This is part 2 of a series of articles examining Singapore Infrastructure Dispute-Management Protocol (SIDP) from the contractor’s perspective. By way of context, SIDP is a set of procedures that govern the functions and authorities of Dispute Board (DB) in its disputes resolution role as regards construction projects above $500million in contract sum. The issues raised in this article are unique from the contractors’ perspective which may be helpful as regards any participation in tender or construction of SIDP projects.

To recap, part 1 of this series dealt with the importance of having a back to back arrangement with subcontractors as it relates to DB and how the Security of Payment (SOP) Act could be used within the dispute resolution functions of DB. In this regard, DB is a panel consist of one, two or three members whose role is to resolve and avoid construction disputes by way of either mediation, rendering of opinion or issuance of determination. Whilst the choice of mode of dispute resolution is decided by the parties, it is fair to say that parties in dispute are unlikely to agree on much including the mode of dispute resolution. In the absence of parties’ agreement, the DB will be authorised under SIDP to issue direction on the mode of dispute resolution. The choice of dispute resolution can be consequential because the DB’s opinion may be binding on an interim basis on the parties and the DB’s determination may be both binding and final which may not be subject to any review under future arbitration or litigation. As DB wears different hats under different circumstances, how the DB conducts itself and how should the parties interact with the DB will vary depending on the role that the DB plays. There is a fundamental distinction between the role of a mediator as compared to an adjudicator issuing determination. If such distinction is blurred during the parties’ interaction with the DB, the impartiality in the dispute resolution process may be compromised resulting in the determination outcome liable to being set aside. This will be examined further in this article. 

One of the unique features of construction contracts is the appointment of an independent certifier. This may be an Architect, Superintending Officer (SO), Engineer etc depending on the contract form used. An independent certifier issues certificate under the contract that in principle resolves dispute until such time parties choose to commence arbitration or litigation to finally determine those very disputes. In this regard, it appears that the certifier’s role may overlap significantly with that of DB. How should a contractor navigate the contractual terrain under SIDP project in view of the coexistence between certification regime and the DB’s dispute resolution function? These issues may have a direct implication on the way in which the contractor deals with its claims management procedures. Due to the multitude dispute resolution avenues provided for under the contract, it is quite common for standard forms of contract to include multi tier dispute resolution clauses that dictates both the sequence and choice of dispute resolution modes. It is of paramount importance to ensure the the functions of DB is not at odds with such multi tier dispute resolution clauses as it may directly affect the jurisdiction and authority of any state court, arbitrator or adjudicator. The issues raised above will be reviewed in further detail in the subsequent sections of this article.

Mediation vs Determination – Managing Conflict of Interest of Dispute Board

The case of Glencot Development and Design Ltd v Ben Barrett and Sons (Contractors) Ltd highlighted the inherent conflict or tension between the role of mediator and adjudicator. In this instance, the adjudicator who previously played the role of a mediator was found at least on prima facie basis to have failed the test of impartiality. This case is relevant to SIDP because the DB could potentially play the role of mediator and subsequently as adjudicator as regards any disputes between the parties. Not all attempt to mediate will result in a settlement. If the DB mediates a set of disputes between the parties that fail to result in a settlement agreement, there is no express rule under SIDP that prohibits the DB from acting as an adjudicator in future. In fact, one may argue that the provision under Article 7.3 of SIDP, is aimed at preserving as far as possible the impartiality and independence of DB to act as adjudicator in case mediation fails. Under this provision, the DB is required to conduct mediations only in joint sessions without private caucuses. All parties shall be present at all times to avoid the actual lack of impartiality or the perception of lack of impartiality on the part of the DB. 

So what exactly happens in mediation sessions that may affect the impartiality of the mediator? For mediation to be successful, the mediator may explore what are the areas of concessions as well as mandatory demands out of each party’s positions or demands. This is a necessary step for mediator to discover what may be the common grounds between the parties and what each party are willing to forgo in the spirit of conciliation and settlement. When a party discloses its areas of concessions, it may give rise to a few reactions. Whilst it may be a strategic decision rooted in pragmatic consideration, it may also be viewed as a sign that such demand was not true and authentic. It may implicitly indicate that the party was not entirely persuaded in the merit of its own claim. On the other hand, a party that is assertive with its demand may be viewed as being difficult, inflexible and lacks self reflection. Whilst making concessions are necessary ingredients to a successful mediation outcome, it may taint the perception of the strength of one’s case. On the other hand, any rigidity in position whilst preserves ones case may very well diminish the prospect of mediation settlement. 

Therefore some have quite validly argued that an adjudicator with insights into the case with its previous role as mediator may have its independence compromised. It will be challenging for an adjudicator to psychologically detached himself from the knowledge acquired previously as mediator and still be able to make a neutral determination purely based on the merit of each party’s claims. In fact under Article 6.4 of SIDP, the DB makes its opinion or determination not exclusively based on merit, but taking into consideration what may be appropriate based on the nature of the dispute so as to facilitate the performance of the contract or reduce the risk of disruption. In other words, project continuity is one of the key points of considerations. Given the circumstances, it is not entirely inconceivable for a DB to render an opinion or determination having considered the Employer’s points of concession (which was disclosed during mediation) in order for the contractor to be in a position to continue with the progress of works.

