Effectiveness of arbitration in construction contracts in Sri Lanka

Abstract

In construction contracts, arbitration is frequently chosen as the ultimate Alternative Dispute Resolution (ADR) procedure. This choice is based on several factors, including the commonly arising technical nature of disputes, as well as the requirements of the contracting parties for a private, timely and cost-effective procedure, all while ensuring the legal binding nature of the decision. However, in its application in to construction disputes arbitration procedure was recognised to be short on its effective delivery than anticipated. To enhance the performance of the arbitration procedure, it is imperative to identify and address the root causes of drawbacks experienced by the participants. Existing literature concerning drawbacks of the arbitration procedure experienced in construction disputes were extensively reviewed to enhance the quality of the research outcome. To address the research problem, a quantitative research approach was employed, which involved conducting a questionnaire survey among professionals who had direct involvement with the arbitration procedure. With use of this questionnaire, it became possible to recognise the overall level of user satisfaction, identify the most significant drawbacks experienced by the parties, determine the root causes of these drawbacks and gather recommendations for improvement of the construction arbitration procedure in Sri Lanka. The findings of the research study revealed that a majority of the respondents have expressed satisfaction with the overall arbitration procedure, even in light of the drawbacks experienced. Notably, the drawbacks in international arbitration included high procedural expenses and legal fees, while domestic arbitration was found to be dissatisfying on procedural delays and administrative difficulties. Based on the survey, nine root causes were identified with significant influence on drawbacks. Recommendation for improvements provided by participants include conduct of pre-hearing meetings, introduction of project specific arbitration clauses, involvement of construction industry experts as arbitrators and legal consultants, and developments of local arbitration institutions. Key words: ADR in construction, Drawbacks of arbitration, Root causes, Cost, Duration