B2 TRAINING ON

PROCUREMENT OF
WORKS AND
CONSULTANCY
SERVICES

IPFMRP – CDP Project

 XX.

DISPUTE
RESOLUTION:
B2 TRAINING ON PROCUREMENT OF WORKS AND CONSULTANCY
PRINCIPLES & SERVICES
PRACTICES
IPFMRP – CDP Project

With Reference to Public

Procurement Act 2063 and
Public Procurement
Regulation 2064
 • Dispute and Dispute Resolution
• Reasons for Disputes
• Forms of Dispute Resolution
• Best Practice Dispute Resolution Outcomes
• Dispute Resolution Processes
Presentation • Dispute Resolution : Mediation, Arbitration
and Litigation
Outlines • Mechanism for Dispute Settlement
• Provision Relating to Dispute Resolution
(PPA/PPR)
• Dispute Settlement & Procedures (SBD)
• Disputes to be Settled through Arbitration Act
2055
• Dispute Settlement Perspectives in Nepal
• Recommendation to Reduce Disputes in Nepal
 A “Dispute”
• Dispute : A 'disagreement' between Employer and the
contractor over the payment of money, the adjustment or
interpretation of contract terms, any claims arising out of or
relating to any aspect of a solicitation, bid, or failure to conduct
a solicitation or bid, any decision to award, deny, suspend or
cancel, terminate or not renew, any contract or agreement.

• Dispute Resolution Procedures : Apply to and shall constitute

the exclusive procedure for resolution of all claims, disputes,
complaints and Dispute Resolution Requests of any kind filed by
an Aggrieved Person relating in any way to any agreement
entered into by the Vendor.
 What is Dispute Resolution?
• Dispute resolution refers to the processes by which disputes
are brought to an end.
• Dispute Resolution occur through:
1. A negotiated outcome: Parties concerned sort out things
themselves
2. A mediated outcome: Parties use the services of an
independent mediator to help them arrive at their own
agreement, or
3. An arbitrated or adjudicated outcome: An independent
arbitrator or court determines how the dispute is to be
resolved and makes a binding decision or order to this effect.
 Dispute Resolution- Settlement
• Dispute resolution or Dispute settlement is the process of
resolving disputes between parties.

• The term dispute resolution is sometimes used

interchangeably with conflict resolution, although
conflicts are generally more deep-rooted and lengthy
than disputes.

• Dispute resolution techniques assist the resolution of

antagonisms between parties that can include citizens,
corporations, and governments.
 Forms of Dispute Resolution
• Dispute resolution ranges from informal, non-legally
binding methods to more structured legal procedures.

• All of them apply to workplace conflict, and all of them can

help organizations avoid lawsuits and other legal battles.
• Some of the most common forms of conflict resolution are
negotiation, mediation, arbitration and mediation-
arbitration
• All of them focus on solving the conflict with the best
interests of all parties involved in mind and avoiding court.
 Forms of Dispute Resolution
• Simple Dispute/s : Disputes if not too severe, simple
negotiation might suffice. With this process, the conflicting
parties agree to discuss their concerns with each other openly.
• Suggestions : Parties might share precisely what actions,
practices or policies they are upset about and make
suggestions about how the dispute/s can be resolved.
• Compromise for Comfort : As part of the dispute resolution,
the involved parties typically agree to work together to find a
compromise with which they all feel comfortable.
• Informal Process : There will be a meeting between the
conflicted parties and a member of the senior management.
 Best Practice Dispute Resolution
Outcomes
Best Practice should be:

Quick - the issues should be resolved quickly rather than

allowing them to escalate through inaction.
Fair - all relevant parties should be consulted so that all
sides of the story are taken into account.
Handled sensitively - disputes should, where possible and
appropriate, be resolved in a confidential context in order
to minimise impact on employees not affected by the
dispute.
 Best Practice Dispute Resolution
Outcomes
Best Practice should be:
Transparent - the procedure should be made known to every
employee.

Dispute resolution procedures should not interfere with the

continued operation of the business where possible.

Continue during Dispute Resolution Process : Any dispute

resolution clause in an agreement, contract or policy should
require that work is to continue normally during the dispute
resolution process subject to any reasonable concerns about
health and safety.
 Dispute Resolution: Processes
Dispute resolution processes fall into two major types:
•Adjudicative processes : Such as litigation or arbitration, in
which a judge, jury or arbitrator determines the outcome.
•Consensual processes : such as collaborative law, mediation,
conciliation, or negotiation, in which the parties attempt to reach
agreement.

