Alternative Dispute Resolution

Guidance Notes
March 2015

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REFERENCES BELOW TO CLAUSES AND GUIDANCE NOTES ARE BASED ON THE
GENERAL CONDITIONS NUMBERING AS USED IN LOGIC "EDITION 3", MARCH 2014

Amend the Guidance Notes for Clause 31 – Resolution of Disputes (Guidance Note 2.17)
in the following terms:

1. Add "(see comments below on Clause 31.2)." after "certain cases." in the first line of
paragraph 2.

2. Add the following text immediately after paragraph 2:

"In certain circumstances arbitration can potentially have some advantages over the
courts as a final forum for resolving disputes. These advantages are often more
obvious if the parties are based in different countries, and are not subject to the
jurisdiction of the same courts (or have assets located in overseas jurisdictions).

Potential advantages of arbitration include:

• Confidentiality – unlike court, arbitration is essentially a private process.

• Ease of enforcement of awards – arbitration awards are often easier to
enforce overseas than "local" court judgments. As noted above, this can be
particularly relevant to contracts with international dimensions. Arbitration can
also ensure more certainty as to where disputes with cross border elements
should be resolved.
• The ability to select arbitrator (s) with relevant industry expertise and
experience.
• The relative flexibility of procedure and timetable available in arbitration.

However, arbitration also lacks certain features of the court system (or at least of the
English courts). For example, there may be potential difficulties in involving more than
two parties in the arbitration process. In addition, there are often limitations on
arbitrators coercive powers (at least when compared to a court). A party's rights of
appeal are also generally greater in court proceedings - although this could be
disadvantageous to a party too, depending on the decision in question.

If the parties wish to introduce an arbitration clause into their contract, the following
changes to the General Conditions may be used or adapted to suit the parties'
purposes. It is envisaged that the drafting below would be set out in the Contract
Special Conditions. The drafting below relies on a selected set of "standard form"
rules for arbitration and does not represent a bespoke, stand alone arbitration
procedure.

Further information on arbitration is available online – see for example

http://www.ciarb.org/dispute-resolution/resolving-a-dispute/arbitration.

The following arbitration clause is a simple ad hoc arbitration clause. It does not
envisage supervision by institutional arbitration bodies such as (for example) the
London Court of International Arbitration (LCIA), the International Chamber of
Commerce (ICC) or the Scottish Arbitration Centre. It may be appropriate in some
contracts to establish this type of arbitration procedure. Legal advice should be taken
in this regard. Parties may also wish to take advice on what other forms of arbitration
clause may suit the circumstances of their contract.

"In Clause 29.5, delete the words "and, subject to the provisions of clause
31, shall be subject to the exclusive jurisdiction of the English Courts."

In Clause 29.10, first line, add ", arbitrator (s)" immediately after "court".

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 In Clause 31.3, delete the words from and including "either PARTY may" to
"at any time." and insert the following:

"the dispute shall, subject to Clause 31.4, be finally resolved by

arbitration under the [specify the applicable arbitration rules. See
Note 1 below] in force at the date of the CONTRACT. It is agreed
that:

(a) the tribunal shall consist of [see Note 2 below] arbitrators.

(b) if the parties cannot agree the arbitrator (s), the appointing
authority shall be [specify an appointing authority - see Note 3
below].

(c) the seat of the arbitration shall be [specify seat - see Note 4
below].

(d) the law governing this arbitration agreement shall be [specify

law – see Note 5 below].

In clause 31.4, first line, substitute "the Courts" with "arbitration".

Notes

1. The clause should specify which arbitration rules should be used.

Arbitration rules are produced by a number of bodies. Commonly used rules
are (for example) the Chartered Institute of Arbitrators Arbitration Rules and
the UNCITRAL Arbitration Rules. Any such rules referred to should be
checked for compatibility for use with the rest of the contract, particularly
where the General Conditions have been amended from the standard form.

2. The clause should state the number of arbitrators - one arbitrator or a

panel of three (either selected in accordance with the chosen rules, or one
by each party with the third chosen jointly by the selected arbitrators).

