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 1 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 (?) . 2 October 2012 1
October 2012 (1) Adjudication! 3 October 2012 (2) Estidama! 4 October 2012 2
October 2012 (3) The ICES survey 2012 on Dispute Resolution! 5 October 2012 How do these 3 relate? 6 October 2012 3
October 2012 My Hypothesis! 7 October 2012 “I assert that Adjudication can significantly assist Abu Dhabi in achieving its Estidama (sustainability) goals for the construction industry” 8 October 2012 4
October 2012 The results of the ICES dispute resolution survey for Abu Dhabi 2012, support my assertion ! HOW? 9 October 2012 First some background information. An Overview of Adjudication, Estidama & key findings from the dispute resolution survey. 10 October 2012 5
October 2012 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) 11 October 2012 Who is the Adjudicator? • Either a single suitably qualified and experienced person / adjudicator. • 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 ad- hoc basis; by the parties to the contract. 12 October 2012 6
October 2012 What is an Adjudicator’s 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 adjudicator’s decision will be contractually binding; unless and until revised in an amicable settlement or an arbitral award. 13 October 2012 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 . 14 October 2012 7
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 15 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 ! WHY? 16 October 2012 8
October 2012 Negotiation cont’d • Here’s 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) 17 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 problem- solving by the parties” . (1.3) BUT WOULD • The optimum solution? IT WORK? 18 October 2012 9
October 2012 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! 19 October 2012 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) 20 October 2012 10
October 2012 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. 21 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. 22 October 2012 11
October 2012 Adjudication cont’d • “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 . 23 October 2012 Arbitration • An independent, impartial and finally binding, private dispute resolution process; proven worldwide. • Typically the default method, after the client’s 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. 24 October 2012 12
October 2012 Arbitration cont’d • 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. 25 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. 26 October 2012 13
October 2012 Litigation cont’d • 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 . 27 October 2012 Estidama! 28 October 2012 14
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 29 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) 30 October 2012 15
October 2012 Pearl Rating System for Estidama • A green building rating system. • Launched by ABU Dhabi UPC in 2010. • Mandatory for all construction projects. 31 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. 32 October 2012 16
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”. (2.2) • To achieve Pearl Credit Points, under the Pearl Rating Categories. 33 October 2012 Pearl Rating Categories (2.4) • Integrated Development Process • Natural Systems • Livable Buildings • Precious Water • Resourceful Energy • Stewarding Materials • Innovating Practice. 34 October 2012 17
October 2012 Integration • Has the potential to benefit from Adjudication. • Integrated Development Process: • “Encouraging cross-disciplinary teamwork to deliver environmental and quality management throughout the life of the project” . (2.5) 35 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) 36 October 2012 18
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