Alternative Dispute Resolution in Construction and Infrastructure Disputes
The term ‘alternative dispute resolution’ (ADR) refers to a range of techniques and processes used to resolve a dispute short of the normal trial process. They are not new – their use can be traced back some 3,800 years to the warring kingdoms in what is now modern-day Syria. However, the past 50 years has seen the global adoption of ADR. This is in part a reaction to the perceived delay in obtaining a decision through arbitration or litigation, and the high costs of both. The febrile economic climate caused by covid-19 has prompted renewed focus on ADR as a means to solve disputes quickly and cheaply.
In this chapter we look at the use of ADR to resolve disputes in the global construction and infrastructure industry. We give an overview of the six main options available and assess their strengths and weaknesses individually, and in comparison with arbitration and litigation.
We start with the non-binding processes that assist the parties in reaching agreement: negotiation, mediation, early neutral evaluation and the mini-trial. We then consider the main temporary binding process: contractual and statutory adjudication. The use of dispute boards in their many guises is a form of contractual adjudication and is dealt with in Chapter 9. Finally, we consider one ADR process that produces a binding decision: expert determination.
This is the simplest method of ADR. Parties to a dispute can try to negotiate a settlement at any time, whether or not it is provided for in any contract between them. Negotiation can be informal: by email, telephone or face-to-face. It can also be more formal, undertaken with the assistance of lawyers and other third parties such as experts. It can take place at any stage of the dispute, and be as quick as the parties want. Negotiation can be between two parties or many parties. Typically, negotiation is private and confidential. In situations where English law applies, the negotiations are usually subject to the ‘without prejudice’ doctrine. The parties retain control of the outcome as they decide whether the proposed terms are acceptable, and give instructions and approve any agreement reached.
Many standard form construction contracts and other construction contracts for long-term or large-scale projects include dispute resolution clauses, which specifically provide for negotiation to escalate through various levels of management. These dispute escalation clauses often begin with a meeting between site representatives, progressing to meetings between directors, finance officers or other senior executives, all with a view to resolving the dispute. This is a useful way of raising awareness of the dispute at more senior management levels. It creates the opportunity for a more objective assessment of the position by senior decision makers, thereby increasing the opportunity of settlement. A successful negotiation increases the chances of maintaining the relationship between the parties.
However, negotiation can be used as a stalling tactic. The absence of a neutral party to manage the process may reduce the chances of reaching agreement, particularly in complex disputes or those involving many parties. In a sophisticated industry sector such as construction and infrastructure where the participants are well placed to identify and manage risks, there is every reason to expect parties to be able to reach a settlement through simple negotiation.
Mediation is a process whereby the parties attempt to reach an amicable settlement with the assistance of an independent and impartial third party. The mediator has no authority to impose a solution on the parties. Mediation can be arranged at any time, anywhere and at short notice. A mediator is appointed by the parties. There is no need for the mediator to be legally qualified.
There are a number of initiatives attempting to develop global, professional standards for mediators and advocates in mediation. Mediation has also adapted quickly to the covid-19 landscape, recognising the efficacy of meeting online.
There is no set procedure for a mediation. It can take place online, by telephone or face-to-face. Many mediations have taken place online or with a hybrid form in the past year due to the covid-19 pandemic. The hybrid mediation can take many forms, such as where one party has some participants online and some together in one venue or all of one party’s participants are together in a venue and others are online. The framework usually is established by the relevant provisions in the underlying contract, and in the mediator’s appointment. All mediation is broadly private and confidential, and where English law applies, is subject to the ‘without prejudice’ doctrine. Mediation can be used in cases involving two parties and those involving multiple parties.
There are two, possibly three, main types of mediation: facilitative, evaluative and transformative. In all cases, the parties are given the opportunity to voice their point of view. In a facilitative mediation, the mediator simply facilitates agreement between the parties. The mediator helps the parties to focus on the real issues in the dispute and find their own solution. He or she gives no view on the merits of each party’s position nor of the likely outcome if the matter is ultimately decided by a judge or other final determiner. In an evaluative mediation, the mediator provides the parties with an assessment of the merits or the likely outcomes. These views are not binding unless the parties agree that they will be. In a transformative mediation, the mediator seeks to transform the relationship of the parties away from an adversarial and attritional relationship to a collaborative relationship. The mediator usually declines to offer a view on the merits of the dispute, but rather facilitates the parties to evaluate the strength of their position in relation to the other. Generally, unlike the other two forms of mediation, transformative mediation happens almost exclusively in joint sessions.
