1. Introduction

In large-scale construction projects, it is rare for everything to go exactly according to plan. Differences in opinion between the Client (Engineer) and the Contractor regarding project delays, extra costs, or the quality of materials are common. When these disagreements cannot be solved through simple talk, they become "Disputes."

While many people think of "going to court" to solve legal problems, the construction industry prefers a process called Arbitration. Arbitration is a private, formal process where an independent third party known as the Arbitrator makes a final and binding decision to end the dispute (Uff, 2021).

2. Why Not Use a Normal Court? (Litigation)

For a university student, it is important to understand why engineers avoid the traditional court system (Litigation).

• Technical Knowledge: Normal judges are experts in law, but they may not understand complex engineering concepts like "structural fatigue" or "liquidated damages." In arbitration, the parties can choose an arbitrator who is both a lawyer and an engineer.
• Speed: Construction projects involve massive amounts of money. Court cases can take years, which can bankrupt a small contractor. Arbitration is generally faster.
• Privacy: Court cases are public records. Large construction firms prefer arbitration because it is private, protecting their reputation.
• Finality: In court, you can appeal many times. In arbitration, the decision (called the Award) is usually final and very difficult to challenge in court.

3. The Arbitration Agreement

Arbitration cannot happen by accident. For a dispute to go to arbitration, there must be a written agreement between the parties. Most standard forms of contract used in Sri Lanka such as CIDA (ICTAD) or the international FIDIC forms already include an "Arbitration Clause."

This clause states that if a dispute arises, both parties agree to skip the court and go directly to an arbitrator.

4. The Step-by-Step Process of Arbitration

The procedure of arbitration is designed to be more flexible than a court, but it still follows a strict logical path,

• Step 1: The Notice of Arbitration: One party (the claimant) sends a formal letter to the other party stating they want to start arbitration.
• Step 2: Appointment of the Arbitrator: Both parties agree on a person to act as the judge. If they cannot agree, a professional body (like the Sri Lanka National Arbitration Centre) will appoint one for them.
• Step 3: Preliminary Meeting: The arbitrator meets with both sides to decide the "Rules of the Game"—where the meetings will happen and how much time each side has to speak.
• Step 4: Statement of Claim and Defence: The contractor explains why they deserve more money (the claim), and the client explains why they refuse to pay (the defence).
• Step 5: The Hearing: This is like a mini-trial. Engineers and experts give evidence, and lawyers ask questions.
• Step 6: The Award: After considering all the facts, the arbitrator writes a final decision. This "Award" is legally enforceable, meaning if the client is ordered to pay, the law will force them to do so (Murdoch and Hughes, 2024).

5. Key Theories in Arbitration: "Separability" and "Kompetenz-Kompetenz"

University students should be aware of these two fundamental legal theories:

1. Doctrine of Separability: Even if the main construction contract is found to be invalid or "illegal," the arbitration clause survives. It is treated as a separate contract so that the arbitrator can still decide the dispute. 2. Kompetenz-Kompetenz: This is a German term meaning the arbitrator has the "competence to decide their own competence." It means the arbitrator has the legal power to decide whether they have the right to hear a specific case or not (Binder, 2023).

6. The Role of the Expert Witness

In construction arbitration, the "star" is often not the lawyer, but the Expert Witness. This is usually a senior Chartered Engineer. Their job is to explain the technical facts to the arbitrator. For example, they might use software to prove that a specific rainstorm caused the 20-day delay in the project.

For a student, becoming an expert witness is a high-paying and respected career path in the later stages of an engineering career.

7. Conclusion

Arbitration is the "safety net" of the construction industry. It ensures that even when relationships break down, projects can be settled fairly, privately, and by people who actually understand engineering. As you move into your professional career, understanding the rules of arbitration will make you a much more valuable project manager or contract administrator.

8. Bibliography

Binder, P. (2023). International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions. 5th edn. London: Sweet & Maxwell.

Murdoch, J. and Hughes, W. (2024). Construction Contracts: Law and Management. 6th edn. London: Routledge.

Sri Lanka National Arbitration Centre (2025). Rules and Procedures for Commercial Arbitration. [online] Available at: http://www.slnac.com [Accessed 4 Jan. 2026].

Uff, J. (2021). Construction Law. 13th edn. London: Sweet & Maxwell.