October 2012

Can Adjudication assist Abu Dhabi in

achieving its Sustainability (Estidama)
goals for the construction industry?
Presentation by:
Paul Straker
FCInstCES, FRICS, FICE, MCIArb
October 2012
October 2012

Credit to Others Citations(?)

Kindly note that throughout this
presentation; I cite other eminent
professionals, by cross reference to a
bibliography at the end of the
presentation notes(?).

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(1)
Adjudication!

October 2012

(2)
Estidama!

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(3)
The ICES survey 2012
on Dispute Resolution!
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How do these 3 relate?

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My Hypothesis!

October 2012

I assert that Adjudication can

significantly assist Abu Dhabi in
achieving its Estidama
(sustainability) goals for the
construction industry

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The results of the ICES dispute

resolution survey for Abu Dhabi
2012, support my assertion!

HOW?

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First some background

information.
An Overview of Adjudication,
Estidama & key findings from the
dispute resolution survey.

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What is Adjudication?
A process whereby the [neutral third party]
adjudicator who may not be a lawyer has to
reach a decision on matters referred to him
[by] the complaining party. (1.1)

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Who is the Adjudicator?

Either a single suitably qualified
experienced person / adjudicator.

and

Or a dispute adjudication board (DAB),

comprising of 3 suitably qualified adjudicators.
Appointed as a standing adjudicator/DAB at
commencement of the project; or on an adhoc basis; by the parties to the contract.
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What is an Adjudicators Decision?

After a dispute (rejection of a clearly defined
claim) has been referred to the adjudicator for his
decision thereon.
The adjudicator, acting fairly and impartially, shall
adopt suitable procedures, to make his reasoned
decision within a limited time (usually 3 months).
The adjudicators decision will be contractually
binding; unless and until revised in an amicable
settlement or an arbitral award.
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What are the alternatives?

In Abu Dhabi Arbitration is the preferred
method of dispute resolution!
However, the Abu Dhabi Commercial,
Conciliation and Arbitration Center (ADCCAC)
also offer Conciliation prior to Arbitration.(3.0)
Other potential options: Negotiation;
Mediation; Early Neutral Evaluation; Expert
Determination; Litigation.
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October 2012

Dispute Resolution Options

The following are the more commonly used
Alternative
Dispute
Resolution
(ADR)
methods.
Discussed in order, from simple inexpensive
methods, to the more complex, legalistic and
increasingly expensive methods.
Negotiation

ADR

Litigation

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October 2012

Negotiation
Theoretically gives the parties most control
over the dispute resolution process.
Without the intervention of a third party:
typically consists of a sequence of proposals
and counter proposals that continue until
agreement is reached or negotiations break
down . (1.2)
Negotiations often break down!
October 2012

WHY?
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October 2012

Negotiation contd
Heres just one of many reasons; the human
ego and lack of negotiating skills:
There will be many times that others would
gladly change their minds and agree with you
except for one thing:
they have already made a definite
commitment, and cannot change position in
good grace
Skillful persuaders know how to leave the door
open so that others can escape from their
previous position without losing face .. (5.0)

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October 2012

Mediation
The least adversarial dispute resolution
method; utilizing skilled persuaders!
the facilitation, by a third party, of a
negotiated agreement in which the
mediator does not decide the dispute, but
facilitates communication and problemsolving by the parties.(1.3)
The optimum solution?
October 2012

BUT WOULD
IT WORK?

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Conciliation
Utilizes similar techniques to Mediation, except:
Its more formalized; no meetings without both
parties present.
Results in a settlement proposal, made by the
conciliator.
Its a means of amicable settlement.
Non-binding on the parties; therefore open to
further dispute!
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Early Neutral Evaluation

Provided by an independent third party: an
early, frank and thoughtful evaluation of the
relative positions of the parties ;(1.4)
to enhance the prospects of a successful
negotiation ;(1.4)
by offering a realistic view of what might
transpire if a case is fully prepared and tried.
(1.4)

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Expert Determination
Used where the parties have appointed a third
party expert and: submit an issue for the
determination of a third party .(1.5)
Its used primarily in disputes of a technical
nature which require an opinion on a
specific issue or issues.(1.6)
The parties may agree in advance, to be
contractually bound by the determination.
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October 2012

Adjudication
Discussed earlier: internationally proven;
used by the Multilateral Development Banks
(incl. the World Bank); on projects worldwide.
FIDIC MDB Harmonised Construction Contract 2010; and
throughout the FIDIC suite of contracts.

