EXPO 2020 in Dubai is fast approaching. The immovable deadline for this incredibly important event for the UAE will put significant time pressure on all those involved, especially on contractors who will have undoubtedly faced delays and other challenges during construction.
In the fourth of a series of articles in the lead-up to EXPO 2020, Driver Trett’s Steve Powell looks at dispute clauses within a contract agreement and the importance of understanding the provisions and wording, and requirements, together with the associated risks and opportunities, to protect the contractual entitlement of both contractors and subcontractors.
Construction of the nature, scale and fixed deadline like that of Expo 2020 will almost certainly result in variations, delays and disruption and associated remedial measures such as mitigation and acceleration. This almost certainly in most cases leads to parties making claims, mainly from subcontractors to contractors and from contractors to employers, and these claims are rarely settled during the course of the works.
In such circumstances, what happens when the parties cannot agree on a matter which has a major effect on cost and time? What recourse is available to them? What does the contract say?
Considering the above, and in the event that two parties cannot amicably agree and resolve a dispute, they must fully understand the clauses contained within the contracts which they have signed up to, including the dispute resolution clauses.
A dispute resolution clause is an agreement within a contract which sets out the process, terms and conditions for the resolution of disputes between the parties. Such clauses can normally be found towards the end of a contract.
Ideally, within the contract, there should be an appropriate procedure in place to deal in a structured way, with any dispute, difference, controversy or claim related to the contract. This procedure will offer the parties the best chance of resolving such matters as quickly and cost efficiently as possible.
The wording of a dispute resolution clause will depend on the form of dispute resolution the parties have selected, and a well drafted dispute resolution clause should include the following:
- The steps to be taken by the parties in efforts to reach an agreement before referring the disagreement for a binding decision;
- The time frames to be adhered to for each step, and what happens if they are not met;
- The ultimate dispute resolution body i.e. a local court, arbitration, or another type of dispute resolution;
- The rules that the resolution process should follow;
- The seat (in the case of arbitrations) and the location (venue) of the hearings, if applicable;
- The law governing disputes under the contract (often this is the same law that governs the contract);
- What costs are and are not recoverable during the resolution process;
Some contracts make provision for an accelerated alternative dispute resolution (ADR) process. On some projects, the contract provides for a Dispute Adjudication Board or Dispute Avoidance (DAB) process, involving independent and impartial persons selected by the parties. However, in some cases these boards are not set up and disputes can arise in relation to the DAB itself.
It is important that parties be certain that a formal dispute has formed before commencing a dispute resolution process. Parties sometimes incorrectly refer matters directly to arbitration when a formal dispute under the contract has not yet formed, for example, if a stipulated period of amicable settlement has not been demonstrably attempted.
Issues can also arise where the person who has signed the contract on behalf of one party is found not to have the authority to sign the dispute resolution agreement (e.g. an arbitration agreement) within the contract.
Unfortunately, the construction industry is synonymous with disputes, frequently running over budget, suffering delay, becoming disrupted, and having significant scope change. It is possible to avoid claims and disputes, however, if the culture of the project lends itself to anything but a collaborative and trusting relationship, it will result in claims that cannot be resolved amicably between the parties, which may later end in a dispute.
Ideally, parties to contracts need to ensure that the contract is administrated correctly from the start to avoid any unresolved matters from developing into claims which later are disputed. However, even with the best will in the world, disputes can arise.
Things change daily as works progress at pace. Therefore, it is important to act now to read and understand the requirements, risks and opportunities associated with your dispute resolution clauses to help preserve your entitlement to additional time and costs.
Being prepared in advance can make all the difference. Expo 2020 opens to the World in October 2020, and there is no time like the present for parties to a contract to familiarise themselves with the dispute resolution provisions in their contracts or seek early advice on the requirements, risks and opportunities of such clauses.
If you wish to have a no-obligation discussion with one of our highly experienced consultants to discuss assistance around the administration of your contract, or assistance and advice specifically in respect to how the dispute resolution provisions in your contract have been drafted or should be operated, please contact dubai@drivertrett.com or call +971 4 453 9031