Practical Law

Last month we asked for feedback on current trends in construction dispute resolution. We reviewed your comments and combined them with our own thoughts and observations.

TCC litigation

As the court term draws to a close, we know that the Technology and Construction Court (TCC) in London and the regions is busier than it has been in recent years, with a general rise in the amount of litigation before it. This is not just through an increase in the amount of adjudication enforcement proceedings, but also reflects the fact that a number of substantial cases have been started in the courts.

Arbitration

Even though the courts are popular, we hear that some of you are “hard at it” dealing with arbitrations. If domestic arbitration is becoming more popular, then this must reflect an increase in the number of parties that are opting to include arbitration in their contracts. Some standard form contracts, such as the JCT, have litigation as the default dispute resolution mechanism, whereas NEC3 recommends arbitration. An increase in domestic arbitration may also reflect an increase in the use of the NEC3 contract. That said, last month saw one of the few reported cases on CIMAR, the JCT’s default arbitration rules.

One of the main advantages of arbitration is the confidentiality that it affords both parties; it has always been one of the key reasons to favour arbitration. Another is the fact that a specialist practitioner (such as an engineer or architect) can hear the dispute. Sometimes, however, complex disputes are best dealt with in a specialist court, like the TCC.

Mediation

Mediation is also a confidential process. Occasionally, we hear about disputes that have settled after mediation. High-profile litigation, such as the Multiplex/Mott MacDonald Wembley dispute, the BSkyB/HP litigation and the Bath Spa disputes have all reportedly settled after mediation. The council (in the Bath Spa case) is a public body, so we know that it received £6.96 million in compensation for the delays to its project. As the other settlement agreements are confidential, that leaves a lot of room for speculation about their terms.

Mediation is also on the increase. In part, this is due to the procedural requirement, before commencing proceedings, for parties to consider ADR (see the Practice Direction on pre-action conduct) and for parties subject to the Construction and Engineering Pre-action Protocol to meet at least once before commencing proceedings.

In its May 2010 audit, CEDR reported that projects valued at over £5.1 billion a year were being mediated in the UK, with a 30% increase in the number of mediations since 2007. Earlier this year, King’s College published a report on mediation in the construction industry. Both reports suggest that parties benefit from mediation, with a high percentage of cases settling on the day of the mediation. That said, at the Civil Mediation Council’s May 2010 conference, the consensus was that there is still a lack of awareness of the effectiveness of ADR and/or a reluctance to attempt ADR.

Adjudication

Adjudication remains as popular as ever and is still the dispute resolution process of choice in the construction industry. The amount of case law continues to grow, with parties using ever more sophisticated arguments to resist enforcement of adjudicators’ decisions, including an increase in the use of CPR Part 8 declarations. The use of arbitration (or the courts) by the losing party to, effectively, reverse an adjudicator’s decision remains relatively rare, but also seems to be on the increase.

And finally…

The way parties litigate is about to change:

• a revised TCC Guide is expected in the autumn (incorporating electronic working and the court settlement process, as well as new transfer provisions and costs orders where pleadings or witness statements merit them);
• a new e-disclosure practice direction and questionnaire is expected to come into effect from 1 October (see here for what this may mean in practice); and
• further ahead, we will see more of Jackson LJ’s recommendations from his costs review.