Not all disputes, even those in which skilled intervention occurs,

end in resolution.

Dispute resolution is an important requirement in international

trade, including negotiation, mediation, arbitration and litigation.
 Dispute Resolution: Mediation
• Goal of mediation : It is for a neutral third party to help
disputants come to a consensus on their own.
• Rather than imposing a solution, a professional mediator
works with the conflicting sides to explore the interests
underlying their positions.
• Mediation can be effective at allowing parties to vent
their feelings and fully explore their grievances.
• Working with parties together and sometimes separately,
mediators can try to help them hammer out a resolution
that is sustainable, voluntary, and nonbinding.
 Dispute Resolution: Arbitration
• A neutral third party serves as a judge who is responsible for
resolving the dispute.
• The arbitrator listens as each side argues its case and
presents relevant evidence, then renders a binding decision.
• The disputants can negotiate virtually any aspect of the
arbitration process, including whether lawyers will be
present at the time and which standards of evidence will be
used.
• Arbitrators hand down decisions that are usually
confidential and that cannot be appealed.
• Like mediation, arbitration tends to be much less expensive
than litigation.
 Dispute Resolution: Litigation
• The most familiar type of dispute resolution, civil litigation
typically involves a defendant facing off against a plaintiff
before either a judge or a judge and jury.

• The judge or the jury is responsible for weighing the

evidence and making a ruling. The information conveyed in
hearings and trials usually enters, and stays on the public
record.

• Lawyers typically dominate litigation, which often ends in

a settlement agreement during the pretrial period of
discovery and preparation.
 Mechanism for Dispute Settlement
(PPA-Sec.58)
• Amicable Settlement : Any dispute arising between the
Public Entity and the construction entrepreneur in
connection with the implementation of the procurement
contract shall be settled amicably.

• Arbitration : If the dispute could not be settled through

amicable settlement, then the contract agreement should
state that the dispute is settled through arbitration as per
the prevailing law (Arbitration Act 2055).
 Provision Relating to Dispute
Resolution
• Dispute Resolution (Rule 129): A procurement contract
may provide a mechanism for a resolution of dispute by
stating the amicable settlement meetings and decision
procedure, application procedure and subject of dispute
resolution through amicable settlement as per the section
58 of the PPA 2058.
• Dispute Resolution Through Arbitration (Rule 135): If the
dispute could not be resolved through the amicable
settlement as per rule 129, shall initiate the proceedings
of resolving such a dispute by means of an arbitration in
accordance with law in force.
 Dispute Settlement & Procedures (SBD)
• Amicable Settlement: The Employer and the Contractor shall
attempt to settle amicably by direct negotiation any disagreement
or dispute arising between them under or in connection with the
Contract.
• Period to refer Arbitration: Any dispute between the Parties as to
matters arising in the Contract which cannot be settled amicably
within thirty (30) days after receipt by one Party of the other Party‘s
request for such amicable settlement may be referred to Arbitration
within 30 days after the expiration of amicable settlement period.
• Procedures of Arbitration : Arbitration shall be conducted in
accordance with the arbitration procedures published by the Nepal
Council of Arbitration (NEPCA) at the place as mentioned in SCC.
 Arbitration Act, 2056 (1999)
• “Agreement”: A written agreement reached between the
concerned parties for a settlement through arbitration of any
dispute concerning any specific legal issue that has arisen or
may arise in the future under a contract or otherwise.
• “Dispute” : A dispute which can be settled through arbitration
under Arbitration Act.
• Counter-claim : means a claim made by the Respondent on
the Claimants.
• “Rejoinder” : A claim to the counter-claim by the Claimants.
• “Arbitrator” : An arbitrator appointed for the settlement of a
dispute and the term also includes a panel of arbitrators.
 Disputes to be Settled through
Arbitration (Sec.3)
• Procurement Agreement has Arbitration Clause : In case any
agreement provides for the settlement of disputes through
arbitration, the disputes connected with that agreement or
with issues coming under that agreement shall be settled
through arbitration according to the procedure prescribed in
that agreement, if any, and if not, according to this Act.
• File Price in case of concerned parties to a civil suit of a
commercial nature which has been filed in a court and which
may be settled through arbitration according to prevailing
laws, file an application for its settlement through arbitration,
such dispute shall also be settled through arbitration.
 Number of Arbitrators
• Arbitrator Number/s: The number of arbitrators is as
specified in the agreement. In case the agreement does
not specify the number of arbitrators, there shall
ordinarily be three arbitrators.

