Adjudication: An alternative dispute resolution tool for construction companies
As Qatar is seeing a large volume of construction being executed ahead of the 2022 World Cup and for the Qatar National Vision 2030, adjudication should be considered as a tool to aid the parties in managing and resolving the majority of their disputes as they arise, writes Sam Barakat – director of the Qatar branch of Rider Levett Bucknall.
Qatar is entering into a challenging phase in its road towards the delivery of the 2022 World Cup and the delivery of its Qatar National Vision 2030. The unusually high volume of works to be completed – and the fast approaching and fixed deadlines – bring immediate challenges to the construction market.
These challenges must now also be delivered within a market that must adapt to the new economic realities of a lower oil price and the subsequent budget pressures that this brings. This will normally have a significant impact on project strategies, feasibility expectations and access to working capital for stakeholders within the construction market. These new pressures may increase the difficulties many face in maintaining a healthy and consistent cash flow throughout the construction period.
Successful delivery of these projects will require the effective collaboration of all stakeholders involved. This will be most effective within a project environment where parties can worry less about protecting their commercial interest and focus more on the completion of the works required. Much of the responsibility for the fostering of such an environment will fall with the employer (as well as the concerned authorities). This will include the use of contractual mechanisms and dispute resolution tools.
Most forms of contracts used in Qatar trace their origin to the International Federation of Consulting Engineers (FIDIC) suite of contracts. Yet these terms and conditions are amended substantially by a set of special conditions. Employers within Qatar have, over the years, made genuine attempts to improve their contract forms. However, the final drafts on the market are still considered by many to remain imbalanced in favour of the employers.
The Qatar International Court and Dispute Resolution Centre has spent substantial time and effort in preparing draft adjudication rules for implementation within the local market.
The essential two questions to be addressed are as follows: (1) Are the parties reasonably protected under the contract or the Law; and (2) Are differences or disputes between the parties being resolved in a reasonable time?
Employers in Qatar have continued generally to favour the traditional approach of contracting. I would describe this approach as a vertical contractual relationship between the parties. This relationship has a tendency to push much of the risk down the supply chain. Such an approach is often unsuitable in reacting efficiently to changes or challenges arising throughout a construction project. This can often lead to delays in the resolution of project issues, that is a common cause of cash flow difficulties. Without a sustainable cash flow supporting the supply chain, these relationships have a tendency to exacerbate the friction between the parties.
With the immovable deadlines associated with the 2022 World Cup approaching fast, it may be counterproductive for employers to experiment now with reformed forms of contract. What could be done instead is for the parties to administer their contracts liberally, keeping in mind the importance of maintaining positive relationships between the parties involved in the project. At the very least, throughout the project, there should be a conscious effort by all parties to reduce the amount of unresolved differences or ongoing disputes among them. Adjudication as an alternative dispute resolution tool is designed to achieve just that.
The recognition that adjudication can play an important role in streamlining the Qatar construction market is not new to the country. The Qatar International Court and Dispute Resolution Centre (QICDRC) has spent substantial time and effort in preparing draft adjudication rules for implementation within the local market.
Some of the key features of these rules are as follows:
• Disputes dealt with by either a sole adjudicator or a panel of three adjudicators.
• Strict timetable for submission of documents and issue of a decision. Each pleading to be supported by documentation limited to two-lever arch files.
• The decision is to be reached and delivered within 60 days. If the adjudicator fails to achieve this, they are deemed to have forfeited their right to payment. An extension can be granted if all parties agree or, in exceptional circumstances, by QICDRC.
• Adjudicator’s decision is binding on an interim basis and enforceable through the Qatar International Court (QIC) with cases being heard by a designated, specialist construction judge. The QIC is a national court of Qatar which is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
• Very limited scope for appeals against adjudicator’s decisions (serious irregularity or breach of the law).
Unfortunately, at the time of writing, the QICDRC draft adjudication rules have not been legislated, nor are there clear signs as to when these rules will be made into a legislation in the near future. Without the legislation support provided by the Qatari courts, the referral to adjudication becomes voluntary, and it takes away the advantage of having a local Qatari Court to supervise the process.
Nevertheless, in cases where the employer is a government entity, existing tender laws allow the submission of voluntary adjudication or arbitration, provided that permission is granted from the Ministry of Finance, Qatar.
Adjudication will not be effective if it is perceived by the parties to be a fighting arena where there is only one winner, and the other party is a loser.
In addition to the adjudication options discussed above, there remain other options in the market that the parties may wish to adopt to suit their needs. One example is the dispute board rules adopted by the FIDIC suites of contract. A decision by a dispute board is contractually binding until appealed in local courts or through arbitration.
The popularity and use of dispute boards has been slow in the Middle East market. The cautious uptake of this may be the result of some bad examples of the process where the parties had little control over the conduct of the proceeding and it turned into a long and costly process. This should not discourage the consideration of this mechanism as a potentially effective process for dispute resolution.
As mentioned previously, the parties must remain focused on the reasons and objectives that lead them to adopting these processes to begin with. Adjudication will not be effective if it is perceived by the parties to be a fighting arena where there is only one winner (and the other party a loser). Adjudication should be considered as a tool to aid the parties in managing and resolving the majority of their disputes as they arise – with minimum interruption to the operation of the project. This can be done by the guidance of impartial and experienced adjudicator(s) or dispute board members.