.Lastly,acomparative
studyofstateslikeUSandUKshowsusthegrowinginclinationtowardsarbitrationfor
resolvingaconstructiondispute.Everynationlooktowardsdevelopingitsnationandthat
canneverbeachievedwithastagnantordecliningGDPandthisproblemcanonlybe
resolvedbyspeedyandefficientdisposalofconstructiondisputes.

1

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ARBITRATIONINCONSTRUCTIONINDUSRTY
ThePriceWaterHousesCoopers(PwC)hassponsoredanewreportnamelyGlobal
Construction2030whichforecaststhatthevolumeofconstructionoutputwillgrowby85%to
$15.5trillionworldwideby2030,withthreecountries,China,USandIndia,leadingtheway
andaccountingfor57%ofallglobalgrowth.TheconstructionmarketinIndiawillgrow
almosttwiceasfastasChinato2030,providinganewengineofglobalgrowthinemerging
markets.India'surbanpopulationisexpectedtogrowbyastaggering165millionby2030,
swellingDelhiby10.4millionpeopletobecometheworld'ssecondlargestcity.1The
Constructionsectorhasbeencontributingaround8percenttothenation’sGDP(atconstant
prices)inthelastfiveyears(2006–07to2010–11).GDPfromConstructionatfactorcost(at
constantprices)increasedto3.85lakhcrore(7.9percentofthetotalGDP)in2010–11from
284798crore(8percentofthetotalGDP)in2006–07.2Forecastsforthemarketsizeof
constructionindustryfortheTwelfthPlanperiodindicatethatthattheaggregateoutputofthe
industryduringtheperiod2012–13to2016–2017islikelytobe52.31lakhcroresincreasing
from7.67lakhcroresin2012–13to13.59lakhcroresin2016–17.3Thesefiguresshowus
thattheIndianconstructionindustryisavitalindicatorofgrowthanddevelopmentasit
createsjobopportunitiesandincreasesproductioncapacityinthecountry.Thesectoris
labour-intensiveandincludingindirectjobs,providesemploymenttomorethan35million
people.4Theconstructionindustryhasnoticeablyplayedaverysignificantroleinthe
developmentofnationsbutitsinceeveryactionhasareaction,thisindustryhasbeen
witnessingcommercialdisputesaswell.Theconstructionprojectsnow-a-dayshavebecome
verycomplex.Theyincludeahierarchyofpeopleandanumerousnumberofindividuals
involvingwithdifferentskillsandexpertise.Theactivityofsomanynumbersofindividualsis
morelikelytocausetheinevitabilityofcertaindisputesanddisagreementssinceitinvolves
tradeinvarioustradeandprofession.Theconstructionindustryisoneofthefastestgrowing
ConstructionIndustryInternationallyandthesecondlargestemployerinIndia.5Ananalysis
ofthe1174projectsattheendofSeptember2016showsthat333projectswererunning
behindtheiroriginalschedule.Thetimeoverrunintheseprojectsrangesfrom1-261months.
1GlobalConstruction2030-aglobalforecastfortheconstructionindustryto2030byPricewaterhouseCoopers2TwelfthFiveYearPlan(2012–2017)EconomicSectors,VolumeII,Chapter19,”OtherPrioritySectors”3Ibid4http://www.centroesteroveneto.com/pdf/Osservatorio%20Mercati/India/Ricerche%20di%20Mercato/2009/-construction%20Sector.pdf5″COUNTRYREPORTINDIA”ConstructionIndustryDevelopmentCouncil,21stAsiaConstruct
Conference,24thNovember2016-25thNovember2016,Tokyo,Japan.

