Last edited 01 Dec 2016

Alternative dispute resolution for construction ADR

Contents

[edit] Introduction

Construction contracts usually provide for disputes to be dealt with by agreed dispute resolution procedures involving mediation, adjudication and arbitration. Often a combination of all three. See for example the New Engineering Contract (NEC) Engineering and Construction Contract, the Joint Contracts Tribunal (JCT) 16 Standard Form of Building Contract, and the Fédération Internationale des Ingénieurs-Conseils (FIDIC) Conditions of Contract.

The construction sector is also subject to statutory schemes which impose adjudication procedures in the absence of contractual agreement (such as the Housing Grants, Construction and Regeneration Act 1996 and the Local Democracy, Economic Development and Construction Act 2009).

Many contracts for large and complex projects now have, in addition to the dispute resolution procedures set out above, tiered dispute resolution procedures with obligations to negotiate in good faith, dispute resolution boards, steering committees and partnering meetings under the nomenclature of 'Partnering Obligations' (see for example NEC & JCT contracts as well as Constructing Excellence: Partnering and the report of the Construction Industry Council (CIC) Industry Improvement Committee). See also the Chartered Institute of Arbitrators 'catch all' dispute resolution clause.

Contract disputes are a complex area of law and the choice of procedure is one which requires careful consideration.

[edit] Definitions

A very wide range of Alternative Dispute Resolution techniques are available.

A consultative document, ‘Alternative Dispute Resolution – A Discussion Paper’, produced by the Lord Chancellor’s Department (LCD) in 1999 provides a helpful summary of the wide range of Alternative Dispute Resolution (ADR) techniques and these are reproduced below:

[edit] Arbitration

Arbitration is a procedure whereby both sides to a dispute agree to let a third party, the arbitrator, decide. In some instances, there may be a panel. The arbitrator may be a lawyer, or may be an expert in the field of the dispute. They will make a decision according to the law. The arbitrator’s decision, known as an award, is legally binding and can be enforced through the courts.

[edit] Court-annexed non-binding arbitration

Court-annexed non-binding arbitration is widely used in the United States. The finding of the arbitrator becomes a binding order of the court if neither party seeks a rehearing by a judge.

[edit] Court settlement process

This is a combination of early neutral evaluation and mediation, which was recently introduced by the Technology and Construction Court (TCC) on a trial basis in 2006. It has been produced for use in those situations where, following a request from the parties, a case managing judge feels that the parties should be able to achieve an amicable settlement.

In those circumstances, the case managing judge would then be at liberty to offer a court settlement process to the parties and, if accepted by all relevant parties to the case, that judge or another TCC judge would make a court settlement order embodying the parties’ agreement and fixing a date for a court settlement conference, with an estimated duration proportionate to the issues in the case.

The judge would then conduct the court settlement process and if a settlement were not reached, then the case would proceed with another case management judge: the judge conducting the court settlement process (the settlement judge) would take no further part in the litigation.

[edit] Early neutral evaluation

Early neutral evaluation is a process in which a neutral professional, commonly a lawyer, hears a summary of each party’s case and gives a non-binding assessment of the merits. This can then be used as a basis for settlement or for further negotiation.

[edit] Expert determination

Expert determination is a process in which an independent third party who is an expert in the subject matter is appointed to decide the dispute. The expert’s decision is binding on the parties.

For more information, see Expert determination.

[edit] Mediation

Mediation is a way of settling disputes in which a third party, known as a mediator, helps both sides to come to an agreement that each considers acceptable. Mediation can be ‘evaluative’, where the mediator gives an assessment of the legal strength of a case, or ‘facilitative’, where the mediator concentrates on assisting the parties to define the issues. When a mediation is successful and an agreement is reached, it is written down and forms a legally binding contract, unless the parties state otherwise.

[edit] Conciliation

Conciliation is a procedure like mediation but in which the third party, the conciliator, takes a more interventionist role in bringing the two parties together and in suggesting possible solutions to help achieve an agreed settlement. The term ‘conciliation’ is gradually falling into disuse and the process is regarded as a form of mediation. It remains, however, a specific process available under various Institution of Civil Engineers’ contracts.

