Why are there disputes in the industry?

Why are disputes prevalent in the construction industry?

Because it exists within an adversarial society

Too many players, each with its own interests (needs, desires, values, etc) and incompatible with others

Nature of disputes

Technical – obstructions on site, suitability of the foundation conditions, quality of materials, performance of mechanical systems

Legal – generally rely on a particularly difficult or controversial interpretation of the conditions of contract or of the law of contract

Managerial- bad management by subcontractor, consultant or the employer. Eg: fail to provide design information, late approval by client

Nature of disputes

Delays in the construction process because of unforeseen obstacles, delays in payments and problems over the technical aspects of construction

DISPUTE RESOLUTION

PAM 2006

Clause 34.0

Adjudication and

Arbitration

Clause 35.0

Mediation

JKR 2007

Clause 65.0

PAM 2006 – Clause 34.0

Reference to adjudication is a condition precedent to arbitration under Clause 30.4

Q : What does condition precedent means?

Q : What is Clause 30.4 all about?

It is on set – off by Employer

Clause 34.1

The parties have the freedom to refer any other dispute to adjudication

Any dispute under clause 30.4 after the date of Practical Completion shall be referred to arbitration under clause 34.5

Clause 34.2

A dispute shall be referred to an adjudicator to be agreed between the parties.

If after 21 days from the date of written notice to agree on the appointment of an adjudicator, there is a failure to agree, the party initiating the adjudication, shall apply to the President of PAM to appoint an adjudicator

Once appointed by the President, such appointment is deemed to be with the consent of both parties

Clause 34.3

Adjudication procedure shall be in accordance with PAM Adjudication Rules or any modification or revision to such rules.

Clause 34.4

A decision made by an adjudicator shall bound the other party until Practical Completion period

If there is any disagreement on the adjudicator’s decision, the other party must sent a notice to arbitrate within 6 weeks of the adjudicator’s decision.

Clause 34.5

This clause is for matters to be referred to arbitration, either during the progress or after completion of the Works.

Clause 34(a) to 34(e) – matters to be referred to arbitrator

Clause 34.6

If there is a dispute or difference arising between the parties :-

a) any party may serve a written notice on the other party that such disputes or differences shall be referred to an arbitrator to be agreed between the parties

Clause 34.6

b) If there is no agreement between the parties after 21 days from the date the written notice to concur on the appointment of an arbitrator, the party initiating the arbitration shall apply to the President of Pertubuhan Akitek Malaysia to appoint an arbitrator.

Appointment by the President shall be deemed to be with the consent of the parties

Clause 34.7

Arbitration conducted shall in accordance with the Arbitration Act 2005 and PAM Arbitration Rules

Clause 34.8

Powers of the arbitrator amongst others :-a) To rectify the contract to reflect the true

agreement made between the Employer and Contractor

b) To redirect measurements and/or valuations c) To ascertain and award any sum which ought

to have been the subject of or included in any certificate

d) To open up, review and revise any certificate, opinion, decision, requirement or notice

Clause 34.8

e) To determine all matters in dispute submitted to him in the same manner as if no such certificate, opinion, decision, requirement or notice had been given

f) To award interest from such dates at such rates and with such rests as he thinks fit i) on the whole or part of any amount awarded by him in respect of any period up to the date of the award

Clause 34.8

ii) On the whole or part of any amount claimed in the arbitration and outstanding at the commencement of the arbitral proceedings but paid before the award was made, in respect of any period up to the date of payment, and

g) To award such interest from the date of the award (or any later date) until payment, at such rates and with such rates as he thinks fit on the outstanding amount of the award

Clause 34.9

If the dispute involves the work of a NSC, and it arises out of or connected to the dispute between Employer and MC, or MC and that NSC, the Employer and MC shall use their best effort to appoint the same arbitrator to hear the dispute under Clause 29.3 of the PAM Sub-contract 2006

Clause 34.10

Arbitration proceedings shall not start until after Practical Completion or alleged Practical Completion or determination or alleged determination of the MC’s employment

Clause 34.10

BUT for these disputes, they may start before Practical Completion or determination of the MC.

a) The question of whether or not issuance of an instruction is empowered by these Conditions

b) Any dispute or difference under Clauses 31.0 and 32.0

Clause 34.10

c) Whether or not a certificate has been improperly withheld or not in accordance with these Conditions; or

d) Whether or not a payment to which the Contractor may claim be entitled has been properly withheld in accordance with these Conditions

Clause 34.11

The award of the arbitrator shall be final and binding on the parties

Clause 35.0 - MEDIATION

Notwithstanding Clause 34.0,upon the written agreement of both the Employer and MC, the parties may refer any dispute for mediation.

If they fail to agree on the mediator after 21days from the date of the written agreement to refer the dispute to mediator, any party can apply to the President of PAM to appoint a mediator.

Clause 35.0 - MEDIATION

Mediation process shall be conducted in accordance with PAM Mediation Rules

Reference to mediation shall not be a condition precedent for its reference to adjudication or arbitration by either the Contractor or the Employer

The rights to adjudication or arbitration under Clause 34.0 shall not be prejudiced or affected by Clause 35.0

ARBITRATION

JKR 203A (REVISED 2007)

Clause 65.1

If there is any dispute/ difference that arise between the Government and the MC out of or in connection with the contract, then the parties shall refer such matter, dispute or difference to the officer named in the Appendix for a decision

Clause 65.2

The Officer’s decision shall be made in written form

The decision shall be binding until completion of the Works and shall be subject to Clause 65.4

The contractor must proceed with the Work with all due diligence whether or not the notice of dissatisfaction has been given by him

Clause 65.3

If the Parties

a) Fails to receive a decision from the officer named in the Appendix within forty-five (45) days after being requested to do so; or

b) Is not satisfied with the decision of the officer named in the Appendix

Clause 65.3

The dispute shall be referred to arbitration within 45 days to an arbitrator to be agreed between the Parties

If they fail to agree, the appointment shall be made by the Director of the Regional Centre for Arbitration in KL on the application of either party

Clause 65.3

Such arbitration shall be heard at the KLRCA and shall be conducted in accordance with the rules for arbitration of the KLRCA using the facilities and system available at the centre.

Clause 65.4

Difference or dispute shall commence only after Practical Completion or determination of the Contractor’s employment under this Contract except those under Clause 52 (termination on national interest), unless with the written consent of the Government and the Contractor

Clause 65.5

If the arbitration process commences in accordance with Clause 65.4( before Practical Completion), it shall no way operate as a waiver of the obligations of the parties to perform their respective obligations under this Contract

Clause 65.7 to Clause 65.11

The arbitrator has the discretion to make an award and determine the amount, and direct the amount to be taxed, who shall pay and in what manner to be paid.

The award of the arbitrator shall be final and binding on the Parties

Clause 65.7 to Clause 65.11

If the arbitrator dies or unwilling or unable to act as the arbitrator, the Employer and the MC shall appoint another person to act as the Arbitrator. If they fail to agree on the appointment of an arbitrator, an arbitrator shall be appointed by the Director of the KLRCA

Clause 65.7 to Clause 65.11

Arbitration process shall be governed by the Arbitration Act 2005 and the laws of Malaysia.