Disputes in construction are as essential as concrete and steel. Since the industry involves high stakes and multiple parties, payment delays, quality issues, as well as timeline conflicts, are common. Besides, these issues often escalate at a rapid rate, frequently leading to delays in project completion and damage to business relationships.
Are you thinking of traditional litigation? Well, adopting traditional litigation is like fixing minor issues in a pipe by demolishing a wall. It’s highly time-consuming and expensive, leaving every stakeholder exhausted and frustrated. The industry requires solutions that are practical and efficient, and here’s where Alternative Dispute Resolution (ADR) comes into the picture.
With ADR, you get faster and more cost-effective solutions for conflict resolution while maintaining confidentiality and preserving personal ties. Whether you are looking for the best solutions through dispute review boards, arbitration, or mediation, ADR provides quicker and more affordable means of resolving conflicts while advancing projects.
Through this blog, we explore what is ADR, its importance, and the different methods used in construction. Besides, you will also learn how these methods are becoming increasingly popular and how they help you resolve disputes while maintaining valuable business relationships.
What is Alternative Dispute Resolution?
Alternate Dispute Resolution (ADR) refers to the modern way of settling disputes or conflicts with the involvement of courtroom litigation. Instead, as an alternative to the traditional methods of resolving conflicts, the parties involved agree to use an ADR process, such as arbitration or mediation. Today, ADR received broad acceptance from the public and the legal profession. If your workplace is experiencing disputes due to poor communication, personal conflicts and alleged discrimination, ADR is the best method of resolving the conflict.
ADR encompasses a spectrum of dispute resolution techniques, covering processes like fact-finding, early neutral evaluation, mediation, negotiation, settlement conferences, arbitration, and adjudication. The different processes associated with ADR help you achieve the following results:
- Motivate the parties to focus their attention on the issues.
- Offer the parties equal opportunities to present their perspectives on the situation.
- Offer the parties a chance to hear a clear explanation of each other’s view for the first time.
- Offer the parties a plethora of opportunities to identify their common interests and points of agreement.
How Does ADR Work?
The functioning of ADR depends completely on the method that both parties agree to use. Several attempts may require direct negotiation between the parties. The parties require working together, clarifying the issue, and figuring out a solution that would work best for all parties involved. If the parties fail to solve a dispute with the process, they must move to mediation or arbitration.
For arbitration and mediation, the parties require hiring a third party, often an attorney, skilled in these areas. The attorney or the third party adopts the discovery process to gather the maximum information possible, helping the parties to arrive at a mutually agreeable solution. While in the case of mediation, the parties themselves come to an agreement; in the case of arbitration, the mutual party decides the outcome. However, if a case fails to achieve resolution through ADR, the parties might take it to the court, allowing the judge to decide the outcome.
Modes of Alternative Dispute Resolution
Mediation, conciliation, arbitration and judicial settlement are some of the most common types of ADR. Let’s discuss each of them in brief.
Negotiation
It’s the most informal and least expensive method of dispute resolution, where only the parties in disagreement and their negotiators take part. The goal of the negotiators is to resolve the disputes on terms acceptable to both parties. The best part about negotiation is that it promotes the parties’ interests, maintaining their relationships where they invest their effort, time, and money. In the event of a failed negotiation, the parties have an opportunity to identify the actual points of their disagreement and understand the other party’s stance on the issue.
Mediation
Mediation, often referred to as assisted negotiation, is a voluntary and informal Alternative Dispute Resolution methods. The negotiation involves a simple, voluntary and party-ventured approach where a neutral or third party or mediator helps the parties in disagreement resolve their conflicts through specified negotiation techniques.
You can opt for an informal or formal mediation process. In the case of an informal mediation, the mediator is usually a friend or family member or a trusted advisor. In such a scenario, you must select a person to whom both parties can agree. In addition, the mediator must bring some form of expertise to bear on the situation. However, in the case of a formal mediation, the parties must hire a professional.
The formal mediators are trained negotiators, helping parties solve the issues and satisfying them. Regardless of whether the process is informal or formal, the mediator does not decide who is right or wrong. The goal is to help the parties find a mutually acceptable resolution. Although the conversations are confidential, a written agreement can also be obtained. Mediation is most helpful when two parties fail to resolve a dispute independently.
