By

Prof. (Mrs) C. Weddikkara , Ph.D (Law)

&
Mahesh Abeynayake
LL.B (Hons) , LL.M, M. Phil, Attorney-at-Law

Lecturer in Law
University of Moratuwa

Disputes and Construction Industry

o The delivery of a product in construction can be identified

as a process and not as an event. Harmon(2003)

o Complexities of the construction industry can create

disputes. (Chong & Zin,2012).

o Disputes frequently occur on construction projects.

Mawdesley(1994)
o Disputes in the construction

Andrew (1986)

industry are complicated.

Reasons for Disputes in the

Sri Lankan Construction Industry
o Breach of conditions of construction contracts
o Delay in issuing of final designs, drawings and instructions as

required by the contractor.

o Delays due to deficiencies in designs.
o Post contract instructions which delay disrupt or suspend work by

the contractor, his site arrangement or his method of construction.

o Inadequate financial strength of any of the parties to the contract.
o Unwillingness or inability to comply with the intent of the contract or

adhere to industrial standards in performance of the work.

o Unforeseen and unusual adverse weather or physical conditions,.
o Site conditions which differ from contract document.
o Price fluctuation.

Background of ADR methods

o There are several disadvantages in litigation such

as stressfulness, inflexibility and formality of court

procedure, restricted scope of claims and remedies
as well.
o Construction professionals are faced aforesaid

difficulties for settlement of disputes and started to

find Alternative Dispute Resolution (ADR) methods.
o

Litigation
Litigation is mainly used to

resolve disputes.
Mediation, Adjudication,
Arbitration, Conciliation ,
Mediation and Negotiation are
main types of Alternative Dispute
Resolution methods.

ADR Methods
Negotiation
Conciliation
Mdiation
Adjudication
Arbitration

General Characteristics of ADR

Methods
o Minimum delay
o Settlement achieved in final and fair
o Confidentially
o Flexibility
o Minimum cost

Stair Step Model for Dispute Resolution

Process in the Construction industry

Increase cost and

hostility

Litigation
Arbitration
Adjudication

Mediation/
Conciliation
Negotiation

Negotiation
A third party may bring the

disputing parties to the

negotiating table and he may
suggest the general
framework for producing a
settlement.

Conciliation
In contrast to mediation,

conciliation involves a more

separated examination of the
situation and the official
presentation of
recommendations which the
parties may then adopt or reject.

Adjudication
Adjudication a process where by, when a

dispute between parties arises, a person who

has no connection with either side is engaged
to examine the arguments of the parties to
decide the dispute. The decision may be
temporary binding.
This is a mandatory pre-step before the final
process may be commenced .

Arbitration
Arbitration is a more formal means of

settling disputes.
It can be defined as the settlement of a
dispute on the basis of the law by the
binding decision of a arbitral tribunal
whose work is determined by the
parties.
In arbitration some times
parties
themselves decide on the law that is to
be applied to the dispute.

Mediation In Sri Lanka

Historically, Sri Lankan administration

of justice revolved a round village level

informal mediation mechanisms, such
as, the teachers & principals and the
village temple and churches playing a
mediators role in Gam Sabha.
The formal introduction of Conciliation
Board in 1958 was controversial and
eventually turned to be a failure.

Mediation In Sri Lanka

The

Mediation Boards Act is

enacted in 1988 and being in
operation since then is regarded as
a comparatively more successful
legislative enactment but continues
to evoke serious debate in view of
its compulsory requirement of
mediation before litigation.

Mediation In Sri Lanka

Voluntary commercial and civil

mediation where parties enlist the

assistance of professional
mediators in whom they have
trust, to help to settle their
disputes is fundamentally different
from compulsory mediation.

Mediation In Sri Lanka

In civil disputes, the word

mediation is often interchangeably

used with the word conciliation
causing some confusion, even
though mediation is generally
regarded as a more practical
facilitation process than
conciliation.

Mediation In Sri Lanka

The submission to mediation is generally a

voluntary process even though in certain

disputes, such as those covered by the
Mediation Boards Act No. 72 of 1988,
submission to mediation of certain categories
of disputes is made a prior requirement before
seeking redress through courts.

Mediation In Sri Lanka

In commercial

mediation law,
submission to mediation
does not oust jurisdiction
of courts.

Mediation In Sri Lanka

Mediation legislation in many

countries has provided for the

speedy
enforcement
of
mediated agreements with
the minimum of additional
inquiry.

