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Resolving disputes: what is your best option?

Byline: By Anne Marie Knight

What happens if there is a dispute? It is obviously sensible to give some thought to how any disputes are going to be resolved before they actually happen, preferably at the time your contract is drafted.

There are three main methods of resolving disputes in the engineering industry, namely by litigation, arbitration or adjudication.

The two main rivals are litigation in the courts and arbitration before an arbitrator. Both are lengthy, fairly slow-moving and expensive procedures which give you a "final decision" which is subject to appeal, although there is only limited scope for appeal in arbitration. The main advantage of arbitration over court litigation is that it is private.

Increasingly, however, employers are taking advantage of the right to adjudicate. So long as you have the type of contract that qualifies, you can obtain a speedy decision from an adjudicator within 42 days of referring the dispute. The adjudicator's decision is binding and the loser must "pay up", although the adjudicator's decision may be reviewed in due course by a judge or arbitrator if formal proceedings are subsequently commenced by either party

In other words, adjudication gives a temporary result. The advantage for the referring party is that he can "ambush" the respondent to adjudication by taking time to fine tune his case preparation, whereas the respondent is pushed into putting in a response to the claim with only a week to prepare due to the very short timetable which adjudication gives.

The most important aspect to be aware of in relation to adjudication under the statutory scheme is that there is no provision for the recovery of legal costs. These may amount to many thousands of pounds. If you want to avoid this, then you need to make sure that your contract provides an adjudication clause that allows the adjudicator to make an award that includes the recovery of costs. A judge or arbitrator will always have the power to order the recovery of legal costs. This could be key where the costs are substantial.

Always consider the issues that matter most to your business when deciding how to resolve your dispute such as speed, expense or privacy. Think about this when you are considering the proposed contract terms at the beginning of the project. Do not leave it until it is too late after the problem has arisen.

Anne-Marie Knight is an associate in the construction department of Watson Burton LLP.
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Publication:The Journal (Newcastle, England)
Date:Apr 20, 2007
Words:409
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