[edit] Med-arbitration (med-arb)

Med-arbitration (med-arb) is a combination of mediation and arbitration. The parties agree to a mediation initially but, if that fails to achieve a settlement, the mediator takes on the role of arbitrator, with powers to make a legally binding award. The same person may act as mediator and arbitrator in this type of arrangement.

[edit] Neutral fact finding

Neutral fact finding is a non-binding procedure used in cases involving complex technical issues. A neutral expert in the subject matter is appointed to investigate the facts of the dispute and make an evaluation of the merits of the case. This can form the basis of a settlement or a starting point for further negotiation.

[edit] Ombudsmen

Ombudsmen are independent office holders who investigate and rule on complaints from members of the public about maladministration in Government and in particular services in both the public and private sectors. Some ombudsmen use mediation as part of their dispute resolution procedures. The powers of ombudsmen vary. Most ombudsmen are able to make recommendations; only a few can make decisions that are enforceable through the courts.

[edit] Utility regulators

Utility regulators are watchdogs appointed to oversee the privatised utilities such as water or gas. They handle complaints from customers who are dissatisfied by the way a complaint has been dealt with by their supplier.


In addition to those listed above by the LCD, the following may be added:

[edit] Mini-trial (executive tribunal)

Mini-trial, also known as executive tribunal, in which each party, often through its legal advisers, makes a presentation of its case to a ‘mini-trial panel’. An abbreviated version of the discovery process may have taken place in advance of the mini-trial. The panel generally consists of three members – a management executive from each party (with sufficient authority to reach a settlement), and a third party neutral who may act as a mediator or adviser. The executive members usually have not been involved in the particular dispute.

After the submissions have been made, the executives seek to negotiate a settlement. The role of the third party neutral may vary. They may act as a mediator or may act as an adviser, assessing objectively both the facts and the merits of the case and advising on the most appropriate solution.

[edit] Construction adjudication

Construction adjudication is a statutory right introduced into UK construction contracts by the Housing Grants, Construction and Regeneration Act 1996, applicable to all relevant contracts entered into after 1 May 1998. It provides a temporarily binding decision which must be complied with by the parties until overturned or varied by the courts, arbitration or agreement.

[edit] Dispute board (dispute review board, dispute resolution board (DRB) or dispute adjudication board (DAB))

Dispute board (also known as dispute review board or dispute resolution board (DRB) and dispute adjudication board (DAB)) is a procedure where a panel, normally of three independent and well-established individuals, is appointed at the commencement of a large construction project and considers project issues and recommends resolutions of disputes. Normally the employer and contractor each appoint one member and the third member is chosen by the first two. The recommendations are normally non-binding.

[edit] Judicial appraisal

Judicial appraisal is a procedure where the parties appoint a judge to receive written representations from each side and make an appraisal of the likely result if the case goes to court. The parties must agree the form and extent of the submissions and whether the appraisal is to be binding or not.

[edit] Med-adjudication (med-ad)

Med-adjudication (med-ad) is a process in which the appointed neutral begins conducting the process as if they were an adjudicator, but after meeting the parties’ key professionals and expert witnesses together, gives a preliminary view on the matter in dispute. If the parties settle, this is recorded in writing, but if no settlement is reached within a fixed period of time the neutral proceeds to make a decision in which they are not bound by their preliminary view.

[edit] Michigan mediation

Michigan mediation is an interesting variation on the theme and, as the name suggests, is used in the US state of Michigan. In any civil case where the primary relief sought is monetary, the assigned judge may refer the case to process. The term ‘mediation’ is, however, something of a misnomer: it is more properly described as a ‘case valuation’ process. After disclosure has been completed, the parties meet with a panel of three neutrals who are all attorneys. They hear 15-minute presentations by each party and give a non-binding evaluation of the case.

[edit] Project neutral

Project neutral is effectively a one-person dispute resolution board.

[edit] Summary jury trial

Summary jury trial is a non-binding, abbreviated mock trial using a panel of actual jurors. The normal rules of evidence and procedure are normally modified to expedite the process, and negotiations generally follow the trial. It is used so far only in the United States.