The parties agree which of these types of mediation should apply. They can change that approach during the mediation. Facilitative mediations are far more common than evaluative. Of the three, transformative mediation is the newest type or style.
Mediation in many jurisdictions is not mandatory. At present, judges in England and Wales have no statutory or other power to order parties in a construction dispute to mediate. However, its use in England and Wales is generally strongly encouraged. An unreasonable refusal to mediate will be taken into account when determining costs, even in situations where a party is otherwise entitled to recover their own costs. There is also judicial support in England and Wales for making an order for compulsory mediation – but no such order has yet been made in a construction dispute. In contrast to this, various jurisdictions have adopted forms of compulsory mediation/ADR for civil disputes.
The international reach of mediation is demonstrated by the number of global providers of mediation services or rules, such as the International Chamber of Commerce (ICC) and the American Arbitration Association/International Centre for Dispute Resolution, together with more regionally based institutions, such as the Hong Kong International Arbitration Centre and Singapore Mediation Centre. The European Union actively promotes mediation. The principal objective of the EU Mediation Directive is to encourage recourse to mediation in the Member States. Where EU law applies, it applies to cross-border disputes in civil and commercial matters.
The main advantage of mediation is that it can produce a quick and cost-effective settlement. Insofar as there is data available, it seems to have a good success rate. Referring a matter to mediation reduces the instances where a dispute leads to the termination of a commercial relationship. Mediation allows the parties to find their own solution, and to accept a range of outcomes broader than any court or arbitrator has the power to grant.
The main disadvantage of mediation is that the resulting settlement agreement is only binding contractually. It is not directly enforceable in the courts. Its enforceability relies on the parties to honour the deal they have made. Where this does not happen, the parties remain in dispute and litigation may be necessary to enforce the settlement agreement or resolve the dispute entirely. This perceived weakness is now addressed by the United Nations Convention on International Settlement Agreements Resulting from Mediation, named the Singapore Mediation Convention. It entered into force on 12 September 2020, and at the time of writing, already has 54 signatories. This includes the world’s two largest economies, the United States and China, as well as several of the largest economies in Asia. The Convention (and the related Model Law) aims to provide an efficient and harmonised framework for cross-border enforcement of mediated commercial settlement agreements. Other problems with mediation are that, although less expensive than litigation, it can be expensive, particularly for smaller parties or projects. Further parties may take advantage of the mediation process to uncover the other side’s case with no real intention to settle.
Finally, there has been increasing focus on combined ADR procedures such as ‘arb-med-arb’. Here, parties embark, even if only nominally, on an arbitration and request a sole arbitrator immediately to refer the dispute to mediation. The arbitration is stayed by a procedural order that refers it to a mediator. If the mediation succeeds, the resulting agreement is referred back to the tribunal, which issues an enforceable consent award. If the mediation is unsuccessful, the matter is returned to the tribunal, and in most cases the matter continues with limited time or cost having been incurred in ADR.
This combined ADR procedure has been successfully adopted by the Singapore International Mediation Centre and the Singapore International Arbitration Centre. It can be written into a contract or agreed on an ad hoc basis once a dispute has arisen.
Early neutral evaluation
Early neutral evaluation (ENE) is a process whereby the parties instruct a neutral third party to provide a non-binding assessment of the merits of their claims. It offers the advantages of a private opinion on the merits of the dispute from an independent, respected and often expert source. There is no prescribed procedure for ENE, and the key elements of the process are likely to be set out in the underlying construction contract. ENE is usually conducted on a ‘without prejudice’ basis. It may relate to factual disputes, technical issues, legal merits or a combination of these. The evaluator may be a judge, lawyer or expert. Many professional bodies maintain lists of approved evaluators. The evaluation is privileged and non-binding, unless the parties agree otherwise. ENE may be used as a means to bring the parties directly to settlement, or may be followed by further forms of ADR. ENE can provide a quick, authoritative and objective assessment of the merits of a claim without incurring the costs of arbitration or litigation. It can be particularly useful where the parties have very differing views of the prospect of success and an inadequate understanding of the risks of litigation itself. It can focus the parties’ expectations of litigation, and offer a realistic indication of the likely outcomes. It narrows the issues to facilitate other forms of ADR. However, ENE may be less suited to disputes involving issues of fact where oral evidence needs to be heard. It is less likely to be useful in large complex disputes, where the necessary preparations may result in a process that is disproportionately expensive for a non-binding result. It may entrench the dispute and compromise further negotiation. Judicial ENE (where the evaluator is a judge) is very rarely used in the Technology and Construction Court (TCC) and commercial courts of England and Wales, although it is widely and successfully used in family law proceedings.
