According to the Arcadis Global Disputes Survey 2016, the average value of a construction dispute is near $46m and it takes over 16 months to resolve. This guide looks at your five main options to resolve a dispute in the UK construction industry. It compares litigation (court proceedings), arbitration, adjudication, negotiation and mediation. The author is Sarah Fox 500 Words Ltd and you can get regular tips for construction contracts to help you avoid disputes and the need for dispute resolution methods in her fortnightly tips sheet http://just500words.co.uk/signup.

1. TOP 5 METHODS OF DISPUTE RESOLUTION
“Contractual disputes are time-consuming, expensive and unpleasant. They can destroy
client/supplier relationships painstakingly built up over a period of time and can impact on the
supply chain. They can add substantially to the cost of a contract, as well as nullifying some or all
of its benefits or advantages.”1
1. Litigation
Litigation is the most widely recognised and used form of dispute resolution. It means taking an
action to the court to determine or enforce a partner’s rights, whether under contract, tort or
statute. The High and County Courts deal with civil claims (i.e. claims between legal persons) but are
not restricted to disputes relating to contracts. Claims under statutes, tort and other legal principles
can be brought.
Litigation is a dispute conducted in and subject to the rules2
of the courts. The courts of England and
Wales3
have an adversarial legal system where the claimant and defendant present their best
possible case. The role of the tribunal is to make a decision based on the information before it (the
evidence) and the relevant law.
Litigation can be slow and expensive compared with other means of dispute resolution, including
adjudication.
Tribunal: The majority of cases are heard by a single judge, with both parties represented by
lawyers. Often cases are slow and expensive. In the Technology & Construction Court (TCC) there are
specialist judges in construction disputes and IT cases. The expertise of the tribunal can minimise
delays, costs and unnecessary explanations. The judges can also apply their expertise to setting
appropriate procedures.
Procedure: This is determined in part by the Civil Procedure Rules (CPR), although judges have
effective powers to manage the case, the costs and the timescales in court.
Costs: The costs of litigation can be prohibitive. The losing party usually pays the winning party’s
legal costs. In Multiplex v Cleveland Bridge4
the legal costs were £22million (£1million on
photocopying).5
However the courts are prepared to disallow costs where they are not proportional
to the amounts claimed.
Advantages: Litigation is one of the main methods of resolving disputes because:
• It is possible to add other parties (even if unwilling) into the dispute
• The result is enforceable immediately
• It involves an in-depth forensic analysis of dispute can provide ideas to improve future
contracts
• The judges are very experienced in law, commercial relationships and some (e.g. TCC) in a
specialist area of disputes.
But as an adversarial process it is likely to damage the partners’ relationship and depends on
confidence in the process and the judge who ultimately decides the case. Like arbitration, the
outcome is rarely based on balancing the interests of the parties, but a strict application of the law
to the evidence.

2. 2. Arbitration
Arbitration is a dispute conducted in and subject to the rules of an arbitrator. The arbitrating parties
agree to accept the decision of the arbitrator as legally binding (subject to limited rights of appeal). It
has a much older history than litigation particularly for resolving disputes between businesses where
the courts were slow to intervene.
For a dispute to be arbitrated there needs to be a valid arbitration agreement between the parties.6
That agreement can be made before the parties have ended up in dispute, often in their contract, or
it can made once the dispute has arisen.
Arbitration is extensively used as a method of dispute resolution internationally.
Tribunal: All arbitration hearings (interim and final) take place in a private forum in front of a single
arbitrator or board of arbitrators. The arbitrators are technically competent and can be nominated
in the contract, often for their specialist knowledge and expertise. As with the TCC, the expertise of
the tribunal can minimise delays, costs and unnecessary explanations. They can also apply their
expertise to setting appropriate procedures.
Procedure: The procedure may be set out in the contract, an arbitration agreement or agreed once
the arbitration has started. It is flexible and often tailored to the dispute in agreement with the
arbitrator herself. It can be as in-depth as litigation or based on a simple documents-only procedure.
Costs: The parties pay both their own costs, but also the costs and expenses of the arbitrator. The
award of costs is in the discretion of the arbitrator and is applied along similar lines to the award in
litigation. Where a similar procedure is used to litigation, then there is little cost saving.
Award: An arbitration award is final and binding with only three limited exceptions when one party
can appeal to the courts to overturn the award:
 Section 67: challenge to the tribunal’s substantive jurisdiction.
 Section 68: challenge on the grounds of serious irregularity.
 Section 69: appeal on a point of law.
Advantages: Compared to litigation the parties benefit from
• some input into and control of process
• cost savings, although it depends on the process
• confidentiality
• the ability to appoint arbitration or nominating body with particular knowledge, skills or
expertise
• a binding and enforceable result (as if a court decision).
3. Statutory Adjudication
In the UK, Part II of The Housing Grants Construction and Regeneration Act 1996 (Construction Act
1996)7
introduced the right of a party to a construction contract to take any dispute under the
contract to adjudication at any time.
A Construction Contract is an agreement for the carrying out or arranging for the carrying out of
construction operations. The definition of construction operations is wide ranging but excludes
certain operations, e.g. works relating to oil and gas and contracts with a residential occupier.