Limited cost, similar to conciliation (typically

between 0.2% - 0.5% of construction costs).
Reaches an impartial and contractually
binding decision; usually within 3 months.
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Adjudication contd
The DB procedure amounts to serial adjudication
over 90% of disputes referred to a DB will not
go beyond that procedure into arbitration or
litigation .(Dr. Robert Gaitskell QC CEng).(4.0)
Speedy resolution; thereby facilitating the works,
enhancing cash-flow and project delivery.
Disposes of the argument, before tensions build;
thereby preserving business relationships.

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October 2012

Arbitration
An independent, impartial and finally binding,
private dispute resolution process; proven
worldwide.
Typically the default method, after the clients
own dispute procedure in the UAE; and the
final method under FIDIC contracts.
Award is enforceable in many countries
(pursuant to the New York Convention); therefore
may be attractive to foreign parties.
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Arbitration contd
Takes many months or 1 2 years to reach a
resolution.
Formal, adversarial, typically with only one
Arbitrator in UAE.
Heard in private; but may still damage
business relationships.
Similar cost to litigation; and substantially
more than any of the foregoing methods.
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October 2012

Litigation
Not a form of ADR, but mentioned here to put
ADR in context.
Settlement of the dispute through the courts.
A judicial process that is finally binding;
subject to appeal.
May not be enforceable outside the UAE
jurisdiction; therefore may not be attractive to
foreign parties.
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Litigation contd
May take many months or years conclude.
Costs similar to Arbitration.
Public hearing that may damage reputations.
Can result in a breakdown of business
relationships.

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October 2012

Estidama!

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October 2012

What is Estidama?
Estidama is Arabic for Sustainability!
But with a difference.
It is comprised of 4 fundamental pillars:
Environment

Economic

Cultural

Social

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October 2012

Integration at its core!

Estidama integrates the 4 pillars.
What are its expectations of the construction
industry?
To achieve significant environmental, social,
economic and cultural benefits, while ensuring
that the costs of the development are
minimized.(2.1)
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October 2012

Pearl Rating System for Estidama

A green building rating system.
Launched by ABU Dhabi UPC in 2010.
Mandatory for all construction projects.

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October 2012

Comprises
Mandatory and optional sustainability
requirements, to achieve:
Minimum One Pearl Rating for all developments.
Minimum Two Pearl Rating for government
developments.
The maximum is Five Pearls.

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How?
An essential part of the strategy for achieving
Estidama is to fundamentally change the way
we approach design, construction and real
estate development.(2.2)
To achieve Pearl Credit Points, under the Pearl
Rating Categories.

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Pearl Rating Categories(2.4)

Integrated Development Process
Natural Systems
Livable Buildings
Precious Water
Resourceful Energy
Stewarding Materials
Innovating Practice.
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October 2012

Integration
Has the potential
Adjudication.

to

benefit

from

Integrated Development Process:

Encouraging cross-disciplinary teamwork to
deliver
environmental
and
quality
management throughout the life of the
project.(2.5)
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October 2012

Innovation
Has the further potential to benefit from
Adjudication.
Innovating Practice:
encouraging innovation in building design
and construction to facilitate market and
industry transformation.(2.6)

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October 2012

Estidama
I propose to you; that Adjudication would be
the most effective dispute resolution
procedure; for Abu Dhabi, as it:
Integrates the team
Results in a contractually binding decision
Gives a quick solution at moderate cost.

Adjudication achieves Integration and would

be regarded as Innovative at present times.
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October 2012

Implementation
Currently the focus of the Pearl rating system
appears to be on design and construction.
The benefits of adopting the most efficient
dispute resolution process are not usually
considered.
The UPC could help to facilitate the adoption
of adjudication; by awarding significant credit
points for its demonstrable and beneficial use.
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October 2012

How?
An essential part of the strategy for achieving
Estidama is to

fundamentally change
the way we approach design, construction
and real estate development.(2.7)

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October 2012

Comfort Break
Help yourself to the refreshments.
Please wait until the end of the
presentation before completing the
questionnaire in your folder.

We will continue in 10 minutes!

October 2012

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October 2012

Dispute Resolution Survey

2012
Carried out between 14th June 2012 and 14th
July 2012.
Issued by the ICES, RICS and associated
institutions in the UAE.
Specific to the dispute resolution culture in
Abu Dhabi.
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October 2012

Survey Results Generally

Unless stated otherwise; the results in this
presentation, are expressed in terms of
percentages of the combined results of all
respondents.
Fractions of percentages and the It Depends
category are not shown, for clarity. Therefore,
the sum of the following percentages, does
not add up to 100% .
October 2012

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October 2012

(1) Survey Results

31 survey returns were made by the closing date;
comprising:
.
Clients - 21%
Contractors - 31%
Consultants - 48%

The detailed results can be viewed now on the

ICES UAE web site; http://www.cices.org

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October 2012

(2) Project Cost

The majority of our projects cost in excess of
US$ 100 million (AED 360 million).
.