A mini-trial, sometimes known as an executive tribunal, is a non-binding, flexible form of ADR. Each party presents its case, usually by legal advisers, to a mini-trial panel. The panel normally consists of a company executive from each party, as well as a neutral third party who may act as a mediator or adviser. The executives who appear on behalf of the parties will not usually have been involved in the dispute, and should have sufficient authority to settle the dispute. The object of a mini-trial is to identify the strengths and weaknesses of each side’s case as quickly as possible. The parties, or their legal advisers, make short and often informal presentations to the panel, all of whom are free to ask questions. Documents, including witness statements and expert evidence, can be exchanged in advance. Following submissions from each party, the panel will negotiate. The role of the neutral on the panel is usually to provide advice on matters of law and evidence during the presentations, and to advise of the outcome in litigation if the parties fail to reach agreement in the course of the mini-trial. The neutral may also act as a mediator between the two senior executives. The mini-trial process gives senior executives an opportunity to consider the legal arguments of both sides and to then negotiate settlement from an informed position, without relying on further legal procedures or remedies. It remains an uncommon form of alternative dispute resolution, even in the United States, where it originated in the 1990s. It is seen as being more suitable than mediation in very large cases or where it is desirable to bring in senior executives who have not previously been involved with the case.
Adjudication is particularly used in construction and infrastructure industry disputes. Parties have always been able to agree to contractual adjudication. Statutory adjudication was introduced in England and Wales in 1996, on the basis that it should be encouraged for use in a wide range of potential disputes under construction contracts, being a swift and immediate means of improving cash flow during ongoing projects. The process has been adopted in other jurisdictions although not in identical form.
In England and Wales, statutory adjudication gives the parties to a construction contract the right to adjudicate a dispute ‘at any time’ upon referral to the appointed adjudicator. It is a quick process. Unless the time limit is extended by the referring party or by agreement, the adjudicator must provide a decision with 28 days, which remains binding until resolution by litigation or arbitration. The underlying principle of adjudication is ‘pay now, argue later’, in that speed and economy of adjudication are generally accepted to come at the price of reliability or means of appeal. In this respect, it may be regarded as a rough form of justice. A decision may be enforced in spite of errors in fact or in law, although remaining binding only until final determination by a court or arbitral tribunal. It generally remains a confidential process unless subsequent enforcement action is taken in court. In England and Wales this is undertaken by a summary procedure. The parties remain free to have their dispute finally determined by way of litigation or arbitration. There is, however, a ‘chorus of observations’ from experienced TCC judges and textbook writers to the effect that in England and Wales at least, in most cases adjudication achieves a resolution of the underlying dispute. The adjudicator’s decision becomes final because it is not thereafter challenged.
Adjudication offers considerable advantages to the parties, not least because it is required to be quick, is usually much more economic than litigation or arbitration and provides an interim decision that may be treated by the parties as a de facto final determination. It is available to any party to a construction contract in respect of any dispute arising under that contract, even after it has come to an end. The jurisdiction of the adjudicator is defined in respect of each dispute, and the parties may appoint a technically qualified adjudicator or a lawyer, as appropriate. It has been very successfully embraced by the construction industry in England and Wales, and its international appeal is growing. In July 2021, at the 54th Session of UNCITRAL, one working group proposed the further development of UNCITRAL Rules to include international commercial adjudication, reflecting a more global appetite for this very popular form of ADR.