Mediation In Sri Lanka

The skill and the prestige of the

mediator and just and fair and

consensual manner in which the
mediation process was conducted
are ingredients that the court
would examine before making
judgment on the enforceability of
the mediation agreement

Adjudication and its

Recent History
In 1982 and 1984 British

Property Federation forms of

building agreements included
adjudication as a dispute
resolving method.
The aim was to make a quick,
inexpensive solution that
parties can agree at least as a
temporary decision.

Recent History
In 1997 adjudication was

introduced in to various forms

of sub contracts in UK.
Under the new engineering
construction contracts
adjudication is a mandatory
first step prior to arbitration.
Normally most of the disputes
do not continue after
adjudication.

What is adjudication?
Its the legal process by which

an arbitrator or adjudicator
reviews evidence and
argumentation including legal
reasoning set forth by
opposing parties to come to a
decision which determines
rights and obligations between
the parties involved.

Powers of an adjudicator
Adjudicator has given some

powers to succeed in his

process.
Freedom in conducting
adjudication Adjudicator can
make his own standard
according to the complexity
and nature of the dispute.

Adjudicator
is allowed
to visit the site,
Powers
of an
adjudicator

examine the factors and collect

information.
Adjudicator is allowed to question the
engaged parties and any third party if
needed.
Adjudicator is allowed to get advises from
any expert that which satisfy his own
intention.

Adjudication in Sri Lankan

In Sri Lankan construction
construction
field field, adjudication
procedure.

It is according to the ICTAD

conditions of contract (SBD 01

of 2002).

Adjudication in Sri Lankan

construction field
Adjudication is a statutory procedure by which

any party to a construction contract has a

right to have a dispute decided by an
adjudicator
It is intended to be quicker and more cost
effective than litigation or arbitration

ADVANTAGES AND
DISADVANTAGES OF
Those advantages and disadvantages are as
ADJUDICATION
follows.

Advantages in
adjudication
The advantages of
adjudication comparison to
other alternative dispute
solving methods are listed
bellow.
Less time consuming The
adjudication process would be
completed in 28 days.

Advantages in
adjudication
Less expensive the only cost is adjudicators
payment
No legal representation (lawyer) is needed
the party involved in the contract can
represent himself and answer for his own self
if adjudicator asks. No need of hiring lawyers.

Advantages in
adjudication
Adjudication can be done when the work is in
progress - delays and wastage according to
disturbance would be minimized
Adjudication has the full backing of
arbitration and litigation if one party
disagree about the decision they can go
further to the court.

Advantages in
adjudication

Parties can talk and

discuss within the
adjudication process
parties can make a
decision themselves while
the adjudication process
go through

Advantages in
adjudication
Reduce the load of cases in

litigation and
arbitration most of the disputes doesnt
remain after adjudication.
Adjudicator can be selected by the parties
normally the adjudicator is named in the
contract after both parties agree.

Advantages
Experienced experts in the field could be used

as the adjudicator engineers, architects,

Quantity Surveyors could be used.
More than one adjudicator could be selected /
named according to the dispute the suitable
adjudicator could be chosen.

Disadvantages in
adjudication
Adjudication also has some disadvantages
comparison to other alternative dispute
solving methods.
If the decision is not satisfactory parties
have to use courts and adjudication
becomes another waste of money and time.
There is a third party involved in
adjudication some times the dispute may
not clearly understand by the third party.

Disadvantages in
adjudication
Decision depends on the adjudicator there is
no exact standard or procedure so the process
and the decision could differ according to the
adjudicator.
The decision may only cause a short term
resolution parties can disagree and same
dispute could arise again after short period of
time.

Adjudication
agreement
The agreement follows

a similar format to that

of the other agreements
, arbitration etc.

Adjudication
agreement

The rules can be

incorporated into any
contract and become
operative when any party
under the contract gives
written notice of dispute
requiring adjudication.

Adjudication
agreement
Some adjudicators guidance notes suggest the
following wording.

Any dispute arising under

this agreement shall in the

first instance be referred to
adjudication in accordance
with the Adjudication Rules

Scope, purpose and conduct of

The adjudicator can limit the length of any
adjudication

written or oral submission,

Specialist / expert advice may be obtained but
only one party need constant or request such
help

Arbitration
Arbitration is the reference

of a dispute or difference
between not less than two
persons for determination
after hearing both sides in
judicial manner by another
person or persons, other
than court competent
jurisdiction.

Sri Lanka construction industry

In Sri Lanka, the construction industry is a
arbitration
major part of Sri Lankan economy.
It will be directly affected to the economic
growth.

Sri Lanka construction industry

Disputes in the construction industry in Sri
arbitration
Lanka were normally those that arise under
contracts for the procurement of supplies &
services and the installation of equipment,
sub contractors etc.

