Pros and Cons of Construction Arbitration

Well, before I go on about this, please allow me to boast a little. Of all the construction contracts for which I’ve been Project Manager, none have ever gone on to Dispute, either in the Law Courts or to Arbitration. More on that after we’ve had a look at the pros and cons of Arbitration.

Ah, I remember it well! In 1996 Parliament passed the Arbitration Act. Us builder’s, like, we took it to be something special and just for us and for our benefit. We took it to be Arbitration in Construction as a new idea for us special people! Strangely, as far as I’m aware, it does actually only seem to be construction disputes which go to Arbitration, although any industry is free to use it.

Read here: Things to Know About Lean Construction Management

We Proudly Call It Construction Arbitration

However, there was a precursor to the Arbitration Act; 1996 and that was the Arbitration Act; 1698! See? Nothing new about the idea! We were just a bit ignorant and didn’t realise that! There have also been various additions and amendments to it during these intervening three centuries.

Now going back to pre-1698 the only Courts there were, were the Royal Courts of Justice. To manage to bring a case before them was a very long-winded process, often taking years to get a hearing. They also meant there was a need to retain legal representatives who were horrendously expensive for most people with a grievance they wanted to have resolved. Allowing people to go to Arbitration allowed them to take their dispute before someone unbiased person, or persons who had some expert knowledge of the technical area being disputed. The two sides presented their arguments and got a decision for the Arbitrators. No heavy costs were incurred I being able to do this; their own staff could represent their side of the story. The pre-requirement was that both parties had to agree to accept the Arbitrator’s decision.

These are the Pros of Construction Arbitration; quick, cheap and easy!

Which takes us to the Cons! For a dispute to be accepted for Arbitration the parties must have agreed to abide by the decision of the Arbitrators. The trouble comes when one party dislikes the outcome so much that they fail to comply with it! There is no power to enforce the decision such as is exercised by a Court of Law. When this happens, all Arbitration has been is a waste of time and effort! The only next step is the Courts! It is quite possible that the additional time delay in a resolution by first going to Construction Arbitration is the thing that pushes one of the construction companies involved into insolvency! That, generally, is the end of the story; Administrators don’t usually pursue litigious claims although they may tighten up the screws to get some cash back. If nothing else, they want a bit of profit to pay themselves!

Now, back to the very beginning of this Blog: – I have managed to avoid all Disputes in my projects by the simple expedient of persuading all parties involved to be sensible and to come up with requests for additional payments which are reasonable and proven or to admit to defective workmanship or materials and to make good their at their own expense.

Common sense rules! Okay!