• Turn into Odd: In case the number of arbitrators

appointed under the agreement is an even one, it shall
be turned into an odd one by designating an additional
arbitrator chosen by them.
 Appointment of Arbitrator
• Appointment of Arbitrator: The process of appointing arbitrators
must be started within 30 days from the date when the reason
for the settlement of a dispute through arbitration arises.
• In case the agreement mentions the names of arbitrators, they
themselves shall be recognized as having been appointed as
arbitrators.
• Separate Provision: If agreement has made any separate
provision for the appointment of arbitrators, arbitrators shall be
appointed accordingly.
• Each Party to Appoint : Each party shall appoint one arbitrator
each and the arbitrators shall appoint the third arbitrator who
shall work as the chief arbitrator.
 Appointment of Arbitrators by Court:
Appointment by Court: The circumstances:
•In case no arbitrator can be appointed upon following
the procedure contained in the agreement.
•In case the agreement does not mention anything about
the appointment of arbitrators.

CV Details : Must explicitly mention the full name,

address, occupation and the field of specialization of at
least three persons who can be appointed as arbitrator,
and also be accompanied by a copy of the agreement.
 Submission of Claims, Counter-Claims,
objections or Rejoinders
• Submission of Claims: The claimant shall submit its claim
mentioning the details of the subject-matter of the dispute
and the remedy sought, along with evidence, and also supply
a copy thereof to the other party within the time limit
mentioned in the agreement, if any,
• If there is no time limit mentioned then within three months
from the date when a dispute requiring arbitration has arisen
in case only the name of the arbitration has been mentioned
in the agreement without mentioning any time limit, and
from the date of appointment of the arbitrator in case the
arbitrator has been appointed after the dispute has arisen.
 Submission of Claims, Counter-Claims,
objections or Rejoinders
• Objection to Claim: Other party shall submit its objection
to it within 30 days from the date of receipt of the claim,
unless otherwise provided for in the agreement.

• Counter Claims : In case it submits a counter-claim also,

the arbitrator shall provide a time limit of 15 days to
claimant submit its rejoinder over such counter-claim. In
case a rejoinder is so submitted a copy thereof shall be
supplied to the party making the counter claim.
 Submission of Claims, Counter-Claims, objections or
Rejoinders
• Time Extension : The circumstances beyond its control, it may submit
an application to the arbitrator for an extension of the time limit
within 15 days from the date of expiry of the time limit, explicitly
mentioning satisfactory reasons for its failure to do so. The arbitrator
may, if he/she finds the reasons mentioned in the application to be
satisfactory, extend the time limit for not more than seven days.
• Documents in Full : While submitting claims, counter-claims,
objections or rejoinders all documents, as well as evidence
substantiating them, if any, shall also be submitted.
• Copies to Other Party: Each party submitting documents to the
arbitrator in connection with arbitration proceedings shall supply
copies thereof to the other party.
 Power of the Arbitrator to Determine
Jurisdiction (Sec 16)
• Jurisdiction: If arbitrator has no jurisdiction over the dispute
which has been referred to him/her for settlement, or that the
contract because of which the dispute has emerged is itself
illegal or null and void, it may claim so before the arbitrator.
The arbitrator shall take a decision on his/her jurisdiction or
the validity or effectiveness of the contract before starting the
proceeding on the matter referred to him/her.
• Time of Appeal to Court : Any party is not satisfied with the
decision taken may file an appeal with the Appellate Court
within 30 days from the date of decision, and the decision
taken by that court on the matter shall be final.
 Arbitrators to Follow Substantive Law
• The Nepal Law shall be the substantive law to be
followed by the arbitrator, except when otherwise
provided for in the agreement.
• The arbitrator may settle the dispute according to the
principle of justice and conscience (Ex aqua et bono) or
natural justice (amiable compositor) only when
explicitly authorized by the parties to do so.
• The arbitrator shall settle the dispute according to the
conditions stipulated in the concerned contract.
• Arbitrator shall also pay attention to the commercial
usages applicable to the concerned transaction.
 Arbitrators Decision Time Period
• Arbitrators should take decision as provided for in the agreement.
• If time is not mentioned in the agreement then the arbitrator
shall pronounce the decision ordinarily within 120 days from the
date of submission of documents (Sec 24).
• In case any issue requiring arbitration is found to be inextricably
linked with any other issue on which the arbitrator cannot
pronounce the decision, the arbitration shall not pronounce
decision on that issue (Sec 24).
• If arbitrator cannot take a decision , the arbitration must inform
the concerned parties accordingly.
• The concerned party may file a complaint to the Court within 35
days from the date of receipt of a notice as per the prevailing law.
 Matters to be mentioned in Decision
(Sec. 27)
• Arbitration Issues: Brief particulars of the matter referred to for
arbitration.
• Jurisdiction of Arbitration: Grounds for deciding that the matter
falls under the jurisdiction of arbitration.
• Reasons & Grounds of Decision: Arbitrator’s decision, and reasons
and grounds for reaching that decision.
• Determine the Amounts/ validate Issues: Claims which must be
realized or amounts which must be compensated.
• Interest / Additional Interest : Interest on amount to be realized,
and the additional rate of interest to be charged with after the
expiry of the time limit for implementing the decision of the
arbitrator in the event of the limit mentioned in section.
• Place and date of decision.
 Decision Invalidation Circumstances
(Sec. 30)
• Time of Appeal to Invalidate: Any party dissatisfied with the
decision taken by the arbitrator may, if one wishes to
invalidate the decision file a petition to the High (Appellate)
Court along with the related documents and a copy of the
decision within 35 days from the date the decision heard or
notice received thereof . Petition shall also supply a copy of
that petition to the arbitrator and the other party.