Themain
The
reasons
disputes
main reasons
for for
disputes
in Sri in Sri
Lankas construction
industry
are
Lankas
construction
industry
are
Breach of construction contract by any

party in a project.
Tax and cost variations due to economic
changes
Insufficient administration of
responsibilities by the client or contractor.
Drawing, Plans that contain errors and
confusions.

The arbitrator
The arbitrator was almost always an

individual with a wealth of experience in the

relevant industry or somebody with a
background relevant to the technical issues in
disputes.

Arbitration
The Arbitration Act of Sri Lanka No 11 of 1995

stated how to resolve disputes arise in any

industry.
The Act provides that an arbitration
agreement shall be in writing.

Arbitration
Characteristics of Arbitration
Economical Arbitration is cheaper than a

court action.
Simplicity- Procedure is simple.
Mutual agreement- Meetings can be
conducted anywhere and at any time which is
suitable for the parties. Parties do not have to
wait for the courts free dates.

Arbitration
Private- The entire hearing takes place in

private.
Speedily- Arbitration is speedier. A court
action will take at least one or two but in
arbitration can be agreed to settle the
disputes within 6 months.
Expertise- Arbitrator is normally selected for
his expert knowledge but the judge will not
have the knowledge of technical side of each
field.

Example for Clause,

Example for Clause,
Recommended
Arbitration
Recommended Arbitration
Clause by ICLP
arbitration
Clause
bycentre
ICLP arbitration
Any doubt, difference, dispute, controversy
centre
or claim arising from, out of or in connection
with this contract, or on the interpretation
thereof or on the rights, duties, obligation,
or liabilities of any parties thereto or on the
operation, breach, termination or invalidity
thereof, shall be settled by arbitration in
accordance with the Rules of the Arbitration
Centre of the Institute for the Development
of Commercial Law and Practice
.

Arbitration
An arbitration clause should be in writing to

meet the requirements of the Sri Lankan

Arbitration Act No 11 of 1995, Section 3(2) of
this Act recognizes arbitration clauses as
deemed to be in writing if contained in a
document signed by the parties or in an
exchange of letters, telexes, telegrams or
other means of telecommunication which
provides a record of the agreement

Advantages of Arbitration.
The process can be speedier than a court

case.
There can be a saving in costs.
Unwanted publicity can be avoided.
The arbitrator can view the subject in dispute
at any reasonable time.

Advantages of Arbitration.
Expertise
When the subject matter of the dispute is highly

technical, arbitrators with an appropriate degree

of expertise can be appointed
Privacy
Arbitral proceedings and an arbitral award are
generally private
Convenience
The arbitral process enjoys a greater degree of
flexibility than the courts
Expedition
Arbitration is often faster than litigation in court

Advantages & Disadvantages

of Domestic Arbitration
Cost
practice.
Arbitration can be
cheaper.
Advantages
of
Arbitration.
Advocacy
The right to appear for parties in the arbitral

tribunal is limited to attorneys-at-law, who in

turn have to be instructed by solicitors. At
arbitration anyone can appear for the parties.

Advantages & Disadvantages

of Domestic Arbitration
Relationship of the parties
practice.
it is generally possible
with arbitration to
Advantages
of Arbitration.
resolve disputes between two parties who
wish to go on doing business together in a
friendly way.
Enforcement
Arbitration awards are generally easier to
enforce abroad than court judgments

Advantages of Arbitration.
Arbitration is considered as an effective and efficient

alternative method of solving any disputes.

It consists of following advantages beyond the
litigation procedure.
Arbitration proceedings are speedier than litigation.
Arbitration is cheaper than litigation in courts.
Party autonomy is encouraged throughout the
procedure.
Ability to appoint an expert in the field as arbitrators.
Arbitration proceedings are confidential.

Alternative Dispute Resolution

Methods in the Construction
Industry in Sri Lanka

Dispute Resolution methods in

the Construction Industry
The construction industry has been renowned

over the years, which is in ripe with

conflict -Prof.(Mrs.) Weddikkara, 2007.

The process of a construction project

generates a number of situations where

disputes may arise. (Sunil Abeyratne, 2006)

Therefore the construction industry today

needs dispute resolutions.

Reasons for Disputes in Sri Lanka

Construction Industry
Breaches of Contract by any party to the

Contract.
Inadequate administration of responsibilities
by the owner/contractor/sub Contractor.
Plans and specifications that contain errors,
omissions
Sudden tax and cost increases.

Advantages of ADR
methods
Minimum delay
Settlement achieved in final and fair
Confidentially
Flexibility
Minimum cost

Advantages
The desirable features of ADR methods are,
Fast
Inexpensive
Fair
Simple and economical process

Construction industry
needs..
Fast and cost effective dispute resolution
method.