2

Thecostoverruninthedelayedprojectshasresulted20.95%increaseinoriginalcost.The
anticipatedcostforalldelayedprojectstogetheris6,47,487.80crore.6Thusitcanbe
reasonablypresumedthattimeoverrunwouldleadtoconflictandwhichshallultimatelylead
todisputes.Thusitisvitallyimportantandexigenttoelucidatethequandaryinorderto
resolvetheconstructionrelateddisputesefficientlyandeconomically
Therearebasicallytwomodesforadjudicatinganydisputenamelylitigationinthecourtsof
justice,b)arbitration.DRBsandarbitrationsaremostcommonlyusedinconstructiondisputes.
Invariablyeveryconstructioncontracthasanarbitrationclause.DRBshavealsobecome
commonespeciallyaftertheWorldBankmadeitmandatoryinallhighvaluecontractsfundedby
them.ArbitrationsareconsideredessentialinIndiaduetotheinordinatetimetakeninnormalcivil
litigation(anythingfrom20-25years)forordinarycivilmatterstoreachresolution(through
variousstagesofappealsetc).ArbitrationsgotaboostwhenIndiaadoptedamodernpro
arbitrationstatuteinJanuary,1996basedontheModelLaw.7Themostfavouredmodeof
disputeresolutionintheconstructionindustryisarbitrationforthreefundamentalreasons:(a)
efficiencyoftime;(b)confidentiality;and(c)controlovertheprocessofdisputeresolution.8
Constructionisthesecondlargesteconomicactivitynexttoagriculture.Broadlyconstructioncan
beclassifiedinto3segments–Infrastructure,IndustrialandRealEstate.Theimportanceof
smoothfunctioningofthisindustrycannotbeoverstatedasconstructionprojectsarethecutting
edgeofdevelopmentandprovideindustrialandsocialinfrastructure.9Disputebeingavery
commonphenomenonissuchindustry,itisveryimportanttohaveproperdisputeresolution
mechanisminplacetopreventandresolvedisputes.Successfulimplementationdependslargely
oncarryingouttheconstituenttasksinapropersequence,anddeployingtheresourcestothe
bestadvantage.Allmeasureslikelandacquisition,fundingposition,lawandorderproblems
shouldbetakencare,wellinadvancebeforecommencingtheprojectsothatthedisputesatlater
stagecanbeavoided.Manyprojectssufferfrominadequaciesinprojectformulationand
implementation,leadingtotimeandcostoverruns,andaffecttheviabilityoftheprojects.In
addition,improperorganisationduetolackofcoordination,communication,andeffective
managementresultindisputesandhampertheoverallprogress.Topreventdisputes,a
systematicstudyisrequiredatthe
6AnnualReport,2016-17,ContributionofdifferentsectorstoGrossValueAddedin2015-16,GovernmentofIndiaMinistryofStatisticsandProgrammeImplementation7SumeetKachwaha,ADRinConstructionIndia,IBAInternationalConstructionProjectsCommittee8DisputeResolutionintheConstructionIndustry,SudipMullick,Partner,YigalGabriel,AssociatePartnerandNiharikaDhall,AssociatewiththeConstructionLawandDisputesPracticeatKhaitan;Co.9BenefitsofInstitutionalArbitrationandtheirroleinConstructionIndustry,ArticlebyCA.RajkumarSAdukia
3

beginningoftheprojectinallaspectsandadetailedprocedureistobeadopted
relatedtotheprojects.10
Therecanbeseveraldisputesoccurringintheconstructionindustry.Theycanbea)
ConstructionRelatedCausesofDispute,b)Financial/EconomicalCausesofDisputes,c)
ManagementRelatedCausesofDisputes,d)ContractRelatedCausesofDisputes.11
ThefactorscontributingtoadisputecanbemanynamelyErrorsindrawings,Defective
specifications,ImproperContractingpracticessuchasContractfamiliarity/client
contractingprocedures,BiddevelopmenterrorssuchasEstimatingerrorPaymentand
budget,Performance,Delayandtime,LackofQuality,LackofAdministrationprocess,
Misunderstandingsbetweenclient,contractor,owneretc.,Unpredictability,Unrealistic
expectationsbyparties,Ambiguouscontractdocuments,Poorcommunicationsbetween
projectparticipants,Lackofteamspirit,Failureofparticipantstodealpromptlywith
changes,unexpectedoutcomes,Bidreviewofcontractingofficers,Faultynegotiation
procedureofcontractingofficers,Knowledgeoflocalstatuesofcontractingofficers,
Schedulingofcontractingofficers,Changeorderofprojectmanagementprocedure,Pre-
awarddesignreviewofprojectmanagementprocedure,Pre-constructionconference
proceedingsofmanagementprocedure,Qualityassuranceofprojectmanagement
procedure,FaultySchedulingofsitemanagementprocess,ImproperProject
managementprocedures,Lackofqualitycontrol.12
Theglobaleconomyhascreatedanenvironmentinwhichconstructionfirmsareforced
tobidforprojectsatorbelowminimumprofitlevels.Atthesametime,ownersare
demandingcontractorstoexecutecomplexprojectswithoutincorporatingthedetailsin
contractdocuments.Thishasplacedanadditionalburdenontheindividualcontractorto
constructincreasinglysophisticatedprojectswithlimitedcapitalresourcesandwith
lowerquality.Underthesecircumstances,itisnotsurprisingthatthenumberofdisputes
withintheconstructionindustrycontinuestoincreaseatanalarmingrate.13
Theprocessofarbitrationbeingprivates,informal,quick,lessexpensiveandtheprocedure
beinglessformalascomparedtolitigationalongwiththeprocessofarbitrationevenhasa
limitedevidenceprocessascomparedtothecomplexlitigationprocessmakesitmore
10Ibid.
11″AREVIEWONCAUSESOFDISPUTESINCONSTRUCTIONINDUSTRY”,InternationalJournalOfAdvancedResearchInEngineering,ScienceAndManagement,ISSN:2394-176612Ibid13Ibid8.
4

