Conflict avoidance, management and dispute resolution procedures Flashcards
What is the RICS guidance on Conflict avoidance and dispute resolution in construction?
This guidance note summarises what is meant by conflict avoidance and dispute resolution. It identifies the key issues that all surveyors should understand in respect of these distinct substantive areas. It cannot cover every issue or every technique for avoiding disputes, nor can it cover the wide-ranging issues that relate to dispute resolution, the applicable rules or strategies that might be adopted.
What is Scott Schedule?
A Scott schedule is essentially a table with inputs from both the claimant and respondent. Typically the claimant will set out their argument first, then the schedule is passed to the respondent to set out their response. This requires a degree of collaboration between the parties.
In the event that the dispute reaches the courts, the final column in the schedule is provided for the judge to give their decision against each item.
What are the most common forms of dispute resolutions in construction?
a. Negotiation: the process where parities work out between them how to resolve any issues. Power to settle is with the parties
b. Mediation and conciliation: The parties agree on an independent, third-party neutral system to facilitate discussions between them, with the goal of reaching a settlement. The power to settle remains with the parties, but the process is led by the mediator.
c. Expert determination: The parties agreed by a contract that a third party will make a binding decision on them. The terms are therefore governed by the contract. In most cases the decision of an expert will be final, and it will not be possible to appeal that decision. This means that the decision of an expert finally determines the dispute without further recourse.
d. Adjudication: Adjudication is a contractual or statutory procedure for swift interim dispute resolution. It is provided by a third party adjudicator selected by the parties in dispute. Adjudication decisions are binding unless and until they are revised by arbitration or litigation. There is no right of appeal and limited right to resist enforcement. Award of legal costs is at the discretion of the adjudicator unless this is excluded by the terms of the contract. Based on decision and written information received from both parties, the whole process can take up to 28 days and the decisions are binding.
e. Arbitration: Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.
f. Litigation: Litigation is defined as a process for handling disputes and bringing lawsuits to court in order to enforce a particular right. During litigation, a judge makes the final decisions for the parties unless they settle before trial. Settlement can happen at any point during the litigation process.
g. Dispute boards: Interestingly, dispute boards sit somewhere between avoidance and dispute resolution. Their genesis is in Dispute Review or Recommendation Boards (DRBs). Three dispute board members are appointed at the start of a project. They become familiar with the project by reviewing some of the project documentation and also regularly visiting the site during the course of the works. If and as issues arise they can be asked for their non-binding recommendation. This may relate to general disagreements or disputes. Often their recommendations are used to resolve disputes between the parties, thus avoiding formal disputes.
What is negotiation?
Negotiation is a communicative process necessary in situations where two or more parties have to reach an common, agreed position. In the construction industry, negotiation is required at almost every stage of a project, from acquiring land and obtaining planning permission, to making appointments, awarding contracts, negotiating change orders and extensions of time, resolving disputes, and so on.
What is mediation?
Mediation is a procedure in which the parties discuss their disputes with the assistance of a trained impartial third person(s) who assists them in reaching a settlement. It may be an informal meeting among the parties or a scheduled settlement conference. The dispute may either be pending in a court or potentially a dispute which may be filed in court.
What is the difference between negotiation and mediation?
- Meaning:
Negotiation - method of dispute resolution in which parties settle their conflict and reach an agreement through discussion
Mediation - also a method of dispute resolutions in which an independent third party assists the parties to conflict in resolving their dispute - Invention of third party
Negotiation: No
Mediation: Yes - Meetings:
Negotiation: Representatives of the parties to conflict meet to discuss their interests and rights.
Mediation: A mediator meets both parties jointly and separately, to talk about the issue. - Representation of interest:
Negotiation: By the parties themselves or by their representatives.
Mediation: By the mediator - Settlement:
Negotiation: Parties themselves reach an agreement.
Mediation: The mediator proposes a solution, to resolve the issues of the parties concerned.
What is adjudication?
- Adjudication is a contractual or statutory procedure for swift interim dispute resolution. It is provided by a third party adjudicator selected by the parties in dispute.
- Adjudication is often subject to a strict timetable and may be based purely on documentary submissions (see for example, NEC Engineering and Construction Contract, option W2). Adjudicators can adopt an inquisitorial role which may involve taking the initiative in ascertaining facts and law.
- Adjudication decisions are binding unless and until they are revised by arbitration or litigation. There is no right of appeal and limited right to resist enforcement. Award of legal costs is at the discretion of the adjudicator unless this is excluded by the terms of the contract. Based on decision and written information received from both parties, the whole process can take up to 28 days and the decisions are binding.
What is arbitration?
- Arbitration is a private, contractual form of dispute resolution. It provides for the determination of disputes by a third party arbitrator or arbitration panel, selected by the parties to the dispute. Disputes are resolved on the basis of material facts, documents and relevant principles of law.
- The arbitration process is administered by an appointed arbitrator subject to any relevant contractual rules and subject to the statutory regulatory framework applied by the domestic courts. There are only limited rights of appeal and legal costs are usually awarded to the successful party.
- English law does not insist on any formal requirements for an arbitration agreement (for example it can be verbal), however if the agreement is not in writing it will be outside the supervisory regime of the courts established by the Arbitration Act.
- Arbitration clauses are traditionally found in all standard form contracts used in the UK, often with related adjudication clauses (for example, JCT 16, and ICE 7th Edition (now withdrawn in favour of NEC3)). In the last few years there has been a tendency to set the dispute resolution default at litigation rather than arbitration, leaving the parties to specifically agree to arbitration.
- Arbitration commences with a notice to concur which provides for agreement on the appointment of an arbitrator, failing which an arbitrator may be appointed by a nominating body (which should be named in the contract). Arbitration is now usually combined with adjudication and mediation in tiered dispute resolution procedures.
