Amman

Construction is an industry with inherent risks, with projects involving long-term commitments in a fast changing environment.

The difficulties inherent in civil engineering and building projects frequently means that expectations of the parties remain unfulfilled. In a highly competitive construction market, projects are often insufficiently planned and, sometimes, improperly estimated and managing change becomes difficult.

Consequently, the euphoria present at the contract signing ceremony, when both parties had the expectations of mutual benefit, no longer exists. The difference in the parties' definition of justice becomes more profound. As a result, goodwill evaporates, relationships deteriorate and problems proliferate causing contract change, claims, counterclaims and often, litigation.

There are significant reasons why business people enter into and remain in disputes. These could be political or psychological factors in any group, including corporate groups. There are certain attitudes toward conflict and toward how to protect one's interest using litigation. And there are those who insist that there can never be "clear contract language". Additionally, different ways of conducting business in the Middle East contribute to differences of opinion between owners, consultants, and contractors who very often are of different cultures and nationalities.

While the moral should be never to get into a dispute in the first place, nowadays it is unlikely that a contract is executed without a dispute arising.

Alternative Dispute Resolution (ADR) is a variety of techniques used to resolve disputes outside the courtroom, including negotiations, mediation/conciliation, mediation-arbitration, arbitration and summary jury trials.

The ADR techniques (alternative to court proceedings) are designed to bring disputes to an end (in private) at terms usually acceptable to both parties (with the exception of arbitration), with neither party having the power to impose a solution which the other is unwilling to accept.

ADR presupposes that the disputing parties agree that they want a settlement. This is of paramount importance. ADR is carried out on a strictly, using the legal jargon, "without prejudice" basis: that is, the parties are not obligated to give as evidence what they discuss during settlement procedure. Additional advantages include speed in resolution of the disputes (typically several days), control over the dispute resolution process by the parties, privacy and confidential exchange of information, preservation of business relationships, confidence in the selection of arbitrator or mediator and, last but not least, cost savings.

Two popular ADR techniques include mediation and arbitration (although some would question whether arbitration qualifies under ADR).

Mediation is a voluntary, structured, confidential process in which the mediator acts as a facilitator to help the disputing parties reach a mutually acceptable negotiated settlement of their difference. The parties take an active role in the management of the dispute and retain the right to formulate a remedy. After all, it is fundamental that the best way to end a dispute is settlement by agreement between the parties themselves.

Any opinion of the mediator is not binding on the parties, except to the extent that they incorporate it into a settlement. In fact, a mediator does not have the power to impose a decision.

The question often arises as to why mediation should work when traditional negotiations fail? Firstly, negotiations tend to be confrontational where the parties perceive themselves as adversaries. A trained mediator will try to shift the dynamics of the negotiations away from positional bargaining towards principled negotiations at which time the parties view themselves as collaborators rather than adversaries.

Secondly, the parties negotiate through a mediator who gives the parties the opportunity to explain the positions at the joint opening meeting and after signature of the Agreement to Mediate (if this was not signed earlier).

Finally, the individual meetings with the parties, called caucuses, are held in private and are confidential. At these meetings, the parties can share confidences with the mediator, and start to differentiate between their positions (what they say they want) and their interests (what they really want). The mediator will also discuss the risks of the case, best and worst outcomes, quality of the evidence and the cost of litigation. The mediator may ask the permission of a party to reveal some information to the other party.

In this manner, the mediator achieves a unique overview of the dispute and can help identify ways in which the parties can satisfy their needs.

If the mediation results in a settlement, the parties then sign a written agreement with the intention that it becomes a legally binding contract. In the US, 80 -90 per cent of the time commercial cases are settled in mediation. However, if mediation does not result in a full settlement (it is possible that some of the issues in dispute are settled) then the parties are free to pursue other options such as arbitration.

Arbitration was developed in the 19th century to avoid the perceived abuses of the systems of litigation. Arbitration was the preferred method for dealing with many commercial disputes and is considered the most traditional form of private dispute resolution.

Arbitration is a procedure where a dispute is put before one or more impartial persons, referred to as the "tribunal", for a legally binding award to be decided in a judicial manner.

The parties have the freedom to choose their tribunal. This has the advantage that the parties can take into account the personality, the qualifications, the experience and cost of potential arbitrators before committing themselves.

In a tribunal of more than one arbitrator there is sometimes the misconception that the arbitrator appointed by a party should judge in that party's favour. Unlike a judge in a court, an arbitrator is not appointed to investigate the truth of the matter; he should simply decide on which party has adduced the heavier evidence and/or the most convincing arguments as to law.

While an arbitrator may, and should use his own knowledge to understand the submission and evidence put before him by the parties, he cannot use his special knowledge so as to provide evidence on behalf of the defendants, which they have not chosen to provide for themselves.

The points in dispute, or issues, put before a tribunal may be issues of pure fact, that is, what was done, what is it worth, what is reasonable care, what is reasonable price and is this what is usually done; or issues of pure law, that is, the entitlements of the parties, the construction of words in a contract or statute, duties and rights, or a mixture of both issues of pure fact and issues of pure law.

Once a factual position has been established then the tribunal will apply the law. If the tribunal finds that a contractor, for example, was delayed in the completion of project without a justifiable ground for extension of time for completion, the legal consequences may be the levying of liquidated damages by the owner.

On the other hand, the application of a legal principle will be determined by legal arguments and production of authorities in support. An example would be the effect of an offer that has been accepted but is revoked before communication of the acceptance has reached the offerer.

The tribunal will take the points of claim or counterclaim and, with his/their own knowledge of the matter, begin to construct the logic required to attain the points pleaded. This is purely a matter of logic, which does not depend on the validity of the arguments or the credibility of the evidence.

An analysis of the following simple, but typical, commercial dispute best illustrates the point.

A claimant claims $100,000 from the respondent because, he alleges, the respondent impeded his performance, which resulted in extra cost. The contract stipulated that such matters must be the subject of a notice by the claimant within a reasonable time. The respondent asserts that the notice given was far too late, and the amount claimed is in any event exorbitant. However, the respondent accepts that had the notice been given in time he would be liable to pay the expenses actually incurred by the claimant, and further states that the claimant cannot claim notional expenses, which he is unable to prove were actually incurred.

The arbitrator may have more than one way to reach his objective. In this event, he should avoid paths which contain the necessity for discussion on doubtful evidence. Furthermore, it would be fruitless to set up a totally logical analysis which would end up with the result that questions cannot be answered with ease and certainty.

In conclusion, the best time to agree on a sensible way to resolve a contractual dispute is at the time the parties are negotiating their business agreement and before dispute has arisen. It is recommended that business agreements include a multi-step ADR scheme with the sequential steps of dispute resolution.