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Bank supports launch of certificate course on contractual dispute resolution in India

Shanker Lal's picture
Powerlines in Mumbai. Photo: Simone D. McCourtie / World Bank


India is the fastest-growing major economy in the world with significant Government investments in infrastructure. According to estimates by WTO and OECD, as quoted in a report from the United Nations Office on Drugs and Crime, India: Probity in Public Procurement, the estimated public procurement in India is between 20 and 30 percent of GDP. 

This translates to Indian government agencies issuing contracts worth an estimated US$ 419 billion to US$ 628 billion each year for various aspects of infrastructure projects. Ideally, in contractual agreements no disputes would arise and both sides would benefit from the outcome. However, unexpected events occur and many contracts end in dispute. Contractual legal disputes devoid project benefits to the public as time and resources are spent in expensive arbitration and litigation. As a result, India’s development goals are impacted.

According to the Global Construction Disputes Report 2016 by Arcadis, an independent consulting firm, global trends show that on average, disputes in the construction sector have become lengthier and costlier with the average dispute lasting 15.5 months and costing US$46 million. This trend is especially relevant for India as it scales up its infrastructure development projects. What might start as a minor dispute due to poorly written contracts or failure to provide timely compensation could potentially escalate into a complicated and expensive legal quagmire. A speedy settlement of a dispute is desirable in order to not waste time, energy, and resourcesthat should be used for efficient project delivery.

The widely referenced World Bank’s Ease of Doing Business Index also uses contract enforcement as an indicator as part of its approach to determine a country’s optimal level of business regulation. As far as ease of doing business goes, India is currently ranked 130th out of 190 nations. India is ranked even lower – at 172nd place – for enforcing contracts. This discrepancy highlights the need for deliberate improvements in enforcing contracts and improving India’s dispute resolution process.

India’s Prime Minister expressed that establishing an alternate dispute resolution ecosystem was a national priority during the Global Conference on National Initiative towards Strengthening Arbitration and Enforcement in India held last October. The Finance Minister has also underlined the need to “streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, public-private partnerships and public utility contracts” during his budget speech delivered last month in February.

One effective way to manage and resolve disputes is through alternative dispute resolution mechanisms (ADR). These mechanisms include mediation/conciliation and arbitration which help deescalate a potentially hostile situation. In a process which uses ADR, the involved parties collaboratively work with a third party individual or dispute board towards an amicable agreement. The parties involved in the dispute have more control and often times resolve disputes with increased satisfaction using ADR than had they tried to resolve their dispute through the legal process. 
 
As India has yet to recognize public procurement as a professional cadre and because of the volume of contracts under implementation, there is a shortage of trained professionals specializing in contract management and ADR. In partnership with the All India Management Association (AIMA), a network of management professionals in India, the World Bank has helped design and develop a certificate course in contractual dispute resolution targeting Indian public sector employers as well as private sector contractors.

The six-month blended learning course was launched during the Global Procurement Summit on 27 February 2017 in New Delhi. This course covers best practices both for preventing disputes by teaching participants how to better draft and manage contracts as well as how to utilize alternative dispute methods.

This opportunity will help build much needed capacity in India to both prevent and resolve disputes allowing the government to more effectively achieve its growth goals. As the renowned dispute resolution expert Joseph Grynbaum rightly once said, “An ounce of mediation is worth a pound of arbitration and a ton of litigation.”  

More details about the course are available at https://www.aima.in/education-services/short-term-courses/cpcdr.html 

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Speedy legal dispute resolutions means more time & money can be spent on dev in India. #goodgov

New course will help India further unlock growth potential w/ better dispute resolution practices.

Comments

Submitted by Tan Nguyen on

In any developing country, building infrastructures such as super-highway, roads and bridges, schools, hospitals, electricity, and clean water are very important for the development, and PPP (Public-Private-Partnership) is a great vehicle to bring success to any nation. However, PPP could not be successful in some countries that PPP is only one body. For example, Vietnam has been applied and used PPP but the result is negative because the private sector is only the government high ranking's elite group so this group is only wanting to win the contract in order to share the interest more than to do excellence job as its function. That is why one-kilometer highway building in Vietnam costs four times more than one kilometer of highway built in the U.S.
I hope India will find ways to cut cost and to run perfect model of PPP even though India is not a pure democracy government as many nations in the West, but India, however is still one hundred percent better than Vietnam on public works.

