Dispute Board and Commercial Mediation in the Construction Sector

On November 30, 2021, Webinar “Dispute Board and Commercial Mediation in the Construction Sector” was hosted by the Vietnam International Commercial Mediation Center and the Vietnam Construction Law Vietnam.

The construction sector makes an important contribution to the modernization of infrastructure, as a premise to promote socio-economic development. Construction projects have specific characteristics with the participation of many parties: investors, contractors, constructors, designers, etc. with a long implementation time, and the object of the project being of great value, the period of use is up to hundreds of years. According to statistics from the international energy agency, in 2016 the total value of Vietnam’s construction market reached 7.7 billion USD, and it is expected that in 2021, it will reach 14 billion USD, [1] in 2020 Vietnam belongs to the group of countries with the highest growth index in the world. [2]

With the strong development of construction projects, the increase in construction disputes is inevitable. According to statistics of the Vietnam International Arbitration Center, from 1993 to May 31, 2020, 14% of the cases handled by the Vietnam International Arbitration Center were disputes related to construction contracts. Although the total number of cases ranked second (after disputes related to purchasing and sales with 44%), the value of cases related to construction always ranked first with the total value of disputes reaching nearly 18,000 billion dongs, equivalent to an average of 90 billion dongs/case, including disputes with a total value of up to 6,000 billion dongs. [3]

Dispute Board

The Dispute Board is a specific and effective method of dispute resolution in the field of construction – performing the task of reviewing and detecting to handle conflicts and preventing them from arising into disputes and settling disputes arising in the course of contract performance. The mechanism was first introduced in 1975 during the Eisenhower Tunnel construction contract in the United States and has been used in approximately 2,700 projects worldwide (more than $300 billion in total). [4]

In those 2,700 projects, the parties adopted 98% of the Dispute Board’s recommendations without going to arbitration or a court. [5] The cost of a Dispute Board is on average 0.15% to 0.26% of the total cost of a construction project – much lower than the cost of resolving a dispute through arbitration or a court from 8% to 10%. [6] More than 80% of projects with the Dispute Board’s operation were completed on or ahead of schedule compared to industry-wide norms (60% for similar values ​​without the participation of the Dispute Board). dispute resolution). Most of these projects were completed within the Owner’s budget. [7]

However, in reality in Vietnam, the use of the Dispute Board is not really popular because Vietnamese law does not have a clear legal framework for the Dispute Board; because the parties to the contract do not fully understand the role of the Dispute Resolution Board, or doubt the legality of the decision of the Dispute Board and ignore the establishment of this dispute settlement mechanism, or wish to but could not establish a Dispute Board because the other party did not cooperate. 

It is difficult and time-consuming to find a member of the Dispute Board with appropriate expertise and experience, and there are no specific regulations on how the Dispute Board works and the mechanism for which it operates. execute the decision of the Dispute Board in accordance with the law of Vietnam. [8]

For construction contracts of great value and long duration, it is essential to maintain a long-term cooperative relationship so that the two parties can continue to complete the project, even if a dispute occurs. Therefore, when a conflict arises, it is important to come up with a solution that satisfies the parties so that an agreement can be reached. Dispute Board in construction contracts was born for that purpose.

Webinar: “Dispute Board and Commercial Mediation in the Construction Sector”

The Dispute Board performs the task of reviewing and detecting to handle conflicts and arbitrate disputes. This feature is very consistent with the goal of the mediation method, providing a satisfactory solution for both parties, thereby helping to maintain a long-term cooperative relationship. Especially in the “new normal” context, construction projects start to operate again, but it is not possible to predict an event due to “COVID 19” that will occur, hindering the contract implementation process, and leading to possible conflicts. 

On that basis, the Vietnam International Commercial Mediation Center in collaboration with the Vietnam Construction Law Vietnam organized a webinar: “Dispute Board and Commercial Mediation in the Construction Sector” to present and discuss this topic.

