14 Sep 2023
Cyrus Titus Aomu FCIArb explores the introduction of deal mediation before adjudication on FIDIC-based public infrastructure projects in Uganda.
In September 2021, I commenced a research project to explore some unanswered questions in the alternative dispute resolution (ADR) space. Having worked on large public infrastructure projects in Uganda, which predominantly adopt the Fédération Internationale des Ingénieurs-Conseils (International Federation of Consulting Engineers, FIDIC) standard form of contracts (where dispute resolution via adjudication is a cornerstone), I dared to explore whether it would be possible to increase the use of mediation on construction-related disputes in Uganda.
The literature review revealed the following:
I. The FIDIC forms of contract (from 1999 onwards) have a tiered dispute resolution procedure, i.e., first, the engineer’s determination about a claim and second, adjudication via a Dispute Avoidance and Adjudication Board (DAAB) in the latest editions, a Dispute Adjudication Board (DAB) or Dispute Board (DB) in earlier editions. Next, after an unsuccessful, obligatory attempt to achieve an amicable settlement, a dispute is finally decided at arbitration. Amicable settlement allows the disputing parties to use mediation (or any other appropriate ADR technique) to resolve their dispute. Though, FIDIC's sub-clause on amicable settlement is less explicit than leading scholars and authors suggest it should be, and its positioning and, therefore, when to adopt mediation is open to challenge.
II. Mediation and its variants should act as filters such that only the stickiest disputes transition to the next tier as a last resort. Hence, the “superior status” that FIDIC accords adjudication is excessive. And besides the FIDIC forms’ stipulation on the duration for amicable settlement, FIDIC’s ADR clause is insufficiently worded to guide disputants who opt for mediation. But literature revealed that contract parties attempting a prior agreement on specific ADR techniques to adopt at amicable settlement might commit to unsuitable techniques to treat the disputes that eventually emerge, and also acknowledges that when disputes manifest, parties are generally unwilling to agree to anything.
III.Uganda (a common law jurisdiction) does not embrace statutory adjudication for construction-related disputes but has an institutional framework that supports mediation. Yet, the ADR clauses in most Ugandan construction contracts exclude this discipline, implying that the framework is insufficiently buttressed to encourage mediation on large public infrastructure projects.
IV.Most construction-sector players worldwide and in Uganda lack mediation experience and exposure, and the benefits of mediation are yet to be clearly articulated for this sector. Unlike lawyers, other construction-sector players need more training and orientation in mediation. The absence of national policies on ADR curtails the use of some ADR techniques, but it allows others to thrive. Without a deliberate effort from governments and construction-sector practitioners, the uptake of mediation would still be threatened even if the government escalated training and education.
V. Funding institutions usually nominate the applicable contract conditions, which the contract parties adopt without sufficient latitude to amend the ADR clause to suit their needs or address existing dispute resolution challenges. Since these funding institutions are not a party to the signed contracts, they generally decline legal responsibility for the adequacy of the contract forms, essentially burying their heads in the sand when contract parties thrash out the finer details before contract signature.
Following the literature review, a qualitative survey conducted on 104 private and public sector professionals domiciled in or who had worked in Uganda revealed the following:
I. The survey participants had varying educational backgrounds and years of experience, worked in different organisations, and took on various roles on a range of public projects. So, their propensity to use mediation, let alone know or appreciate mediation's merits or demerits, varies. Project managers and engineers interacted most with public projects, yet most had never undergone or practised ADR education. So, upskilling would be achieved via bespoke continuous professional development programmes or from the school of hard knocks.
II. The World Bank is the largest financier of public projects, and adjudication will undoubtedly grow in popularity and frequency because the World Bank and other financing institutions support and encourage their borrowers to use the FIDIC forms of contract. Surprisingly, some users of FIDIC deleted the adjudication clause or, if the financiers obliged them to retain it, they disregarded it after contract signature and deliberately delayed appointing the member(s). Some contract parties waited a year after work commenced or long after a dispute crystallised before establishing the DAB. Therefore, even with the low uptake of mediation on public projects in Uganda, the use of adjudication is also threatened.
III. Several participants indicated they had worked on public projects that the Government of Uganda financed. This prompted a deep dive into two popular local Standard Forms of Contract (SFC) for similar public works. The research revealed that the only dispute resolution options in these SFC were adjudication and arbitration. The opportunity to use mediation (perhaps at amicable settlement, as it is under the FIDIC forms) is non-existent. Hence, FIDIC’s ADR clause is more encompassing than the ADR clauses enshrined in Uganda’s SFC.
IV. The survey participants indicated that negotiation and mediation were the predominant ADR techniques. Arbitration and adjudication came in third and fifth place. This implied that regardless of whether the parties adopted the FIDIC or the local SFC, most contract parties are finding a way to circumvent adjudication and amicably resolve their disputes via negotiation or mediation.
