Whilst adjudication, arbitration, and mediation are all forms of dispute resolution, there are some important differences between the three.
All parties involved must understand the differences to choose the right dispute resolution process.
This is because parties might be contractually obliged to follow a specific method.
Before outlining the different dispute resolution processes and the differences between them it is worth noting that statutory adjudication is a mandatory right but only in disputes arising from construction contracts in England and Wales. Whether or not your contract is a construction contract is determined by reference to the Housing Grants Construction and Regeneration Act 1996 (“the Construction Act”) as well as case law.
The key points
Adjudication
The adjudication is a mandatory right under the Construction Act when the contract in question is a construction contract as defined by the Construction Act. One of the most common adjudications is in respect of payment disputes whereby improper notices have been served and is commonly referred to as the “pay now argue later”.
An adjudication process usually takes 28 days unless extended albeit there are strict requirements as to when and how this can be extended, and begins with a party being served a Notice of Intention to Adjudicate.
There are strict time limits which must be adhered to when handling an adjudication.
In most cases, an adjudicator does not have the power to award recovery of legal costs. However, the Adjudicator can award payment of his/her fees typically against the losing party but this can also be split between the parties, which is determined by the outcome of the adjudication.
Awards given under an adjudication process need to be enforced by the Courts.
The thinking underpinning this approach is to prevent one party from withholding payment to the other for a significant period. In this way, cash flow is protected.
Arbitration
Arbitration is handled in private as opposed to in public.
The mechanism behind arbitration is based on impartiality. An independent paid professional and/or panel of arbitrators is presented with both parties’ points of view and asked to decide on a resolution.
There is limited scope for either party to appeal the arbitrator’s decision.
As such, both parties must agree to use this process. Whilst the arbitration process remains flexible, it will often take on a similar format to court proceedings.
Mediation
This method of conflict resolution is becoming increasingly common.
The mediation process is completely voluntary and by agreement between the parties, as such, is conducted on a “without prejudice” basis. As such, neither party can refer to the matters discussed or raised in the mediation in any Court proceedings. Courts often expect the parties to attempt mediation to resolve disputes.
The mediation process is designed to help the parties involved view the dispute from a more objective point of view. Due to this mechanism, mediations are used to settle even the fiercest of disputes. This is achieved by way of a neutral mediator selected by agreement between the parties who is not there to act as a Judge but seeks to facilitate settlement and assist the parties in narrowing the issues.
The key differences
There are three key points to consider when choosing a dispute resolution process. These are time, cost, and formalities.
Time
Of the three, adjudication is the quickest way to begin resolving a dispute. Unless extended, it takes 28 days to conclude. However, you must remember that adjudication awards whilst binding on the parties and capable of enforcement, is not a final resolution, and can be revisited by later court proceedings in certain circumstances.
In contrast to adjudication, the time frame for mediation can depend on both parties’ agreement.
Arbitration can often take some time to conclude which is for a variety of reasons.
Costs
Mediation and adjudication processes are lower in cost compared to arbitration.
Only one dispute can be referred to an adjudicator in respect of one contract at any one time. However, if the disputes involve similar facts and are in relation to the same contract then there is the possibility these can be heard together in certain circumstances. Along with a quick turnaround, and meetings between the parties involved being few and far between, the overall cost of this method is lower than more formal processes. However, you will be unable to recover your legal costs of adjudication.
Generally speaking, arbitration processes can often be expensive, because of the time they take along with the complex procedures involved. Albeit on occasions still cheaper than formal court proceedings.
Formalities
Owing to the “without prejudice” nature of the medication process, this can be as informal as all parties wish.
An adjudication process is less formal than an arbitration process. There are, however, rules on the presentation of evidence and specific time limits within which things must happen.
Arbitration is the most formal of the three processes.
Whilst the adjudication process is a statutory right in construction contracts as outlined in the Construction Act, it is a good idea to be aware of the other options available, which might offer quicker, cheaper and generally more pragmatic ways to resolve disputes.
Should you ever need advice on the disputes outlined above, please do not hesitate to contact one of our representatives.