Webinar on Dispute Board and Commercial Mediation in the Construction Sector
Webinar on Dispute Board and Commercial Mediation in the Construction Sector

[1] Baomoi newspaper, “Total construction value in Vietnam in 2016 reached 8 billion USD”, <http://vietq.vn/tong-gia-tri-xay-dung-o-viet-nam-nam -2016-cham-moc-8-ty-usd-d109607.html>, accessed on 04/3/2019.

[2] General Statistics Office, January 14, 2021, accessed at: https://www.gso.gov.vn/du-lieu-va-so-lieu-thong-ke/2021/01/ Kinh- te-viet-nam-2020-mot-nam-tang-truong-day-ban-ling/.

[3] Phan Trong Dat (2020), Presentation on “Practice settlement of construction disputes at Vietnam International Arbitration Center”, at the Workshop on Risk prevention and settlement of construction disputes by arbitration”.

[4] Joyce, Henry, Dispute Resolution Board Foundation Region 3, FAQ, accessed at: https://www.drbf.org.au/concept/faqs, accessed on June 22, 2021.

[5] Andrew Stephenson & Lucy Goldsmith, June 22, 2021, Time for Australia to take advantage of Dispute Resolution Panels, available at: https://corrs.com.au/insights/time-for-australia-to-embrace-dispute-resolution-boards, accessed on June 22, 2021.

[6]   Paula Gerber and Brennan J Ong, 2011, 21 today! Dispute review boards in Australia: Past, present, and future.

[7] Andrew Stephenson & Lucy Goldsmith, June 22, 2021, Time for Australia to take advantage of Dispute Resolution Panels, available at: https://corrs.com.au/insights/time-for-australia-to-embrace-dispute-resolution-boards, accessed on June 22, 2021.

[8] Luu Tien Dung, Proposal on a new approach to the dispute settlement process in EPC contracts in Vietnam, Workshop document Effectively resolving disputes arising from EPC contracts – Clearing congestion at key projects in Vietnam, April 19, 2019, VIAC.

Các bài viết trước

CUSTIOMS IN INTERNATIONAL TRADE

Promoting the development of international trade is a trend in countries around the world; therefore,  international trade contracts are increasingly popular and widely used. However, in international trade, the  parties are from various countries that under the same contract, which causes differences in the application of regulatory laws as well as differences in the way the law is applied when resolving disputes. So in those cases, what do businesses need to keep in mind when entering the market?

Training program on PPA organized by ERAVCTED on October 12-13, 2023

Training program on PPA organized by ERAVCTED on October 12-13, 2023, coordinated with Bitexco Energy Joint Stock Company (Bitexco Power) on “Construction investment, Operational management of power plants and contract dispute resolution, legal issues arising during the implementation of electricity purchase contracts” with the offline and online participation of senior experts and Bitexco Power staves.

INTERNATIONAL FRANCHISING ESSENTIALS: WHAT YOU MUST KNOW

Vietnam’s business landscape has transformed, shifting from hosting international franchise brands to witnessing a surge in domestic enterprises venturing into global markets, spurred by the challenges of COVID-19. Leveraging Vietnam’s culinary heritage and technological advancements, local businesses are making significant contributions to economic growth on the international stage. However, as businesses embrace this global expansion, they must equip themselves with knowledge, conduct thorough research, and formulate effective strategies to capitalize on opportunities while mitigating risks inherent in this model.

E-COMMERCE CONTRACTS: CRITICAL FACTORS TO BEAR IN MIND

In recent years, Vietnam’s e-commerce sector has witnessed remarkable growth, emerging as the preferred choice for both businesses and consumers. The surge in e-commerce contracts across this platform showcases a varied range of formats, content, and execution methods, facilitating the expansion and deregulation of commercial dealings. Yet, beneath the apparent convenience lies a web of legal intricacies, exposing implementing entities to unforeseen risks and lacking necessary legal protections.

Talkshow on the Business and Law program

When entering the market, lack of information related to legal regulations during operations will cause many disadvantages for enterprises not only in the domestic market but also in the international market. Therefore, it is necessary for enterprises to actively access to legal information.

Leave a Comment