REALWorld Law

Construction

Alternative Dispute Resolution Procedure (ADR)

Is it common for construction disputes to be referred to ADR – such as adjudication, determination by an expert, mediation or conciliation? Is a form of ADR required by law, perhaps as a mandatory first step in the dispute resolution procedure?

UK - England and Wales UK - England and Wales

UK - England and Wales

The Housing Grants, Construction and Regeneration Act 1996 introduced, as a new option in the dispute resolution process, a procedure known as ‘adjudication’, designed to help parties obtain a speedy decision. Parties to construction contracts now have a statutory right to adjudication. Contracts may also make express provision for adjudication, but the terms must comply with the Act; if they do not, a statutory scheme will automatically apply.

The adjudicator must reach a decision within 28 days of the referral, but this period may be extended by up to 14 days with the consent of the referring party or indefinitely if both parties agree. This flexibility has allowed more complex disputes to be dealt with by adjudication which, otherwise, would have been referred to arbitration or litigation.

Mediation is a method of seeking compromise by referring a dispute to an independent third party who has expertise in the field of the dispute and skills at brokering a settlement. There are two main types; facilitative mediation (where the mediator effectively tries to facilitate a settlement between the parties, but without expressing any view on the merits) and evaluative mediation (where the mediator will give a non binding view as to the merits, the intention being that this view on the merits will engender settlement). In relation to construction disputes, mediation is generally a facilitative process.

In England and Wales, case law has made plain not only the higher rate of a successful outcome being achieved by mediation but also its established importance as a track to a just result running parallel with that of the court system. Both have a proper part to play in the administration of justice. The court has given its stamp of approval to mediation. The TCC also offers an Early Neutral Evaluation service, carried out by a TCC judge.

Expert determination plays a valuable role where the issue in dispute is narrow and specific eg a pure valuation dispute (where the answer can be determined by a chartered accountant, a quantity surveyor or some other such professional) or a dispute concerning whether a piece of equipment meets its performance criteria (where the answer can be determined solely by an appropriate technical expert). The expert does not act in a judicial capacity and there is no general obligation on an expert to apply the rules of natural justice (this should be contrasted with adjudication, arbitration and litigation where, unquestionably, rules of natural justice apply). Expert determination will generally be regarded as final and binding; the court will not interfere with an expert determination, even if it is plainly wrong (provided the expert has purported to answer the right question). It is, therefore, inappropriate as a general form of dispute resolution.