Last edited 20 Jan 2016

Options for dispute resolution

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[edit] Negotiation

Before any of the more formal procedures are initiated, there may be a period of negotiation where the parties attempt to resolve their differences themselves. This might be the best solution to the problem.

[edit] Mediation

However; if negotiation fails, the parties may submit the dispute to mediation – a popular form of alternative dispute resolution. JCT Standard Building Contract SBC11 clause 9.1 requires each party to give serious consideration to a request by the other to use mediation. It is not compulsory for parties to use mediation, however English courts strongly encourage it and have introduced cost sanctions against parties that refuse to resolve a dispute through mediation where it would have been clearly in its interest to attempt to do so.

Usually the mediator is appointed jointly by the parties. Mediation typically lasts for 1 day. The mediator does not take sides, make decisions or judgements. He/she will talk to each party in private, and will not reveal anything to the other party. The mediator will seek to establish common ground and encourage the parties to reach an agreement. The advantage of this method is that the parties can maintain a functioning long-term business relationship.

NB Where a construction contract is made with a residential occupier, it had been held that an adjudication clause is potentially an unusual and onerous provision which if it had not been individually negotiated, may be invalidated by the Unfair Terms in Consumer Contracts Regulations 1999.

[edit] Adjudication

If mediation also fails, then under the Housing Grants, Construction and Regeneration Act 1996, parties to the construction contract have a right to adjudication, designed to produce a decision that is binding unless the dispute is subsequently resolved in arbitration or litigation, or settled by agreement. Under SCB11, the adjudicator may either be named in the contract or nominated by the nominating body identified in the contract. The adjudicator must consider any information properly submitted by the parties and reach a decision within 28 days of receipt of the referral notice. During this process, if a party fails to comply with any direction of the adjudicator, the latter may draw whatever inferences he or she feels justified. And if either party refuses to comply with the adjudication decision, the other may seek to enforce it through the courts.

[edit] Arbitration / litigation

If the parties are unsatisfied with the adjudication, they may refer the dispute to either arbitration or litigation depending on what is agreed in the contract. The default of SBC 11 is litigation. Arbitration and litigation have many similarities – in both cases the outcome is final and binding.

Under the Arbitration Act, the arbitrator is empowered (provided that parties agree) to grant a rage of remedies similar to those obtainable in court. The advantages of arbitration include privacy – arbitration can be kept private whereas litigation is open to public and press. Secondly, the arbitration process is consensual and parties have slightly more autonomy.

The advantages of litigation include the ability to include multiple parties in the case to avoid duplication of hearings and potentially conflicting outcomes. Moreover; disputes heard in court can invoke two very powerful legal remedies – summary judgement and interim payment.

It should be noted that even where parties have selected arbitration under their contract, it is still open for them to elect litigation once a dispute develops. However, the other party may ask the court to stay the proceedings on the grounds that the arbitration agreement already exists.

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