Disputes happen. Regardless of size, value or type of project/works, disputes can cause significant issues and delays. Alternative dispute resolution (ADR) offers a way to solve disputes fairly and quickly. Some ADR options can also result in a binding decision that both parties must stick to.
In this guide, we look at exactly what ADR is, the different types of ADR and the advantages of ADR over court proceedings.
What is alternative dispute resolution (ADR)?
Alternative dispute resolution (ADR) is the term used to describe ways of resolving a dispute without having to go to court. There are many different forms of ADR, but the one thing they have in common is that they all have the potential to resolve a dispute without any court involvement. This is why it is referred to as ‘alternative’ – it’s an alternative to litigation (settling in a court of law).
What are the different types of alternative dispute resolution?
Some of the more common forms of ADR include:
- adjudication
- mediation
- arbitration and
- expert determination.
Here we’ll look at each in detail.
Adjudication in construction
The most common form of ADR to resolve construction disputes is adjudication. It was established by the Housing Grants, Construction and Regeneration Act 1996 (commonly referred to as the Construction Act). This Act says that any party to a construction contract can refer any dispute under that contract to an impartial adjudicator to make a decision on how to resolve the issue. However, the Construction Act does not apply where one of the parties is a ‘residential occupier’ (a person who is living in a property).
The aim of adjudication is to resolve the dispute quickly, fairly and cost-effectively. The Construction Act outlines a 28-day procedure for adjudication, although this can be extended for another 14 days with the agreement of the party that started the procedure, and even longer if both parties agree.
RICS adjudicators are experts in their field, with many years of experience in the construction industry. Opting for adjudication ensures the parties use a knowledgeable professional to resolve their dispute. The adjudicator understands the technical issues relating to construction. They will evaluate the evidence submitted by each party and will reach a decision based on the facts of the case. The adjudicator’s decision is binding, although it can be overturned later by a court or by arbitration.
The parties to a dispute can agree who their adjudicator will be. If they can’t agree, one of the parties can apply to an Adjudicator Nomination Body (ANB) to appoint one for them. RICS is the UK’s leading ANB, and is such a popular choice because its adjudicators are experts in the issue the parties are arguing about. They are also regularly reassessed by RICS to ensure they maintain their high levels of expertise.
Mediation
Parties who opt to use mediation agree that they want to try to negotiate a settlement of the issues. They instruct an experienced mediator to help them engage in meaningful dialogue, explore the disputed issues in detail and keep them focused on achieving an amicable outcome. If they cannot agree on a mediator, or do not know who to approach, they can ask RICS to make the appointment for them.
A mediator isn’t there to come to a decision themselves or impose a solution on the parties. The role of the mediator is to help the parties clarify and prioritise their issues, and understand the needs of the other party, as well as supporting their search for solutions.
There are different forms of mediation. Some mediators are facilitators who guide and manage the parties through a process of controlled negotiations to help them find appropriate solutions. Mediation can also be more hands-on, with the mediator evaluating the parties’ positions, pointing out areas of weakness in their case and offering solutions they may not have considered.
Mediation can be used alongside other forms of alternative dispute resolution. For example, parties may use mediation to explore options to settle one aspect of a larger dispute that is being determined by arbitration or adjudication.
Mediation tends to be more cost-effective and flexible, and less formal, than some of the other forms of ADR. Disputes can often be settled quickly, sometimes in as little as a day, but it does require both parties to participate fully and work together to reach a settlement.
Arbitration
Arbitration is a form of alternative dispute resolution where both disputing parties agree for a decision to be made by an independent arbitrator (or a panel of arbitrators). The process is formal, similar to court proceedings – but, unlike open court, it is private and confidential.
The arbitrator will usually be an expert in the subject of the dispute. The parties put forward their case to the arbitrator, who will assess the evidence and decide which party’s case was most persuasive. The arbitrator’s decision (called an award) is final and legally binding. This means that if a party doesn’t like the arbitrator’s findings, it is not possible for them to try and get a better outcome by taking the case to court.
Arbitration can be a quicker and more cost-effective solution than going to court.
Expert determination
Like arbitration, expert determination is a private process where an independent technical expert is appointed (by the parties themselves or by an appointing body such as RICS) to conduct their own investigation and reach a decision on the dispute. Expert determination is often used when the dispute focuses on a technical issue rather than a legal one. The technical expert will be required to use their expertise, knowledge and experience to come to a decision.
The decision can be binding or non-binding. The expert also doesn’t have to refer back to the parties before they make their decision, which can save both time and money.
Expert determination is often used alongside other dispute resolution processes, most often mediation, if an authority (who is independent of the mediator) is needed to make a binding decision on a technical issue as part of a wider dispute.
How does ADR work?
The exact process will depend on the type of ADR chosen, but typically it will involve an impartial professional – such as a surveyor, lawyer or other technical specialist – who is tasked with resolving the issue between the parties. This will be done either by:
- examining evidence submitted by the parties to the dispute, judging whose is the most persuasive and issuing a decision – as in arbitration, adjudication or expert determination, or
- facilitating discussions between the parties so that they can come to a mutually acceptable agreement – as in mediation.
Courts will often encourage parties to use ADR before beginning court proceedings as it can be cheaper and quicker for the parties involved. It also helps to keep the court’s time free for cases that need to be litigated. In fact, some courts will even penalise a party who has unreasonably refused to use ADR before initiating court proceedings.
What are the advantages of ADR?
ADR offers an opportunity for parties to avoid going to court. Court proceedings are lengthy, costly and can cause significant bad feeling between parties. The process can also be stressful, and the level of formality can be intimidating. ADR, on the other hand, can be a much quicker process – for example, adjudication can be completed within 28 days and mediation can even help find a resolution in one day.
One of the main benefits of ADR is that it is a much more cost-effective solution. Yes, there are costs involved, but they can be significantly less than the legal costs associated with taking a dispute to court. Some ADR proceedings are notably less formal, such as mediation where the parties need to work together to find a solution.
At RICS, we offer a range of world-class dispute resolution services, and we inspire confidence in parties through our complete impartiality and the quality of our dispute resolvers. Discover more about RICS and our dispute resolution services.