[edit] Third party opinion and fixed-fee mediation

In November 2014, the RIBA launched two new dispute resolution schemes, intended for low-value disputes where both parties have a genuine wish to reach settlement. See Third party opinion and fixed-fee mediation procedures for more information.


The above processes can be divided into two broad categories which the LCD has described as:

[edit] Alternative adjudication

Alternative adjudication comprises those processes whereby a neutral third party makes a decision, such as arbitration, construction adjudication, expert determination, ombudsmen and industry regulators;

[edit] Assisted settlement

Assisted settlement comprises those processes whereby a neutral third party offers an opinion and/or seeks to bring the parties to an agreement, such as mediation, conciliation and early neutral evaluation.

Med-arb and med-ad are hybrids of these two categories.

[edit] Selection of technique

Whether or not a particular form of ADR is suitable depends upon a number of factors including the nature and value of the dispute, the attitude and financial resources of the parties, the desired outcome, and the balance of representation.

Both (or all) parties must be willing to submit their dispute to a form of alternative adjudication, or willing to try a form of assisted settlement as clearly, if both parties are not willing, there can be problems in enforcing an apparently contractual agreement to try mediation or conciliation.

Litigation is, of course, the only option where one party needs to set a legal precedent or obtain an injunction, or where one party is refusing to acknowledge the problem or engage in negotiations. Any form of ADR will be worth considering where the cost of court proceedings is likely to equal or exceed the amount of money at issue.

Where parties wish to preserve an existing relationship, mediation or conciliation may be helpful. A great advantage of mediation is that the mediator is not bound merely to consider the obvious disputes between the parties but can bring in other matters, perhaps unrelated to the particular dispute, provided they may help the parties towards settlement.

Arbitration may be suitable in cases where there is no relationship to preserve and a rapid decision is needed.

Where available, trade association arbitration schemes, utility regulators and ombudsmen can provide a cheaper alternative for an individual seeking redress against a company or large organisation, but they may be limited in the redress they can provide.

Early neutral evaluation might be applicable in cases where there is a dispute over a point of law, or where one party appears to have an unrealistic view of their chances of success at trial.

Where there is a technical dispute with a great deal of factual evidence, mediation or determination by an expert in that area might be best. In addition, parties involved in a commercial dispute may prefer to use a form of ADR to keep sensitive commercial information private.

In many apparently intractable, large-scale and complex multi-party cases, mediation has achieved settlement. Where there is a significant imbalance of power, however, mediation might not be appropriate. Mediation is also now the preferred method of settlement of family disputes, such as divorce. Part III of the Family Law Act 1996 allows for the provision of publicly funded mediation in family proceedings. There has been a wide take-up of this service and the statistics for the six full years of operation are as shown in the following table:

Financial year Number of mediations started
1997/98 406
1998/99 1,349
1999/00 6,333
2000/01 9,308
2001/02 12,335
2002/03 13,841

Section 29 of the Act, which requires those seeking legal aid for representation in family proceedings to attend a meeting with a mediator to consider whether mediation might be suitable in their case, has now been implemented in over 60% of the country and was intended to be in force across England and Wales in 2000.

Figures for 2005 produced by the Legal Services Commission show that over 14,000 family mediations took place which were either wholly or partly publicly funded. The UK College of Family Mediation reports that for the same year some 4,000 privately funded family mediations took place, making a total of some 18,000 for that year.

Mediation is also frequently used in neighbour disputes. Not all disputes between neighbours are necessarily suited to mediation, however, particularly where there are issues of harassment or mental health problems. Mediation UK reports that, between 2004 and 2005, more than 40,000 people were involved in community mediation.

[edit] Consumer Rights Act

On 1 October 2015 the Consumer Rights Act came into force. This included provisions allowing businesses that sell directly to consumers to use ADR to deal with disputes. The Act applies to consultants and trades people offering services direct to consumers. See Consumer Rights Act for more information.


This article was created by --The College of Estate Management 16:32, 11 December 2012 (UTC)

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