preferablewhenitcomesdowntochosebetweenthetwoprocess.Withanobjectiveof
providinganinstitutionalmechanismforresolutionofconstructionandinfrastructure
relateddisputes,theConstructionIndustryDevelopmentCouncil,India(CIDC)in
collaborationwiththeSingaporeInternationalArbitrationCentre(SIAC)hassetupan
ArbitrationCentreinIndiacalledtheConstructionIndustryArbitrationCouncil(CIAC).
CIACisaRegisteredSocietywithitsheadquartersinNewDelhi.TheCouncilwas
inauguratedon15thNovember2006bythenHon’blePresidentofIndia,Dr.APJAbdul
Kalam14.ArbitrationundertheauspicesoftheCIACwillhavethefollowingfeatures:
a.Speed;TheCIACArbitrationRulesprovidesfortighttimelinesforappointmentof
arbitratorsandforrenderingoftheaward.UndertheCIACArbitrationRules,the
arbitratorwillhavetomakeareasonedawardwithin45daysfromcloseofhearing.
b.TrainedArbitrators:ThepanelofarbitratorsofCIACconsistsofprofessionalsfrom
theconstructionindustryaswellasthelegalfraternity.Theyhavegonethrough
formaltrainingbeforebeingadmittedtothepanel.Asontoday,approx140
arbitratorshavebeentrainedandcertifiedinarbitrationworkshopsconductedin
IndiaandSingaporeandhavebeenadmittedtothepanel.
c.StrictCodeofEthicsforArbitrators:Anarbitratorisappointedtoaparticularcase
onlyafteravailabilityandconflictofinterestchecksaremade.Arbitrators
appointedareremindedineachassignment,ofthestrictCodeofEthicsunder
whichtheyaretoconductthearbitration.
d.Transparentmanagementofarbitrator’sfees:Toassistpartiesknowtheirfinancial
exposuretothecostsofarbitration,CIACwillchargepartiesbasedonapublished
ScaleofFees.
e.Monitortheprogressofthecase:TheSecretariatofCIACwillmonitorthe
progressofthecasethroughoutthearbitration.
f.Arrangingfacilitiesandservicesforhearing:TheSecretariatwouldbeabletoarrange
Roomsforarbitrationhearings.TheSecretariatwouldalsobeabletoarrange
14http://www.cidc.in/new/activities1a.html
5