Agree 61%
Disagree 6%
Sometimes 13%
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October 2012

(3) Base Contract

A substantial proportion of projects use:
39%

Bespoke

Agree

NEC3 3%
Disagree
52%

FIDIC 1999 R&Y

Sometimes

68%

FIDIC 4th 1987

0%

50%

100%

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October 2012

(4) Dispute Resolution

Procedures
DAB or adjudicator 3%
is appointed at
commencement.
DAB or adjudicator
is appointed on an
ad-hoc basis.

October 2012

68%

29%

Agree
Disagree

45%

32% 23%

Sometimes

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October 2012

(4) Dispute Resolution

Procedures contd
An independent
16% 19%
expert is appointed.
Mediation /
counselling is used.

39%

Employer's own
procedures are used.

48%
Agree
39% 16%

6% 13%

74%

Disagree
Sometim
es

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October 2012

(5) Settlement of Disputes

An amicable settlement 32% 26%
is reached.
Majority 42% of

39%

Agree

Contractors disagree

The Engineer / CA acts 35% 42% 23%

84% of Contractors
impartially.
disagree

The Engineer / CA acts

39%
fairly.
64% of Contractors

29% 29%

Disagree
Sometim
es

disagree
October 2012

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October 2012

(5) Settlement of Disputes

contd
Arbitration is the
preferred method.

48%

26% 19%
Agree

But see later

statistics!

Litigation is the
preferred method.

61%

32%

Disagree

0%
Disputes are usually
settled before
reaching arbitration.

Sometim
es

26%

65%
3%

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October 2012

(6) Disputes Relate to:

120%

Contract

EOT
97%

100%

Specs

Specs
68%

80%

Variations

60%
40%

Contract Variations
74%
74%

20%

Const
29%
Design
48%

EOT
Design
Const

0%

Type of Dispute
October 2012

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October 2012

(7) Impact of Disputes

More than 3 months
delay. 85% of Clients

58%

13% 19%
Agree

Agree

Increased costs more

than 5%.

32% 16% 32%

Increased costs more

than 10%.

48%

74% Contractors Agree

Disagree

19% 13% Sometim

es

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October 2012

(8) Quicker Settlement

Cognizance of
of Disputes Would
previous questions
100%

Reduce Cost
84%

80%
60%
40%
20%
0%

Reduce
Delay
74%

Improve
Const
32%
Improve
Design
32%

and answers!
Reduce Delay
Reduce Cost
Improve Design
Improve Const

Agreed Impact
October 2012

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October 2012

(9) Effective Methods

of Dispute Resolution

Adjudication
68%
Mediation
61%
Arbitration
16%

Litigation 0%

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October 2012

Summing up the Statistics

In my opinion, the key
statistics fall under the
following heads:
which I suggest are
correlated with the
dispute resolution
procedure in the
contract.
October 2012

(A)
TRUST

(C)
COST

(B)
DISPUTES

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October 2012

Trust
FIDIC contract is used, without the use of the
adjudication provisions.
Clients own dispute procedure is mainly used.
Engineer / CA; does not usually act impartially;
and sometimes acts unfairly.
The lack of impartiality by the dispute resolver;
leads to mistrust; a priceable Risk!

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October 2012

Disputes
Disputes mainly relate to:
Extension of time.
Interpretation of contract.
Valuation of variations.
Interpretation of drawings & specifications.

Which are all interrelated; resulting in risks to

time, cost and quality.
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October 2012

Cost to the Parties

Projects typically cost more than U.S. $100
million.
With delays of
disputes.

more than 3 months; due to

and increased costs of 5% - 10%; due to disputes.

Thats a Substantial Loss!

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October 2012

Cost to the Environment

One of the many costs: With an
estimated annual construction
expenditure for Abu Dhabi in 2011, of
U.S. $100+ billion; funded
substantially from oil revenue, at $80
per barrel; based on the dispute
statistics, this equates to around 100+
million barrels of oil, consumed due
to disputes, in just one year!
October 2012

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October 2012

Dispute Resolution
Arbitration is not the preferred method.
A quicker settlement of disputes would reduce
delays and cost; as well as improving the quality
of design and construction.
Adjudication would be the preferred method for
settling disputes.

