How to Refer a Construction Dispute to Arbitration

1. When shall an unresolved dispute be referred to arbitration?

An unresolved dispute is referred to arbitration where the contract does not provide for adjudication, or adjudication has been exhausted, and the parties do not wish to submit the dispute to mediation. The contract should allow for arbitration or there should be an agreement between the parties to submit a dispute to arbitration. The agreement to arbitrate could take the form of a separate agreement between the parties, however, most construction contracts contain an arbitration clause in respect of dispute resolution. These clauses constitute an Arbitration Agreement in terms of the Arbitration Act 1965.

2. You wish to submit your dispute to arbitration, what should you do?

In most instances, the contract sets out the process to follow when invoking the arbitration clause. The general process is as follows:

3. The arbitrator is appointed, now what?

Once an arbitrator is appointed, there is usually a preliminary meeting and the process to be followed is clarified. The rules applicable to the arbitration are usually specified in the contract following wich, these are agreed to with the arbitrator. During the preliminary meeting, the submission timeframes for documentation are agreed to, including how evidence will be led and the arbitration hearing dates are planned. 
The parties are then responsible to adhere to the process and timelines as agreed to during the preliminary hearing.
The arbitration process is not to be construed as a review or appeal process. The disputes are referred anew and the arbitrator will decide based on the submissions and evidence of the respective parties.

4. What happens after the arbitration hearing has been finalised?

The arbitrator then communicates his / her decision to the parties in a document known as the Award. The Award is almost always for the payment of a sum of money by one party to another. The performance of certain works is seldom made since such an Award will lack finality. 

5. Who pays for the costs of an arbitration?

The parties usually share in certain costs of the proceedings whilst it is still pending. This includes the arbitrator appointment costs, the costs of the arbitrator and the venue etc. Whilst the arbitration is pending, each party will pay their own legal fees and the costs of their own experts. On conclusion of the arbitration, the arbitrator may make an award for costs which may be a punitive measure. There are various considerations employed by an arbitrator when making a costs award but there is no general rule that the successful party will recover all costs of an arbitration. 

6. You received an Award, what’s the next step?

Once you have received an Award, the other party must comply with the Award. If required, the successful party may apply to a court of competent jurisdiction to compel the losing party to comply with the Award in terms of section 31(1) of the Arbitration Act. The arbitration award can then be made an order of court and executed upon.

7. Can a court remit or set aside the Award?

An arbitration award is usually final and binding and not subject to appeal unless agreed to by the parties. On good course shown, it may be referred back to the arbitrator for consideration or to hear further evidence or any other purpose agreed by the parties or upon direction of the court. An arbitration award may also be set aside by a court where it has been tainted by gross and reprehensible misconduct. 

The Association assists parties by providing representation during adjudications and arbitrations. Should you require any assistance or any further clarity, please contact the Association.

B. Dawood | Head: Membership Services