Strife in the fast lane

These days there is really no need to worry about choosing a dispute resolution route, as everyone in the construction industry is partnering, holding hands and hugging each other until all is right with the world. Oh, I'm sorry... was that the sound of a thousand readers choking on their jasmine tea? So for those of us not covered in pixie dust, a quick look at dispute resolution options is in order.

Prior to the introduction of the statutory right to adjudication on May 1, 1998, there were only two serious options: arbitration and/or litigation. Litigation is a very public affair that involves spending huge sums on men in wigs, and while some of you might enjoy that kind of thing, it's something most of us should avoid at all costs.

Choose your method
These days if you are running a pilot scheme for constructing partnered schools you would not want to publicise the twenty subcontract disputes plaguing the project. You'd want to choose the private processes of adjudication or arbitration. Many years ago, when dinosaurs ruled the earth, you would have chosen arbitration. Set out in various pieces of legislation, arbitration is not a statutory right, and requires an agreement between the parties. Even with such an agreement, arbitration usually cannot begin until after practical completion when the issues raised are staler than last Saturday's meatloaf. Also, despite having wide ranging powers to set the procedure many arbitrators let the process get grotesquely complex. I've seen shopping trolleys full of lever arch files. "May I refer you to page 10,978," is a common refrain. Arbitration is losing its "cheap alternative to litigation" advantage.

So what's the alternative? Adjudication can arise because the parties have a statutory, or contractual right. Under statute it is available at any time, allowing the parties to begin proceedings as soon as a dispute arises without any apparent time limit within which to bring an action. It started off as quick, cheap and simple, and, despite the best efforts of many gold-toothed lawyers, still retains its critical advantages. In terms of time scale, an adjudicator can be appointed in a matter of a few days following the payment of an appointment fee. In 1998 the RICS, the most prevalent appointing body, made 23 adjudicator appointments. In 2002 they made 1076. The number of arbitration appointments last year was probably less than 50, with clear numbers being difficult to elicit from the Chartered Institute of Arbitrators. I tried four times.

Arbitration is losing its advantage as a cheap alternative to litigation

Peter Gracia

Quick justice?
Within five weeks of the Adjudication Notice a decision should be available, the parties having made their arguments and possibly attended a hearing. Adjudications cover disputes from a few thousand to millions of pounds, and in most cases everyone has to pull out the stops to fit the timeframe. A critical failing however, in terms of justice, is that the adjudicator lacks the power to apportion the parties' costs. Many main contractors abuse this by including a clause in their contracts stipulating that if a subcontractor starts adjudication they have to bear both parties' costs. This puts an effective stop to disputes below a threshold of, say, £8,000. Sadly, I have even seen a chartered building company doing this on a NEC/ECC contract, in direct contradiction of its goal of mutual trust and co-operation.

One fundamental difference between the processes is that once you have received an arbitrator's award, there is little opportunity to appeal. Adjudication is a stop-gap process, and while any decision must be complied with, it allows the issues to be re-visited in arbitration or litigation. There are dozens of cases that end up in litigation but, out of a pool of 1076 in 2002, for instance, that still makes adjudication the quicker, cheaper and more effective option.