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Stage 5: Binding Dispute Resolution

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... Between Contractor and EPC Excluding Labor Strikes in the Force Majeure Clause ... Task Force, Survival Kit for Complex Construction Arbitration in the 1990's. ... – PowerPoint PPT presentation

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Title: Stage 5: Binding Dispute Resolution


1
Stage 5 Binding Dispute Resolution
2
Definitions
  • WHAT
  • referral of a dispute to one or more impartial
    persons for final and binding determination.
    Private and Confidential, it is designed for
    quick, practical, and economic settlements.
    (American Arbitration Association)
  • WHO
  • A Panel of Three Arbitrators
  • WHY
  • Impartial, Final and Binding Decisions Issued by
    Knowledgeable Experts
  • HOW
  • Follow the Steps in the Contract to Reach a
    Binding Decision
  • Review the Contract for the Appropriate
    Procedures
  • File the Necessary Forms and Select the
    Arbitrator
  • Prepare your Case Relevant to the conflict

3
Reservoir Project
  • Project Scope Upgrading a Water Reservoir in an
    Environmentally Sensitive Zone
  • Fixed Price Contract
  • US6 million Bid Price
  • 480 Days for Completion
  • US 1,000 Per Day For Liquidated Damages
  • Major Participants
  • Owner (Public Agency)
  • Designer
  • Contractor (Lowest Bidder)
  • Problematic
  • Widening for a Temporary Access Road For
    Equipment
  • Owners Complaint The Impact on 35 feet of
    Environmentally Sensitive Area
  • Delay Claim Issued by Contractor
  • Arbitration

4
Outline
  • Mediation/Arbitration (Med/Arb)
  • Adjudicator/Expert Determination
  • Arbitration
  • Single Arbitrator
  • Baseball Arbitrator
  • Shadow Mediation

5
Mediation/Arbitration (Med/Arb)
  • Least Adversarial Binding DART
  • Same Third Party Neutral Acting as Mediator and
    Arbitrator if No Mediated Settlement Was Reached
  • Disadvantages (As Compared to Mediation)
  • Commitment of Parties to Proceed to Arbitration
    if Mediation Failed
  • Difficulty in Divulgating All Confidential
    Information to Neutral Third Party in the
    Mediation Phase

6
Med/Arb A Worldwide Practice
  • East Highly Encouraged
  • West Preference of an Unbiased Judge
  • Asia Conciliation Prior to Arbitration , Highly
    Encouraged
  • Australia
  • Pre-Trial Motions Set by Arbitrators in an
    Attempt to Promote Early Settlement
  • Proceeding to Arbitration if Failure to Reach
    Settlement

7
Outline
  • Mediation/Arbitration (Med/Arb)
  • Adjudication/Expert Determination
  • Arbitration
  • Single Arbitrator
  • Baseball Arbitrator
  • Shadow Mediation

8
Adjudicator/Expert Determination
  • Expert With His/Her Own Inquiries and
    Investigations
  • Award by the Expert, Binding If Enforced by
    Contract
  • Characteristics of the Expert Adjudicator Fast,
    Decisive, Binding

9
Adjudicator Procedure in the UK
Peña-Mora et.al, 2002
10
Adjudicator Procedure in the UK
  • Main Features
  • Unilateral Procedure Initiated by One of the
    Parties
  • An Interim Decision that Can be Reviewed or
    Appealed in Arbitration Upon Project Completion
  • Disadvantages
  • Very Limited Timeframe (7 Days) for the Joint
    Selection of a Knowledgeable and Reliable
    Adjudicator
  • Limited Time for the Adjudicator to Gather
    Information (2 Months)

11
Outline
  • Mediation/Arbitration (Med/Arb)
  • Adjudication/Expert Determination
  • Arbitration
  • Single Arbitrator
  • Baseball Arbitrator
  • Shadow Mediation

