Alternative dispute resolution – a brief overview

Dispute resolution clauses are frequently included in construction contracts. The alternative dispute mechanisms often selected by parties to the contract include mediation, adjudication, and arbitration.

Mediation is often referred to as an amicable settlement and is an efficient method of resolving disputes, whilst maintaining the relationship between the parties so that they may continue to work together. Mediation is a private process in which the parties work together with a mediator to negotiate a settlement to the dispute. The mediator does not make any binding decision and the parties to the dispute remain the decision-makers. This differs from Adjudication, Arbitration, and Litigation where the parties relinquish decision-making to the Presiding Officer.

The other main advantages of mediation are that it is a quick process, usually only taking a day to finalise and it is cost-effective. Once a mediation is finalised, the settlement is usually captured in an agreement which may become binding and enforceable upon the parties.

Adjudication entails the parties appointing an Adjudicator to adjudicate the dispute. Adjudications are usually decided by reviewing papers. The Adjudicator may request the parties to present themselves or to provide additional evidence to resolve any ambiguity. Adjudication is binding upon the parties; however, certain contracts contain an automatic right to refer the matter de novo to arbitration where the outcome of the Adjudication is not taken into consideration.

Arbitration is a formal dispute resolution process, and the outcome of the arbitration is final and binding upon the parties. It is recognised by legislation as an alternative dispute resolution process, where the outcome is capable of being made an order of the court upon application by a party to the arbitration proceedings.

Arbitration is a speedy method of resolving a dispute, however, it is not necessarily more cost-effective than litigation. In arbitration proceedings, the parties are required to contribute to the costs of, inter alia, the arbitrator, the venue for the arbitration and the stenographers whereas these costs are not incurred in litigation. These costs are over and above the costs of representation and the costs of expert witnesses at an arbitration.

Arbitration is a quasi-judicial process which is like a court process. There are rules that the parties may agree upon, and a hearing usually ensues. Witnesses are capable of being subpoenaed to attend an arbitration hearing. The arbitrator makes a ruling at the end of the hearing and the ruling is considered final and binding.

An important feature of Alternative Dispute Resolution is that it is only used where there is an agreement for it to be used. A party cannot unilaterally demand an Alternative Dispute Resolution process where there is no agreement. This agreement usually arises from the contract clauses dealing with disputes. These clauses also provide direction as to how the parties refer the disputes, provide the details of nominating bodies for the appointment of adjudicators or arbitrators, and stipulate the rules that shall be applicable for the adjudication or arbitration.

An additional advantage of parties to a construction contract following the process of Alternative Dispute Resolution is that the Presiding Officer often has the desired skill set to resolve the dispute. This includes either legal skills and/or technical skills required to preside over a construction dispute.

To facilitate speedy and cost-effective resolution of disputes, the Association provides a free mediation service in disputes concerning its members, if all parties consent to it. 

Bilaal Dawood

Head: Membership Services