Dispute resolution schemes: Easy does it

An architect friend of mine recently pointed me in the direction of two new dispute resolution schemes from the RIBA launched in November 2014. They are described as “alternatives to more formal dispute resolution processes - RIBA fixed-fee mediation and RIBA third party opinion”.

Although the fixed-fee mediation without doubt has significant benefits to the parties, it is the third party opinion which particularly caught my eye.

Before the introduction of this dispute method, I have often had to tell clients that certain disputes simply aren’t suitable for adjudication. It wasn’t that they might not have a good case, they often did, but the cost of going through the whole process from a risk profile point of view simply outweighed the potential recovery.

Adjudication is typically viewed as a mini arbitration with a raft of case law to review and legal challenges now the norm. It is little wonder lawyers see adjudication as fertile grounds for fee-earning and adjudicators’ hourly fees reflect the level of knowledge they need to know, understand and apply.

Such a ‘quick and dirty’ approach isn’t suitable for many disputes - such as high ticket items

Additionally some clients have steered away from adjudication as it typically creates a large divide between the parties with the result that neither side wishes to jump straight into another contract with the other. With the recession reducing the number of supply chain partners in the market and with the possibility that the current “good times” may increase long-term collaboration, I think it is right that adjudication is not seen as one size fits all.

Expert determination is an existing alternative to adjudication but the take-up within the construction industry is extremely low. Also, on low value disputes, the risk/reward profile still might not work. Most standard forms of contract don’t include an expert determination process, so one would need to be created. With bespoke drafting required and consideration for such things as privacy, finality, procedure and enforceability, input from lawyers will often be required. Add the fact that most companies are busy building things, they probably don’t even know who or where to look for a suitable expert.

Well, possibly all this will change with the introduction of the RIBA third party opinion. The RIBA describes it as: “An independent professional being appointed on behalf of the parties to provide a professional opinion and recommendation for settlement. Third party opinion is suited to disputes concerning matters of valuation or a technical nature such as the performance or installation of a
product or service, where the matter can reasonably be expected to be resolved in a relatively short timescale.

It is a procedure entered into by consent, rather than forming part of the contract terms.”

The procedure is broadly the same as an adjudication process but some key differences do exist:

• There is no statutory right to use this process, and it has to be agreed by both the parties
• A party (or the parties) will apply to the RIBA administrator setting out the dispute on no more than two sides of A4
• Subject to the administrator being satisfied, both parties agree to the process and a £50 application fee is received; an independent professional will be nominated
• Once nominated, the independent professional will contact both parties and request their relevant submissions, being limited to 10 sides of A4 of supporting documents
• The independent professional fee is limited to five hours at £100 per hour (or such other timescale and therefore cost as the parties may agree), plus expenses
• If a settlement is reached the parties will sign a binding agreement with the agreement being confidential
• The parties are jointly and severally responsible for the payment of the fees.

With such a process I see the benefit not only being the minimal cost of determination, but also the minimal cost in party preparation due to the severe restraint on the submission size.

Obviously common sense must prevail - such a “quick and dirty” process isn’t suitable for many disputes and certainly not high ticket items. Often however adjudications are single disputes but over multiple items and if one or two of them were settled early in the project, this would have set a precedence on how to deal with the remainder, thereby avoiding disputes. Additionally simply getting a determination of an item could prove beneficial therefore allowing the parties to carry on with their day job.

It will certainly be interesting to see if this alternative method changes the current dispute landscape. In any case we should take our hard hats off to the RIBA for looking at ways disputes can be resolved without the parties falling out with each other.

Further information can be obtained on the dispute resolution page of the RIBA website.

Gary Sinden is a director of G Sinden Consult