You talkin' to me?

With adjudication entering into its sixth year it is generally accepted by the construction industry that it has been a success. It is certainly preferable to litigation.

Section 108 of the Housing Grants Construction and Regeneration Act 1996 provides that a party to a dispute has a right to refer to Adjudication at any time. This, plus judgements such as R G Carter Limited –v- Edmund Nuttall Limited (June 2000) that effectively outlaw contract clauses requiring attempted mediation before adjudication, have blinkered the industry into thinking that adjudication is the only option for the resolution of disputes.

Adjudication will remain the main way in which parties resolve their differences, subject to the requirements of the Act. But the industry should open its eyes to softer alternatives. These may be more suited to resolving a dispute, especially where there is an interest in preserving a business relationship. These alternatives include mediation, expert determination and early neutral evaluation.

The case for mediation
Mediation is likely to increase in popularity. This follows the 2003 case of Royal Bank of Canada –v- Secretary of State for Defence in which the courts confirmed that parties to a court action would be penalised if they unreasonably refuse an offer to mediate.

Mediation is already the most commonly known and used alternative form of dispute resolution. It generally only works when both parties want to settle their differences. It is a formalised, non-binding and without prejudice negotiation.

The neutral, third party mediator's role is to facilitate or broker a settlement. They cannot impose a settlement and have no judicial role. The process only becomes binding if and when agreement is reached.

A mediation typically follows the following course:

• both parties choose a mediator. They then exchange brief case summaries and a date and venue for the mediation are arranged;
  
• on the set date the mediator makes a brief opening statement to both parties. They will then explain the process and ask each party to outline its view, expanding orally on the advance written statements;
  
• the mediation then breaks into caucus, each party retiring to a separate room with the mediator shuttling between the two, clarifying issues and seeking a mutually acceptable settlement;
  
• these caucus', perhaps with further joint meetings, continue for the duration of the mediation. The aim is to discuss options for settlement and the costs and risks of not settling. Either party can walk out of the mediation at any time if it feels it is not getting what it wants.

The advantages that mediation has over other ways of dispute resolution is that both parties retain control and it tends to be less confrontational. It is also private and can be quick and relatively cheap.

Mediation is generally successful. The overall settlement rate of all cases conducted through the ADR Group is 80%. The majority of cases that do not settle during the mediation process do so shortly after. The narrowing of issues and more open dialogue between the parties can provide a catalyst for a negotiated settlement subsequent to the mediation.

For disputes where adjudication is not an option, the industry should remember the alternatives

Expert determination
Expert determination is not subject to statutory rules. The parties control the process and agree to the appointment of an independent expert to rule on the dispute. In a binding agreement on terms to be negotiated the parties set out:

• a definition of the nature and scope of the dispute;
  
• the expert's terms of reference;
  
• the timetable and procedure for resolution of the dispute through publication by the expert of their opinion.

This process is most appropriate when the dispute is technically complex, with no or few issues of fact or law. It is private but nearly always binding and cannot be appealed.

Should either party not accept and implement any binding decision of an appointed expert it would constitute a breach of contract that would be enforced by the Court. Care needs to be taken in appointing the correct expert, defining the issues and to ensure that the expert will act in their capacity as an expert and not as an arbitrator.

Early neutral evaluation
Early neutral evaluation (ENE) has steadily gained in popularity. Again the parties agree as early as possible in any dispute to the appointment by a professional body of an independent third party with relevant professional qualifications and experience.

The issues are presented in a round table discussion to the third party, who can ask questions as needed. There then follows a debating period. There is no courtroom, no hearing and no opening/closing speeches.

The third party evaluates the merits of each case and provides an opinion on the likely outcome should the dispute go to trial. The opinion is not binding, but usually helps the parties to agree an amicable settlement. It can be a relatively quick and cheap process. Much of the work in preparing for an ENE is not wasted even if it fails as it can aid subsequent negotiation and would be necessary for litigation.

Making the choice
Disputes where both parties have entrenched positions and principles are at stake may never be capable of resolution by any means other than adjudication or through the courts, where a decision is essentially imposed on them.