transcription,translationandinterpretationservices.Audioandvideorecording
facilitiescanalsobearranged.15
TheCIAAModelArbitrationClausestatesthat””Allandanydisputearisingoutoforin
connectionwiththiscontract,includinganyquestionregardingitsexistence,validityor
termination,shallbereferredtoandfinallyresolvedbyarbitrationinNewDelhioranyother
placeinIndia*inaccordancewiththeArbitrationRulesoftheConstructionIndustryArbitration
Association("CIAAArbitrationRules")forthetimebeinginforceatthecommencementofthe
arbitration,whichrulesaredeemedtobeincorporatedbyreferenceinthisclause.”16Ifthe
matterisdomestic(betweenIndianparties)thenNewDelhioranyotherplaceinIndiacanbe
chosen.Ifthematterisinternational(betweenanIndianpartyandforeignpartyorbetweentwo
foreignparties)thenSingaporeistobechosen.17InIndiathereisanallinclusivelegalscheme
toconductarbitrationsi.e.ArbitrationandConciliationAct,1956toconductarbitrations
irrespectivewhoeverthepartymaybeadomesticoraforeignelement.Beforethe2016
amendmenttotheArbitrationActearlierthisyear,inconstructioncontractsforlargeprojects
particularlywithpublicsectorundertakings(PSUs),theownertendedtocontrolthearbitration
proceedingsentirely.ThePSUsgenerallyexercisedthiscontrolthroughone-sidedarbitration
clausesinthecontracts.UndertheArbitrationAct,thepartiesarefreetoagreeontheprocedure
fortheappointmentofthearbitraltribunal.18InthecaseofACEPipelineContracts(P)Ltdv.
BharatPetroleumCorporationLtd19,thearbitrationagreementread:”Anydisputeordifferenceof
anynaturewhatsoeveroranyclaim,cross-claim,counterclaimorset-offoftheCorporation
againstthevendororregardinganyright,liability,act,omissionoraccountofanyoftheparties
heretoarisingoutoforinrelationtothisagreementshallbereferredtothesolearbitrationofthe
Director(Marketing)oftheCorporationorofsomeofficeroftheCorporationwhomaybe
nominatedbytheDirector(Marketing).204Basedonthis,thearbitrationagreementswithPSUs
wouldprovidethatthemanagingdirectororemployeeofoneofthepartiestothedisputewould
bethearbitrator.
ThecourtsofIndiapriortothisamendmenthadtimetotimeupheldthevalidityofsuch
clauses.InthecaseofIndianOilCorporationLtd.;Ors.Vs.RajaTransportPvt.Ltd21.
15http://www.ciac.in/about_us.html16Ibid17Ibid.18Section11(2)oftheArbitrationandtheConciliationAct,1956.19BharatPetroleumCorporationLtdandAcePipelineContractsPrivateLtd(2007)5SCC304.20Ibid.21(2009)8SCC520IndianOilCorporationLtd.;Ors.Vs.RajaTransportPvt.Ltd
6

WhichwasreaffirmedinthecaseofDenel(ProprietaryLimited)vBharatElectronicsLtd.;Anr
22,itwasheldthatthefactthatthenamedarbitratorisanemployeeofoneofthepartiesisnot
ipsofactoagroundtoraiseapresumptionofbiasorpartialityorlackofindependenceonhis
part.Therecanhoweverbeajustifiableapprehensionabouttheindependenceorimpartialityof
anemployeearbitrator,ifsuchpersonwasthecontrollingordealingauthorityinregardtothe
subjectcontractorifheisadirectsubordinate(ascontrastedfromanofficerofaninferiorrankin
someotherDepartment)totheofficerwhosedecisionisthesubject-matterofthedispute.Thus,
headsofdepartmentsanddirectors,notassociatedwithacontractcouldhavebeenappointed
asarbitrators.ThishasbeenheldinanumberofdecisionsoftheCourt;interalia,Ladli
ConstructionCo.(P)Ltdv.PunjabPoliceHousingCorporationLtd23,Secy.toGovt.,Transport
Depttv.MunuswamyMudaliar24,S.Rajanv.StateofKerala.25
Howeverthispositionhasundergoneasignificantchangewiththe2016amendmentto
theArbitrationAct(amendedArbitrationAct)which,interalia,providesthat
notwithstandinganyprioragreementtothecontrary,anypersonwhoserelationship,with
thepartiesorcounselorthesubject-matterofthedispute,fallsunderanyofthe
categoriesspecifiedintheSeventhSchedule(oftheamendedArbitrationAct)shallbe
ineligibletobeappointedasanarbitrator.26Thus,byvirtueoftheSeventhSchedule,
employees,consultants,advisor,managers,directorsorotherpersonswhoarepartof
themanagementofapartytothedisputearedisqualifiedtobeappointedasan
arbitratorirrespectiveofwhatthearbitrationagreementmayprovide.27TheDelhiHigh
Courtinarecentlandmarkjudgementhasconfirmedthisposition.
Thoughthispositionhasundergoneadrasticchangewiththeintroductionofthe2016
amendmentwhichprovidesthatnotwithstandinganyprioragreementtothecontrary,
anypersonwhoserelationship,withthepartiesorcounselorthesubject-matterofthe
dispute,fallsunderanyofthecategoriesspecifiedintheSeventhSchedule(ofthe
amendedArbitrationAct)shallbeineligibletobeappointedasanarbitrator.28
Arbitrationisperhapsthemostcommonlyusedmechanismforsettlementoftechnicaldisputes
inaconstructionproject.Itisaquasi-judicialprocesstotheextentthatlegalprotocol
22ArbitrationPetitionNo.16OF2009,SupremeCourtofIndia.23LadliConstructionCo.(P)Ltdv.PunjabPoliceHousingCorporationLtd(2012)4SCC609,24Secy.toGovt.,TransportDepttv.MunuswamyMudaliar1988SuppSCC65125S.Rajanv.StateofKerala(1992)3SCC608.26Section12(5)oftheamendedArbitrationAct27Rule1;12oftheSeventhScheduleoftheamendedArbitrationAct.28Section12(5),THEARBITRATIONANDCONCILIATION(AMENDMENT)ACT,2015
7