12
Arbitration Characteristics
  • Decisions Are Impartial.
  • Decisions Are Final and Binding on All Parties.
  • Decisions Are Issued by Knowledgeable Experts in
    the Field of Dispute.
  • The Contract Specifies the Size of the
    Arbitration Panel, the Codes and Regulations, the
    Organization Administering the Procedures, the
    Location

13
Arbitrators Attributes
  • Impartiality and Objectivity
  • Dispute Management Skills
  • Experience With Arbitration Proceedings
  • Strong Academic Background and Professional or
    Business Credentials

14
Classification of Arbitration Cases
  • Decline in the Usage of Arbitration Since 1991
  • New Classification of Arbitration Cases by AAA
    (1999) and Implementation of New Sets of Rules
  • Fast Track Rules for Cases up to 75,000
  • Regular Track Rules for all Other Cases
  • Large Complex Track Rules for Cases Involving in
    Excess of 1,000,000

15
Outline
  • Mediation/Arbitration (Med/Arb)
  • Adjudication/Expert Determination
  • Arbitration
  • Single Arbitrator
  • Baseball Arbitrator
  • Shadow Mediation

16
Single Arbitrator
  • One Expert Presiding Over the Hearings Instead of
    a Panel
  • Need to Weigh the Cost Savings Against the Risk
    of Having One Single Viewpoint

17
Outline
  • Mediation/Arbitration (Med/Arb)
  • Adjudication/Expert Determination
  • Arbitration
  • Single Arbitrator
  • Baseball Arbitrator
  • Shadow Mediation

18
Baseball Arbitrator
  • A Single Neutral Advisor Is Selected.
  • Each Party Presents Its Offer for Settlement.
  • The Arbitrator Selects One of the Two Offers.
  • Disadvantages
  • Lack of Flexibility
  • Absence of Alternative Solutions

19
CN Oil Refinery Project
  • Construction of a Refinery Complex for Heavy
    Crude Oil in Venezuela
  • Contractor Experiencing Disruptions Due to
    Unforseen Labor Conditions
  • Total Number of Man-hours Growing From 1,500,000
    to 3,000,000, Total Project Duration Growing From
    18 to 28 Months
  • Some of the Labor Conditions
  • Labor Strikes
  • Shortage of Skilled Labor
  • Overcrowding and Trade Stacking
  • Extensive Overtime and Shift Work

20
CN Oil Refinery Project
  • Contract Between Contractor and EPC Excluding
    Labor Strikes in the Force Majeure Clause
  • Contract Requiring Dispute Settlement Via
    Arbitration After Project Completion
  • Contractor Hiring an Independent Auditor Halfway
    in the Job for an Independent Third Party Review
  • Benefits of Auditor
  • Objective Analysis and Review Performed by an
    Expert
  • Organization of All Documentation in One File
  • Establishment of Key Variables to Assess the
    Impact on Productivity
  • Establishment of a Cost Structure to Track Costs
    Deviations From Initial Estimates

21
CN Oil Refinery Project
  • Major Advantage of Third Party
  • Provision of Valuable Document for Claim
    Settlement for Only 0.07 of the Original
    Contract Amount
  • On-Going Negotiations Between Contractor and EPC,
    Last Step Before Arbitration

22
Outline
  • Mediation/Arbitration (Med/Arb)
  • Adjudication/Expert Determination
  • Arbitration
  • Single Arbitrator
  • Baseball Arbitrator
  • Shadow Mediation

23
Shadow Mediation
  • Mediator Present During Arbitration Proceedings
  • Advantages
  • Parts (or All ) of the Dispute Can Be Removed
    From Arbitration and Settled Through Mediation
  • Shadow Mediator Recommends Possible Settlements
    Options Faster Than Arbitration

24
Reservoir Project
  • Sources of Conflict
  • Environmental Concern
  • Misunderstandings and Unrealistic Expectations of
    the Owner
  • Contractors Arguments
  • Bid Price Based on Ability to Modify Access Roads
  • Impact of Lack of Access on Schedule
  • Damages Exceeding US1.0 Million
  • Owners Arguments
  • Request of Access Road After the Permit Was
    Issued
  • Contractor Involved During Request for Use of the
    Road
  • Contractor Aware of Environmental Sensitivity of
    the Area
  • No Proof in Bidding Documents That Bid Price Was
    Based on the Access Road
  • Results Arbitration and Judgment in Favor of the
    Owner