3. Tribunal: The adjudicator is appointed by a nominating body such as RICS, ICE, TECSA, or RIBA. The
parties can choose to agree the nominating body in their contract or once the dispute has arisen.
Many adjudicators are on more than one nominating body’s list.
Procedure: From the written referral of a dispute to obtaining an adjudicator’s decision can take as
little as 28 days. The process can be on documents only or can involve a hearing/meeting with the
adjudicator.
Costs: The parties pay their own costs and the costs of the adjudicator. These are awarded along
similar lines to the award in litigation. However, as the procedure is much quicker than litigation, the
costs are much reduced.
Award: The adjudicator’s decision is binding, unless and until it is finally decided by settlement,
litigation or arbitration, or other dispute resolution procedure. It is therefore an interim award,
which may become final through inaction.
Advantages: It is a speedy process, which can be used during the project without legal advice and so
can be done for limited costs. However, as an interim decision, the costs of the adjudication are
additional to the costs of any subsequent dispute resolution procedure, unless the parties agree to
abide by the decision.
4. Negotiation
Although under-rated, this is far the most common form of resolving disputes and differences,
especially in an industry known for its pragmatism. In multi-tiered dispute resolution clauses (co-
called ‘wedding cake’ clauses), the first step is often negotiation between members of the respective
boards.
The key success criterion for negotiation is preparation. A party who wants to agree a mutually
acceptable deal needs to understand the contracts, the project, the parties, the history of the
dispute, their behaviours, cultural influences and so on. Even if the negotiation is not successful, the
information gained will have a direct effect on any subsequent procedures, often saving time and
money.
Tribunal: The contract may set out the individuals who should negotiate and any structure or
process. However, there is rarely any independent third party tribunal.
Procedure: The aim of negotiation is to agree a mutually acceptable settlement of all issues as soon
as possible.
Costs: Negotiation usually is the most efficient form of dispute resolution in terms of internal
management time as well as external legal costs (if any). Its key advantage is that it can preserve
commercial relationships.
Award: Any settlement agreement is a contract, and has the same status as a mediation settlement.
Failure to comply is a breach of that contract.
Advantages: Negotiation is a fascinating exercise in understanding each other (although a little too
late in the process in my opinion). It has significant advantages:
• It can be combined with other forms of dispute resolution:
• It is very fast, with huge potential cost savings

4. • It is confidential (e.g. on the Wembley project the main contractor, Multiplex, settled its
disputes with the employer confidentially)
• It can help to preserve relationships
• There is no limit on the solutions the partners can agree including future working deals, and
the partners have complete control of process and outcome.
5. Mediation
Mediation is negotiation carried out with the assistance of a third party. In preparing for the
mediation, as stated in The Jackson ADR Handbook, “the lawyers acting for each party should ensure
that a full risk assessment is carried out in relation to the client’s case”. It is said that they have an
80% success rate.8
The timing of mediation is important. The parties need proper information about the claim before
they start as preparation is vital to success: “The trick in many cases is to identify the happy medium:
the point when the detail of the claim and the response are known to both sides, but before the costs
that have been incurred in reaching that stage are so great that a settlement is no longer possible.”9
Tribunal: The parties can choose to agree a mediator, or mediation body, in their contract or once
the dispute has arisen. The Centre for Dispute Resolution (CEDR) is a well-known organisation which
promotes mediation, trains and accredits mediators and can nominate mediators for specific
disputes.
Procedure: The parties, with the assistance of the mediator, are free to set whatever procedure they
think is most relevant to settling the dispute. Often there is an exchange of documents and then a
meeting to ‘thrash out an agreement.’ Most mediations usually last only one day, although they can
extend to up to 3 days; and many are heard within one month of being started. The process is
private, confidential and without prejudice.
Costs: The costs of the mediation are entirely dependent on the procedure chosen and agreed by
the parties. More critically, ignoring an invitation to mediate can have adverse consequences in
terms of costs orders in any other form of dispute resolution, particularly litigation. The costs of the
mediation are normally paid by each party with the costs of the mediator split between the parties,
although other agreements are possible.
Award: The mediator, in contrast to the arbitrator, adjudicator or judge, has no power to impose an
outcome on disputing parties. Any ‘award’ is a settlement between the parties and is not a decision
of the mediator. The outcome is a settlement agreement which is a form of contract– failure to
comply with the settlement is a breach of contract.
The Author
Sarah Fox of 500 Words Ltd prepared this note. She helps construction companies write simpler
contracts and understand complex ones. She is also author of the 500 Word Contract™. To find out
how Sarah can help you avoid disputes, contact her on: 07767 342747 or by email:
sarah@500words.co.uk.
Video Discussions
Which is better: mediation or adjudication?
Which is better: litigation or arbitration?

5. Which is better: negotiation or adjudication?
Quick explanations (videos)
1 Minute on Mediation
1 Minute on Adjudication
Footnotes
1
OGC 2003 Guidance on ADR. Available through this link.
2
The Civil Procedure Rules (CPR) 1998 govern the court procedure for the English civil courts.
3
‘The Supreme Courts of Judicature of England and Wales’ for their full title.
4
Multiplex Construction (UK) Ltd v Cleveland Bridge (No 6) [2008] EWHC 2220 (TCC).
5
Source: Article in the Lawyer, 6 October 2008.
6
Section 6 Arbitration Act 1996.
7
As subsequently amended by the Local Democracy, Economic Development and Construction Act 2009 (the
Construction Act 2009).
8
CEDR Fifth Mediation Audit, 2012, showed success rates for settlement on the day of 70% with settlement
shortly after adding another 20%. Success rates for all types of mediation are widely quoted as 80-85%.
9
Coulson J in Nigel Witham v Smith [2008] EWHC 12.