On the other hand, if one party has received majority of opinions or determinations not in its favour (perhaps rightly so) may understandably be reluctant to participate in mediation administered by the very same DB. Such party may be reluctant to disclose its areas of concessions on various aspects of its claims due to the lack of faith or trust in the process. Therefore, the historical positions of an adjudicator can potentially implicate its future role as mediator. 

Given the observations above, how should a contractor intellectually process its position as regards the DB’s duality in role? Firstly, the contractor has to appreciate that it is possible for issues subject to mediation to be resolved via DB’s determination. Therefore, notwithstanding the spirit of conciliation and settlement, contractor should be strategic in its approach to mediation. Under Article 7.2 of SIDP, each party under mediation shall submit to the DB a mediation summary which shall contain a brief statement of facts and the positions it takes in accordance with any directions issued by the DB. In any such submission of mediation summary, it will be useful to stick to the facts of its case rather than its opinion or subjective evaluation of the claims.  Parties are usually not expected to argue its case or advocate its position under mediation. All correspondence made during mediation should appropriately be labelled as being ‘without prejudice’. Finally, the counter party shall be kept in the loop as regards any correspondence with the mediator so as to avoid any perception of bias. This may affect any of the determination of the DB in case the mediation fails. 

Independent Certification vs Dispute Board

The SO under the PSSCOC is both an agent of the Employer as well as an independent certifier. Under common law, such certifier is required to discharge his certification function in an independent, impartial and neutral manner notwithstanding its simultaneous role as the agent of the Employer. The element of independence is necessary because much of the decisions made by the certifier involve subjects that are either already in dispute or at least has the propensity to turn into dispute. By way of example under Clause 35.1 of the eight edition of PSSCOC published in July 2020, if a dispute arises between the Employer and the contractor in relation to the contract or the execution of the works, it shall in the first place be referred to the SO in writing for his decision. Under Clause 35.1(2) such decision by the SO shall be binding on the parties until and unless either party require that the decision to be referred to arbitration. By way of further example, the independent certifier is expected to assess the contractor’s application for any extension of time where in most cases the project is already in delay and the contractor is likely to simultaneously claim for loss and expense due to events that are considered to have prevented the contractor from completing its works. The certificates issued by the independent certifier are decisions of the certifier based on his assessment of the facts surrounding the issues before him. 

According to the preamble of the SIDP, its procedures can be easily incorporated into any construction or infrastructure contract using the recommended standard clause. Therefore, it is fair to say that no major modification is expected to the existing standards conditions, including the provisions for the independent certification regime. Given the circumstances, how should one navigate the dispute resolution role of DB and the independent certification regime with the potential overlap in responsibilities? Assuming parties refer their disputes to the SO and the SO subsequently makes a decision under Clause 35.1(2) which shall be binding and final subject to any future reference to arbitration, can such decision be referred to the DB prior to arbitration? Does the DB has the power to override the SO’s decision by way of its own determination? 

The SIDP is presently silent on the hierarchy of authority between the SO and the DB. However, there are two opposing perspectives as to whether the DB is empowered to override any decisions made by the SO. One of the perspectives is that the DB’s authority is found under the contract and no further, much like the SO. However,  under Article 6.0 of the SIDP, the DB shall have the power to resolve ‘disputes’ via mediation, opinion or determination as the case may be. It should be noted, such power is not expressly extended to include any review of decisions or determinations already made by the SO. In other words, the DB’s function should not be viewed as one of legal appellate in authority. Since both the SO and DB are both ‘creatures of contract’, there is no reason to believe that a decision already made by the SO is subordinate to the DB. Likewise, any determination made by the DB (apart from opinion since it is non binding if objected in a timely manner by either party), shall not be subject to review by the SO. Whilst it is mandatory for the parties to refer their disputes to the SO pursuant to Clause 35.1 of the PSSOC, there is no such mandatory requirement as regards reference of dispute to the DB. Under Article 6 of the SIDP, difference or dispute ‘may’ be referred by any party by filing a referral of dispute. In other words, the DB’s involvement in dispute resolution is on a non mandatory basis. If indeed the intent was for the DB to review an SO’s decision, the reference of dispute to DB should have been mandatory as well, which is not the present case. By way of illustration, since the SO’s decision can be reviewed by an arbitral tribunal, the parties ‘shall’ refer all their disputes to be finally resolved under arbitration as well. 

