Legally Bound

Jordan ... should we sign the pledge?

Jordan ... should we sign the pledge?

Giving peace a chance with ‘pledge’

July 2020

At regular intervals, someone comes up with a plan to reduce the frequency and seriousness of disputes in our industry. This usually comes from an industry body, and sometimes a government. It begins with telling us about the damage inflicted by construction disputes globally, in terms of hard cost, distraction from project delivery and damage to relationships. We must always look seriously at these initiatives (as we have done before) in case they have something new and useful to say – even if we may be often disappointed.

One current effort is the Conflict Avoidance Pledge (CAP) produced by a coalition of industry bodies including the Institution of Civil Engineers and the Royal Institution of Chartered Surveyors (RICS). According to the RICS, their objective for the CAP is to bring about a behavioural change “by encouraging all organisations to consider their working practices and the way they deal with disputes. The pledge is voluntary and self-assessed, and can be signed by any organisation or firm regardless of size or location”.

This is ambitious. The pledge itself goes as follows: 

  • We believe in collaborative working and the use of early intervention techniques throughout the supply chain, to try to resolve differences of opinion before they escalate into disputes.
  • We recognise the importance of embedding conflict avoidance mechanisms into projects with the aim of identifying, controlling and managing potential conflict, whilst preventing the need for formal, adversarial dispute resolution procedures. We commit our resources to embedding these into our projects.
  • We commit to working proactively to avoid conflict and to facilitate early resolution of potential disputes.
  • We commit to developing our capability in the early identification of potential disputes and in the use of conflict avoidance measures. We will promote the value of collaborative working to prevent issues developing into disputes.
  • We commit to work with our industry partners to identify, promote and utilise conflict avoidance mechanisms.

 These principles are, perhaps, easily dismissed as ineffectual good intentions. Certainly, it is difficult to argue against the objectives here, and I would guess that all or most construction players would be happy to sign up to this.

The question is: what practical steps are required in order to give effect to the pledge? This is where the Conflict Avoidance Toolkit comes in. This is a short (14-page) document setting out ways that parties can proactively avoid and manage disputes. Its stated aim is “to educate people working across the industry about the lifecycle of conflict avoidance and early intervention to prevent disputes”.

The toolkit sections are:

  • Pre-Contract Preparation
  • Dispute Avoidance
  • Early Intervention
  • Amicable Resolution
  • Dispute Resolution

The Pre-Contract Preparation section advises on having clear contract terms suitable for the works, no unnecessary terms or legal jargon, early warning systems such as continuous updating of programmes – plus a “viable compensation event procedure”. This means a way to make and assess time and money claims at the time the event occurs.

The Dispute Avoidance section advises early engagement on potential problems to prevent them becoming disputes. The one practical suggestion is the engagement of a neutral person to do “routine information gathering”. This could start pre-contract and last throughout the life of the project in case the parties want a “neutral insight into how identified risks are performing over time”. I think this is an elliptical way to describe a first-line decision-maker. The “identified risks” will be breach or time and money claims – and the “neutral insight” will be a decision or opinion on the issue raised.           

The next section – Early Intervention – follows on with this theme. The main idea here is ‘early neutral evaluation’: the briefing of an impartial person with the requisite expertise, to give an opinion or binding decision on the issue referred. This is usually set up to be done without involving the parties’ respective lawyers. The benefit (supporters say) is that the evaluator gives an “unbiased” opinion on the merits of the issue, which is better than either party seeking legal advice.    

The toolkit adds some detail to the pledge but no real insights or new ideas. The recommendations are aspirational and do not engage with the arguments for and against different ways to reduce disputes. There are, for instance, longstanding industry debates about whether prospective delay analysis can accurately foretell the impact of delay events, or whether a standing disputes board (or neutral evaluator) is worth the cost.

This is unfortunate, not least because the industry sponsors of the pledge are important institutions and they are capable of being at the front edge of these debates. Of course, the pledge itself is well-meaning and will do no harm. So instead of me criticising it, maybe we should all sign the pledge!

 

* Stuart Jordan is a partner in the Global Projects group of Baker Botts, a leading international law firm. Jordan’s practice focuses on the oil, gas, power, transport, petrochemical, nuclear and construction industries. He has extensive experience in the Middle East, Russia and the UK.  




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