The Procedures For Settlement Of Construction Contract Disputes

Construction is the engineering industry that plays a very important role in building a country’s infrastructure. This is a very diverse activity with many stages and construction is an essential phase in the whole process. Therefore, when establishing a project related to construction, the parties must make a construction contract according to the regulations. Although having a contract, for several reasons, construction contract disputes often arise, affecting the construction progress. And this is the reason why Lac Duy & Associates publishes an article analyzing the process of handling a construction contract dispute.

Principle of settlement

According to Article 146 of Law of Construction 2014, guided by Article 45 of Decree 37/2015/ND-CP of the Government, the regulation of dispute settlement is based on two basic principles:

• Observance of contractual agreements and commitments in the course of contract performance, ensuring equality and cooperation;

• Contractual parties shall themselves negotiate on the settlement of disputes. If their negotiation is unsuccessful, their disputes shall be settled through conciliation or commercial arbitration or court proceedings in accordance with law.

Order and procedures for settlement of construction contract disputes

Conciliation

According to Clause 2, Article 45 of Decree 37/2015/ND-CP of the Government stipulates: If the two parties agree that dispute settlement is conducted by an agency, organization or one or some expert individuals (commonly referred to as the settlement committee), the settlement via this committee shall be prescribed as follows:

• The dispute settlement committee can be specified in the contract at the time of signing or can be formed after the dispute arises. Several members of the dispute settlement committee shall be negotiated by the parties. Members of the dispute settlement committee are required to be highly qualified and experienced in dispute settlement and have good knowledge of the law provisions on construction contracts.

• Within 28 days since the two parties receive the result of dispute settlement from the dispute settlement committee, if such result is not accepted by either party, the dispute settlement shall then be brought to arbitrator or court as regulated; after this period, if neither party opposes the result, the result shall be deemed as agreed by the parties. Hence, the two parties must comply with such a result.

• Expenses for the dispute settlement committee’s works shall be included in the contract and incurred equally by both parties except otherwise as agreed.

If the parties do not agree with the dispute settlement results of the conciliation, they may initiate lawsuits by commercial arbitration or at court.

Commercial arbitration

Commercial arbitration is governed by the Law on Commercial Arbitration 2010, including the following steps:

•  The plaintiff files a petition and enclosed documents with the following contents: date, month, year; name, address; summary of dispute content…

• The defendant sends a self-defense statement to the arbitration center within 10 days of receiving the petition and enclosed documents.

• The arbitration center format an arbitration council consists of one or more arbitrations. When the parties fail to reach an agreement on the number of arbitrators, an arbitration council shall be composed of three arbitrators.

• The arbitration council conducts conciliation for the parties to reach an agreement on the settlement of their dispute.

• The arbitration council holds a dispute settlement meeting and issues the award, according to the majority rule.

People’s Court

If the parties do not have an agreement on dispute settlement at the commercial arbitration, the parties may initiate a lawsuit at a competent People’s Court. Procedure to initiate a lawsuit by the court includes the following steps:

• The involved parties file the lawsuit petition in the competent court to request the settlement of disputes over construction contracts. Attached to the lawsuit petition, the plaintiff must provide the construction contract and other documents and evidence proving the other party’s breach of the contract.

• After receiving the lawsuit petition and enclosed documents and evidences, if all conditions are met, the petitioner will notify the advance court fees and proceed to accept the case.

• The case entered the trial preparation and conciliation stage. At this stage, the Court will collect documents and evidence (if necessary) and open an inspection session, handover, access to, and disclosure of evidence. The purpose is for the involved parties to reach an agreement on the direction to resolve the case and provide evidence for the involved parties.

• Finally, the Court will bring the case to the first instance trial according to general procedures.

The construction contract acts as an agreement between the principal and the contractor; this is an important document in the construction field because it recognizes the commitments of the parties involved in the construction of the project to complete the project on schedule. When a dispute arises, the parties can choose the types of disputes to ensure their interests and resolve promptly. In addition, readers can contact Lac Duy & Associates to receive timely advice and support on other issues such as: construction contract disputes, consulting construction contract disputes…

More information: Types Of Construction Contracts In 2020