• Petitioners to Prove : In case a petition is filed in the High

(Appellate) Court the petitioner need to prove that the
arbitration decision contains matters that invalidate decision or
issue an order and need to have a fresh decision be taken.
 Implementation of Award (Sec.31)
• Implementation Time of Decision: Concerned parties shall
be under obligation to implement the award of the
arbitrator within 45 days from the date when they receive a
copy thereof.
• Implementation of Award by Court: In case a award cannot
be implemented within the time limit as above, the
concerned party may file a petition to the District Court
within 30 days from the date of expiry of the time limit
prescribed for that purpose to implement the award.
• In case such a petition is filed, the District Court shall
implement the award ordinarily within 30 days as if its was
its own judgment.
 Cost of Arbitration Proceedings/
Arbitrator’s Remuneration
• Fixed Amount: Parties seeking arbitration must pay to the
arbitrator the amount fixed their in consultation with parties for
conducting the arbitration proceedings.
• Proportionate Expenses: Each party shall bear the expenses
required for the arbitration proceedings in the proportion
prescribed by the arbitrator taking into account the relevant
circumstances.
• Arbitrator’s Remuneration: Shall be as prescribed in the
agreement.
• If remuneration is not mentioned in the agreement :
Concerned parties shall pay the remuneration fixed by the
arbitrator in consultation with them. Paid as a full payment or
advance payment.
 PRACTICE OF
DISPUTE
SETTLEMENT
B2 TRAINING ON PROCUREMENT OF WORKS AND CONSULTANCY
THROUGH SERVICES

ARBITRATION IN IPFMRP – CDP Project

NEPAL
 • In Nepal, the provision of arbitration was introduced in
1957, while the Development Committee Act 1956 was
amended.
• The provisions were confined up to the dispute to
which the Development Broad is a party to the
contract.
Dispute • Real practice of dispute settlement through arbitration
Settlement was stated after the enhancement of Nepal Arbitration
Act 1981 (Now, Arbitration Act 1998)- This is based on
Perspectives UNCITRAL model law.
in Nepal • Nepal has very short history of modern arbitration
concept. Before enactment of the Arbitration Act 1981,
arbitration was carried out through a local celebrity
when it becomes necessary to settle the disputes
between the villagers and it has been in practice for a
long time. Slowly business people felt necessary of a
quick and cheap methodology of settling disputes and
came up with arbitration proceedings.

•35
 • The new act stated that the disputes arising out
of the agreement made with foreign donor
agency shall be settled through arbitration, So,
some example of excessive delay up to four or
Dispute five years for the settlement of disputes .
• It was felt as expensive as well as cumbersome
Settlement and has adverse effect on the main purpose of
Perspectives arbitration.
in Nepal • To solve the problems associated with
arbitration and to assist in the development of
adequate infrastructure, Nepal Council of
Arbitration (NEPCA) was established in 1991
through initiation of non - government sector.
• It is important to understand the problem
related to dispute and try to mitigation it in
construction contract in the context of Nepal.

