Suitability of AD-HOC and institutional arbitration for resolving disputes in Sri Lankan construction industry

Abstract

Construction industry being vulnerable for disputes due to its comprehensive and complex nature, the resolution of disputes become a prominent factor. Disputes have the potential to arise in any stage of a construction project. Thus, a significant need for Alternative Dispute Resolution (ADR) methods has arisen where arbitration plays a vital role. There are two basic forms of arbitration namely ad-hoc and institutional, where both forms have advantages as well as shortcomings when practicing them. Even though there are many researches available regarding ad-hoc and institutional arbitration pertaining to global context, less evidences can be found for researches on the suitability of ad-hoc and institutional arbitration for the Sri Lankan construction industry. Therefore, this study aims to investigate the suitability of ad-hoc and institutional arbitration to resolve disputes in Sri Lankan construction industry. The different types of arbitration, their significance in construction industry, and current practice, applicability and appropriateness of ad-hoc and institutional arbitration have been reviewed through literature survey. Subsequently, qualitative research approach was followed to achieve the aim of this research. Semi-structured interviews were conducted with 10 arbitrators practicing in Sri Lankan construction industry. The collected data were analysed using code-based content analysis with the aid of NVivo 11 software. Further to the findings, institutional arbitration contains strengths like pre-tested rules and firm procedures with adequate administrative support as well as weaknesses like higher administrative fees. Ad-hoc arbitration comprising with party autonomy and flexible procedures as strengths and controlling time of the proceedings as the major weakness. Based on strengths and weaknesses of both forms, most international and upper-level local contractors are likely to go for institutional arbitration due to its reliable rules and procedures. Finally, strategies were proposed to enhance the effectiveness of ad-hoc and institutional arbitration for the progression of Sri Lankan construction industry. Since ad-hoc arbitration does not contain procedural rules and time limit to conduct arbitration, it has been suggested to amend the Arbitration Act by including a provision for procedural rules and specific time duration to provide the arbitral award. In terms of institutional arbitration, capacity development programs for arbitrators have been suggested as a strategy focusing to their development towards institutional arbitration. It can be concluded that among the two arbitration methods, institutional arbitration is the most suitable method under the prevailing legal system in Sri Lanka, where ad-hoc arbitration is the most feasible method to resolve disputes in Sri Lankan construction industry. Construction industry practitioners can use the findings of this study to effectively solve disputes in Sri Lankan construction industry.