Although parties can regulate their relationships by way of contract, disputes may still arise.
Having an agreed means by which such disputes can be effectively resolved is important. At whatever stage a dispute arises, there are a number of dispute resolution options available. This note highlights the issues which should be considered when selecting the form of dispute resolution and considers recent developments that could affect how construction disputes in Ireland may be resolved.
Dispute Resolution Options
As regards the dispute resolution options available to the parties to a construction contract, some work better than others, depending on factors such as the nature of the project, the issues in dispute, the stage at which the dispute arises and the relationship of the parties. In addition to litigation: arbitration; mediation; conciliation; and, expert determination are all methods of dispute resolution which are either well established or whose usage is increasing. Adjudication has also been utilised more recently as a contractual form of dispute resolution but it has also been formally proposed as a form of dispute resolution which would be available to a party as a statutory right. Save in respect of litigation, they are all confidential processes.
Litigation: is simply the term used to describe the resolution of disputes through the Courts. The nature and level of damages sought will generally determine what court an action will be heard in, which can have a significant impact on the speed and cost of the action. Actions in the High Court Commercial List1 tend to be the most actively managed. Litigation will also allow parties to an action to join other parties in, either as co-defendants or as third parties.
Mediation and Conciliation: are terms which are often used interchangeably but the difference between them is not always clear. Both are based on being a without prejudice process which involves a neutral third party facilitating the parties to reach an agreed resolution to their dispute. However, in mediation, the mediator's role is purely a facilitative role. The mediator does not provide any evaluation on what the solution to the dispute should be. A conciliator on the other hand, if the parties are unable to settle the dispute, may make proposals to the parties to resolve it, usually described as a "recommendation". Generally, the recommendation will become final and binding on the parties if it is not rejected within a limited timeframe.
Arbitration: is supported by a statutory framework2 and is commonly used in construction disputes in Ireland. The arbitrator, who usually has a construction background, effectively sits as the judge and follows procedures akin to those applied by the Courts. However, either of the parties to the arbitration is unable to force others to be joined into the arbitration unless specific provision has been made in the relevant contracts. The arbitrator's award is a binding decision which can only be challenged before the Courts in very limited circumstances.
Expert determination: also results in a binding decision but differs from arbitration in that there is no statutory framework governing expert determination. The contract will generally identify the type of dispute that an independent expert will determine. It is worth noting that, unless the contract so provides, an expert is not bound by the rules of natural justice. Once the expert has rendered his decision, there are very few grounds on which it can be appealed, even if he gets it wrong! Expert determination though can work particularly effectively in resolving technical disputes.
Adjudication: is very similar to expert determination and in many cases may actually be that, save under a different name. However, statutory adjudication in the UK is considered as being distinct from expert determination as such adjudications are subject to the rules of natural justice. Adjudication allows decisions to be made promptly which are enforceable and are to be complied with, pending any final determination of the dispute by arbitration or litigation.
Recent Developments
New rules of the Superior Courts, which came into force in November 2010, provide that the Court may, on the application of any of the parties involved in litigation, or on its own motion, adjourn proceedings in order to allow the parties to engage in mediation, conciliation or another dispute resolution process approved by the Court, but not arbitration. If a party refuses to participate in an approved process without good reason, the Court may, where it considers it just, have regard to the refusal in awarding costs against that party.
Adjudication has attracted attention in Ireland as an alternative means of resolving disputes, largely as a consequence of the generally positive experience of statutory adjudication in the UK and the very adverse impact of recent contractor insolvencies. This has resulted in the introduction of the Construction Contracts Bill by Senator Feargal Quinn in 2010. The Bill (similar to corresponding UK legislation) has already successfully passed through the Seanad.
Conclusion
The most appropriate dispute resolution forum will depend on a number of factors including: who you are; the contractual relations that you are entering into; and the nature of the project. What you are able to agree may also depend on your bargaining position.
A point to bear in mind is what works for you may not be ideal for someone else. Even if you have expressly opted for one, when the dispute occurs, keep an open mind as to whether another option might be a more effective way of resolving the dispute.
Footnotes
1 For claims in excess of €1,000,000
2 Arbitration Act 2010
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