•36
 • A disputes arises when a demand is made by a
party and denied by the other and the
contradiction is not accepted by the demanding
party (either employer or contractor).
Causes for • Dispute originates due to disagreement on a
Emergence of decision or action taken by one party on the
ground of effect to be borne by the other as
Disputes in consequence of the decision.
Nepal • In construction projects in all sector of
development either completed or ongoing have
suffered from time and cost overrun.
• A major reason for this is poor management of
contract resulting in disputes leading to
intermittent stoppage of works or slow progress
or even abandonment of work requiring fresh
call of tenders to engage a new contractor for
execution.
•37
 Generally: four areas of disputes- contract
document, force measure, timely action, and
project characteristics
•Change of material Source
Major Causes of •Inadequate design and site information
Disputes in •Commencement and Delay information
•Unforeseen physical / Site condition resulting to
Nepal variation
(Road Project/s) •Strikes, Bandh, Riot (disturbance) or Disorder
•Delay in decision making and settlement of
dispute
•Possession of site and Access to site
•Unusual weather condition and Inflation
•Unavailability of fuel and Construction material

•38
 • Engineer doesn’t work impartial and do
not fulfill their responsibility promptly.
Problematic • Contractors generally do not fulfill or
Areas for the are reluctant to perform contractual
claim and obligations.
disputes • Employers are not prompt in decision
making for any problems.
• Employers are not very serious toward
fulfillment of their contractual
obligation.
• Incorrect and inconsistent Drawing.

•39
 • Due to small size of construction industry of Nepal, the
problems associated with disputes are not so similar to
developed countries.
• A common problem generally found in Nepalese context
is launching many claims but abandoned at last.
• Main reason of such abandonement is due to Employer
dominated contact documents, Contractor’s right
Dispute/ Claims minimally protected and low level of knowledge
Resolution regarding contractual rights and obligation among the
contracting parties.
Practices in • Neither employer nor contractor gives adequate
attention about status of contract documents before
Nepal entering into the contract Which, generates adequate
ground to gives rise of many problems during contract
execution.
• Due to no adequate provision incorporated in contract
to tackle the probable situation liable to dispute, its
resolution seems very difficult.

•40
 • Party-initiating disputes, a contractor has only
two options these are:
 Abandon the claims or disputes or
 Go to litigation in court.
Dispute/ Claims
Resolution • Court Process being contractor is compelled to
choose former one other very time consuming
Practices in wise he suffers of payment delay of due amount.
Nepal • The main reason of delay was improper provision
of disputes resolution in contract clause.
• The clause prevented to enter into arbitration
process unless the work is completed.

•41
 • Proper Site Investigation: Claims arising from
unforeseen physical conditions can be reduced
by comprehensive site investigation during the
phase of details design preparation.
• Risk and Budget: The employer / executing
Recommendation agency should prepared to bear all risk and
allocate with add proper budget in
to Reduce contingencies for the issues arises from
disputes / claims.
Disputes in Nepal • Realistic BoQ & Periods: Consultants (i.e.
Engineer) should ensure that BOQ and contract
periods, which specified in the bid documents,
are realistic and take account of existing site
conditions.

•42
 • Facilitate regular execution work and make
prompt decisions : Consultants (i.e. Engineer)
should provide any information with corrected
drawings timely on site to facilitate regular
execution work and make prompt decisions
Recommendation regarding the technical and contractual issues by
to Reduce taking employer approval where necessary in
specified time as required.
Disputes • Organize a kick off meeting : Consultants (i.e.
in Nepal Engineer) should organize a kick off meeting with
contractors to confirm material availability,
constructability and other constraints flagged up
by contractors before their site mobilization.

•43
 • Better to establish a dispute settlement unit
should be established to amicably (negotiation)
settle any disputes before referring to contractual
authority.
• Regular Management and Site Meetings involving
Recommendation employer, engineer and contractor. The time
to Reduce periods may be once a week, two weekly or
monthly meetings among them.
Disputes • Recording of every minutes of meeting and issues
in Nepal for the future reference regarding EoT, Price
Adjustment, determine compensating events and
even force majeure etc.
• Strictly adhere the Work Schedule and make
contract administrator / coordinator responsible
for non-performing of contract and punishing the
contractor as per agreement.

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B2 TRAINING ON PROCUREMENT OF WORKS AND CONSULTANCY
SERVICES

IPFMRP – CDP Project

45