September 5, 2022

Construction arbitration – what is it and when might you want to use it?

Going to court is expensive, disruptive and a lengthy process, but equally, it’s not viable to let debts go unpaid or to pay for work that doesn’t meet the brief.

That’s why methods of Alternative Dispute Resolution (ADR) are so important in the construction sector, where the scope for disputes to arise is generally higher than is the case in other sectors, given the complexity of the work and the risks of problems arising.

In recent blogs, we’ve discussed ADR in general terms as well as focussing in more detail on two of its most common forms – mediation and adjudication, which offer the obvious benefits of reducing the cost and disruption involved in resolving a dispute.

This time, we’ll be looking at a slightly less common form of ADR – arbitration.

What is arbitration?

Arbitration is a more formal process than other forms of ADR, involving hearings that are in many ways similar to litigation proceedings in court.

The dispute will be heard by an independent arbitrator, whose ruling will be binding. The arbitrator will normally possess technical expertise in the subject area and the parties can jointly appoint the arbitrator.

An arbitrator’s ruling can generally only be appealed on the basis of procedural issues or the misapplication of the law.

As with litigation proceedings in court, you will usually be represented at the hearing by a barrister who will put forward arguments on your behalf.

However, the crucial difference between arbitration and a court hearing is that arbitration is private, whereas a court case is a matter of public record unless the judge makes an order to the contrary, which would be unusual in a commercial dispute.

When might you want to use arbitration?

Arbitration can be provided for in a construction contract as the required process for resolving any disputes that arise. In these instances, you will have no choice but to pursue arbitration.

It can also be used voluntarily where the parties agree, even if it is not provided for in the contract in question.

You might want to do this if the dispute is particularly technical or complex, or if you want to keep it private.

There are some practical benefits to arbitration too. You will generally have more say over timescales and schedules than you would in a court hearing, meaning less disruption to your business. Arbitration is often cheaper than court hearings, although it is usually more costly than other forms of ADR.

So what should I do?

When a construction dispute arises, the best route to resolving it will depend on the specific facts of the case as well as your circumstances, attitude to risk and relationship with the other parties involved.

By seeking expert legal advice at an early stage, you can benefit from a strategic approach to dispute resolution based on the needs of your business in order to bring about a pragmatic outcome.

Contact us today to find out more.