Conciliation
Conciliation is similar to mediation. It’s a confidential, flexible, and voluntary ADR method facilitated by a neutral third party. Besides, it focuses on reaching a dispute resolution that satisfies both parties.
However, there are certain differences between mediation and conciliation. In this method, the conciliator offers parties a proposal to resolve the issue. The versatile Alternative Dispute Resolution mechanism helps the parties decide the time and content of the conciliation procedure, which is seldom public. The method is appropriate where the conflicting parties wish to preserve and sustain their commercial relationships.
Arbitration
A type of alternative dispute resolution, arbitration refers to a strategy for resolving conflicts outside the court system. In case of a disagreement, the parties submit their dispute to an arbitrator for rendering a decision following the process. The third party of the arbitrator examines the evidence, rendering a legally enforceable decision for both parties.
Although formal and similar to a court proceeding. Yet, unlike an open court, the process remains private and confidential. Voluntary and compulsory arbitration are the two major types of arbitration. Other forms of arbitration involve ad-hoc arbitration, institutional arbitration, statutory arbitration and domestic arbitration.
Judicial Settlement
Similar to arbitration, judicial settlement or expert determination involves a private process. In such a scenario, either the parties themselves or an appointing body appoints an independent technical expert. The expert conducts their investigation and reaches a decision on the dispute. Expert determination is the best choice when the parties have disputes on a technical issue rather than a legal one. The expert must use their expertise, knowledge, and experience to make their final decision.
The decision given can be binding or non-binding. Besides, the expert never refers back to the parties before they make their decision, saving time and money. Parties can also opt for expert determination alongside other dispute resolution processes. Mediation is the most often used process along with the judgmental process when an authority requires making a binding decision on a technical issue as a part of a wider dispute.
Importance of Alternative Dispute Resolution in Construction
In this section, we will discuss some of the advantages of ADR and learn how a dispute resolution firm can help in settling disputes.
Cost-Effective
Most construction companies these days are opting for more affordable processes for settling a dispute instead of going to trial. Trials are expensive, as they involve high attorney fees, court reporter fees, and other expenses. Furthermore, a drawn-out court trial requires both parties to attend the hearing. However, with the cost-effective ADR, the parties need to invest significantly less time.
Faster Resolution
Construction projects are complex, and court trials remain pending for long periods in Indian courts, often taking years for a dispute to be resolved. However, with ADR, the resolution is faster. The parties receive an arbitration award in a shorter time compared to a court trial.
Maintains Confidentiality
Since experts conduct the ADR processes outside the court, the records pertaining to disputes do not stand as public records. As construction companies possess numerous confidential information, including project costs, materials, and schedules used for dispute resolution, ADR is the most suitable process. By avoiding court trials and hearings, construction firms keep their business information out of the public eye.
Preserves Professional Relationships
In the construction industry, disputes are inevitable, making ADR the most efficient and effective method of conflict resolution. Whether there is a disagreement regarding the scope of work or a billing issue, litigation often damages relationships between parties and hinders progress on future projects. However, when problems are resolved amicably, the parties maintain business relationships where they invested their time, money, and effort.
Conclusion
With the construction sector driving Indian economic growth, the frequency and complexity of construction disputes are on the rise. The legal landscape is continuously evolving to meet the challenges of expediting dispute resolution. However, experts are trying their best to implement effective strategies to achieve faster and fairer outcomes.
As a leading and trustworthy construction firm in India, Brick&Bolt has connections with the best specialised legal services for managing all types of construction disputes. The experts are experienced and proficient in representing various stakeholders, including investors, contractors, and developers. With extensive experience in addressing disputes related to delays, contract breaches, cost overruns, and scope variations, you will receive tailored dispute resolution strategies that minimise project disruptions. Whether you are looking for an arbitrator, negotiator, mediator, or expert determination for your dispute, Brick & Bolt commits to safeguarding its clients while navigating the complex legal framework of the construction sector.
Hemali Patel