As follows are some answers to Frequently Asked Questions (FAQs):
Alternative Dispute Resolution (ADR)
The phrase covers a variety of processes, which provide an alternative to litigation through the courts, and can be used to resolve disputes where those involved would be unlikely to resort to the courts.
- Expert Determination
- a neutral third party makes a decision; such as adjudication, arbitration, and expert determination.
- a neutral third party offers an opinion, and/or seeks to bring the parties to an agreement; such as mediation, conciliation and early neutral evaluation.
- hybrid processes, e.g. Med-Arb, where there is an initial agreement to mediate the dispute and, if that fails to achieve settlement then the outstanding issues are submitted to arbitration.
- More flexible
- More cost effective
- Offers confidentiality
- Less stressful or less damaging
- Evidence from various countries suggests that the parties are more satisfied with the dispute resolution process where ADR has been used.
- To reach a fair, rapid and inexpensive determination of disputes arising under a construction contract.
- A judicial process to determine the rights & obligations of the parties under the contract.
- It does not finally decide the dispute (unless agreed by the parties) but it does give the parties an impartial decision in limited time.
- All parties of a construction contract. (The contract must be in writing if entered before 1 October 2011 in accordance with Section 107 of the Construction Act 1996. Section 107 is repealed by Part 8 Section 139 of the Construction Act 2009.)
- Includes consultancy work.
- Not if one of the parties is a residential occupier.
Any dispute arising under the construction contract, e.g.
- A failure to pay by the due date.
- Disagreement about a valuation.
- Disagreement on the terms of contract.
- Adjudication is a statutory procedure by which any party to a construction contract has a right to have a dispute decided by an adjudicator.
- It is intended to be quicker and more cost effective than litigation or arbitration.
- It is normally used to ensure payment (although most types of dispute can be adjudicated).
- The Adjudicator must generally decide the dispute in less than 42 days.
- The decision is binding and is usually upheld by the Courts.
The scope of adjudication is set out in the provisions of the Construction Act 1996. It applies to contracts concerning:
- The Construction Industry
- The Telecommunications Industry
- Installation of Security Systems
- It also includes contracts for professional services within the above.
- The scope of adjudication is set out in the provisions of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”).
- It applies to Construction Contracts entered into after 1 May 1998.
- The Act imposes a duty on the adjudicator to act impartially and enables him to take the initiative in ascertaining the facts and the law.
- It is implicit that the adjudicator should also act “fairly”. However the fairness of the process must reflect the fact that the decision of the adjudicator will decide the rights or interests of the parties under a contract.
- The adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith. Any employee or agent of the adjudicator is similarly protected from liability.
- Depends on the terms of the contract. Most standard form of contracts and adjudication rules provide that the parties cannot recover their own costs in the adjudication.
- Generally both parties are jointly and severally liable for the adjudicator’s fees.
- The HGC&R Act provides, at s108 of Part II, that a Construction Contract must embody 8 principles concerning the right to adjudication. If the contract does not comply with s108 then any adjudication provisions in the Contract (with the exception of the naming of an adjudicator or ANB) are ignored and the Scheme applies.
- It is a set of rules which includes all eight principles and will automatically apply to any Construction Contract which omits even one of these.
- The Standard forms of contract generally include all of the principles.
- The Scheme will therefore usually apply to non standard forms or ad-hoc agreements.
- The Adjudicator must give his decision within 28 days of the referral.
- Extended to 42 days with the agreement of the referring party.
- Extended to any period by agreement between the parties.
- The Adjudicator’s Decision is binding on the parties until the dispute is finally decided by arbitration (if provided for in the contract or agreed to), litigation or agreement.
- Because it is binding the Courts will enforce the decision in summary proceedings.
- Generally the only defence to such proceedings is that the Adjudicator’s decision was made outside his jurisdiction.
- The unsuccessful party is required by law to pay a sum of money awarded by an adjudicator.
- If a party does not pay, the other party may make an application in court to have the adjudicator’s Decision turned into a court order by means of summary judgment.
- Continued refusal to pay will mean that, upon further application to the court, the money may be directly recovered from bank accounts or other assets.
You need to have a dispute resolution clause in your future contracts that in the event of a dispute it will be resolved by reference to arbitration. We can advise you as to an appropriately worded clause meeting your particular needs.
- The parties can appoint an Arbitrator who is a specialist in the field of the dispute.
- Arbitration proceedings are generally shorter than court proceedings;
- The Arbitrator’s Award is normally binding on all parties with a limited right of appeal on questions of law and/or procedure; and
- The Arbitrator’s Award can be enforced in other jurisdictions.
- Mediation has a fundamentally different approach to traditional dispute resolution. In court or arbitration, the judge or the arbitrator decide the legal rights of the parties and declare them; those rights are then enforceable by further legal process if necessary.
- Mediation on the other hand is a voluntary and confidential principled negotiation, held on a without prejudice basis, aided by a skilled neutral third party, the mediator. The mediator’s role is to assist the parties to find their own solution; he is not there to impose his decision.