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Construction litigation is an alternative and specialist route for settling disputes, different in many ways from general commercial litigation.
Litigation processes are fairly common in the construction industry. Many projects are long-term and complex transactions, and unforeseen complications can arise during the construction process. This leads to the need for litigation to settle payment and contractual issues.
Parties may choose litigation as a construction dispute resolution for many reasons, including:
- It is regarded as the best quality decision making of all resolution methods
- Judges have the power to compel parties to comply with timeframes, and can issue sanctions for failure to comply
- Judges have the power to order interim relief to protect parties’ positions while waiting for the final judgment
- There are clear provisions for rights of appeal if errors of law or fact are found to have been made in the process
Some drawbacks of the process include:
- Likely greater costs than other methods like adjudication or arbitration; especially if the dispute is poorly managed or another party seeks to delay proceedings
- Can last 12-18 months
- Proceedings are conducted in public, where adjudication and arbitration are conducted in private. This can have an effect on the company’s public image
- Judgement is subject to appeal, potentially dragging out the claim even longer.
Arbitration is where parties involved in a dispute agree to bring in a third party arbitrator to award a resolution. The arbitrator could be a lawyer or an expert in the particular field of the dispute, and in some cases there might be a panel. Either way, the arbitrator makes their decision according to the law. The arbitrator’s award (their decision) is legally binding and therefore can be enforced by court.
Arbitration might be chosen as the parties’ preferred resolution method because:
- It’s usually a cheaper and faster resolution method than litigating in court (unless a non-binding arbitration route is chosen, where the ruling is not final and a party is free to take the issue to court, incurring further costs and drawing the dispute on longer)
- Both parties agree on who should be the arbitrator, or agree on a service through which one is chosen for them
- The arbitrator’s decision is final (if binding arbitration is chosen), putting an end to lengthy disputes
- Arbitration eliminates many of the expensive and time-consuming factors used in litigation
- It does not take place in court and transcripts are not made public, making it a preferable choice if parties wish to keep the dispute confidential
Potential drawbacks include:
- The complexity of the specific case might make this route equally as lengthy and expensive as other forms of construction dispute resolution. Some arbitration cases can involve multiple parties, more than one arbitrator and very complicated claims
- It is very difficult to appeal the award of arbitration, even if the arbitrator has made an important oversight or mistake – although this is rare. Even in this case it’s unlikely that a court can step in to correct the decision
- There is no jury – essentially the arbitrator plays its role as well as a kind of judge.
For mediation in construction disputes, the parties call in a third-party mediator to help both sides settle on a resolution they both agree on.
Mediation can either be ‘evaluative’, whereby the mediator gives an assessment of the legal standing of the case for the parties to predict what a court outcome would likely be, or ‘facilitative’, where the mediator assists the parties to identify and define the issues.
When this method is successful, the agreement is made in writing and becomes a new legally binding contract, unless both parties state otherwise.
Reasons why parties may choose to resolve through mediation:
- To save money on costly legal fees
- Mediation in construction disputes usually allows for the matter to reach a resolution quickly and amicably
- To keep the dispute out of public court
Drawbacks of this method can include:
- This route relies on lots of communication between the parties and some parties can feel forced or guilt-tripped into accepting a resolution they aren’t truly happy with
- Some parties can feel concerned that the opposing party may see their case as weak or judge that they are admitting liability
- If an agreement is not reached, the costs and wasted time incurred through mediation can be seen to have been unnecessary, while more time and money must be spent on a different method of dispute resolution.
At Helix Law we can advise you on which method could be best for you to pursue, then guide you through that process.