REUTERS | Daniel Munoz

Increased use of mediation in construction disputes

Is it just me, or has anyone else noticed that there is an increased use of mediation in construction disputes these days? Also, is it purely coincidental, or does it seem to have come at a time when there seems to be less adjudication (and adjudication enforcement) about?

Perhaps it is simply that it is on my radar because, lately, I’ve been receiving more appointments as a mediator, and people have been talking more about the subject. For example, we have seen a number of posts by Liz Repper over the last couple of years all focusing on different aspects of mediation (including the courts’ attitude towards those parties that fail to mediate and reasons why we may see more parties mediating in the future).

The courts are also being more supportive of the process, imposing costs sanctions on those that refuse to mediate or otherwise behave unreasonably.

Adjudication is not a panacea

Although adjudication dominates the way construction disputes are resolved, it is not a panacea. It is more a palliative, like a sticking plaster, that relieves but does not cure. In part, this is because of the interim-binding nature of an adjudicator’s decision.

We all know that the parties may agree to be bound by what the adjudicator decides simply by accepting it, paying up and moving on. We know that the vast majority of adjudications end this way. However, there is still the threat of serial adjudications on big projects, or disputes where the sums in issue are significant and the parties are not content to let one or more adjudicators’ decisions be the end of the matter.

Parties moving away from adjudication?

Arbitration may be gaining in popularity, possibly for many of the reasons Jonathan gave in his recent look at the RICS’ new construction and engineering arbitration service. However, in my experience, adjudication is still the gateway for parties to resolve their disputes. The disputes that I get instructed on (whether as mediator or arbitrator) have invariably been to adjudication somewhere along the way.

When a dispute comes before a mediator, in some instances, it may help that an adjudicator has already considered it. For example, it may mean certain elements of the claim have been considered properly by both sides and, even if there is still disagreement between them, the gulf may be narrower than on an issue that is “fresh”. It may also mean the parties’ position statements and other materials they prepare for the mediation are clearer (although it is worth noting that the mediator doesn’t need to see all the documents from the adjudication). Conversely, it can lead to the parties being more entrenched in their views on the dispute. You never know.

Mediating construction disputes

Mediation often leads to settlement, possibly far more than adjudication does. It can also lead to some surprising and unexpected results, ones you wouldn’t necessarily anticipate at the outset of the process. In this respect, I often find that I am being asked to provide an evaluation for the parties, rather than stepping back and staying in the facilitative role. Sharing my views, if I consider it appropriate and it is what the parties want, can help achieve a settlement, but parties need to understand that any view is typically based on a limited knowledge of the facts and documents. This means it can only help the parties so far, and much of the work is for them to do. It also depends on how early in the process the parties are mediating. Obviously, if they are still in the pre-action phase, there will be less material to work with, whereas later in the process, the parties may have been through disclosure and exchanged witness evidence (both fact and expert).

Conclusion

What with the courts getting more expensive (and tougher on costs) and the renewed enthusiasm for arbitration (at least in some quarters of the construction industry), we may start to see a shift away from the TCC and adjudication. Perhaps an increased use of mediation is a sign of things to come.

MCMS Ltd Matt Molloy

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