In Constructive’s final blog from the 2014 Construction Law Conference, we provide an overview of Andrew Aglionby’s speech about on arbitration.
Adjudication is an automatic right under any UK construction contract, and that process is generally considered to be swift and cost-effective. Other jurisdictions, such as Singapore and New Zealand, have followed suit in enacting similar legislation. With recourse to the courts as an alternative, many would ask why the construction industry would even consider arbitration as a route to dispute resolution. However, look more closely and you might find a host of situations in which arbitration might be a more appropriate medium for some cross-border construction contracts. It may be that projects involving parties (including suppliers) from other countries, particularly those outside of the European Union, should consider arbitration as it can allow parties to submit to dispute resolution without the formalities (and sometimes unpredictable nature) of their respective legal systems.
There are other pragmatic reasons why arbitration may be an attractive choice: it requires limited disclosure (an appealing proposal in a complex project where a party to a claim can be overwhelmed by reams of papers) and documents of all kinds may be served and shared electronically, speeding up the process and creating significant cost savings. Additionally, where the matter in hand is of a commercially sensitive nature, arbitration allows for private, closed hearings, delivering a ruling without the worry of washing one’s dirty laundry in public.
Arbitration is also widely internationally enforceable in other jurisdictions (much more so than court judgments, particularly outside the European Union) by virtue of the 1958 New York Convention with generally limited rights for appeal, enabling the successful party to minimise the threat of having to go through the process again. Finally, the ability for the parties to choose their judges makes significant commercial sense in the context of a complex or technical construction dispute. Parties can choose the expertise and background of their arbitrator (or specify that an arbitrator is to be selected from a jointly-approved shortlist) giving greater peace of mind that the issue in hand will be understood and considered thoroughly.
Arbitration is not for everyone; institutional fees and other associated costs such as paying for the arbitrators and for the hearing facilities may make the process prohibitively expensive. The UK courts, on the other hand, are primarily paid for by the taxpayer. In addition, the process is more lengthy than adjudication. Although that allows a more thorough look at the issues, parties should allow, for example, 3 months to appoint a panel of three arbitrators. However, the next time a construction dispute arises where confidentiality, a neutral tribunal, international enforceability or procedural flexibility offer advantages, you may wish to consider the alternative, dispute resolution route.
Andrew’s slides can be found here.