What is the difference between adjudication and arbitration?
- Definition
Adjudication: Disputes submitted to an adjudicator for binding decisions unless substituted by arbitration/litigation
Arbitration: Dispute submitted to arbitrator for a binding decision (award) - Time
Adjudication: Much shorter than arbitration and litigation; normally about 28 days to decide
Arbitration: May takes years/months. Procedure to be agreed by the parties - Cost
Adjudication: Lower than arbitration because of faster hearing
Arbitration: higher than adjudication
What is litigation?
Litigation is the process of engaging in or contesting legal action in court as a means of resolving a dispute. The court is able to enforce or determine one party’s rights or obligations.
Litigation is not uncommon in the construction industry because of its adversarial nature and the tendency for disputes to arise. A combination of environmental and behavioural factors can lead to construction disputes. Projects are usually long-term transactions with high uncertainty and complexity, and it is impossible to resolve every detail and foresee every contingency at the outset. The basic factors that drive the development of construction disputes are uncertainty, contractual problems, and behaviour.
What are the parties of adjudication?
- Referring party
- Responding Party
- Adjudicator
What are responsibilities of each party?
- Referring party
- must serve the Notice of Adjudication including key information such as details of the parties, the contract , the nature of the dispute, the remedy sought;
- the adjudicator should be appointed within 7 days of the Notice of adjudication.
- must serve referral notice within 7 days of the notice of Adjudication – this should set up the referral party case and other supporting information
- Responding Party
- within 7 days of the Referral Notice the Responding Party must serve their response together with evidence
- Adjudicator
- the adjudicator must give this decision within 28 days
- the decision is binding unless challenged by litigation or arbitration
How NEC4 deals with Dispute Resolution? How it impacts on the project management?
NEC4: Dispute Resolution Service Contract
• NEC4 offers an improved provision for dispute resolution procedures, with new processes to help parties avoid the time and costs of formal disputes. The new Dispute Resolution Service Contract (DRSC) will therefore replace the NEC3 Adjudicator’s Contract.
• Conditions of Contract: 1 General, 2 Adjudication, 3 Dispute Avoidance Board, 4 Payment, 5 Termination, Contract Data Index
• The DRSC may be used for the appointment of an adjudicator or a member of a Dispute Avoidance Boards
Resolving and Avoiding Dispute Options:
• W1 – Used when adjudicator is the method of dispute resolution and the UK Housing Grants, Construction and Regeneration Act 1996 does not apply.
o W1.1 Resolving Disputes – first refer to the Senior Representatives if they cannot resolve it then refer to Adjudicator;
o W1.2 The Adjudicator
o W1.3 The adjudication
o W1.4 The tribunal – first refer to adjudication
• W2 – used when adjudication is the method of dispute resolution and the UK Housing Grant, Construction and Regeneration Act applies:
o W2.1 Resolving Disputes – first refer to the Senior Representatives if they cannot resolve it then refer to Adjudicator;
o W2.2 The Adjudicator
o W2.3 The adjudication
o W2.4 The tribunal – first refer to adjudication
• W3 – Used when a Dispute Avoidance Board is the method of dispute resolution and the UK Housing Grants, Construction and Regeneration Act 1996 does not apply.
o The DAB consists of either one or three members. The number of members is stated in the Contract Data Part 1. If there are to be three members, both the Client and the Contractor nominate a specific individual who is named in the Contract Data and the parties jointly chose the third member. There is also provision for dealing with a member not being able to act.
o The DAB is appointed under the NEC DRSC. The DRSC is relevant to all three W option clauses.
o The DAB visit the Site at intervals. The frequency is specified in the Contract Data. The aim is that the DAB inspect the progress of the works and become aware of potential disputes, thereby resolving issues before they become disputes.
o A potential dispute is notified to the DAB between two-four weeks after notification to the other party and the Project Manager.
o The DAB makes recommendations. It visits site and inspects the works and prepares a note of its visit. Unless the parties have resolved the issue by the end of the visit, the DAB provides a recommendation for resolving the issue.
o Only if a party is dissatisfied with the recommendation is the dispute referred to either court or arbitration (as appropriate). The dissatisfied party must notify the other party of the matter which it disputes and state that it intends to refer to court or arbitration (as appropriate) within four weeks of notification of the DAB recommendation.
NEC4 introduces the concept of Senior Representatives. The idea is that Senior Representatives of the parties meet and attempt to resolve the dispute before there is an adjudication. This applies to both options W1 and W2. So far as option W2 is concerned, NEC does not make it a condition that the Senior Representative route must be followed - it can’t, that would be in breach of the Act which states that a party may refer a dispute to adjudication at any time. The Senior Representatives route is merely an option if the parties agree.
The Senior Representatives for each party are named in the Contract Data. There is provision for two Senior Representatives from each party. This can be problematic in lengthy construction projects. Those named as Senior Representatives may move on. There is nothing obviously within the contract to allow for replacements.
How NEC3 deals with Dispute Resolution? How it impacts on the project management?
• Option W1 – Despite resolution procedure (used unless the UK Housing Grants, Construction and Regeneration Act 1996 applies)
o W1.1 Dispute resolution – no senior representative
o W1.2 The Adjudicator
o W1.3 The adjudication
o W1.4 Review by the tribunal
• Option W2 - Despite resolution procedure (used in the UK when Housing Grants, Construction and Regeneration Act 1996 applies)
What is expert determination?
Expert determination is a procedure in which a dispute or a difference between the parties is submitted, by agreement of the parties, to one [or more] experts who make a determination on the matter referred to it [them]. The determination is binding, unless the parties agreed otherwise.
