18 Feb Alternative Dispute Resolution Services
BCQS provides expert alternative dispute resolution services to the construction industry throughout the Caribbean region and Latin America with the hopes of resolving disputes in a timely and cost-effective manner.
In the event there is a conflict or dispute on a construction project, it is important for the client to remember that there are a number of very successful alternatives to litigation. Each option has unique characteristics, but they all share the same principle that they are often better for managing the successful outcome of the project and long-term relationships within the industry.
Depending on the dispute, its complexity and value, we will quickly run through the options available to clients for resolving these issues in a timely and cost-effective manner. One key thing to stress is that early intervention on these issues often avoids the high cost of resolution if the dispute carries on for too long.
The four main alternative dispute resolution procedures are:
Negotiation is more than just a dispute resolution procedure, it’s a way or liaising with others to reach a compromise or agreement. There need not be a dispute, and it can be used in a positive way to negotiate building contracts and contractor appointments in the first instance.
In order to resolve any dispute, negotiation would involve some form of communication leading hopefully to a mutually beneficial joint decision. It is the least expensive and most widely used form of dispute resolution, but of course relies on the parties finding common ground.
There are two main approaches to Negotiation: Competitive and Principled.
Competitive negotiators will often make a very low initial offer, and then gradually through the negotiation raise their offers (whilst weaving in other issues) in order to hopefully settle the matter. The sophistication of this proceed depends upon their experience and expertise.
Principled negotiations are more cooperative and rely on a few key principles; separating the people from the problem; focus on the interests and not the positions; invent options for mutual gain; assess an alternative to a negotiated settlement which gives more flexibility to the process.
Mediation and Conciliation are basically informal processes whereby the parties are assisted by a neutral third party in their efforts towards reaching a settlement.
There are two important aspects to mediation or conciliation. The first is that the third party is there to facilitate the decision-making of those in the dispute. It builds upon the negotiation process, but it’s the mediator who maintains and reviews the situation with the parties without expressing their own opinions. Secondly, the mediator or conciliator should be independent of the parties, they are impartial, and trust develops during the process to allow the mediator to assist in finding a settlement for the parties.
Mediation in construction disputes can be used during the project to resolve disputes, after completion, during escalation of a dispute or at any time up to a hearing. The contract need not make provision for Mediation as the parties can just agree to attempt Mediation at any stage as a faster, cheaper alternative to the Court, Arbitration or Adjudication.
A skilled Mediator takes control of the process and aids the parties towards settlement by:
- Gathering information and identifying the parties true objectives.
- Acting as a problem solver, thinking creatively in order to help the parties construct their own outcome.
- Manage the process firmly, sensitively and assist the parties to take a realistic view of the problem.
- Soak up the parties feelings and frustrations in order to channel their focus their emotions into a positive approach to the issues.
- Overcome deadlocks and facilitate a settlement, and further aid the parties to accurately record the settlement.
Adjudication in construction is a dispute resolution process whereby an appointed adjudicator reviews evidence and arguments, including legal opinion put forward by opposing parties and comes to a decision on the dispute within a fixed timeframe.
It is a well-established and fundamental procedure using in the UK to quickly resolve construction disputes brought in by the Housing, Grants, Construction and Regeneration Act 1996.
The process begins when the party referring the dispute to adjudication gives written notice of its intention to do so, this notice briefly sets out:
- a description of the nature of the dispute and the parties involved;
- details of where and when the dispute arose;
- the nature of the remedy being sought;
- names and addresses of the parties to the contract, including addresses where documents may be served.
The construction contract must provide that notice can be given ‘at any time’ in respect of the dispute, and once the dispute has been referred, an adjudicator should be appointed within seven days of the issue of the notice.
The benefit of adjudication is that the decision must be given within 28 days of the issue of the referral. The referral must be issued to the responding party and the adjudicator simultaneously on or before the expiry of the 7-day referral period.
The adjudicator has a duty to act impartially and fairly by giving both parties a reasonable opportunity of putting their case forward and responding to the case before them within the timeframes.
It’s important to note that the adjudicators decision will be binding on both parties and can be enforced by the courts as long as all due processes have been followed, and there has not been a breach of natural justice.
Arbitration is a formal, private dispute resolution mechanism that the parties can agree to, to assist with the resolution of disputes the outcome of which, is legally binding and enforceable with “res judicata” effect.
Parties can agree to Arbitrate once a dispute has arisen, however it’s more common to encounter an Arbitration Agreement or Arbitration clause within a contract which refers all future disputes to Arbitration. The Arbitration Agreement sets out the scope and parameters of how and where the dispute will be heard including all applicable laws.
Depending on the dispute and subject to the terms of the Arbitration Agreement the case would typically be put before a tribunal of selected arbitrators for large complex disputes or by a sole arbitrator for smaller fewer complex disputes.
The Arbitration Act 1996 provides a legal framework for Arbitration including recognition of the process, selection of the arbitrator(s), the procedure, the award and enforcement of the award. It contains five main objectives:
- To ensure that the Arbitration process is fair, cost-effective and quick
- To allow the parties their own autonomy in how the dispute will be handled to best suit their needs
- To ensure that the courts give supportive powers at appropriate times
- To ensure that the language used is user-friendly and readily accessible to the parties
- To follow the model law (which is used internationally) wherever possible
When deciding whether to take the dispute to Arbitration or to Litigation, there are a number of important issues to consider in selecting the right approach of the dispute:
- The competence and expertise of the decision maker – in technical disputes, a specialist Arbitrator can be chosen to determine the dispute rather than a judge who will rule on points of law.
- Privacy and confidentiality – Arbitration is not a matter of public record like litigation.
- Enforceability – under the New York Convention, awards made in one Convention state can be enforced in another, which is very beneficial in resolving international disputes.
- Speed & Finality – Arbitration is a much faster binding dispute resolution approach
- Neutral Forum – in disputes between international businesses the Arbitration proceedings can be held in a neutral third country to ensure that the hearing is fair and without bias.
- Procedures – the parties can decide what rules and procedures they want to use to best handle their disputes.
- Cost – the cost of an Arbitration is higher than that of a court (which is absorbed by the state) however the legal costs associated with long protracted litigation often surpasses the high initial Arbitration outlay cost.
- Representation – parties can decide who represents them at the Arbitration, it does not have to be a legal practitioner.
There are many different options available to clients when deciding the best approach to resolving their construction disputes, the BCQS team has extensive experience in dispute resolution and should you have any questions or would like to speak with one of our advisers to see how we can assist please contact the head of Dispute Resolution and Director of BCQS Chris Graham on firstname.lastname@example.org