V. Amicable settlement was observed to have considerable potential to resolve most construction-related disputes in Uganda. However, the study revealed a high familiarity with amicable settlement but a significantly lower level of involvement. Suggesting that, perhaps, the parties resolved the disputes in the first instance via adjudication (with participation from project managers, engineers and consultants) or amicable settlement proceeded but with a higher calibre of stakeholders such as directors and/or legal representatives from either contracting party with the capacity and jurisdiction to shoulder such responsibility.
VI. Some participants indicated that mediated settlements are more acceptable if they succeed an adjudicator’s decision. But, for contract administrators, amending an adjudicator's decision during amicable settlement is like skating on thin ice. Most public officials would face challenges enforcing such settlements. Furthermore, before the contract administrators enforce such settlements under the contract, a separate government organ called a Contracts Committee (CC) must approve the settlement. The CC operates within strict boundaries and in the taxpayer’s interest and may face challenges approving settlements that disadvantage or favour the taxpayer, especially after an independent third party (an adjudicator) has already issued a decision.
VII. Most participants endorsed using mediation in the dispute resolution process before adjudication because it preserves business relationships. Given the prevailing institutional framework in Uganda, it appeared sensible to amend the ADR clause for FIDIC-based public projects in the country to allow the parties to trigger and pursue mediation before adjudication. However, the research also showed that mediation best suits 'grey' disputes instead of ‘black and white’ disputes. The study explored deal and project mediation as options, and deal mediation (adopted when an independent third party is introduced into a negotiation process to help the negotiating parties achieve the best outcome) appeared to be the most suitable.
VIII. Where a standing board is in force, its members are uniquely positioned to assist the contract parties in avoiding disputes. When operating in dispute avoidance mode (as a DAAB), the members employ mediation skills to facilitate dispute resolution. But Lloyd J’s ruling in Glencot Development & Design Co v Ben Barrett & Son Contractors[1] highlights that even if the parties have consented to adjudicators acting as mediators, the adjudicators risk being perceived as biased if they eventually adjudicate a dispute that they had unsuccessfully attempted to mediate. Therefore, while maintaining FIDIC’s standing boards, if the parties engaged a deal mediator, this impartiality would virtually be ruled out, and the board would probably be left to deal only with ‘black and white’ disputes or those where mediation failed. This unlocks the opportunity to introduce deal mediation in the FIDIC forms of contract before either party triggers adjudication.
IX. The sticky question that arose is whether or not deal mediation needed to be a condition precedent to adjudication. The research revealed that making mediation a condition precedent to adjudication would prevent the dispute resolution process from being as fluid as it should be – with the 'black and white' disputes immediately proceeding to adjudication (if the parties so wish). In contrast, the 'grey' disputes navigate the mediation path before proceeding to adjudication if still unresolved. When the disputing parties know that adjudication is still an option if mediation fails, they are more inclined to use mediation in consideration of its benefits.
X. Most participants were uncertain about how mediators are selected, which negatively affects their propensity to use mediation, and the Uganda Institution of Professional Engineers (UIPE) does not offer similar support for mediation on construction projects as it does for adjudication. Additionally, most participants were uncertain about Uganda's mediation policy but were familiar with the merits of mediation.
Conclusions and recommendations
The research proposed the introduction of deal mediation before adjudication in FIDC’s ADR clause to increase the use of mediation while maintaining the standing adjudication boards. Deal mediation can complement the board’s avoidance role but, more importantly, eliminate the board’s impartiality when adjudicating a matter that they had unsuccessfully attempted to mediate. However, introducing deal mediation before adjudication may occasionally render the amicable settlement clause redundant.
Since Uganda’s institutional framework requires parties to have considered (and probably attempted) mediation along the dispute resolution process, the framework sends loud signals to the drafters of ADR clauses in Uganda’s public infrastructure construction contracts. So, it is incumbent upon FIDIC practitioners in Uganda to collectively (but tactfully) and via organised movements, like UIPE and the Uganda Law Society (ULS), campaign for an appropriate amendment of FIDIC’s ADR clause and institute a robust plan to monitor implementation.
From a global perspective, perhaps the proposal to introduce deal mediation before adjudication on FIDIC-based public infrastructure projects requires a large 'guinea pig' project, like the London 2012 Olympics project or the recently concluded construction works for the FIFA World Cup 2022 stadiums, to test its efficacy.
About the author:
Cyrus Titus Aomu, FCIArb, is a civil engineer with 19 years of work experience in Uganda's public and private sectors. His expertise comprises portfolio and contract management of large water supply and sewerage infrastructure projects funded by multilateral development banks and the management of public water utility operations. Cyrus is the Chief Executive at CAT & ASHE Limited (Formerly The Builders’ Garage Limited). He offers specialist services in Construction Claims, Dispute Resolution, Tender, Contract & Execution Support.
Further information and resources from Ciarb:
CIArb - Online Introduction to Mediation 2023
CIArb - Virtual Module 1 Mediation Training & Assessment 2023
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[1] Glencot Development and Design Co Ltd v Ben Barrett & Son (Contractors) Limited [2001] 2 WLUK 352, 2001 WL 239771 at [23]-[25]