ALTERNATIVE DISPUTE RESOLUTION (ADR)

MECHANISMS FOR HYDROPOWER PROJECTS

International Conference on Hydropower and Dams Development

for Water and Energy Security- Under Changing Climate

07.04.2022
Presentation Layout

• Company Profile of SJVN

• Disputes in Hydropower Projects
• ADR Mechanisms
• SJVN’s Experience in NJHEP
• Conclusion
• References

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 Shared
Beginning First Project Portfolio Presence
Vision
• Incorporated in • Commissioned • Projects with • Nine states of
1988 as JV first project, over 16,900 MW India
between GoI and 1500 MW NJHPS capacity • 5000 MW by 2023
GoHP in 2004 • Two
• 25000 MW by 2030
neighbouring
• Category-I, • NJHPS is largest • Eight projects of countries - Nepal
• 50,000MW by 2040
schedule-A mini- hydropower 3300 MW are and Bhutan.
ratna CPSE under station in India under-
MoP construction
 Installed Business Recent
Subsidiaries Joint Ventures
Capacity Verticals Developments
• SAPDC -– 900 MW • CPTC - Cross Border • Generation : 2016 • Power Generation - • Five projects of
Arun-3 HEP in Power Transmission MW hydro, thermal, 5097 MW in
Nepal. Company Limited - wind and solar Arunachal Pradesh
26% equity.
• STPL - 1320 MW • Transmission :86 • Power Transmission • Seven Pump storage
Buxar Thermal • KHEL - Kholongchhu km, 400 kV (CPTC- projects (PSPs) of
Power Project in Hydro Energy JV) • Power Trading 9600 MW in
Bihar. Limited, 50% equity Maharashtra
- 600 MW
• SGEL- SJVN Green Kholongchhu HEP in
Energy Limited Bhutan.
Disputes in Hydropower Projects
• Disputes are endemic to construction industry in general and
hydroelectric projects in particular.

• Delays in dispute resolution is major reason for time and cost

overruns.

• Timely resolution of disputes is in best interests of all key

stakeholders – project developers, contractors, funding agencies,
and consumers.

• Key causes of disputes include challenging nature of projects,

owner caused delays and inflated claims by Contractors

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ADR Mechanisms

1. Dispute Adjudication Board

2. Dispute Avoidance through Independent Engineer
3. Conciliation through Conciliation Committees
4. Mediation through Independent External Monitors
5. Arbitration
6. Amicable settlement

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Dispute Adjudication Board
• DABs by whatever name they are called - Dispute Boards (DB), Dispute Review Board
(DRB), Dispute Avoidance and Adjudication Board (DAAB) were introduced in India by
World Bank.

• Involve a standing body of one or three independent domain experts, who undertake
regular visits to project sites, adjudicate disputes, when they are referred by one of the
parties.

• DAB is creature of contract; parties establish and empower DAB with jurisdiction to
hear and give the decision on dispute.

• Lately DABs adopt elaborate procedures with little to differentiate DAB proceedings
from Arbitration.

• Submission of Claims by Contractors after completion is major impediment.

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Dispute Avoidance through Independent Engineer

• In Sept. 2021 MoP notified Dispute Avoidance Mechanism through Independent Engineer for
contracts of hydropower projects being implemented by CPSEs.
• It recognizes that fair and just resolution of disagreements at inception stage is key to
successful performance of contract and prevention of time and cost overruns.
• The stated objectives of engaging 'Independent Engineer' are as follows:
 To reduce the conversion of initial disagreements over issues into full-fledged disputes
 For expeditious elimination of disagreements in a just and fair manner
 To avoid time and cost overruns to ensure timely completion of the Projects
• Selection procedure of IE is a major reform. IE to be selected from panel approved by MoP. In
case of negative feedback, empanelled persons could be dropped from the panel.
• IEs are expected to comply with the timelines prescribed by MoP for site visits and
adjudication process.
• As panel is approved by MoP, neutrality of IEs is now beyond doubt

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 Conciliation through CCIE
• Conciliation exists as recognized form of dispute resolution with a
governing statute in place - The Arbitration and Conciliation Act, 1996,
which inter alia provides:

 Conciliation involves reference of disputes to Conciliators, which may

number one, two, or three.
 The Conciliator assists parties to reach amicable settlement and may
make proposals for settlement, which need not be in writing and need
not be accompanied by reasons.
 The settlement agreement shall have status and effect of an arbitral
award.
 Parties to Conciliation may withdraw at any stage.

• Conciliation has found widespread recognition after NHAI and MNRE

successfully resolved many disputes through Conciliation Committees.

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Conciliation through CCIE ... contd.
• Conciliation mechanism through Conciliation Committees of
Independent Experts (CCIE) introduced in December 2021 by MoP.

• Three CCIEs constituted and notified by MoP.

• The contractor can choose to refer dispute to any one of these

CCIEs.

• Envisaged as second tier mechanism after IE mechanism.

• Recourse to Arbitration not available to Parties availing CCIE

mechanism.
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Mediation through Independent External Monitors

• Advised by Central Vigilance Commission (CVC) in contracts with Integrity

Pact (IP).

