Explainer: Dispute terms made easy

Court proceedings are still one of the most common forms of resolving disputes in the construction industry. The Technology and Construction Court (TCC) is a specialist court that deals with technology and construction disputes and is governed not only by the Civil Procedure Rules but also by the TCC Guide. A specialist TCC judge will deal with these cases. 

Advantages:  

• The claim process will be managed by a judge and the decision is binding and enforceable. 
• Complex issues can be dealt with. 

Disadvantages: 

• Only claims over £250,000 can be dealt with at the TCC. Any claims below this sum will be dealt with at the County Court. 
• It is often slow and likely to be the most expensive way to resolve a dispute. 
• Proceedings will be public and are therefore not confidential, except in certain very limited circumstances. 

Arbitration is an alternative to litigation in which the parties agree to refer the dispute to a third party, the arbitrator. Disputes are resolved on the basis of material facts, documents and relevant principles of law. Arbitrations in the UK are governed by the Arbitration Act 1996, which ensures that arbitrations are fair, cost-effective and rapid, that the law is followed wherever possible and that the language used is friendly and accessible. Arbitration is often used for international construction disputes but can equally be used for domestic ones. 

Advantages: 

• Everything that happens in an arbitration is confidential.  
• Parties can agree on an arbitrator who has relevant experience in the matter. 
• Compared with litigation, it is highly flexible and relatively quick. 

Disadvantages: 

• It is the parties’ responsibility to bear the costs of both the arbitrator and the venue where the arbitration takes place. 
• There are limited powers of compulsion or sanction available to the arbitrator if one party fails to comply with their directions. 
• There are limited appeal rights available during arbitration. 
• Costs can be similar to litigation. 

Mediation is commonly used in the construction industry to resolve disputes. The TCC Guide encourages parties to use alternative dispute resolution (ADR), which is often mediation. The Pre-Action Protocol for Construction and Engineering Disputes requires parties in dispute to meet, at least once, before litigation commences, to discuss whether some form of ADR, such as mediation, would be a more appropriate means to resolve the dispute. 

The mediator is an independent person and generally highly experienced in the area of dispute. They will not make a decision, judge or advise but will facilitate discussions between the parties, with the aim of resolving the dispute. 

Advantages: 

• It can help to maintain a business relationship. 
• It is relatively quick, usually lasting one or two days and being considerably less costly than litigation. 
• Everything that happens in a mediation is confidential. 
• A mediator will encourage the parties to find a solution that suits both the parties’ needs. 

Disadvantages: 

• Parties may be concerned that, during mediation, they may disclose an important aspect of their argument or commercial position that (despite the confidential nature of mediation) could benefit the other party if the matter went to litigation. 
• If the parties do not come to an agreement, the dispute will remain unresolved and the cost of mediation will have been wasted.

Adjudication is a process in which a neutral third party gives a decision on a dispute. The Housing Grants, Construction and Regeneration Act 1996 (the Construction Act) states that parties to a construction contract may refer their disputes to an adjudicator. Adjudication has become known as a ‘pay first, argue later’ way for parties to resolve their disputes. A successful party to adjudication can apply to the TCC to enforce an adjudicator’s decision as it will be binding, unless or until it is revised in arbitration or litigation. 

Advantages: 

• The adjudicator is a neutral person who is not involved in the day-to-day running of the construction contract. 
• Adjudication is quick and less expensive than court proceedings. 
• Although it is still possible to go to court, in most cases the decision of the adjudicator decides the dispute. 

Disadvantages: 

• The dispute needs to have been aired between the parties before adjudication can start. 
• The adjudicator’s powers are limited. 
• Court proceedings are still required to enforce the adjudicator’s decision if the ‘losing’ party does not pay. 

Expert determination is often used to resolve issues or disputes of a specialist nature, and is one of the most informal systems of dispute resolution. Expert determination is often used when there is a valuation dispute. If an expert is to be used to determine the dispute, the parties will agree this by contract and will also agree that the expert determination will be binding. 

Advantages: 

• It is an economic way of resolving valuation disputes. 
• It is less expensive, quicker and a less formal method of dispute resolution. 

 Disadvantages: 

• The use of experts is much less tied to legal processes and therefore it is more difficult to challenge their decision. 
• An expert’s report cannot generally be enforced without further court or arbitration proceedings.

In some regions, particularly in the US, alternative dispute resolution includes all dispute resolution methods other than court proceedings (and therefore includes arbitration). In the UK, it is generally understood to describe all dispute resolution methods other than court proceedings and arbitration.