Expert determination is a process in which a dispute is submitted by the agreement of the parties to one (or more) independent experts who make a determination on the matter. Typically, the parties agree that the expert’s decision will be final and binding except for a limited number of circumstances such as fraud, partiality or a material departure by the expert from his or her instructions. The expert is permitted and entitled to use his or her own expert knowledge. Unlike a judge or an arbitrator, the expert does not decide matters solely on the basis of submissions and evidence put before him or her. Unless required by the parties, the expert does not have to provide reasons for his or her decision.
An expert determination is a confidential process. It is particularly suited to disputes involving matters of valuation or those that involve technical issues. Expert determinations are entirely dependent and controlled by the agreement between the parties. There is no statutory basis or control of the process. Many institutions provide their own rules that may be incorporated into the contract, from the ICC to smaller transnational institutions such as the Resolution Institute in Australia and New Zealand.
The main advantages of the process are that it is usually a quicker and cheaper process than litigation or arbitration, and the parties can create their own procedure. It allows parties to go straight to the expert without the involvement of a judge or arbitrator, who, in any event, may be reliant upon an expert for assistance in reaching a determination. The main pitfall of an expert determination is that if the expert reaches the wrong conclusions, the parties have very limited rights of appeal. Additionally, it is not usually suitable for factual disputes, as so many construction disputes tend to be.
ADR compared with arbitration and litigation in construction disputes
Irrespective of the industry sector, settlement requires communication and a willingness to compromise. ADR can assist with both. The processes set out above give the parties in any commercial dispute an opportunity to communicate their understanding of the dispute to each other, and, if they wish, to seek an objective evaluation by an independent party of the strengths and weaknesses of their respective positions. Except for adjudication and expert determination, these consensual processes of ADR can produce creative commercial solutions that are not available through litigation and arbitration. ADR is private, confidential, quick and flexible, as well as generally inexpensive. The flexibility of ADR was particularly apparent throughout the global covid-19 crisis. Parties accepted remote interactions with each other and neutral resolvers such as mediators in the face of national and international restrictions on meetings and movement. Even if ADR does not generate a settlement, it can help the parties refine and define the dispute, making it ultimately less costly to resolve. ADR permits the parties to collaborate to find a solution and to thereby preserve the commercial relationship. One of the simplest ways to demonstrate an acknowledgment of the advantages of ADR is the fact that many courts around the world offer ADR as an adjunct to their own trial processes, whether as a prerequisite to litigation or as an option for the parties. Court-annexed mediation is particularly prevalent, and the courts in a number of countries offer judicial early neutral evaluation.
However, ADR does not suit all disputes. Certain complex disputes will need a full trial process with disclosure, witness statements and expert reports. There are others in which an important point of legal principle needs to be resolved in order to address the underlying dispute.
Construction and infrastructure disputes in particular can be factually and technically complex. They can generate difficult points of law involving specialised forms of contract. They also frequently involve multiple parties, making it more difficult to reach agreement to use ADR effectively. These disputes may still need to be finally decided by judges and arbitrators. Both litigation and arbitration have responded to the challenge of resolving construction and infrastructure disputes. Both have introduced procedural innovations to provide shorter and earlier hearings at reasonable and proportionate cost. Recognising the need for judges and arbitrators with industry experience, specialist commercial courts are opening across the world such as in Singapore, Amsterdam, Paris, Frankfurt, Brussels, Dubai and throughout China.
However, ADR should be more attractive to the construction and infrastructure industry as a means of risk management. Disputes in this sector can be especially costly to litigate and arbitrate due to typically large volumes of documents and the use of expert evidence, in many cases across multiple disciplines and involving many participants. Typically, those involved with a construction project at the outset do consider the appropriate dispute avoidance and resolution mechanisms for the particular project, and these processes are incorporated within the contract between the parties. Many of the widely used standard forms in this sector, including FIDIC and NEC, provide for ADR. The 2020 ICC Dispute Resolution Statistics show that a record number of new requests were filed with its International Centre for ADR under the ICC Mediation Rules. The disputes concerned a wide range of business sectors. Construction and engineering disputes accounted for almost 24 per cent of cases, followed by disputes relating to energy and telecommunications. In the aftermath of the covid-19 pandemic, the ‘massive economic advantages’ that speedy and effective resolution of disputes provides should be particularly attractive to this industry sector. It can be the difference between solvency and insolvency. We may be about to reach the time when the construction and infrastructure sector stops talking about alternative dispute resolution, and dispute resolution edges towards becoming an integrated whole.
