La Escena del graffiti y el Arte Urbano en Bogotá

5.1 Most disputes are settled by negotiation. That is the ordinary way of doing business and the most sensible way of bringing disputes to an end. Unfortunately in a small proportion of cases negotiation on its own does not succeed and it is necessary to look to other methods of resolving differences. The traditional forms of dispute resolution are litigation, in other words proceedings through the courts of whichever country is chosen or alternatively and most often the case in international construction projects, arbitration.

5.2 Litigation is not popular with many companies which operate on an international basis.

There is concern in some cases as to the independence of the courts and whether they are open to outside influences and in other cases there is concern as to the length of time which matters can take to be resolved. Inevitably it is also seen as expensive.

5.3 Arbitration, which has the distinct benefit of being confidential, was initially thought to be cheaper and more flexible than litigation. That is no longer the case. Arbitrators have to be paid by the parties to a dispute, not by the state. An ICC Arbitration can be very expensive. Not only are the Arbitrators themselves expensive but the ICC itself charges a large administration fee. With lawyers experts and arbitrators the cost of an arbitration can easily run to many thousands of dollars per day and that figure does not include the costs of preparing for the hearing.

5.4 Furthermore, because Arbitrations are now generally run by lawyers the process has become very like that before the Courts and can be procedurally drawn out. It is not unheard of for a full blown construction arbitration to go on for seven or eight years and incur costs of much more than the amount which was originally in dispute. That being said I should of course emphasise that ICC Arbitrations are generally expected to be concluded within six months of the terms of reference being agreed.

5.5 While there are benefits with both arbitration and litigation, which in certain circumstances make them the most appropriate forms of dispute resolution, as a consequence of the growing realisation that they were disproportionately expensive, in the late 1980's and throughout the1990's there was a growth in what is now known as ADR, which stands for Alternative Dispute Resolution. Such has been that growth that in a number of jurisdictions mediation is now a condition precedent to pursuing claims before the courts and that principle has been carried over into the construction industry.

5.6 These alternative forms of dispute resolution originally came out of the United States primarily because under the legal system of that country costs in litigation are not recoverable. That position is not the same in many other jurisdictions, for instance under

English law, which forms the basis of many legal systems throughout the world, the winner recovers costs. Nevertheless the perceived success and advantages of Alternative Dispute Resolution have led to an increased use on the international scene and its incorporation into international construction contracts.

5.7 I am today going to consider three forms of Alternative Dispute Resolution which might be applicable to the case study which has been looked at previously. Those methods are:

• Expert determination;

• A decision of a Dispute Adjudication Board;

• Mediation.

5.8 It is important to recognise that there are a number of other types of ADR which can be used these include but are not limited to : conciliation; med/arb; adjudication and mini trials

Expert Determination

5.9 One of the quickest and most speedy forms of Alternative Dispute Resolution is that of Expert Determination.

5.10 It is important to recognise the difference between expert determination which I am going to consider in some detail and something very similar but not the same which is "early neutral evaluation". In some contracts provision is made by the parties for either of them to have the right to seek a neutral non binding opinion from a neutral third party at a very early stage. This effectively gives the parties the opportunity the take a view before the problem has developed into a full blown dispute. It may encourage or discourage a party from pursuing a dispute but has the advantage of providing a neutral view at an early stage before the Parties have become entrenched in their positions.

5.11 Expert determination works like this. The matter in issue between the parties is put to an independent "expert" whose decision on the subject the parties agree to accept. The precise procedure to be adopted in expert determination is something that the parties have to work out between themselves either in anticipation of a dispute or once a dispute has arisen. In most cases the agreement in relation to expert determination makes that decision final and unappealable even if the decision is completely wrong.

5.12 This contrasts with litigation and arbitration where, whilst there may exist some procedural hurdles which need to be overcome and there may be stringent restrictions on

rights, there is nevertheless normally some recourse if the decision is completely and absolutely nonsensical. It is therefore very important that the parties have faith in the expert they chose to determine the issue. It is also important to ensure that expert determination is applicable only to appropriate disputes. This is one of the processes fundamental difficulties.

5.13 In some contracts provision is made from the outset for there to be determination of issues by an expert. That may be appropriate but has considerable risks because it is not always possible to anticipate precisely the nature of the dispute which may arise and therefore to anticipate an appropriate form of expert.

5.14 In a construction project a dispute may arise because of any number of reasons. There could be a claim that the project was delayed because of late design information. There could be a claim based upon bad workmanship or a claim as to the programming or scheduling effects of a variation. An engineer might be an appropriate expert to give a view on design or workmanship but not on scheduling effects. However even engineers have specialities: for example, a civils engineer could not properly be considered an expert in relation to mechanical and electrical matters.

