The term ‘alternative dispute resolution’ (ADR) refers to a range of techniques and processes used to resolve a dispute short of the normal trial process.
Disputes can often arise in construction contracts and in this article, alternative dispute resolution UK construction, we take a look at the process involved and the options available to you in resolving any conflicts.
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Alternative Dispute Resolution (ADR)
In the construction industry, Alternative Dispute Resolution (ADR) is the preferred method for resolving disputes outside of court. ADR procedures include Adjudication, Mediation, Arbitration, and Conciliation, which are more rapid and cost-effective than litigation.
Disputes between Main Contractors, Subcontractors, and Building Employers occur regularly when additional work or adjustments are required, the work is delayed, or the project’s expenses increase, all of which might result in a claim by one of the parties. ADR is often used to resolve payment-related disputes, such as interim payments, pay less notices, payment notices, default payments, final accounts, and retention issues. In addition, it is used for construction delays, claims for an extension of time, losses and expenses, repudiatory breach of contract, contract termination, defects, practical completion, incomplete work, design failure, revisions, and frequently liquidated damages, bankruptcy, or insolvency.
What are the benefits of alternative dispute resolution?
The ideal alternative dispute resolution strategy for resolving a construction dispute will depend on the nature of the disagreement and the construction contract at hand. There are numerous advantages to utilising ADR rather than court proceedings to settle a construction issue.
Cost
ADR minimizes your expenses because you do not require a Construction Solicitor, Barrister, or Construction Lawyer as there are no time-consuming and costly court processes. Through the “Pre-Action Protocol for Construction and Engineering Disputes,” courts regularly mandate ADR as a preparatory step (PAP).
With litigation and court proceedings, often only a percentage of costs are recoverable, and the unrecoverable court costs (about 75% of the total) could outweigh your claim and spiral out of control.
Speed
Unlike court proceedings, which can be time-consuming, ADR can quickly resolve disputes. In the construction industry, adjudication is the predominant form of alternative dispute resolution, which may frequently resolve a dispute within 28 days of its inception.
Confidentiality
Unlike litigation, ADR is a private process between disagreeing parties that is not open to the public. This simplifies the process and improves the maintenance of ties between General Contractors, Subcontractors, and Building Owners.
There are a number of methods in resolving a dispute in construction and they include the following:
Arbitration
Arbitration is a private, contractual dispute resolution procedure. It stipulates that disputes will be resolved by an impartial arbitrator or panel of arbitrators chosen by the conflicting parties. Utilizing applicable information, documentation, and legal principles, disputes are addressed.
A designated arbitrator administers the arbitration procedure in line with any applicable contractual provisions and the statutory regulatory framework established by the courts. There are few possibilities for appeal, and the winning party typically receives legal fees.
Advantages
- The proceedings are private, albeit they are not necessarily confidential.
- The parties can agree on a skilled arbitrator.
- The arbitrator’s judgement can be enforced as if it were a court order.
Disadvantages
- The parties must pay for both the arbitrator and the location of the arbitration.
- If a party does not comply with the arbitrator’s instructions, the arbitrator has limited powers of compulsion or punishment, which can severely slow down the procedures.
- There are limited rights of appeal.
Adjudication
Adjudication is a contractual or statutory process for resolving a dispute expeditiously in the interim. It is handled by a neutral third-party arbitrator designated by the disputing parties. Typically, adjudication is confined to a specified timeframe, and only submitted documentation may be considered. An arbitrator may assume an inquisitorial function, which may involve launching an inquiry into the relevant facts and laws.
Until reversed through arbitration or litigation, adjudication rulings are conclusive. There is no right of appeal, and the right to resist enforcement is severely restricted. Unless the contract says otherwise, legal fees are awarded at the arbitrator’s discretion. The entire procedure can take up to 28 days, based on the judgements and written materials received from both parties, and the rulings are binding. The law will impose a method of adjudication if the parties to a building contract cannot agree on one.
Throughout the adjudication of contracts, Section 108 of the Housing Grants, Construction, and Regeneration Act must be complied with. Either the adjudicator is specified in the contract or a nominating body, which is often specified in the contract, selects the adjudicator.
If the parties are unable to agree on procedures that comply with the Housing Grants, Construction, and Regeneration Act, the Act applies the Scheme for Construction Contracts criteria.
Mediation
In mediation, a neutral third party supports disputing parties in resolving their disputes through conversation and negotiation. This technique is dynamic, structured, and participatory. Everyone involved in the mediation process is strongly encouraged to participate completely. Mediation is a “party-centred” method since it prioritises the needs, rights, and interests of the disputing parties.
Among the most important aspects of mediation are the following:
- The mediator is a neutral third party and typically, both parties have the choice to participate.
- Compliance with the final agreement is frequently high because the parties collaborated to create a solution that is mutually acceptable.
- The costs are significantly lower than those of alternative settlement strategies.
Preserving the parties’ relationship is an additional advantage. The concept of “good faith” plays a role in the resolution of conflicts via this technique, which is only legally binding with the consent of both parties.
Conciliation
Conciliation is an alternative dispute resolution (ADR) technique in which a neutral third party (the conciliator) steers conversations toward a mutually agreeable resolution.
Comparable to mediation, but with significant distinctions, the main difference between conciliation and mediation is the conciliator’s role. Additionally, they may have a far more active and direct part in expressing their view and generating resolution options.
A conciliator will examine each party’s case, assess their particular merits, and offer settlement options. It is then up to the parties to decide whether or not to accept the conciliator’s suggestions, as the conciliator will not compel them to do so.
Conciliation has both benefits and drawbacks.
Advantages
- Conciliation is most frequently utilised as a preventative strategy for settling disputes, whereas the assistance of a mediator or arbitrator is typically sought when a disagreement is ongoing and judicial intervention is anticipated.
- The conciliation procedure is handled in full confidentiality and without prejudice, so that if no settlement is reached, the reasons for the failure remain between the parties.
Disadvantages
Parties must acknowledge the authority of the conciliator and desire a settlement in order for conciliation to be effective. It may be a waste of time and resources if any of the people involved do not approach the procedure with the correct mindset.
How we can help
We have a proven track-record of dealing with construction contracts and alternative dispute resolution. Not only does our construction department have extensive legal experience and knowledge of construction law but we also have the benefit of chartered surveying experts. The nature of construction disputes often involves potentially complex areas of law. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Construction Solicitors
It is important for you to be well informed about the issues and possible implications of construction contracts and dispute resolution. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Construction solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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