Alternative Dispute Resolution (ADR)

Most of the time, when people refer to ADR in construction, they talk about mediation. Mediation is a consensual process (you can’t generally be forced to mediate) where an independent mediator tries to facilitate a settlement – often by banging heads together and asking the parties if they really want not to settle, and thereby spend a lot of money for the pleasure of spending the next few months or years sitting in rooms with lawyers. Given that choice, mediation often leads to settlement.

Mediation is very much in the mainstream – but other forms of ADR are available:

• Dispute Avoidance Panels (DAPs) can be useful on the right scheme. They are built-in to a contract and allow parties to refer issues to them during the life of a project. They are typically made up of construction professionals with a mix of experiences, who will try and find pragmatic solutions to avoid issues becoming full-blown disputes. Agreeing their terms of reference and powers is key, but they have been shown to work – notably being used with success on the London 2012 Olympic Games infrastructure works.
• Increasingly popular is Early Neutral Evaluation (ENE). The parties present their case to a neutral third party who considers submissions, and may even convene a meeting, before giving their view on who’s right and who’s wrong. It is perhaps not that dissimilar to adjudication – albeit that adjudication ends with an (at least temporarily) binding decision. Originally ENE was designed to be presided over by a judge (who wouldn’t then hear the case if it ended up in court), although now other senior lawyers or industry figures may be called on to participate.
• Expert determination sees an independent expert consider the parties’ submissions and evidence, and draw on their own knowledge and experience, to reach a decision. That decision will usually be binding (i.e. incapable of appeal, save for breaches of natural justice or jurisdictional issues), so a decision to refer to an expert determination can be a tough one. It is particularly popular in certain sectors where particular technical issues arise, such as in oil and gas works or power generation, and for that reason is built into some forms of standard contract including as published by FIDIC and IChemE.

Whatever form it takes, we know how ADR works and, just as importantly, how and when to deploy it. A mistimed invitation to use ADR or picking the wrong form can be just as damaging, if not more so, than not engaging in ADR at all – so it’s important that you know your advisors know what they’re doing. With us, you will.