20
Sun, Oct
22 New Articles

Arbitration in the Construction and Engineering Sector

Special Reports

Arbitration is once again becoming popular in the construction and engineering sector, but parties must make sure they choose the right arbitrator

 

If a builder contractor completes his obligations under a contract later than the agreed date, a quarrel might develop about whether he is liable to forfeit part of his payment for not delivering his promise on time. The contractor might accuse the employer of placing obstacles in the way of the smooth progress of the works, such as failing to provide adequate access to the site. The employer might have demanded some variations to the original design, and then fell out with the contractor when he subsequently charged extra for the additional work. This scenario hints at the fact conflict often occurs on construction and engineering projects, large or small, and there is relentless potential for disputes to occur.

The resolution of construction and engineering disputes has advanced building contract law to high levels of sophistication. In fact, construction dispute resolution is such an established and significant element of English law that it has its own specialist court, the Technology and Construction Court (TCC).

The end result of litigation in the TCC is a binding and enforceable judgment which, as a result of legal precedent, should preclude similar disputes arising in the future. The reality also is that parties have no control over the litigation process, or who is appointed as judge to hear their disputes. Litigation can often prove to be a lengthy and costly exercise. In the TCC it is invariably held in public. Proceedings and judgments are often published, and many are broadcast in the media and in technical journals. This is not good for business and professional reputations.

Arbitration, on the other hand, is driven by party autonomy. The parties choose for themselves how they want the dispute to be dealt with and can agree, for example, the timetable and procedure for submitting evidence and responses. Arbitration procedure is held in private and the outcomes are not automatically drawn into the public domain. Another key benefit of arbitration is that the parties can select their arbitrator, or agree on a method for his/her selection. This means they can choose someone who speaks the language of the parties, and is able to understand highly technical issues integral to the dispute

Arbitration has for a long time been recognised as a viable alternative to litigation, but it is only as good as the arbitrators who are appointed to resolve disputes.
The quality and experience of an arbitrator will significantly impact on the value of the overall process and its outcome. It can be immeasurably important for an arbitrator to possess certain skills and subject matter experience.

The parties’ power to choose their arbitrator is a major advantage of arbitration over litigation. It stimulates confidence in the process when an appointed arbitrator is someone the parties recognise and respect as someone with relevant technical expertise in the subject matter.

The Royal Institution of Chartered Surveyors (RICS) is named in many standard forms of contracts as an arbitrator appointing body, and RICS has been regularly appointing chartered surveyors to act as technical arbitrators for over 40 years.

Chartered surveyor arbitrators are appointed from a panel which is maintained by RICS. All surveyors who aspire to be on the panel must comply with strict
criteria, which include completion of a 20- month RICS Diploma in arbitration law and practice, or comparable qualification approved by RICS. They must also demonstrate their ability to discharge the role through practical assessments and robust interviews.

Surveyor arbitrators bring enormous levels of subject matter knowledge and expertise to arbitrations. Their understanding of the way construction projects
work and are costed helps them to appreciate how disputes arise, and what might be at the core of a particular matter. This can reduce the time and costs in dealing with procedural matters and issues, which in turn minimises disruption to the everyday business of parties who are involved in arbitration proceedings.

Chartered surveyors are technical arbitrators, though they must also maintain a high level of awareness and knowledge of arbitration procedure and relevant law
RICS requires chartered surveyors on its panel of arbitrators to undertake 100% more CPD than other surveyors who are not arbitrators (40 hours compared to the standard 20 hours). Half of the 40 hours’ CDP must be relevant to a surveyor’s role as arbitrator.

Becoming an RICS qualified arbitrator requires significant investment in terms of time and money. There will always be the uncertainty for any person seeking to qualify as an arbitrator that they will ever be appointed to resolve disputes. So why do so many chartered surveyors put themselves through the discomfort of all the training, assessment and additional CPD?

It is feasible that part of the answer lays in the fact that merely being an RICS arbitrator is a sought-after qualification in its own right. It provides status and it
adds kudos to a surveyor’s professional CV. Training and qualifying as an arbitrator imparts a range of transferable skills and knowledge, which makes a surveyor more marketable in other areas of his or her professional work.

For others though, the aim is to get regular work as an arbitrator, and get paid for it. A chartered surveyor who wants more than a qualification and status, needs
to put the time in to gain hands-on experience. It must be said that actually doing arbitrations is vital to achieving a reputation in this highly specialised field. A starting point for an aspiring arbitrator is to offer to arbitrate low value disputes for little or no financial reward. It is also advisable to raise one’s profile and gain some credibility in the market place. They would be wise to join arbitration network groups and volunteer to speak and write on the subject, for example.

It seems inevitable that the construction and engineering sector will remain a source of conflict. Arbitration is likely to continue as a viable way to deal with disputes, and there are signs that it is in reality gaining in popularity. Parties and lawyers irritated by onerous costs regimes in litigation, and who desire levels of meticulous and careful consideration of issues in disputes that are not available through 28-day adjudication, appear to be turning their attention towards arbitration. For parties who desire privacy, and comparatively inexpensive and speedy outcomes, arbitration conducted by subject matter experts is the way forward.

Martin Burns
14 March 2016

Sign up via our free email subscription service to receive notifications when new information is available.