Submitted by Satya Panda on

Dispute is inevitable in any form of contract. Yes well written contracts may have less disputes, but disputes can never be ruled out. In India where there is a boom in infrastructure development through various contract, knowledge in dispute resolution methods will be an asset for contract managers.
I hope this course will go along way in educating the contract managers and help them in managing the disputes.

Submitted by Rehan Hyder on

Dear Shanker Sb heartiest congratulations on leading this much needed initiative to enhance development effectiveness , not as a rhetoric. We had an opportunity through a small grant to kick start an initiative for Extending Outreach of Alternate Dispute Resolution Mechanism’. Draw up a strategy to increase the outreach of Federal and Provincial Mohtasib (Ombudsperson). Hope to find ways to piggyback the contractual ADR on the existing supply chain

Submitted by Atin Kumar Rastogi on

Once the contract is in place good contract management is key. Contract management techniques should include monitoring for the early detection of any problems. In any contract both parties should be required to give the earliest possible warning of any potential dispute and regular discussions between the client and supplier should include reviews of possible areas of conflict. However, if a dispute arises, it is important to manage it actively and positively and at the right level in order to encourage early and effective settlement. Unnecessary delays and inefficiency can lead to rapid escalation of costs and further damage the client/supplier relationship. I hope this course would help client/supplier to resolve dispute in a better and professional ways.

Submitted by Chandra Mishra on

A great initiative of the World Bank and AIMA to launching a blended course in Arbitration sector. Hopefully, it will help a lot to procurement and contract officials/managers to prevent and resolve disputes of large contracts in general and disputes of infrastructure development projects in particular.

Submitted by Shivendra Kumar on

This is a very timely and most coveted initiative of the World Bank. India is on the verge of gigantic investments in infrastructure projects with the Union Budget 2017 allocation of Rs 3.96 lakh crore [US$ 59 billion], and Union Minister of Roads and Highways, and Shipping announcement of the GoI’s target of investing US$ 376.5 billion in infrastructure in the next three years.

Large construction contracts are obviously complicated and result in complex high value claims, if and when disputes arise. Reportedly the amount under arbitration is of the order of Rs 1 lakh crore [US$ 15 billion] with some claims over a decade old. Unless disputes are settled expeditiously, large sums get stuck causing severe liquidity crunch, thereby directly effecting implementation of projects.

Effective contract management and practical ADR mechanisms are currently the pressing requirements, and this course should pave the way in the right direction.

Submitted by Dr.Ajit Patwardhan - Consultant W.B. on

This is a grate initiative taken by AIMA with the technical support of World Bank.As we all are aware that the biggest challenge to the successful completion of Infrastructure Projects is the claims and disputes that arise between the Employer and the Contractor on various issues related to Project execution.Well trained professionals on Employer's and Contractor's side can quickly grasp the nature of problem that may arise in Project execution and proceed for satisfactory resolution if both parties understand and accept the complexities and and imperfection in the Contract and move for it's resolution in a systematic way in line with contractual provisions and applicable laws if trained by such course. This will save a lot of time and cost for both the parties and projects will be completed with minimum delays and cost overruns.All the Government and Public bodies alongwith contractors should equally participate in this certificate program of contract dispute resolution.

Submitted by Payal Malik Madan on

Great article and initiative. Conflict is a part of business life and hopefully after this course the participants will understand the advantages and disadvantages of litigation, negotiation, mediation, arbitration etc. and how each works. Hopefully they will develop the skills necessary to participate effectively in these processes.

All the best!!

Submitted by Antonio R. Parra on

Dear Shanker,
This is indeed a great -- and very timely -- initiative. We must all congratulate you on undertaking it.
All the best,
Antonio

Submitted by Dhruv Umadikar on

Dear Mr. Shanker, appreciate your personal efforts and Bank's initiative in bringing about this timely intervention. Until India has in place a system for time bound resolution of disputes through the judicial system, ADR mechanisms would play a crucial role. Besides, this course would also provide insights to practitioners in honing their contract drafting skills which would aid in nipping off many a disputes at source!

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