5.15 For this reason experts are often not identified from the outset in contracts. The decision to rely upon expert determination may arise as a consequence of sensible negotiations between the parties or an agreement from the outset that an expert be appointed with a mechanism for choosing him in the event of disagreement.

5.16 It is much easier to find an expert who can deal with one specific distinct issue, for instance, responsibility for a defect including as to whether or not it is one of design or workmanship than for instance getting an expert to give a decision on a claim for loss and expense running into many millions of dollars.

5.17 In my experience expert determination normally works best where the parties agree to that course of action voluntarily after a dispute has arisen and such agreement normally takes place if the parties are seriously working towards resolution of their dispute. If both parties have a will to resolve the issue then they will need to agree and identify the experts for the particular issue. It does happen and often the parties stay on good terms.

If there is not a genuine wish to resolve the issue then it may not work and no agreement will be reached.

5.18 There is no set procedure for expert determination, some professional bodies have procedural rules in place but these are not fixed. Normally what happens, is that once an expert has been agreed between the parties, which as I have stated is not necessarily

straightforward, then each party will submit its written case in relation to the issues between them, to the expert who will after a period of time give his determination. The expert may carry out his own investigations but essentially will be able to make his decision based upon his own experience and what he finds rather than being restricted by the submissions which are made to him.

5.19 Expert determination is rarely appropriate where the dispute is about complex legal issues although in certain circumstances this can be appropriate. Because it has a flexible procedure and the Expert will be expected to investigate the role of lawyers is greatly reduced although not normally dispensed with entirely. It can be very quick and costs considerably less than other forms of dispute resolution.

5.20 I indicated previously that it is usually the case that the expert's determination is considered final and unappealable. There is, however, nothing to stop the parties agreeing that the expert's decision should be appealable and only an interim solution.

One has to question, however, whether such a procedure has any real benefit.

5.21 Not everything about expert determination is good. Experts do get it wrong and often are unable to think outside the confines of their own expertise. They can be oblivious to views other than their own and as such many parties are reluctant to submit to them.

5.22 If one refers to the case study mentioned previously one can envisage circumstances where the parties agree that the question of what mark up our Contractor should recover on rates charged by its Sub-Contractors, should be referred to expert determination.

5.23 It would be necessary if this was to happen for the issues to be clearly defined and the scope of the expert's role and authority clarified.

5.24 In the case study, the parties have been arguing over three possible ways of valuing the mark up.

• Method 1 was based upon an allowance derived from the tender (which the Employer favours);

• Method 2 was based on an allowance based on the actual company figures (which the Contractor favours); and,

• Method 3 was based on industry norms (which the Contractor favours).

5.25 Assuming the parties commenced negotiations but were not able to resolve this issue and they determined to have it resolved by expert determination, then their first task would be to agree on an appropriate expert.

5.26 Precisely who would be an appropriate expert is not necessarily certain. Clearly the individual would need to have experience of the industry so that he could make a decision in relation to industry norms and furthermore that the individual who it was proposed should be an expert needs to understand figures and costings in relation to claims of this nature. One could envisage in these circumstances a Quantity Surveyor or Cost Engineer, respected by both parties being appointed as an appropriate expert.

Normally one would anticipate the parties agreeing on the nature of the individual to be chosen before actually choosing the individual, however in my experience parties are often unable to agree on the nature of an expert never mind his actual identity.

5.27 The Expert approached needs to be one who is familiar with the process. In many countries there are professional bodies where members are trained in this type of ADR and who should accordingly be able to give the determination required. On the other hand there is little point having an expert who does not understand at least the basic consequences of what he is being asked to do.

5.28 Usually after the parties to a dispute have "agreed" an expert he needs to be approached to see if he can act. He will need to be questioned about any potential conflicts, his availability and the timescale within which he can operate. All of these factors may be relevant in determining whether to use him.

5.29 The expert needs to make his mark from the outset and once appointed should after consultation with the parties set the procedure and stick to it. He will require an agreement binding both parties and setting out the scope of his role. Lawyers usually need to be involved at this initial stage for the protection of the parties. As the decision of an expert tends to be binding without any right of appeal the scope of the issues which the expert is being asked to determine needs to be very clearly defined. If it is not then the parties may find that the expert extends his brief and reaches a decision on a matter which one or the other parties had no wish for him to consider.

5.30 In the example from the case study if one assumes a quantity surveyor was appointed he would make a decision based upon submissions put forward by both parties. He would also no doubt ask questions and demand information.