islargelyobserved,anditisimportantthatthearbitrator,whobasicallyactsasajudge,
understandslegalprocedures.InIndia,theArbitrationandConciliationAct,1996,provides
thelegalframeworkforthearbitrationprocess.Inprinciple,collectionandinterpretationof
evidence,examinationandcross-examinationofwitnesses,etc.,aresomeexamplesof
essentiallylegalmatters,whichanarbitratorneedstohaveasoundunderstandingof.
However,abasicbeliefinprinciplesofnaturaljusticeandapracticalapproacharea
hallmarkofasuccessfularbitrator.Heshouldbeabletoguideandprovideadirectiontothe
proceedings,whichcouldbequitetough,especiallywhenthepartiestothedisputeare
representedbyprofessionallawyers.Infact,thelawhasnowaddedanewdimensiontothe
arbitrationprocessbyempoweringthearbitratorstoconciliateandhelpthepartiesinarriving
atafaircompromiseoranequitablesettlementofthecasebeforehim.Asfarasthenumber
ofarbitratorsisconcerned,muchlikethejudicialsystem,technicaldisputescanalsobe
resolvedbysinglearbitrators,orapanelofseveralarbitrators,andthoughthepartiesare
freetodeterminethenumberofarbitrators,itshouldbeensuredthatthenumberisodd,so
thatasituationofatie?inanawardispreempted.Often,onearbitratoreachisnominatedby
thecontractorandtheowner,andtheseindividualstogetherchooseathirdcolleague
arbitrator,tocompletetheconstitutionofabenchofarbitrators.29Themostcarefulplanning
cannotalwayspreventdisputesandthisstepisthelastchancetoresolveadisputebefore
resortingtoabindingsettlement.30ThedisputesintheconstructionprojectsinIndiaareof
utmostconcernsincetheyaredirectlyrelatedtothedevelopmentofthecountry.Aneffective
claimmanagementprocessisessentialtoensurethatanycontractualclaimsarisingare
dealtwithinawaythatisfairtoeachinvolvedparty.
ArecentdevelopmentwastheapprovalofseriesofinitiativesbytheCabinetCommitteeon
economicaffairschairedbythePrimeMinisterShriNarendraModion31stAugust,2016
withanintentionofrevivingtheconstructionsectorinIndia.Theproposalwasputforwardby
theNITIAayogandwasapprovedbytheCabinetCommitteeonEconomicAffairsItwasthe
paymentof75%ofthearbitralawardtoanescrowaccountagainstmarginfreebank
guaranteebythegovernmentagenciesincaseswherethearbitralawardispending.This
accountmaybeusedfortherepaymentofbankloansandtomeettherequirementsofan
ongoingconstructionproject.Thismeasurewouldcertainlystimulatethedevelopment
processintheconstructionindustry.GovernmentDepartmentsandPSUshavealsobeen
29ManagementofClaimsandDisputesinConstructionIndustry,InternationalJournalofScienceandResearchISSN(Online):2319-706430Ibid.
8

