June 30, 2023

Dispute resolution in the construction sector: Avoiding arbitration

Construction projects are known to face many challenges along the way, and those involved will often suffer the frustration and stress that are the consequences of arduous legal disputes.

With each construction project entailing a multitude of details and often involving numerous stakeholders, disagreements are bound to emerge.

However, the method used to resolve such disputes can greatly affect the outcome, time, cost, and future business relationships.

Understanding the nature of disputes

According to the 2022 RIBA Construction Contracts and Law Report, 18 per cent of those asked said that dispute resolution was the biggest legal issue they would face during a construction project.

To put this into context, only three other issues came higher in the survey.

Over a quarter of the participants in the report had been involved in one or more disputes in the 12 months prior to the report’s release, and three per cent said they had been involved in five or more disputes in that time period.

In the same report, the main issue causing disputes was an extension of time, which was reported by 50 per cent of the report’s participants.

This was followed by defective work (41 per cent), loss and expense (31 per cent), valuation of the final account (thirty per cent), and valuation of variations (26 per cent).

Arbitration in construction disputes

The arbitration process involves an independent third party, known as an arbitrator, who makes a binding decision after considering the evidence and arguments from both parties in a construction dispute. The decision made at the end of the arbitration is legally enforceable.

Arbitration can be highly technical and follows strict procedures, often making it more formal than mediation. Arbitration can be quite costly, so parties involved may want to avoid such expenses and choose mediation as a method of dispute resolution.

Mediation in construction disputes

Mediation is a process where an impartial third party, known as the mediator, facilitates communication between the parties in dispute.

The mediator’s role is to help the parties identify the issues, develop options, consider alternatives, and attempt to reach an agreement.

The principal benefits of mediation are its flexibility, confidentiality, speed, and cost-effectiveness.

Mediation allows the parties to maintain control over the outcome of the dispute and often leads to solutions that preserve business relationships.

At Palmers Solicitors, we can identify the most effective strategy for dispute resolution in construction projects. If you need assistance in such a matter, please contact our expert team today.