Contract Laws: Alternative Dispute Resolution Mechanisms in Infrastructure Sector
Contract Laws: Alternative Dispute Resolution Mechanisms in Infrastructure Sector
Contract Laws: Alternative Dispute Resolution Mechanisms in Infrastructure Sector
UTSAV SHUKLA
MBA(INFRASTRUCTURE)
1800239MBI
1. INTRODUCTION
Infrastructure sector of India is certainly one of the most widespread and vital
sector of the nation. This sector is the life and soul of the country because it is
highly responsible for country's overall development and as well as for the
nation's economy. A proper infrastructure is nothing but basic organisational ,
well functioned and well managed structures and services always needed for the
operation of a society , or a county .
As the infrastructure and construction sector are growing with a speedy rate
which is further enhancing more demands and supply of services as well , it can
be clearly seen that various disputes and unwanted mishaps between the parties
are very common these days. And despite how much efforts parties do , the
disputes occur eventually in the infrastructure sector . These disputes generally
have far-reaching and never-ending negative impacts on the projects such as -
delay in completion of the projects , less profits , opportunity costs , irregular
operational & management works and the reputation of the parties as well.
Ultimately these impacts have a major impact on the economic development of
the country.
Disputes are very delicate and critical in the infrastructure field which may arise
during the completion of the project or after its completion . If these unwanted
disputes are not quickly solved or managed properly during their birth , they
may have a cascading effect on the projects and time & money of the
contractors and investers . The Infrastructure sector , itself being very delicate in
nature where the investment of capital is huge and gestation plus completion
period is long where multiple stakeholders are involved , the occurance of these
disputes are unavoidable. Infact sometimes the contracts are framed in very
complex manners and often do not clearly define the role of the parties that are
involved in the projects. Therefore these projects are prone to litigations and
disputes .
2. INFRASTRUCTURE PROJECTS
As India is becoming a very attractive destination for foreign investors and they
are entering in the Indian market and they prefer a very strong ADR mechanism
i.e. an international standard ADR Institution for to resolve the disputes. There
are many types of infrastructure projects which require huge capital investment
and where gestation period is very long. Some of them are -;
PPP
PFI
The private finance initiative (PFI) is a way of creating PPPs , where private
firms are hired to complete and manage public projects. This initiative is taken
and developed initially by the governments of many countries like Australia and
the United Kingdom, and used extensively there. In Spain , PFI and its variants
have now been adopted as part of the wider programme
of privatisation and financialization, and presented as a means for increasing
accountability and efficiency for public spending.
There are a number of reasons that parties elect Alternate Dispute Resolution
mechanism to have their disputes resolved. These include the prime desire to
avoid the uncertainties and local practices associated with litigation in national
courts, the desire to obtain a quicker, efficient decision, the relative
enforceability of arbitration agreements and arbitral awards, the parties' freedom
to select and design the arbitral procedures, confidentiality and other prime
benefits.
Some of the basic and most common causes of these disputes include
unexpected and improper site conditions , omissions and errors in the contracts
or tender documents are unprofessionally done , failure of owner or contractor
to understand the contractual obligations , incompletely or poorly drafted of
claims and policies , biased engineers / project managers , insufficiency of
FRONT END ENGINEERING DESIGN (FEED). And because of these causes
disputes occur in the projects which often lead to delay in completion ,
liquidated damages , price escalation issues and sometimes termination of
projects.
4. ADR MECHANISM
The main problem is , that the India's judiciary system is already over-burdened
with many pending cases. Approximately 2.18 crore cases are still pending
across the country . Therefore ALTERNATIVE DISPUTE RESOLUTION
TECHNIQUES or ADR MECHANISMS or external dispute resolutions
broadens for resolving the conflicts and tackle the various disputes which also
minimises the costly litigations and court processes.
4.3 In Mediation processes of ADR there is a third party involved just to give
his proposal for the resolution to overcome the dispute. It facilitates the
resolution process or give its proposal but does not impose a resolution on both
the parties. This is always unbiased and fair so that the relationship between the
parties are not compromised. This method is preferred many times because of
its various benefits such as it always the mediation processes are always flexible
and informal where both parties can openly share their price , creative
resolutions are often indentified , final outcome is always in the hands of the
parties , no outsider can pronounce or declare a person if he is winner or loser
and ultimately the relationship between the parties can be preserved which is
always a requirement. But unfortunately there are some cases where mediation
processes can fail where parties are adamant , or the parties have high egos ,
where parties want judicial determination, or one party wants a delay on
purpose.
5. DISADVANTAGES OF ADR
All of the mechanisms are highly effective in their own way but still there are
some disadvantages of ADR system such as -
6.ADVANTAGES OF ADR
7. CASES
8.CONCLUSION
Apart from an effective legal system and judiciary control which provides
resolutions for the conflicts , its is highly important to extend and create more
facilities and services and infrastructure that enable to implement rules to
facilitate the adoption of alternative dispute resolution mechanisms an d
requirement of certain arbitrators , negotiators , mediators and reconciliators is
much needed for transparent and fair ADR practices. Undoubtedly specialized
firms and organisations are always more promising and reliable in this case
where people can choose to consult them for various resolutions.
Though there are already some important organizations in India that are making
significant contributions in promoting ADR services and mechanisms such as
the Indian Chamber of Commerce (ICC), the Indian Council for Arbitration
(ICA), which is also considered as one of the apex arbitral body in the country; ,
International Centre for Alternative Dispute Resolution (ICADR), and the
Federation of Indian Chambers of Commerce and Industry (FICCI) but as the
nation is growing in this sector at a speedy rate more contribution is needed.
Infact the construction industry development council (CIDC) in cooperation
with the Singapore International Arbitration Centre (SIAC) is another institution
that has set up an arbitration centre in India known as the Construction Industry
Arbitration Council (CIAC). The council resorts to conflict resolution
mechanisms with the timely appointment of trained arbitrators following a strict
code of ethics for the delivery of awards.
Though the benefits of ADR mechanisms have not been completely discovered
but there is still infinity scope in India for arbitral justice system , which results
in huge dependence on judicial system. The ADR mechanism is still lagging
behind because of the intervention and interference of Indian government and
Indian courts in international arbitration processes and various other PPP
projects in terms of eligibility and selection. According to word bank report an
approximate Rs 90 billion is still locked in various disputes and arbitration cases
in infrastructure sector which requires serious attention to frame some
construction laws to improve legal environment in the country.
“It is the spirit and not the form of law that keeps the justice alive.”
- LJ Earl Warren
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