Mr Pallab Mukherjee is our guest speaker who will be presenting his thoughts and sharing some key information on resolution of disputes in construction contracts on the 22nd March 2022. The presentation will focus on the emerging trend of alternative dispute resolution (ADR) in the Middle East, particularly in the GCC countries.
Mr Mukherjee is a commercial management expert having more than 30 years of diverse experience across Middle East and India in various industry sectors including Oil & Gas and Petrochemicals. He has a long association with EPC project contracting and had played pivotal roles in commercial management transformation projects. He actively promotes the profession of contract management and authors articles on contract law published in journals having international readership. He is also a public speaker, mentor and coach.
According to Mr Mukherjee, ADR is fast evolving in the Middle East as the construction disputes are increasing progressively. The Singapore Convention on International Settlement Agreements Resulting from Mediation (adopted on 20 December, 2018) has already been signed by 55 nations including Middle Eastern nations. The signatory nations now have the obligation to make provisions in their national laws to embed the principles of the convention. This is another significant milestone achieved for ADR.
We spoke to Mr Mukherjee about the latest trends on resolving construction disputes , and how that is impacting the EPC landscape in today’s world.
Managing EPC projects, irrespective whether it is from the client’s side or from the contractor’s side, is extremely complex and challenging given the multitude of factors that have impact on the project delivery. Construction disputes just add to that challenge. Considering the contrasting interests and diversity in perceptions among the project stakeholders, conflicts are inevitable and often lack of attention and absence of dispute avoidance policies incubate the conflicts into disputes that finally result in undesired consequences like cost and schedule overrun in addition to incurring legal expenses to resolve disputes. During the Covid-19 pandemic, the long court waiting times and financial stress caused by COVID-19 have somehow created a significant appetite amongst many parties (in dispute) to resolve disputes amicably and resultantly avoid long and expensive legal battles. Settlement agreements on disputes were achieved through negotiations and virtual mediations.
Industry 4.0 is likely to have impact on Product liability, IT security/data protection law, IP law and Antitrust law. For example, the companies contemplating digital transformation of its business processes are likely to face challenges associated with product liability stemming from business integrations with external counterparties in the Supply Chain (suppliers, customers). The integration is likely to create overlapping liabilities requiring the parties to revisit their contractual and legal risk profile and have clear guidelines to determine and limit liabilities. EPC projects relying on Industry 4.0 will have a data-centric approach, which means that all concerned parties have real-time access (may be restricted in some cases) to the same information to make real-time changes and decisions. The data may include confidential and controlled information (design, know-how, etc. protected by Intellectual Property rights) provided under non-disclosure agreements, which if misused breaching the secrecy agreement may lead to complex legal issues and the breaching party may face multiple lawsuits.
Mediation’s main disadvantage, as an international dispute resolution mechanism, is the enforceability of the settlement agreement. The outcome of Singapore convention on mediation is long awaited; it has effectively created a framework for judicial recognition and enforcement of settlement agreements arising out of mediated disputes. It is likely to change the landscape of international cross-border alternative dispute resolution. One of the primary objectives of the convention is to boost confidence of the parties in dispute on mediation as an alternative dispute resolution process. Mediation is yet not an appropriate choice of dispute resolution mechanism in many legal jurisdictions where national laws are evolving, although a mediation can be significantly cheaper and less time consuming than arbitration and litigation, in addition to being non adversarial. The Singapore Convention aims to bring in the same finality in world of mediation which New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards) brought in the world of international arbitration.
Disputes in the construction industry is more a rule than an exception, often leading to arbitration and litigation, which undoubtedly add cost to the projects, erode the relations of the stakeholders and destroy the principal of “good faith” between the contracting parties. Even if the construction industry is voicing mediation/conciliation as its choice over arbitration to settle disputes, it is no more than saying that they still prefer to resolve disputes rather than avoid its occurrence. The construction community must proactively think of having appropriate techniques, rules, guidelines and protocols in place that would facilitate dispute avoidance. The DAAB (Dispute Avoidance and Adjudication Board) must play its role effectively in the tiered dispute resolution approach so that majority of the disputes are extinguished at DAAB and not progressed to arbitration and only the most intractable disputes are escalated to arbitration. Referring disputes to DAAB should not be treated as just a contract compliance requirement, parties must submit their disputes with a view to resolve, not just for the sake of procedural compliance. FIDIC 1999 and 2017 suites require that, if a party (or the parties) is/are dissatisfied with the decision of Dispute Boards, they must attempt to settle the disputes amicably before the commencement of arbitration. This reflects the fact that amicable settlement has been encouraged until the last moment and this spirit must be held high by the parties while settling their disputes and particularly so in EPC project contracts wherein the size and frequency of disputes are often overwhelming. Dispute avoidance must take the front seat – prevention is better than cure.
I would be looking forward to hearing on the present challenges that the EPC project stakeholders are experiencing, particularly the challenges posed by the Covid-19 pandemic which include breakdown of supply chains and severe shortage of construction manpower. It would be interesting to know how the force majeure claims by the contractors amidst the pandemic affected the on-going projects in terms of time and cost. Is the EPC sector resilient enough to overcome the impediments posed by the pandemic and bounce back on track?