An alternative perspective is that the DB is a dispute resolution mechanism that is agreed by the parties above and beyond a conventional construction contract with a pre-existing independent certification regime. In other words, had parties taken the position that an independent certification regime was sufficient for their dispute resolution requirements, there is no reason to further agree on the formation of DB under the SIDP. Under this alternative interpretation, any ‘dispute’ shall include disagreements between parties arising from differences in respect of decisions made by the SO. Further, it should be noted that whilst the determinations of the DB and decisions of the SO can be subject to review under subsequent arbitration, there are no express provisions that the SO’s decision shall exclusively be reviewed by an arbitrator. A decision by the SO shall be rendered within 30 days upon receipt of such reference by the parties. There are no express requirements on the breadth and extent of submissions expected from the parties to facilitate the SO’s decision making process. By contrast, the DB has the authority to issue directions pursuant to any proceedings for resolution via determination. Such direction may include duration that the DB requires to render its determination that could well exceed the 30 days prescribed for the SO. Under Article 13.2 of the SIDP, the DB shall have the power to require parties to among others, produce any documents or materials deemed relevant, convene hearings, decide on all procedural matters for such hearings, appoint experts, examine parties or witnesses called by the parties, issue procedural directions if any party fails to comply with any provisions of the protocol, determine any application for interim or provisional relief etc. It is clear that the procedural powers of the DB is comparable to that of a statutory adjudicator or tribunal under arbitration. It is unlikely that any determination made under such elaborate procedural framework could be viewed as being subordinate to an abbreviated reference of dispute to the SO. Finally it should noted that if either party fail to comply with any of the binding decisions made by the DB, the subsequent courts or arbitral tribunal shall have the power to summarily or by expedited procedure order enforcement of such decision under Article 10.2 of the SIDP. By contrast, such provision is not available for the decisions made by the SO. Therefore under this alternative perspective it appears that the DB’s decision has a higher degree of legal enforceability, suggesting that any differences arising from SO’s decision may be deemed a dispute before the DB. 

Multi-Tiered Dispute Resolution Clauses vs SIDP

Multi-tiered dispute resolution clauses can be commonly found in standard forms of construction contracts where parties are required to subject their disputes to an agreed sequence of steps prior to the final dispute resolution forum. Using the example in the preceding section of this article, parties under the PSSCOC shall firstly refer their disputes to the SO prior to any final reference of dispute to arbitration. Any party that prematurely commences an arbitral proceeding without fulfilling the prior agreed sequences of steps may breach the multi-tiered provision jeopardising the authority of the final arbitral tribunal. Any arbitral award rendered by a tribunal that lacks the necessary authority may have its award liable for being set aside. Therefore it is of paramount importance for parties to be clear whether the multitude dispute resolution avenues available constitute mandatory sequences of steps or purely voluntary options available for consideration. In this regard, if SIDP is adopted in a contract with pre-existing multi-tiered dispute resolution clauses, how can the DB work in tandem with such clause?

As mentioned in the preceding section of this article, Article 6.1 of the SIDP states that any dispute or difference ‘may’ be referred by any party to the DB which suggest that the involvement of DB in dispute resolution is not mandatory unless either party decides to make such reference on a voluntary basis. In other words, if both parties do not refer their dispute to the DB and proceeds with the mechanism under the existing multi-tiered dispute resolution clause, the jurisdiction of the final arbitral tribunal is unlikely to be compromised. Therefore, the DB constituted under SIDP is unlikely to be part of the pre-agreed sequences of steps prescribed under the multi-tiered dispute resolution clauses. However, if the DB is involved in a particular dispute and subsequently renders its determination, such decision shall be binding and final. Even if either party objects to such determination within 28 days upon receipt of such outcome, the determination continues to be binding but interim. It is interim in that such decision can be reviewed under arbitration if such is the final dispute resolution forum. Can such interim but binding outcome still be subject to the pre-existing multi-tiered dispute resolution clause? If yes, what if the SO makes a decision contrary to the DB’s determination? If the SO’s decision happens to be in favour of the Employer, departing from the DB’s determination previously made that was in favour of the contractor, it is entirely possible for the SO to be perceived as being biased. Therefore will the contractor’s refusal to participate in the SO’s decision making process be deemed as a breach of the multi-tiered dispute resolution clause? 

It is clear that under the hypothetical scenario above, the availability of multitude dispute resolution avenues may promote more disputes than it actually resolves any dispute. Parties should therefore be clear in the actual intention of DB’s role vis-a-vis any pre-existing multi-tiered dispute resolution provision.

Conclusion

From the discussions above, it is clear that any contractor that decides to address any of the SIDP negotiations with a ‘light touch’ may do so at its peril. It is both in the contractual and financial interests for the contractor to avoid expending legal fees in the midst of construction projects as that can be extremely draining to its cashflow. One should appreciate that dispute resolution provisions can be the very source of disputes if it lacks clarity that it deserves. It should also be noted that one of the clear and unique benefits of SIDP is that the DB’s overarching mission is avoidance of dispute as opposed to purely resolving disputes that had crystallised. At present, most if not all of the dispute resolution methodology resolves disputes as opposed to avoiding disputes. Therefore the overall effectiveness of SIDP should be viewed from the percentage of disputes that do not require escalation to arbitration (or litigation as the case may be), rather than making a like for like comparison with other conventional dispute resolution mechanism e.g. arbitration, litigation, mediation, adjudication etc.




Koon Tak Hong Consulting Private Limited