October 29, 2024

Arbitration vs adjudication – Which one is right for your dispute?

News Article

Construction projects are legally complex, and disputes between parties can arise over various issues, such as contractual breaches, delays, or payment issues.

When these disputes occur, it is important to resolve them efficiently and fairly to ensure your project remains compliant with the law and maintain professional relationships between all parties.

This can be done in a number of ways, including:

  • Informal discussion
  • Alternative dispute resolution (ADR) – such as adjudication or mediation
  • Litigation

Arbitration and adjudication are similar but distinct ADR methods that are commonly used to end a dispute in a way that satisfies the needs and rights of everyone involved while avoiding costly, time-consuming litigation – but which one should you be using?

Arbitration vs adjudication – What are the key differences?

Arbitration is a formal process in which a neutral third party, known as an arbitrator, is appointed to hear both sides of the dispute and make a binding decision. It often follows a similar pattern to the traditional court process albeit, often less costly.

By contrast, adjudication is a generally quicker process designed to resolve construction disputes on an interim basis –  often there maybe a statutory right to adjudicate under the Housing Grants, Construction and Regeneration Act 1996.

An adjudicator is appointed to provide a decision within a short time frame, often 28 days, which the parties must abide by until the final resolution is reached, either through arbitration, litigation, or mutual agreement. Adjudication, if often solely conducted in writing only and there is only in rare cases a meeting between the parties and the Adjudicator.

Which is most appropriate?

The choice between adjudication and arbitration depends on several factors which should all be considered carefully before making a decision, including:

  • Complexity – When a dispute is complex or involves large sums of money, arbitration may be more appropriate to achieve a binding resolution.
  • Timeline – Adjudication is generally the faster of the two processes, which may make it the better choice for projects where a long delay could result in significant financial losses.
  • Costs – Arbitration is typically more costly than adjudication, so this may be a consideration for cost-conscious parties. However, you cannot recover your legal costs associated with an Adjudication.

When entering into a contract, you should always seek independent legal advice and agree with the other parties what will happen if a dispute arises.

This can help to prevent delays and preserve your professional relationships.

For advice on ADR in construction contracts, please do not hesitate to get in touch with our Construction Law team.