instructedtotransfercasesunderarbitrationtotheamendedArbitrationActwhichhasan
expeditedprocedure,withtheconsentofthecontractors.Inthelongrun,othermeasures
arealsounderconsideration,includingchangestobiddocumentsandmodelcontracts,and
increaseduseofconciliation.NITIwillalsoexaminetheideaofcreating"claimtakeout
funds"financedbyprivatesectorinvestors,whiletheDepartmentofFinancialServiceswill
examineasuitableschemeforaddressingstressedbankloansintheconstructionsector.31
Themovecomesinthebackdropoftheneedtohaveaslewofshort-termandlong-term
initiativestoaddresstheissuesailingtheconstructionsector.Theconstructionsectorisa
majorcontributortoeconomicactivityaccountingforabout8%ofGDP.Inrecentyears,the
constructionsectorhasbeenaffectedbythelargenumberofprojectswhichgotstalled
duringtheperiodofstagnationbetween2011and2014.Thebankingsectoralsohasalarge
exposure,studieshaveshownthatakeyfactorbehindthedifficultiesfacingtheconstruction
sectoristhependencyofclaimsfromGovernmentbodies.AnestimatedRs.70,000crores
istiedupinarbitration.Over85%oftheclaimsraisedagainstGovernmentbodiesarestill
pendingofwhich11%ispendingwiththeGovernmentagencies,64%witharbitratorsand
8.5%withcourts.Theaveragesettlementtimeforclaimsisestimatedatmorethanseven
years.32Theconstructionsectorhasbeenfacingseveralchallengesleadingtodeclinein
overalldevelopmentandgrowth.
DisputeReviewBoards(DRB)providetheconstructionindustrywithamechanismtohelp
constructionprojectstopredictandhandlepotentialconstructionproblemsbeforetheyoccur,to
provideadvisoryopinionsonquestionableordisputedmatters,andtoprovideanalternate
disputeresolutionprocesstosettleanydisputesthatcannotbesettledbetweenthepartiestothe
constructioncontract.DRBsarecurrentlyusedallaroundtheworldintheconstructionofroads,
railroads,tunnels,dams,bridgesandothermajorconstructionprojects.Itisonlyinrecentyears
thattheDRBhasbeenusedintheconstructionoflargecommercialbuildingssuchas
manufacturingfacilities,shoppingcentres,hotels,etc.Becausetheconstructionindustryhas
seenthemanybenefits,DRBsarenowbeingusedfortheconstructionofsmallcommercial
projectsandlargeresidentialhouses.IftheDRBisempoweredwiththeabilitytorenderfinaland
bindingdecisionsuponthepartiestotheconstructionproject,theprojectisvirtuallyguaranteed
tocontinuewithaminimumamountoflosttimeandmoneythatwouldnormallybeencountered
whenarbitrationorlitigationisrequiredtosettledisputes.
31PressInformationBureau,GovernmentofIndia.CabinetCommitteeonEconomicAffairs(CCEA),31-August-2016

32Ibid
9

CDRSrecommendstheDRBhavingtheauthoritytomakefinalandbinding
decisions,whichisreflectedinthefollowinginformation.33
COMPARATRIVEANALYSIS
UNITEDKINGDOM:HamishLal,constructionpartneratAkinGumpStraussHauer;Feld,
suggeststhatwhilestatutoryadjudicationandtheexistenceoftheTechnologyand
ConstructionCourt(TCC)hasmadearbitrationlesscommononUKprojects,theuseof
arbitrationoninternationalprojectshasincreasedsignificantly.34TheADRbannerhasbeen
increasinglyadaptedandmaybeusedtodescribethreedistinctmovements.First,the
developmentofanewprofessionalgroupseekingtoinstitutionalisepartysupported
negotiations.Thesenewprofessionalgroupsareessentiallynon-lawyerswhoadvocatethe
useofmediationorconciliationindisputeresolution.Theseconddistinctmovementcould
bedescribedasthelawyer’scounterattackortheremodellingoflitigationpractise.This
movementmayincludesuchthingsasthe”mini-trial”whichseekstoensurethatlawyersare
includedaspartofthemediationprocess.Finally,thecourtshaveenteredtheADRarenaby
attemptingtoregulatethepathwaytotrialandalsobyofferingcourtannexedADR.35
Respondentsperceivenegotiationasthemosteffectivedisputeresolutiontechnique
intermsoftime,costs,satisfaction,minimisationoffurtherdisputes,etc.Second,
respondentsconsideredthattheyweremostabletoanswerthequestionsrelatingto
negotiation,slightlylessconfidentintheareasofarbitrationandlitigation,and
particularlyunsureaboutmediationprocesses,expertdeterminationand
adjudication.36ThisclearlyindicatedthegrowingscopeofarbitrationandotherADR
methodsinUKfortheadjudicationofindustryrelateddisputes.
UNITEDSTATES:TherearetwobasicmethodstoresolvedisputesintheUnitedStates
legalsystemi.e.a)litigationinthecourtsystem,b)arbitrationbeforeaneutralpersonor
panel,chosenbythepartiestohearanddeterminethedispute.Recently,moreandmore
constructiondisputesarebeingsubmittedtoarbitration,wherethearbitratorsareoftenmore
familiarwiththeconstructionprocessandconstructionrelatedissues,thanjudges.InUnited
33http://www.constructiondisputes-cdrs.com/creative_dispute_resolution_proc.htm34http://www.hardwicklegal.com/the-evolving-role-of-arbitration-in-construction-disputes/35AlternativeDisputeResoultionintheUKIndustry,14thAnnualARCOMConference,9-11September1998,UniversityofReading.AssociationofResearchersinConstructionManagement,Vol.2,428-3736Ibid.
10

