According to the ICC Court of Arbitration, construction arbitration is substantially different from other types of commercial arbitration and “Construction arbitration needs careful handling”. Construction disputes require professionals who are experts in the field of the peculiar inherent characteristics of construction disputology and are trained to manage the arbitral process effectively in all aspects. Domain experts having expertise in arbitration, commercial and construction laws are required to assist the parties and arbitral tribunals in resolution of disputes in infrastructure and construction contracts.
In India, most of the construction and infrastructure contract disputes are related to Government sector. The contractors need to safeguard their contractual rights while maintaining good business relationship by skilful communication. The State contracts like conventional item rate & lump sum, EPC, PPP, BOT, BOOT and other Hybrid models, are usually made in non-uniform standard contract documents with bespoke conditions. The nuances of such contract conditions and disputes arising out of the same coupled with complex technical issues such as variation, extension of time, concurrent delay, delay & disruption compensation, escalation, exclusion clauses & limitation of liability etc. gives rise to interpretation of mixed questions of facts and laws. This requires sound knowledge of judicial precedents and authorities in absence of a codified special construction law in India.
There are large numbers of domestic players in construction and infrastructure sector, along with many international investors and players increasingly participating in the Indian market. The jurisprudence in construction & arbitration law in India is not exactly the same on some vital aspects as in other common law countries, both historically as well as due to many statutory reforms in such jurisdictions over the last century.
Simultaneously there is development of a few uniform standard contract documents in these jurisdictions, which have been judicially noticed there. The gaps in existing laws in India with respect to evolving commercial necessities pose challenges as well as opportunities to apply common law principles and foreign authorities.
In the procedural realm, there is huge scope in adopting good international practices in construction arbitration in India. This can reduce time and cost in arbitration and restore commercial purpose of alternative dispute resolution mechanism. These are particularly relevant in evidentiary methods, framing of issues and bifurcation of liability and quantum in interim awards; each of which requires professional skills. One more area of concern is delay analysis and its utility particularly in Government contracts; which can be handled credibly with expertise in both theory and practice.
According to Price water cooper research report on Global construction 2025, world construction markets are already booming with 52% of all construction activity in emerging markets today. This is expected to increase to 63% by 2025, with China and India contributing most to growth in emerging markets. India will overtake Japan as the third-largest construction market with annual growth averaging 7.4% annually in construction sector and it is further expected to exceed even China.
Disputes are very common in the construction and infrastructure sector projects and with the increase of number of projects there is likelihood of increase in number of disputes also. According to Arcadis-Global Construction Dispute Report 2018 “ Both the length and value of disputes around the world have increased; larger and more complicated projects and uncertainty in markets create the need to continue to stay aware of the key factors contributing to these disputes.” Broadly, the causes of disputes in construction projects are-
In India many infrastructure contracts are stuck in disputes and huge amount is blocked, resulting in stressed assets in construction sector. Various other ADR mechanisms are not so successful in India as on today and most disputes invariably end up in arbitration. Parties need to be careful while entering into contracts since certain PSUs do not even contain arbitration agreement in their standard contract conditions and in such case the disputes may be required to be referred to the commercial courts.
Kabi & Associates is India based arbitration and techno-legal firm, conceptualized and established by Mr. Ganesh Chandra Kabi. The firm specialises in Construction Law related to engineering & infrastructure, oil & gas and energy sector. The team at Kabi & Associates consists of professionals who are mostly dual qualified having both engineering and legal background, consisting of experienced arbitrator, top level engineers possessing years of experience in Government sector, arbitration lawyers and construction law experts. Our expertise covers contract management, delay/damage analysis, claim preparation, expert witness, negotiation, mediation, conciliation, arbitration, dispute resolution and litigation. The firm has in depth knowledge and experience of various contract forms used in India including EPCs and have good understanding of various international contract forms for example FIDIC, JCT, NEC and IEC forms of contract. We value ethical practices throughout the dispute resolution process.