3. Parties may wish to specify a body or an authority for appointment of an

arbitrator (s) if they cannot reach agreement on who should be appointed.
Bodies such as (for example) the Chartered Institute of Arbitrators, the LCIA
and the ICC appoint arbitrators. A number of other bodies also provide this
service.

4. Parties should agree the "seat" of the arbitration – eg, London or

Aberdeen. The seat governs the overarching procedural law for the
arbitration, and usually links to the governing law of the contract.

5. In order to avoid any uncertainty, the law of the arbitration agreement itself
should also be set out. This will ordinarily be the same as the law governing
the contract or the law of the seat. The law of the contract is set out
elsewhere in the General Conditions.

3. Add the following text immediately after the final paragraph of Guidance Note 2.17:

"Clause 31.2 – Alternative Dispute Resolution

This clause envisages that the parties may agree a form of "alternative dispute
resolution" to resolve disputes. Five specific forms of alternative dispute resolution
which parties may wish to consider are:

• Mediation

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 • Expert determination

• Conciliation

• Early neutral evaluation

• Adjudication

The notes below provide an overview of what each process involves, and how parties
may utilise these processes.

EXPLANATORY NOTES ON MEDIATION

Mediation is a voluntary and confidential form of alternative dispute resolution. A

neutral third party will be appointed to assist the parties in negotiating their dispute to
a settlement. The mediator will not determine the dispute or suggest terms of
settlement, although he will control the mediation process and strive to facilitate a
resolution. Mediation can also be used when there are more than two parties in
dispute.

The parties will ordinarily enter into a mediation agreement. This will govern the
mediation procedure and structure, and record the mediator's fee arrangements. A
number of independent bodies publish mediation rules and template mediation
agreements; these bodies can also appoint mediators if so requested (see Notes on
the suggested Mediation Clause, below).

Parties will normally prepare case summaries and lodge supporting documents in
advance of a meeting with the mediator. The mediation itself will usually commence
with an initial meeting involving all parties and the mediator, during which parties will
frequently make opening statements. Parties are often accompanied by their legal
representatives. The parties will then move to private rooms, with the mediator holding
discussions with each party and shuttling between the groups.

If settlement is reached, the terms will usually be recorded in a formal agreement

(often before the mediation concludes). The duration of mediations varies, but many
conclude within 1 –2 days.

Mediation can be an effective way of resolving disputes. The majority of mediations

end with a settlement, or at least pave the way for this shortly afterwards. UK courts
(particularly in England) actively encourage mediation before parties commence court
proceedings - and in the English court system adverse cost consequences can arise
for a party who declines an invitation to mediate. Deciding at what stage mediation
may be most effective requires careful consideration - mediation is often most
effective after parties have developed their cases through other means and
communications.

Further information on mediation is available online – see for example

http://www.core-solutions.com/what-is-mediation.

Mediation can be used to resolve a dispute even if there is no "mediation clause" in a

contract. Parties can simply agree to go to mediation at any time (subject to General
Conditions Clause 31.2, if left unamended), and a process for this can be agreed on
an ad hoc basis.

If, however, the parties wish to introduce a mediation clause into their contract, the
following changes to the General Conditions may be used or adapted to suit the
parties' purposes. The drafting below can be set out in the Contract Special
Conditions.

"Delete clause 31.2 and insert the following:

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 If no agreement is reached within twenty (20) days of expiry of the
period referred to in Clause 31.1 (c) (that is within eighty (80) days
of the service of the formal notice referred to at Clause 31.1 (a)),
the PARTIES may attempt to settle the dispute by:

(a) mediation, in accordance with the following provisions:

(i) the mediation shall proceed and be governed by

[describe the Mediation Procedure to apply - see Note 1
below] in force at the date of the CONTRACT or such
other procedure or process as the PARTIES may agree.

(ii) The mediation shall take place in [city/country – see

Note 2 below] and the language of the mediation shall be
[see Note 2 below].