States,thepublicpolicyhasdevelopedverystronglywhichisfavouringarbitration.37Florida
courtshaveruledthatarbitrationisthefavouredmeansofdisputeresolutionasan
alternativetolitigation.38Anycontroversyorclaimarisingoutoforrelatingtothecontractor
breachthereof,shallbesettledbyarbitrationinaccordancewiththeConstructionIndustry
ArbitrationRulesoftheAmericanArbitrationAssociation,andjudgmentupontheaward
renderedbythearbitratororarbitratorsmaybeenteredinanyCourthavingjurisdiction.39
37Lapidusv.ArlenBeachCondominiumAssociation,394So.2d1102(Fla.3rdDCA1981).38Roev.AmicaMutualInsuranceCompany,533So.2d279(Fla.1988)39ArbitrationintheConstructionIndustry,StuartH.Sobel(March1996)
11

CONCLUSION
TheconstructionindustrynotonlyinIndiabutallaroundtheglobeisthemajorcontributor
towardstheoveralldevelopmentofthenationsinceitinvolvesandemploysworkers
pertainingtovariousknowledgeandskills.Itmarginallycontributestowardsthegrowthof
GDPofacountry.Sinceconstructionbeingaveryvitalindustryandinvolvesahuge
investmentofmoneyinit,acountrycannotaffordmuchdelayintheadjudicationofcases
relatedtoconstructiondisputes.Inthe21stcentury,theconstructionrelateddisputesare
neededtoberesolvedattheearliestotherwiseitmayleadtostagnantconstructionprojects
alongwiththedecliningeconomyofthecountryandthebankfloodedwiththerecoveringof
loanamount.Theslowandcumbersomeprocessoflitigationinthecourtsimposesabig
threattothespeedydisposalofthecasesintheconstructionindustryduetowhichthe
countriesareresortingtoalternativemethodsofresolvingthedisputes.Adetailedanalysisof
theIndianscenarioalongwiththecomparativestudyofUnitedKingdomandUnitedStates
evenshowsustheshiftingofthecultureofresolvingthedisputestowardsarbitrationand
mediationandotherADRmethods.Thisismajorlyhappeningbecauseofthespeedy,
efficient,costandtimeeffectiveandlessformalprocessoftheADRmethods.Avery
effectivefeatureoftheArbitrationActisthatthearbitratorcanencouragesettlementofthe
disputebetweenthepartiesduringanystageofthearbitration.40Ifthepartiesreacha
settlementandsodesire,thetermsofsuchsettlementcanberecordedinanawardofthe
tribunal.41Thistechniquehasbecomepopulartheworldoverandisutilisedasahelpfultool
fordisputeresolution.
Thus,Arbitrationisveryhelpfulinresolvingcomplexconstructiondisputesanditisa
vitaldecisionwhichcanreducethetimeandcostofsuchlongprevailingdisputes
andcandetermineadisputeinamuchbetterway.
40Section30(1)oftheamendedArbitrationAct.41Section30(2)oftheamendedArbitrationAct

12