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October 2012

Adjudication
Settles disputes impartially and quickly, which
builds trust; resulting in time and cost savings,
as well as improved quality.
Is contractually binding, giving certainty.
Achieves Estidamas tenets of Integration and
Innovation, at reduced cost; as well as being
the preferable method of dispute resolution.
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October 2012

Reflection
We need not all agree, but if we
disagree, let us not be disagreeable in
our disagreements (Martin R.
DeHaan).(6.0)

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October 2012

Closing Thought
An essential part of the strategy for
achieving
Estidama
is
to
fundamentally change (UPC).(2.2)

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October 2012

Conclusion
Does my Hypothesis stand?
Based on my research and the findings of the
dispute resolution survey; I maintain my
assertion that:
Adjudication can significantly assist Abu
Dhabi in achieving its Estidama goals!

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October 2012

End of Presentation
Questions

Learning

Integration

Please return the questionnaire

with your opinions; before you leave.

October 2012

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October 2012

Afterward
Your response will form part of an article on
the survey and following CPD presentation; to
be published in the ICES Civil Engineering
Surveyor magazine. This article will also be
used as part of my dissertation for a Masters
Degree in Construction Law and Arbitration.

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October 2012

Bibliography
Kindly note the following that have been cited
throughout this presentation:
(1.0) Crook JA & Betancourt JC, What is Alternative
Dispute Resolution (ADR)? (CIArb, London WC1A 2LP,
2010).
(1.1) Ibid. @ p. 5; citing, Reynolds, Michael et al.
Construction Litigation Practice, (Welwyn Garden City, 2000,
p.57.
(1.2) Ibid. @ p. 19; citing, Forgas Joseph On Feeling Good
and Getting Your Way: Mood Effects on Negotiator
Cognition and Bargaining Strategies, (1998) 74 Journal of
Personality and Social Psychology, p. 565.
(1.3) Ibid. @ p. 15; citing, Menkel-Meadow, Carrie, Lawyer
Negotiations: Theories and Realities-What we Learn from
Mediation, (1993) 56 Modern Law Review, p. 372.
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Bibliography contd
(1.0) Crook JA & Betancourt JC, What is
Alternative Dispute Resolution (ADR)? ; contd
(1.4) Ibid. @ p. 5; citing, Levine, David, Early Neutral
Evaluation: A Follow-Up Report, (1986) 70 Judicature,
p. 237.
(1.5) Ibid. @ p. 9; citing, Jones, Doug, Expert
Determination in Commercial Contracts in Cato, Mark,
The Expert in Litigation and Arbitration (London, 1999),
p. 789.
(1.6) Ibid. @ p. 9; citing, Wright, Ian, et al. Alternative
Dispute Resolution in Ramsey, Vivian et al.,
Construction Law Handbook (London, 2009), p. 905.

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October 2012

Bibliography contd
(2.0) Abu Dhabi Urban Planning Council (UPC),
The Pearl Rating System for Estidama, Version 1.0
(UPC, Emirate of Abu Dhabi, April 2010).

(2.1) Ibid. @ p. 14.

(2.2) Ibid. (emphasis added).
(2.3) Ibid.
(2.4) Ibid. @ p. 1.
(2.5) Ibid.
(2.6) Ibid.
(2.7) Ibid. @ p. 14. (emphasis added).
(2.8) Ibid.

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October 2012

Bibliography contd
(3.0) Abu Dhabi Commercial Conciliation and
Arbitration
Center
(ADCCAC),
Procedural
Regulations 2005.
(4.0) Gaitskell R QC, Trends dispute resolution in
the credit crunch (Construction Law International
Journal, Vol. 6, issue 3, October 2011) @ p. 6-12.

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October 2012

Bibliography contd
(5.0) Giblin L, The Art of Dealing With People
(Embassy Books, Mumbai 400 023, 2001); at p. 48.
(6.0) Taddeo D, Notable Quotables 3,000
Quotations from A to Z (Creation House Press,
Florida 32746); at p. 39.

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Disclaimer
This survey and/or presentation material may not be
used for any commercial purposes whatsoever. The
opinions expressed in this survey and/or
presentation, do not necessarily reflect the views of
the Chartered Institution of Civil Engineering
Surveyors (ICES), its Council of Management or
other committees or members, or those involved in
conducting the survey. No material may be
reproduced in whole or in part without the written
permission of the ICES.
END.
October 2012

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