A recent NBS survey found that 30% of UK construction companies had been involved in a dispute in the previous 12 months. But despite the litigious nature of the industry, construction still struggles to find effective ways of resolving disputes.
Most contracts provide for adjudication. Here, the adjudicator will impose their decision on the parties under a prescribed set of rules – but the price paid for a decision made by an adjudicator or judge can be a heavy one.
An alternative dispute resolution process is mediation, which departs from the traditional, often adversarial process. Settlement rates are high – achieved in 86% of cases in 2016, according to resolution consultancy the Centre for Effective Dispute Resolution.
However, mediation is not widely used in UK construction. A 2016 report by the International Journal of Law in the Built Environment revealed that only 13% of main contractors had previously used mediation compared to 66% in the US. Among subcontractors the use of mediation was particularly low at 9%.
One explanation given for mediation not being more common was a lack of detailed knowledge of the procedure. To address this, Constructing Excellence South West has published a Mediation Guide and Protocol that suggests, rather than imposes, a procedure that sets out who is involved at each stage, what information is needed and a suggested timetable. The key points are detailed here:
1. The role of the mediator
Mediation is geared to resolving the dispute. One feature is the chance to hold confidential discussions with the mediator. The opportunity to discuss issues with the mediator in private can often be a more appealing way of getting a point of view across rather than being constrained by what has been prepared by legal representatives in case and witness statements.
Once the mediator has a grasp of what is driving the dispute then he or she can get to work. Mediators are independent and neutral. They will use their knowledge and experience of the law and construction to rigorously test what each party is saying and help parties decide on what terms a case might be settled.
Preparation is therefore geared to helping the mediator to help the parties with identifying the point at which one or more of the parties have a reason to settle: the point at which the benefits of reaching a settlement outweigh the alternatives.
Mediation is not adversarial in nature, unlike adjudication or court proceedings. Parties to a dispute can mediate their differences without legal representation. That said, legal representatives can and do serve a useful role in assisting the mediator, identifying the issues and advising their clients on settlement as well as the consequences of the alternatives.
3. Know the case
Knowing the facts, the case and the realistic costs of court proceedings is key. The Constructing Excellence guide encourages the exchange of information between parties before the meetings take place. Where there is deadlock on this, the mediator can help unlock information in the lead-up to the mediation meetings.
Clarification of issues and disclosure of documents before mediation meetings is an important part of the process. Mediation meetings can then be used to test issues once the parties have shared relevant information and settlement options explored.
4. Be prepared to negotiate
A dispute is seldom settled by trying to persuade the mediator that your case – and your bottom line – is the right outcome, but because one or more of the parties does not have a better alternative. This inevitably means you need to identify the point at which you will walk away from the mediation without a settlement. If that is less than the other party’s bottom line – what they are prepared to settle for – then the dispute will obviously be settled.
5. Be prepared to make hard decisions
An experienced mediator will test you as well as your case. Be prepared to listen to criticism. Consider that the mediator may try to help you rationalise your own case as well as giving a clue about the other side’s bottom line without breaching confidentiality. Parties often push back against hard questions from the mediator. Rather than push back, take the opportunity to reassess your own prospects of success.
6. Aim for settlement
As noted above, settlement rates are high. This reflects the fact that management of risk in dispute resolution is hard to achieve in more adversarial processes. The benefits of mediation are many, and being familiar with how to prepare for mediation might just persuade you to consider mediation not as an alternative but as the norm.