(iii) In order to initiate a mediation a PARTY must give

notice in writing to the other PARTY. Such notice must be
issued in accordance with any applicable rules in the
mediation procedure described at Clause 31.2 (a) (i)
above and otherwise in accordance with the
CONTRACT; or

(b) another form of Alternative Dispute Resolution to be agreed

between the PARTIES;

Notes

1. Reference should be made here to the mediation rules or procedure to be

adopted. A number of bodies publish these for use by parties. Some
commonly used rules are (for example) the Centre for Dispute Resolution
Model Mediation Procedure and the Mediation Rules of the Chartered
Institute of Arbitrators (both of these being available to view on the internet).
These procedures also refer to template Mediation Agreements for adoption
by parties. Other bodies also publish mediation rules and procedures.

2. Parties may wish to select the location of any mediation at the stage of
contract negotiation. This may be particularly relevant if parties are based in
different countries and the contract involves elements of international
contracting. This principle also applies to the selection of the applicable
language.

EXPLANATORY NOTES ON EXPERT DETERMINATION

Expert Determination involves selecting an "expert" to determine specified issues or

disputes within a short timescale and in a relatively informal way. This process is often
used to resolve specific technical or valuation disputes. The appointed expert is
generally a person with experience and knowledge of the particular matters in
contention, although not always. Expert decisions are ordinarily contractually binding
on parties. Flexibility of process is often an advantage of expert determination.

Depending on the procedures adopted, there is often only limited recourse by way of
appeal or challenge to an expert's decision – but parties can tailor this aspect of the
process to their needs. An expert (in the context of expert determination) performs a
different role to an arbitrator.

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 Expert determination as a process will not be suitable for every dispute arising under a
given contract (eg, those heavily dependent on questions of law), and lacks the back-
up rules and processes available to courts and arbitrators. If one party refuses to
comply with an expert's decision further action in court or arbitration will be required.
Parties should also carefully consider the extent to which they wish an expert's
decision to be finally binding, and the type of disputes an expert is able to finally
determine.

Further information on expert determination is available online – see for example

http://www.academyofexperts.org/alternative-dispute-resolution/what-expert-
determination.

If the parties wish to introduce an expert determination clause into their contract, the
undernoted changes to the General Conditions may be used or adapted to suit the
parties' purposes. The drafting below can be set out in the contract Special
Conditions.

The suggested drafting represents just one possible approach to expert determination.
An expert determination process tailored to the specific circumstances of a particular
contract could be produced. For example, if an existing set of expert determination
rules is adopted (see Notes below), it could be further amended to meet the parties'
requirements, and the amendments recorded in the Special Conditions. Parties should
check that any rules which are adopted meet their needs. Alternatively the parties may
wish to create a new and bespoke expert determination procedure.

The suggested drafting also allows parties to define the type and nature of disputes
which can be referred to expert determination. The drafting also envisages expert
determination (for specified types of dispute) being available for use at any time. This
may be helpful in resolving issues as and when they arise during a project. Such an
approach may also narrow the ambit of any dispute which may ultimately be referred
to court or arbitration, by removing certain disputes from the scope of these
proceedings.

"In Clause 1, add the following defined terms:

"EXPERT" means a person appointed to determine an EXPERT

DISPUTE

"EXPERT DETERMINATION" means the determination of an

EXPERT DISPUTE by an EXPERT in accordance with Clause
31.5

"EXPERT DISPUTE" means [See Note 1 below]

In Clause 31.1, first paragraph, insert the following wording immediately

before "Any dispute between":

"Subject to Clause 31.5,"

Insert a new Clause 31.5, as follows, and re-number existing clause 31.5 as
clause 31.6:

Clause 31.5 Expert Determination

(a) Either PARTY may refer an EXPERT DISPUTE to an EXPERT

for EXPERT DETERMINATION at any time and without following
and completing the procedures set out in Clauses 31.1 (a), (b) and
(c).

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 (b) The referral of an EXPERT DISPUTE to an EXPERT for
EXPERT DETERMINATION and the EXPERT DETERMINATION
itself shall proceed in accordance with (and each PARTY shall
comply with) [see Note 2 below]

(c) Each PARTY shall be bound by the outcome of the EXPERT

DETERMINATION in the manner specified in the [see Note 3
below].

Notes

1. The Parties should define which types of dispute can be referred to expert
determination. Care should be taken to carefully describe the scope of this
definition. See comments above on the type of dispute which is commonly
referred to expert determination.

