The unmitigated success of adjudication leads us logically to reassess the potential of a streamlined version of arbitration to deal with more complex cases
Way back in 1995, I wrote an article on the idea of immediate arbitration. My argument was that the full flexibility of the arbitration process should be exploited. Arbitration did not have to be a highly formal, inflexible procedure similar to litigation. It did not have to be deferred until after practical completion.
What happened to my article? It did not see the light of day. A well-meaning editor told me that it would be superfluous. A new act governing adjudication would reform dispute resolution so that any dispute could be resolved within 28 days. Arbitration would be overhauled by the Arbitration Act 1996.
Cut to today and the success of adjudication cannot be overstated. However, as we pore ever larger and more complex disputes into the pint-sized pot of adjudication, its limitations are increasingly apparent. So this seems the perfect time for a radical reworking of construction arbitration, to make it immediate, responsive and frequently concurrent with the contract works, and so I have dusted off my old ideas.
An agreed arbitration procedure could be devised under which the parties to a contract required and empowered a named arbitrator or an arbitrator selected from a shortlist to resolve disputes swiftly. The selected arbitrator who accepted the appointment would sign an agreed set of terms. The parties could require the arbitrator to attend site to resolve defects disputes within, say, two or three working days and to make his decision within two working days thereafter. If he was unavailable or did not respond within 24 hours, another arbitrator could be engaged. The chosen arbitrator could, in certain circumstances, be empowered to delegate his powers to another arbitrator on the shortlist. Alternatively, if the dispute in question was not within the arbitrator’s expertise, he could be required to nominate an expert from an agreed list who would also be required to attend site swiftly to give an opinion to the arbitrator.
All kinds of disputes could be referred to the arbitrator. Disputes over time and delay and disruption could be referred. The arbitrator would be empowered to investigate, to appoint a programmer as an expert if required and to reach a decision within, say, 28 days. Where the contract provides a period of time for the recipient to review an application for an extension of time, the parties, knowing that an arbitrator could be engaged to resolve matters quickly, might be minded to agree to shorten the contractual review period so that disputes could be referred to the arbitrator during the course of the works. Programmers engaged by arbitrators in this way would, in effect, be acting as a single joint expert. Their role would be active and, contemporaneous, rather than retrospective and based on old records that may be inaccurate.
It would be important for the parties to establish the nature of the arbitrator’s decision that was required. This would need to be done either at the time that the arbitration agreement was entered into, or at least before any decision was made. Under section 58 of the Arbitration Act, unless the parties otherwise agree, the award of an arbitrator is final and binding, even if it is an interim award. It would be prudent to agree that certain decisions, for example over extensions of time, were not final and could be reviewed by the same arbitrator after practical completion.
The parties could also agree that decisions on certain matters were to be treated as a provisional order or as provisional relief. The parties can agree this under section 39 of the Arbitration Act. Such orders are subject to adjustments in the final award and are brought into account in the final award. They must be limited to relief that could be granted in a final award.
These matters are detailed and can be worked out by lawyers. It is the principle of arbitration as a rapid response that actually matters. There is certainly a place for the 100-day arbitration but such arbitrations are likely to be formal and retrospective, even if they are relatively quick. What I’m proposing is the involvement of the arbitrator in the course of the project. As superfluous ideas go, this one could run for quite a while.
Philip Harris is head of construction at solicitor Wright Hassall in Leamington Spa