• Integrity Pact(IP) adopted to ensure transparency, equity, and

competitiveness in public procurement.

• Under IP Act parties agree to refer differences during pre-award as well as

execution phase to IEMs.

• Mediation through IEMs for public procurement contracts is welcome step

being cost-effective vis-a-vis Arbitration.

• Contracts of hydropower projects already contain pre-arbitral mechanisms

like DAB/Dispute Avoidance with domain experts.

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Arbitration
• Advantages of Arbitration over other ADR methods :
 Results in binding award with limited grounds for challenge.
 Unlike conciliation and mediation, arbitration proceedings do not
terminate if a party withdraws .

• Disadvantages of Arbitration over other forms of ADR:

 Not cost effective for low-value disputes.
 Unlike mediation and conciliation which ends in win-win situation
arbitration ends in win-lose situation.

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Arbitration ... contd.
• Following recent amendments in Arbitration Law, arbitral proceedings
now conclude in 1-1.5 years.
• As arbitral proceedings are confidential, Arbitration does not aid in
development of Law.

• Fast Tack Procedure for Arbitration

 Recently MoP issued guidelines regarding Fast Track Procedure for
Arbitration
 Introduced in A&C Act vide the 2015 amendment.
 Involves adjudication by a sole arbitrator, based on only written
pleadings within six months.
 Oral hearings will ordinarily not be held.

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Amicable settlement

• For settlement of pending issues and eventual closure of

contracts, amicable settlement can be attempted
through a sub-committee of the Board.

• Successfully achieved by SJVN in its 1500 MW Nathpa

Jhakri HEP.

• MoP also advised for constitution of sub-committee of

Board to resolve ongoing disputes expeditiously.

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SJVN’s Experience in NJHEP
• The major civil works of NJHEP were awarded under four
packages to joint ventures of foreign and Indian construction
companies.

• The project faced insurmountable challenges - poor geological

conditions, hot water conditions, flash floods, labour unrest, etc.
Powerhouse was inundated twice due to floods in river Satluj.

• Contracts had three-tier dispute resolution mechanism.

• Challenge of DRB decisions was an exception rather than a rule.

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 Summary of DRBs’ decisions
Amount awarded
Total claims Decided in favour Decided in favour
Contract as % of claimed Claims referred
referred of Employer of Contractor
amount to Arbitration
1 29 24% 76% 28% 4
2.1 35 23% 77% 20% 3
2.2 45 20% 80% 29% 4
3 34 53% 47% 23% 6

• Awarded amount was in the range of 20 – 29 % of claimed amount.

• Most DRB decisions implemented by parties, with 17 cases referred to Arbitration.

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Amicable Settlement for Closure of Contract

• Efforts made to resolve all disputes/issues pending before different forums

• Settlements reached in three out of four contracts.

• Settlement could not be reached in one Contract due to Contractor’s

reluctance.

• Sub-committee of Board of Directors, assisted by internal committee

negotiated with Contractors.

• On recommendations of sub-committee, Board approved terms of

settlement.

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Conclusion
• DABs and Dispute Avoidance with Independent Engineer suited
for inception stage.

• Conciliation and Arbitration suited as second-tier mechanism

• Conciliation has better chances of success vis-a-vis Arbitration as

it leads to a win-win situation.

• Key to success of dispute resolution process is parties faith in the

process.

• Notification of panel of IEs and Conciliation Committees are

welcome moves.

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Conclusion ... contd.
• Need to consider Litigation history during bid evaluation. Quality-based selection
for procurement of works allowed now.

• In March 2022, MoP issued guidelines for debarment of contractors who

repeatedly raise unjustified/inflated claims and engage in frivolous
litigation/arbitrations

• SJVN’s experience in NJHEP shows adjudication of claims during progress of works

helps avoid disputes.

• Ultimate goal of parties should be expeditious resolution of all pending issues to

enable closure of contracts.

• Parties must share the belief - their interests are best served if resources are
utilized on productive pursuits.

• This belief will enable them to work together towards the common goal of dispute
resolution.

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 THANK YOU

We can't solve problems by using the same kind of thinking we used when we
created them.

- Albert Einstein

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References
• The Arbitration and Conciliation Act, 1996

• MoP’s O.M dated 27.09.2021 on Model Contract Provision for “Dispute Avoidance
Mechanism” through ‘Independent Engineer (IE) in the Construction Contracts of CPSEs
executing Hydropower projects

• MoP’s O.M dated 29.12.2021 on Dispute Resolution through Conciliation for Contractual
Disputes in Projects implemented by CPSUs/Statutory Bodies under the administrative control
of Ministry of Power – Constitution of Conciliation Committee of Independent Experts (CCIE)

• MoP’s O.M dated 16.03.2022 on Guidelines for early settlement of disputes and to minimize
the arbitral claims/disputes in hydropower sector

• CVC circular dated 28.01.2022 on Standard Operating Procedure for implementation of

Integrity Pact

• Department of Expenditure, MoF’s O.M dated 29.10.2021 on General Instructions on

Procurement and Project Management

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