5.31 In most instances where there is expert determination there is not a hearing in front of the expert although the expert can call for further information as a consequence of his reading the papers submitted by both parties. Once the expert feels that he has investigated and understood the issues involved he should publish his decision which will in most circumstances bind the parties.

5.32 In the case study, therefore, it would not be inappropriate to envisage that if the question of the appropriate rate of mark up was sent to an expert for determination he could make a decision based upon the industry norm thereby the appropriate figure would 12.5%.

On the other hand as I have said earlier an expert is entitled to rely upon his own expertise and knowledge and could therefore conclude that non of the three methods which have been postulated are in fact appropriate. In these circumstances he could put in his own alternative rate which would bind the parties or indeed conclude that no mark up would be appropriate.

5.33 In summary so far as Expert determination is concerned:

• It is quick;

• It is cheap;

• It is most appropriate to deal with technical issues where the facts are agreed;

• There may be difficulties in making it compulsory;

• It is often difficult to agree an appropriate expert; and

• Care needs to be taken with defining the scope of the experts jurisdiction.

Dispute Adjudication Boards

5.34 Expert determination may work, but for various reasons it may not be appropriate to deal with all disputes or alternatively the parties may not be able to agree identity of an expert.

5.35 A further alternative is for a dispute to be referred to a Dispute Adjudication Board ("DAB") as it is called in the FIDIC form of contract, or a Dispute Resolution Board ("DRB") as it is called in the World Bank Form of contract.

5.36 Either of these boards can be asked to give a decision on a matter in dispute. This is the procedure which is envisaged by the two forms of contract I have referred to earlier although there are differences between the procedures powers and make up of the two.

5.37 In most instances Adjudication Boards' decisions or the like, which may occur in other contracts, are not final decisions but are ones which can be overturned, if found completely unsatisfactory by arbitration or litigation. Often however it proves to be the case that neither party wishes to take a decision of a Board any further even if they are dissatisfied with that decision.

5.38 In the case study which we have been considering the parties are not able to agree the extension of time sought by the Contractor. The Contractor seeks an extension of time for a period of two months. It is unlikely that a dispute of this nature would be referred to an expert for determination and therefore assuming the FIDIC 1999 terms apply the parties would proceed to a DAB.

5.39 In order for a matter to proceed in that way it is necessary for the appropriate procedural steps to have been taken in relation to the claim. In many cases the conditions of contract specifically determine how and what constitutes a dispute which can then be referred to a DAB. In FIDIC clause 20 of the General Conditions makes it clear that if a Contractor wishes to make a claim for instance for an extension of time the appropriate notices must be given within pre described time limits in order for that claim to proceed.

5.40 If the Contractor does not make a claim for an extension of time within 28 days then it will not be entitled to do so. This is a strict requirement of clause 20 and there is little point in a Contractor failing to comply with this time limit and then seeking to get around it by going to the DAB

5.41 The FIDIC Form of Contract specifies how a DAB is set up and there is an element of flexibility as to whether or not the Board should consist of one or three people. If there is only one individual then he becomes an adjudicator rather than a board.

5.42 Provision is also made in relation to the remuneration of the Board and methods of resolving disputes as to the identity of the Board.

5.43 The contract also makes provision for replacing members of the DAB if appropriate and takes account of the possibility of there being a list of eligible experts identified in the contract

5.44 Boards are not, as I indicated earlier exclusively a FIDIC concept. They have been used worldwide and vary in their nature and make up from contract to contract.

5.45 Boards can have permanent or floating members and the methods by which the constituent members are chosen varies from contract to contract.

5.46 In some cases there is a pool of individuals who are identified in the contracts and in the event of a dispute the initiating party picks an individual, the responding party another and those two then pick the third. Variations on this method can include larger panels of individuals but usually there is an odd number so that a majority decision can be made.

5.47 Individuals are appointed to the board by various methods but the intent is that at the end of the day the Board forms an independent body which will give a decision on a dispute which is referred to it.

5.48 The procedure for a Board will also depend on the form of contract used. In some cases the Board has a fixed and permanent membership from the outset and they agree to meet on specified days in advance of being aware of any disputes so that they can deal with them if they arise. This is the procedure envisaged by the World Bank Form.

5.49 It follows that in many some cases the Board has arranged to meet but have nothing to give a decision on. They are still obliged to meet and be paid. All that is left is for them is to have a good lunch and return home until the next time they are due to meet!

5.49 It follows that in many some cases the Board has arranged to meet but have nothing to give a decision on. They are still obliged to meet and be paid. All that is left is for them is to have a good lunch and return home until the next time they are due to meet!