 Marion Smith QC, Hannah McCarthy and Joe-han Ho are barristers at 39 Essex Chambers.
 Jerome T Barrett and Joseph Barrett, A History of Alternative Dispute Resolution: The Story of a Political, Social, and Cultural Movement (Wiley 2004).
 One example of this is the Call for Evidence issued by the UK Ministry of Justice: ‘Dispute Resolution in England and Wales – Call for Evidence’, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1008487/dispute-resolution-in-england-and-wales-call-for-evidence.pdf, last accessed 30 August 2021. The stated aim of the UK Ministry of Justice is to ‘support parties to use the best processes to achieve high quality, timely, cost effective, proportionate and enforceable resolution to their disputes’.
 There are also other forms of managing the risks of disputes during the delivery stage of a project, such as partnering.
 This is a reference to the principle of English law that written or oral communications that are made for the purpose of a genuine attempt to compromise a dispute between the parties may generally not be admitted in evidence, Phipson on Evidence, 19th Edition, (Phipson), [24-13].
 Wilmot-Smith on Construction Contracts, 4th Edition 2021, [2.74]. Also see the discussion on the advantages and disadvantages of such clauses at Chapter 12 under ‘Multi-tier dispute resolution clauses’.
 The term ‘conciliation’ is frequently used interchangeably with mediation.
 United Nations Convention on International Settlement Agreements Resulting from Mediation.
 See, for example, the International Mediation Institute, www.imimediation.org/about/, last accessed 30 August 2021, and the Civil Mediation Council, https://civilmediation.org/for-the-public/about-mediation/, last accessed 2 September 2021.
 See, for example, the Joint COVID-19 Protocol established between the Japan International Mediation Centre and the Singapore International Mediation Centre, which provides for low fixed fees and online mediation, https://simc.com.sg/jimc-simc-joint-covid-19-protocol/, last accessed 30 August 2021.
 The mediation community in England and Wales has sought to suggest that mediation is entitled to a self-standing privilege that is greater than that accorded to without-prejudice discussions, Phipson, –. There is no court decision that so holds to date. However, Lord Briggs, writing in the New Law Journal (‘Mediation Privilege?’, 159 N.L.J. 506 and 159 N.L.J. 550) argues that public policy may justify a new privilege strictly limited to mediator secrets defined as ‘the important part of the mediator’s facilitative role [which] is to encourage the parties to share with him or her information, views, hopes and fears about the dispute which the party communicating them does not wish the other party to know, and which the mediator agrees to keep secret from the other party’.
 See Halsey v. Milton Keynes General NHS Trust  EWCA Civ 576. This case has been cited in more than 60 authorities, which demonstrates the clear judicial determination to encourage ADR. There is a useful summary of the related subsequent case law in the White Book 2021, Vol. II, Section 14, Part 3 ‘ADR and Costs’.
 Sir Geoffrey Vos raised the possibility of whether the court might also require parties to engage in mediation despite the decision in Halsey, in McParland v. Whitehead  EWHC 298 (Ch) .
 These include Italy, Ontario, Australia and Greece; see Civil Justice Council, Compulsory ADR, June 2021  and its cited sources.
 Directive 2008/52/EC.
 The Centre for Effective Dispute Resolution (CEDR) Ninth Mediation Audit (launched May 2021) reports an aggregate settlement rate in civil and commercial disputes of 93 per cent, compared with 89 per cent in 2018. The proportion of cases that achieved settlement on the day of mediation was 72 per cent, not significantly different from the 2018 Audit, but there had been a marked increase in the proportion settling shortly after mediation, rising to 21 per cent of all cases compared to 15 per cent in 2018. It also reported on the impact of covid-19 on mediation – while there was a downturn in mediation activity with overall activity dropping by 35 per cent from March to September 2020, there was a very rapid surge in online mediation. There is no concrete data on whether online mediation has impacted the settlement rate of cases. CEDR quotes its own statistics as showing a ‘circa 90% settlement rate for online mediations, something which is conferred, anecdotally by mediators’, Thomson, ‘The Ninth Mediation Audit – Five Things you Need to Know’, www.cedr.com/the-ninth-mediation-audit-five-things-you-need-to-know/, last accessed 30 August 2021.
