The construction industry is regarded as one of the most conflict and dispute ridden industries, which has resulted in it being one of the most claim orientated sectors. Traditionally, parties would enter into litigation, often a costly and long winded means of resolving a dispute. Over the years, various methods of alternative dispute resolution (ADR) have been introduced into the construction industry as a means to avoid lengthy and expensive litigation.
These methods include:
Negotiation
A negotiation clause basically includes the agreement that if a cause for a dispute should arise between a contractor and a project owner, these parties will attempt to reach a just and satisfactory resolution between themselves before moving on to other means.
Benefits of negotiations
- It can help maintain a business relationship.
- It is less expensive and a quicker and a less formal method of dispute resolution.
- It is highly flexible.
Mediation
A mediation clause suggests the inclusion of a neutral third party in the dispute situation to help mediate the process of resolving the dispute. Mediation is not legally binding in any way, but can be an effective way out of a situation which could otherwise deteriorate.
Benefits of mediation
- The mediator will be an independent person, who will not make a decision, judge or advice, but will facilitate discussions between the parties, with the aim of resolving the dispute.
- It can help maintain a business relationship.
- It is relatively quick, with mediation usually lasting 1-2 days.
- It is usually considerably less costly than litigation.
- Everything that happens in a mediation is confidential.
- A mediator will encourage the parties to find a solution to the dispute which will suit both the parties’ needs.
Expert determination
Expert determination is often used to resolve issues or disputes of a specialist nature, such as construction, and is one of the most informal systems of dispute resolution. Expert determination is often used when there is a valuation dispute. If an expert is to be used to determine the dispute, the parties will agree this by contract and will agree that the expert determination will be binding.
Benefits of expert determination
- It is an economic way of finally resolving valuation disputes.
- It is less expensive and a quicker and a less formal method of dispute resolution.
Adjudication
Adjudication is a process in which a neutral third party will give a decision on a dispute. It has become known as a ‘pay first, argue later’ way for parties to resolve their disputes. The decision of the adjudicator will be binding, unless or until it is revised in arbitration or litigation.
Benefits of adjudication
- The adjudicator is a neutral person who is not involved in the day to day running of the construction contract.
- Adjudication is a quick process, which is designed to ensure that cash flow is maintained during the construction process.
- Although it is still possible to go to the Court, in most cases the decision of the adjudicator decides the dispute.
- Adjudication is less expensive than court proceedings.
Arbitration
Arbitration is another alternative to litigation and is a process in which the parties will agree to refer the dispute to a third party, the arbitrator. Disputes are resolved on the basis of material facts, documents and relevant principles of law. Arbitration is often used in the context of international construction disputes, but can equally be used for pure domestic disputes.
Benefits of arbitration
- Like mediation, arbitration is a confidential process.
- Parties can agree on an arbitrator who has relevant experience in the matter.
- Compared to court proceedings, it is a relatively quick process.
- It is highly flexible compared to court proceedings.
Litigation
Whilst there are many methods of ADR, court proceedings are still one of the most common forms of resolving disputes within the construction industry. Litigation is usually also included in the dispute clause, in case the parties do not find any other way to resolve the issues that have come up. It involves a trial and is legally binding and enforceable, though it can also be appealed. Litigation can be by far the most thorough, complex as well as slow and costly way of resolving a dispute.
Advantages of litigation
- The claim process will be managed by a judge throughout.
- Complex issues can be dealt with.
- The parties will obtain a binding and enforceable decision.
