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Construction contracts often provide for the arbitration of construction and engineering disputes rather than litigation.
Our advice would ordinarily be that it is preferable to have litigation as the express means of dispute resolution rather than arbitration.
Unfortunately, at the time of negotiating or entering into a contract, Specialist Contractors may regard dispute resolution clauses as peripheral and unimportant. The problem is that by the time a dispute arises, it is too late to change or add them, unless both parties are willing to do so – an unlikely event given that the parties are by then in dispute.
Arbitration is a “voluntary” process of dispute resolution where a neutral third-party renders a final and binding decision as between the arbitrating parties, which can be enforced as if it were a judgment.
We highlight “voluntary”, because arbitration is a contractual agreement and an arbitration provision in the proposed contract, is open to negotiation in much the same way as all the other terms.
It is not a “voluntary” process if it is one of the terms that the Contractor will not negotiate!
If a party tries to litigate in breach of an express contractual agreement to arbitrate, English Courts will ordinarily ‘stay’ proceedings.
See the Arbitration Act 1996
“s9 Stay of legal proceedings
(1) A party to an arbitration agreement against whom legal proceedings are brought
(whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.
(2) An application may be made notwithstanding that the matter is to be referred to
arbitration only after the exhaustion of other dispute resolution procedures.
(3) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.
(4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.
(5) If the court refuses to stay the legal proceedings, any provision that an award is a
condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.”
What is arbitration?
Arbitration is a procedure by which the parties to a dispute appoint an independent and neutral arbitrator to determine the dispute.
Arbitration is often selected in a contract as an alternative to litigation and arbitration has many parallels with litigation.
The object of arbitration is to provide a fair resolution of a dispute by an impartial tribunal.
The arbitrator will hear both sides’ evidence and arguments and make a decision, which the parties will have agreed to be bound by.
The general procedure and the steps that will be taken in litigation and arbitration can be very similar and judges are sometimes appointed as arbitrators.
Why choose arbitration?
The parties to a dispute must arbitrate a dispute if they have a prior contractual agreement to do so, or agree to do so after the dispute has arisen.
In the absence of agreement a party cannot force another party to resolve a dispute by way of arbitration.
The main reason for opting for arbitration is that the entire process will usually be conducted in private. Court hearings usually take place in public, which makes arbitration attractive to parties wishing to prevent trade secrets or other sensitive information from entering the public domain.
The parties can appoint an arbitrator of their choice who is experienced in the relevant field, which means the process can be less costly than litigation because there may be less of a need for expert evidence although there will be other costs that would not be incurred in litigation.
Although in some circumstances arbitration can be cheaper than litigation, it can also be more expensive because the parties have to pay for the venue and the arbitrator’s fee.
What if I disagree with the arbitrator’s decision?
In certain limited instances an arbitrator’s decision can be appealed to the High Court.
How do I enforce an arbitrator’s decision?
Unless they have agreed otherwise, the decision is final and binding on both parties. In most cases a party in whose favour a decision has been made will be able to enforce the award immediately through the Courts
As Specialist Sub-Contracting is all about entering into legally binding contracts (with Contractors or Clients) you will be pleased to know that you can access a wealth of information on Streetwisesubbie.com about avoiding contractual problems and construction arbitration.
If you already have a problem with a Contractor or Client or a Construction Arbitration and you need help to find a solution please check out the Dispute Resolution Section for information that may help you to resolve the situation.
If you simply haven’t got time to look or have any other arbitration problem whatsoever and you can’t find what you are looking for, then why not use the Ask Streetwise feature on this site to ask our virtual team of experts for help?
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