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Alternative Dispute Resolution is here to stay

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Alternative Dispute Resolution broadens options for resolving conflicts & minimises costly litigations. It is time to unlock its future potential, says Sachin Sandhir

Construction disputes can be frustrating, upsetting and time consuming. No matter what your concerns are, you will want to ensure that your rights are upheld in the matter. Alternative Dispute Resolution (ADR) has become an effective way of settling disputes not only in the construction sector but also in the real estate and infrastructure space, be it commercial, contractual or personal. This is attributable to the inherent characteristics of the ADR process to overcome the shortcomings of litigation through arbitration, negotiation and mediation.

ADR is not a new phenomenon in India but only recently has started to be used more extensively in the construction and real estate sectors. It broadens options for resolving conflicts and minimises costly litigations. Although disputes cannot be completely settled, the trend is definitely in favour of upholding and enforcing agreements to arbitrate, which is the best-known and most formalised alternative to litigation.

Until the enactment of the Arbitration and Conciliation Act 1996, the process of arbitration was totally ad-hoc in India. Increasingly, there is a growing dependence by companies, public sector undertakings, and Government departments to rely on institutionally administered arbitration rather than ad-hoc arbitration. The 1996 Act has facilitated the adoption of the Institutional Arbitration mode and has taken some bold initiatives in attempting to provide an effective framework for resolution of disputes without depending on the overburdened judicial system of the country.

Apart from an effective legal system that provides for conflict resolution, it is also imperative to extend or create facilities, services, and infrastructure that enable the implementation of rules to facilitate the adoption of ADR procedures and fair and transparent appointment of arbitrators that lead to an effective ADR practice. Specialized firms or organizations are more promising and reliable in this sphere and people choose to consult them and engage their services for dispute resolution.

Some important organizations making significant contribution in promoting ADR services in India include the Indian Council for Arbitration (ICA), considered as the apex arbitral body in the country; International Centre for Alternative Dispute Resolution (ICADR); the Federation of Indian Chambers of Commerce and Industry (FICCI); and the Indian Chamber of Commerce (ICC).

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.

Increasingly, the use of ADR mechanisms is also being considered to resolve online disputes. The swift growth of e-commerce and web site contracts has increased the potential for conflicts over contracts which have been entered into online. This has necessitated a solution that is compatible with online matters. ADR procedures such as arbitration, negotiation, mediation etc. can be modified and used effectively to settle online disputes. However, there are certain issues such as human resources constraints on the skills and knowledge of IT; ADR and law; technical concerns; legal sanctity of proceedings; industry support etc. that pose as impediments in the adoption of such a mechanism.. But these hurdles are a passing phase which can be overcome with time.

There is infinite scope in India for the arbitral justice system. However, arbitration as a procedure and its benefits have not been completely explored, resulting still in the heavy dependence on the judicial system. The arbitral mechanism is also grappling with other challenges such as the intervention by Indian courts in international arbitration processes and concerns related to the terms of eligibility, selection and governing practices for arbitrators.

On account of these factors, the effectiveness of the alternative dispute resolution mechanism has been brought under the scanner. A World Bank report estimates an approximate Rs90 billion to be locked in various disputes and arbitration cases in the construction sector, which recommends the framing of construction law to improve the legal and regulatory environment in the country and implement the use of standard contracts documents such as FIDIC.

Hopefully, with formation of the proposed nodal committee of arbitrators there will be an adoption of recommendations that lay down eligibility criteria for nomination of arbitrators; defining work ethics and setting up an implementation mechanism; and notifying and embodying the approved mechanism as part of Standard Contract Conditions. It is also gratifying to see the establishment of international arbitration forums such as the London Court of International Arbitration (LCIA) opening a branch in India in mid 2009 allowing Indian companies to seek to resolve their disputes under international rules.

But arbitration is not the only solution to conflicts management. In recent years there has been a growing interest in the use of mediation as a means of resolving disputes rather than resorting to the traditional litigation process. In 1999 and 2002, the Parliament amended the Code of Civil Procedure, 1908 and vide section 89, enlarging the scope of use of the mediation process. The amendment has transformed the role of judges, as they are now required to watch out for ‘elements of settlements’ in existing and ongoing litigations. In the advent of there being a scope for settlement outside the purview of the judiciary, the case maybe referred to mediators who can help the disputants to negotiate and arrive at a consensus on the impending decision. In fact to encourage this dispute resolution mechanism several Mediation and Conciliation Centres have been formulated under the jurisdiction of High Courts in Delhi, Karnataka, Punjab, Haryana, Chennai etc. where judges are now referring cases to mediation centres. Although, most construction contracts’ and purchase agreements nowadays factor in a clause on mediation, its implementation lacks on account of limited knowledge and experience of professionals in this field.

To counter this trend, the RICS has initiated an accredited Mediation Training Programme in some parts of the world to help meet the increasing demand for professionals in this space. Additionally, the RICS is also responsible for setting the strategic direction for the specialisation of dispute resolution in the future and for identifying and serving the information needs of its members.

The RICS Dispute Resolution Services (DRS) is the world’s largest provider of alternative dispute resolution services to the property and construction industries, appointing around 10,000 dispute resolvers per year and offering a complete range of methods for resolving disputes.

Sachin Sandhir is Managing Director & Country Head, RICS India. He can be contacted at ssandhir@rics.org

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