ADR IN SOUTHERN AFRICA

article 57: ADR IN SOUTHERN AFRICA

 

 

South African Standard Forms of Contract still draw, to a large extent, on their English historical counterparts. Indeed the Standard Building Contract prior to 1991 was based on JCT63 and the Standard Civil Engineering Contract, current edition 1990, was modelled closely on ICE 5th Edition. With the launch of the New Engineering Suite of Contracts in 1991 (1st Edition) and their adoption by the electricity parastatal, Eskom, adjudication was introduced for the first time as a mechanism for dispute resolution. In 1986 and 1991 respectively the Civil and Buildings Forms of Contract introduced mediation as a voluntary precursor to arbitration. Although statistics are hard to come by, a survey done by The South African Institute of Civil Engineers during the mid 1990s indicated that mediation was an exceedingly successful mechanism for dispute resolution. The figures quoted were that in excess of 75% of the matters referred to mediation were settled without recourse to subsequent arbitration or litigation. In the building industry no such figures are available but our own perspective is that mediation has not been a success and is generally utilised as a delaying or fishing expedition prior to the matter being referred to arbitration.

The high cost of litigation and arbitration is still the major motivator for pursuing some form of Alternative Dispute Resolution procedure but ADR procedures are, in large, measure hampered by the absence of adequately qualified, competent third party neutrals. Whilst many organisations pay lip service to ADR, the non binding effect of these decisions means that there must be a high degree of co-operation and willingness to settle matters if there is to be any prospect of a negotiated settlement through the intervention of the third party neutral. South Africa has very little construction legislation and certainly nothing equivalent to the Housing Grants, Construction and Regeneration Act of 1996. Large organisations continue to take financial advantage over smaller contractors and sub-contractors and settle their disputes through financial pressure rather than relying upon the intervention of dispute resolution procedures.

The FIDIC Civil Engineering Document (Red Book) is widely used both in Africa generally and in South Africa for domestic contracts. The 1999 Suite of FIDIC Contracts is also starting to be used more regularly and, certainly on the larger projects, the recognition of the advantage of dispute adjudication or dispute review boards as a first port of call is not only gaining momentum but also gaining recognition for the effectiveness of early intervention strategies.

The Association of Arbitrators (Southern Africa), of which the author has been Chairman for the past five years, has pioneered the introduction of the Small Claims Arbitration Tribunal Rules for disputes up to R50 000.00 in value. Under the scheme arbitrators are paid a fixed fee for resolving disputes in three categories, up to R5 000.00, from R5 000.00 to R25 000.00, and from R25 000.00 to R50 000.00. The participants are not entitled to legal representation and these Rules are increasingly finding favour, not only with the construction industry but also with other consumer based contracts.

In March 2001 government published a Code of Practice as a draft entitled “Adjudication in Engineering and Construction Contracts in South Africa”. The Code of Practice was prepared to assist the Construction Industry Development Board (“CIDB”), a statutory board with overall responsibility for monitoring and advising on best practice in the construction industry, for the establishment of adjudication in South Africa including a panel of accredited and state approved adjudicators. The stated intention being to move towards implementing rapid and inexpensive dispute resolution mechanisms in engineering and construction contracts. The Code of Practice envisages a list of accredited adjudicators and will be located on the CIDB website to enable all organs of state and contractors to access the list and to make their selection of an approved and accredited adjudicator.

Save in regard to the Code of Practice, there are no new initiatives on the horizon as far as ADR is concerned and the construction industry in South Africa remains too fragmented and unable to agree as to the best route forward.

C D BINNINGTON
Managing Director
BINNINGTON COPELAND & ASSOCIATES (PTY) LTD
Engineering & Construction Contract Consultants
www.bca.co.za