 See https://treaties.un.org/doc/Treaties/2019/05/20190501%2004-11%20PM/Ch-XXII-4.pdf, last accessed 30 August 2021.
 The final text of both are available on UNCITRAL’s website.
 Bresco Electrical Services Ltd (In Liquidation) v. Michael J Lonsdale (Electrical) Ltd  UKSC 25, per Lord Briggs JSC, .
 See footnote 5.
 For example, the Chartered Institute of Arbitrators, the Royal Institute of Chartered Surveyors or the Academy of Experts.
 Seals v. Williams  EWHC 1829 (Ch) per Norris J, .
 See Lomax v. Lomax  EWCA Civ 1467, in which the Court of Appeal ruled that the court has the power pursuant to Civil Procedure Rule (CPR) 3.1(2)(m) to order early neutral evaluation, even in circumstances in which one party had not consented to its use.
 CPR, the International Institute for Conflict Prevention & Resolution, provides a Minitrial Procedure for use in a variety of circumstances, with a sample minitrial schedule, www.cpradr.org/resource-center/rules/international-other/mediation/cpr-minitrial-procedure, last accessed 30 August 2021.
 Housing Grants, Construction and Regeneration Act 1996 Part II.
 New South Wales in 1999 by the Building and Construction Industry Security of Payment Act 1999. This was followed by most other Australian states and territories: Building and Construction Industry Security of Payment Act 2002 (Victoria, Australia); Building and Construction Industry Payments Act 2004 (Queensland, Australia); Building and Construction Industry Security of Payment Act 2009 (Tasmania, Australia); and Building and Construction Industry Security of Payment Act 2009 (South Australia). New Zealand introduced a statutory scheme in 2002 by the Construction Contracts Act 2002. Singapore followed suit by the Building and Construction Industry Security of Payment Act (Cap 30B) 2004. Malaysia introduced a statutory regime in 2012: Construction Industry Payment and Adjudication Act 2021. The Republic of Ireland introduced a statutory mechanism in 2013 by the Construction Contracts Act 2013. Most recently, Ontario has adopted statutory adjudication for all contracts entered into after 1 October 2019: the Construction Act 2017. In addition, statutory adjudication has been actively considered in Hong Kong, South Africa and Germany; see Peter O’Malley, ‘A new “UNCITRAL Model Law on International Commercial Adjudication”. . . . How beneficial could it be?’, November 2020, www.omalley.eu.com/wp-content/uploads/2021/01/6.-UNCITRAL-Content-16.01.2021.pdf.
 Pegram Shopfitters Ltd v. Tally Weijl (UK) Ltd  EWCA Civ 1750 per May LJ, , and see Bresco, –.
 Bresco, per Lord Briggs JSC, . Lord Briggs notes that underlying statistics are hard to find, but cites various decisions and text books in support –.
 See, for example, Flowgroup Plc (In Liquidation) v. Co-operative Energy Ltd  EWHC 344 (Comm), in which the court found that where parties had agreed to subject their dispute to an expert determination, a ‘manifest error’ exception within the contract allowed recourse to the court in only limited circumstances.
 The EU Mediation Directive (2008) issued a demand for Member States to build mediation into their legal systems, which some Member States adopted as a requirement. For example, Italian law requires parties to attend what is called a ‘required initial mediation session’ for certain limited categories of disputes.
 Court-appointed mediators are available for certain disputes, usually in family law or for claims of less than £10,000 in England and Wales. In the United States, the Alternative Dispute Resolution Act of 1998 required all federal courts to establish some form of ADR, and granted the courts authority to send civil cases to ENE and mediation.
 In England and Wales, the court’s power to order ENE is included with the Civil Procedure Rules (CPR 3.1(2)(m)), and in some states of the United States, such as California.
 The value of disputes in all business sectors in 2020 ranged from a few thousand dollars to over US$800 million (with an average amount in dispute of US$66 million).
 See the comments of Sir Geoffrey Vos, ‘The Relationship between Formal and Informal Justice’ (March 2021), –, www.judiciary.uk/wp-content/uploads/2021/03/MoR-Hull-Uni-260321.pdf, last accessed 30 August 2021.