Arbitration in the construction industry

Revision as of 08:15, 5 December 2011

Arbitration is a private, contractual form of dispute resolution. It provides for the determination of disputes by a third party arbitrator or arbitration panel, selected by the parties to the dispute. Disputes are resolved on the basis of material facts, documents and relevant principles of law.

The arbitration process is administered by an appointed arbitrator subject to any relevant contractual rules and subject to the statutory regulatory framework applied by the domestic courts. There are only limited rights of appeal and legal costs are usually awarded to the successful party.

English law does not insist on any formal requirements for an arbitration agreement (for example it can be verbal), however if the agreement is not in writing it will be outside the supervisory regime of the courts established by the Arbitration Act. In addition, construction projects with complex disputes require properly constituted arbitration procedures in order for them to be effective.

Arbitration clauses are traditionally found in all standard form contracts used in the UK, often with related adjudication clauses (for example JCT 05, and ICE 7th Edition (replaced by NEC3)). In the last few years there has been a tendency to set the dispute resolution default at litigation rather than arbitration leaving the parties to specifically agree to arbitration (for example JCT 05 Section 9 and NEC3 option W2). Arbitration remains the favoured method of dispute resolution for international projects (for example FIDIC contracts) and UNCITRAL are widely accepted in international commerce.

Arbitration commences with a notice to concur which provides for agreement on the appointment of an arbitrator, failing which an arbitrator may be appointed by a nominating body (who should be named in the contract). Arbitration is now usually combined with adjudication and mediation in tiered dispute resolution procedures (see for example the Chartered Institute of Arbitrators ‘catch all’ dispute resolution clause and the Construction Industry Model Arbitration Rules 2005 (CIMAR).

See also

• Alternative dispute resolution.
• Adjudication.
• Mediation.
• ICE contract.
• JCT contract.
• FIDIC contract.
• JCT/CIMAR: Construction Industry Model Arbitration Rules.
• PACE: Guide to the Appointment of Consultants and Contractors P549 and 384
• OGC guidance on dispute resolution.