2. The clause should specify which expert determination rules should be

used. Expert determination rules are produced by a number of bodies.
Commonly used rules are (for example) the Academy of Experts Rules for
Expert Determination, the Institution of Mechanical Engineers Rules for
Expert Determination and the Institution of Chemical Engineers Rules for
Expert Determination. Any such rules referred to should be checked for
compatibility for use with the rest of the contract, particularly where the
General Conditions have been amended from the standard form.

3. Reference should be made here to the rules which have been selected for
use (see the preceding sub-clause).

EXPLANATORY NOTES ON CONCILIATION

Conciliation is a similar process to mediation, but with some key differences. As with
mediation, an independent third party is engaged with a view to assisting the parties to
resolve their dispute. Like a mediator, a conciliator (ordinarily) has no power to issue a
binding determination of a dispute.

However, most conciliations operate on the basis that the conciliator can at least make
proposals for settlement, and express (non binding) views on the merits of the dispute.
The role of the conciliator is often therefore more assertive and interventionist than
that of a mediator. This can sometimes assist in facilitating a settlement.

Conciliation can be established on an ad hoc basis – a conciliation can take place

even if the contract does not expressly provide for this. Various bodies publish
standard conciliation rules which can be adopted by parties if they wish to proceed
with conciliation.

EXPLANATORY NOTES ON EARLY NEUTRAL EVALUATION

An independent third party can be selected by the parties to provide a non binding
opinion on the likely outcome of a dispute if it proceeded to court or arbitration. In this
way parties can gain a better understanding of their prospects of success, and the
strengths and weaknesses in their respective positions. All of this can in turn drive a
negotiated settlement. This process is often referred to as early neutral evaluation.

Senior lawyers or even judges are often appointed to undertake early neutral
evaluation, although parties are free to choose other appropriate candidates. Early
neutral evaluation is frequently carried out on a documents only basis, but can
sometimes involve a meeting. The process commonly proceeds on a without prejudice
basis.

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 Early neutral evaluation can be established on an ad hoc basis, and can take place
even if the contract does not expressly provide for this process.

The Technology and Construction Court (part of the High Court of Justice in England
and Wales) publishes a Guide, which describes how early neutral evaluation works in
the context of that court (see https://www.justice.gov.uk/downloads/courts/tech-
court/tec-con-court-guide.pdf).

EXPLANATORY NOTES ON ADJUDICATION

Adjudication is frequently used to resolve disputes in the domestic (onshore)

construction and engineering industry. Its use is underpinned by the Housing Grants,
Construction and Regeneration Act 1996 (HGCRA), which permits parties to
"construction contracts" (as defined by the HGCRA) to refer a dispute to adjudication
at any time, even if their contract does not expressly provide for adjudication. In
practice most domestic construction contracts do provide for adjudication as a method
of dispute resolution.

HGCRA does not, however, apply to or affect the vast majority of construction and
engineering operations undertaken for the offshore oil and gas industry. For this
reason the LOGIC suite of contracts does not provide for adjudication. If parties to a
LOGIC contract wish to use adjudication as a method of resolving a dispute, they
would have to expressly agree to this, either in their contract or on an ad hoc basis
(and assuming that HGCRA does not otherwise apply to the contract in question).

Adjudication is similar to expert determination, but with some important differences.

Adjudication typically attracts a broader (and more complex) range of disputes as
compared to expert determination. Adjudicators' decisions are generally binding on an
interim basis, but not finally binding, with parties being permitted to refer a dispute
afresh to court or arbitration if they wish.

The timescales for an adjudication decision are short, as is the case with expert
determination, albeit an adjudicator will often have a longer period to reach a decision
than an expert. Adjudicators are also subject to more procedural restraints than
experts (but less than apply to court or arbitration proceedings). Adjudicators are often
non lawyers (eg, engineers or quantity surveyors).

If parties wish to adopt adjudication as a method of dispute resolution legal advice

should be sought, particularly in relation to how the use of adjudication may impact
upon their other contractual arrangements. Adjudication procedural rules are
published by various bodies (as well as being available in a statutory scheme
associated with HGCRA).

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