Mediation is too often overlooked as a cost-effective method of dispute resolution
In 1994, Sir Michael Latham published his review of procurement and contractual arrangements in the UK building industry, Constructing the Team. Since then the construction dispute resolution landscape has changed almost beyond recognition. I recently went back to that review and was struck by Latham’s aim: “helping clients to obtain the high-quality projects to which they aspire. That requires better performance, but with fairness to all involved. Above all, it needs teamwork. Management jargon calls that ‘seeking win-win solutions’. ”
It’s difficult to believe that this was written 24 years ago. A quick flick through the news pages of Building today reveals many similar themes: the desire – and economic need – for high-quality projects, better performance, fairness and teamwork.It all sounds very post-Carillion 2018.
The solution remains at all times in the hands of the parties, not the mediator
A key part of Constructing the Team was Latham’s insistence that the construction industry needed a quicker and cheaper way of resolving its disputes. He was right. At the time, more than 2,000 claims were issued in court each year. Cases often ran for years, costing parties time, expense and disruption to business. In 1998, adjudication – backed with legislation – arrived on the construction dispute resolution scene.
Is adjudication a win-win?
But 20 years later, is dispute resolution the “win-win” scenario envisaged by Sir Michael? The arena has certainly changed. Claims in the Technology and Construction Court (TCC) now number about 400-500 a year, and the number of domestic arbitrations has drastically reduced. Adjudication continues to address complex issues that are subsequently considered in the TCC. These include valuations and pay less notices, “smash and grab” adjudications, and arguments about natural justice and adjudicator jurisdiction.
It is undeniable that adjudication has evolved. Complex disputes worth millions of pounds are adjudicated now. Adjudication often involves solicitors, barristers and experts. It remains “rough and ready”, and the costs can be significant. According to a paper produced for the Adjudication Society in November 2017, the average total fee charged by adjudicators was £8,878 per adjudication. And this relates solely to the adjudicator’s fee; it doesn’t take into account legal and expert fees or lost management time. Adjudication has, arguably, morphed into “litigation-lite”.
So a question for those of you who’ve been involved in adjudications over the last 20 years: did you feel it resulted in a “win-win” solution? I’m going to hazard a guess that many of you will say no.
A faster, cheaper option
But is there an alternative? Is there a forward-looking process that’s quick and cost-effective and which lets the parties express how they view the dispute? A method that establishes (or re‑establishes) communications and negotiations and allows parties themselves to decide on the final and binding settlement?
This is how mediation works. Generally accepted statistics indicate that about 80% of disputes that go to mediation are settled either on the day or shortly afterwards. That’s a pretty high success rate. If the parties don’t settle, they can still carry on to court, arbitration or adjudication. Everything said or disclosed in the mediation stays confidential and cannot be used in any subsequent proceedings.
Mediation benefits from the presence of a neutral third party, the mediator.
The mediator brings his or her own skills set to the process, including negotiation, communication and listening skills, and is independent and neutral. The mediator does not decide the outcome for the parties – the solution remains at all times in the hands of the parties. This is a crucial difference between mediation and adjudication or litigation.
Mediation also lets the parties think – and negotiate – around the strict legal confines of their dispute. In adjudication, the adjudicator’s jurisdiction (and thus the decision the adjudicator can reach) is rigidly defined with reference to the dispute as referred in the notice.
A settlement in mediation can include not only financial claims – freeing up cash flow – but also other, commercial or practical elements. Elements the parties would not be free to discuss or include in adjudication proceedings.
The benefits of mediation include:
- A confidential and dedicated space for the parties to explain how they each see the situation
- Starting, or re-establishing, communication and negotiations
- Letting the parties take control of the problem to find a final, binding solution.
Twenty-four years on from Constructing the Team, it may be time to reassess our dispute resolution options. Mediation is not a panacea for the disputes that occur in construction and infrastructure projects. But it gives the parties the space and possibility of achieving the “win-win” scenario that Sir Michael Latham envisaged in 1994.