25
Outline
  • Mediation/Arbitration (Med/Arb)
  • Adjudication/Expert Determination
  • Arbitration
  • Single Arbitrator
  • Baseball Arbitrator
  • Shadow Mediation

26
Summary
  • Common Characteristics Between Arbitration and
    Litigation
  • High Costs
  • Time Consumption
  • Strains in the Relationship Among Parties
  • Increased Formality
  • Decrease in Control by the Parties and in
    Flexibility of Outcome
  • Adversarial Stance
  • Win/Lose Outcome
  • Valuable Trait
  • Reliance on Knowledgeable Third Party Neutral
  • Other Binding Procedures as Modification of
    Arbitration
  • Mediation-Arbitration and Shadow Mediation
    Increasing Mediation During Binding Procedures
  • Adjudicator and Baseball Arbitration Rapid
    Closure of Dispute, Less Communication , win/lose
    outcome

27
References
  • AAA, 2000 American Arbitration Assiociation.
    A Guide to Mediation and Arbitration for Business
    People 2000.
  • Beresford Hartwell, 1998 Beresford Hartwell,
    Geoffrey M., (1998). The Relevance of Expertise
    in Commercial Arbitration. " Arbitration
    Procedures Achieving Efficiency Without
    Sacrificing Due Process." Last Update 22 June.
    Paris. Downloaded from the web on April 5, 1999
    www.ciob.org
  • Crowter, 1998 Crowter, Harold, (1998).
    Chartered Institute of Arbitrators. Chairman's
    Address Member Lunch, Butchers Hall. June 23,
    London. Downloaded from the web on April 5, 1999
    www.cioa.org
  • DRT, 1997/1998 Dispute Resolution Times,
    (1997/1998). AAA Partnering Boosts Jail Project
    in San Diego. p. 7 Winter
  • ENR, 7/11/1994 McManamy, Rob. Industry Pounds
    Away at Disputes. Engineering News Record.
    McGraw-Hill, New York. pp. 24-27. July 11, 1994.
  • Fenn et al., 1994 Fenn, P., and Gould, N.,
    (1994). Dispute Resolution in the United Kingdom
    Construction Industry. October 1994. University
    of Kentucky. p 1-17.
  • Fizel, 1994 Fizel, John L., (1994). Play Ball
    Baseball Arbitration After 20 Years, Construction
    Dispute Prevention Comes of Age. Dispute
    Resolution Journal pp. 42-47, June
  • Gould, et al.,1998 Gould, Nicholas and Cohen,
    Michael. ADR Appropriate Dispute Resolution in
    the U.K. Construction Industry. Sweet Maxwell,
    London. Vol. 17. April 1998.
  • Hollands, 1989 Hollands, David S. FIDIC
    Provision for Amicable, Settlement of Disputes.
    International Construction Law Review. Issue 1.
    pp. 33-43. 1989
  • Latham, 1994 Latham, M. Constructing the
    Team Final report of the Government/Industry
    Review of Procurement and Contractual
    Arrangements in the UK Construction Industry.
    HMSO London. 1994.
  • Myers, 1994 Myers, James. Task Force,
    Survival Kit for Complex Construction Arbitration
    in the 1990's. Dispute Resolution Journal. pp
    53-57. September 1994.
  • Peña-Mora et al, 2002 Peña-Mora, F., Sosa,
    C., and McCone, S. Introduction to Construction
    Dispute Resolution. Prentice Hall, New Jersey,
    2002.
  • Staniforth et al., 1998 Staniforth, Alison
    and Taylor Kathryn, (1998). Building and
    Engineering Disputes Reasons to be Worry Part
    II. Credit Control Hutton. Vol. 19 (2) pp. 12-13.
    1998.
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