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It's official: Construction disputes are on the increase – and wasting ever more time and money. A survey in Legal Director reports that 77% of companies had recently experienced a serious dispute, up on 64% the year before.
Rather than offering a new approach to dispute resolution, there is a way to prevent disputes arising in the first place – it is called contracted mediation.
Ordinary mediation is usually only considered as a last-minute alternative to costly and time-consuming forays into adjudication, arbitration or litigation after contractors have downed tools and time and money has already been wasted.
By then, personal anger, stubbornness and pride make the mediation process more difficult. In contrast, contracted mediation aims to change the culture of confrontation by providing a problem-solving mechanism before things get that bad.
A panel of two mediators, one legal and one commercial, is appointed at the start of a project by all the parties involved and remains on call until the end to help keep control of project delivery, manage unexpected risks and prevent disputes.
At first, the mediators lead a workshop to establish a positive, co-operative culture between all the parties and to identify the likely risks of the project. Subsequently, the whole team decides how frequently they want the mediators to visit the site, although any party is free to consult the mediators privately at any time.
If differences arise, the parties agree to use the mediators as their first port of call to resolve the situation. A mediation session is arranged, at which parties jointly identify the key issues that need to be resolved. The mediators provide each of the parties with an opportunity to explain their concerns.
The emphasis is on the needs of the participants, rather than on the rights that a court, arbitrator or adjudicator would focus on. If necessary, the parties may agree to appoint an expert to help determine an issue. When settlement terms are agreed (usually after no more than a day's mediation), the parties draw up and sign a binding settlement agreement. At no time is a decision imposed on the parties. Thus, all parties retain control of the negotiated settlement, which is a considerable advantage over other methods of dispute resolution, not least because it protects reputations and enables the parties to continue to work together.
Another advantage of contracted mediation is that it happens while all the parties are still working on the project. Information about any contentious issues is therefore fresh and readily to hand. Moreover, legal representation is often unnecessary. The problem with arbitration or litigation is that when it is initiated, the parties have usually left the site and memories have started to fade. It can therefore take considerable and expensive time and effort for the lawyers to rebuild the "knowledge base" in order to assemble the necessary evidence.
Now, the insurance industry is getting in on the act. Insurance broker Alexander Forbes Construction and Commercial Property has started to offer contracted mediation to all their clients as part of their project insurance package.
Alexander Forbes' support is echoed by by Mike Lanyon, director of Jersey airport, who has tried the contracted mediation route. He says: "It introduces a team approach to resolving differences for the common good of the project."
Tony Blackler, partner at solicitor Macfarlanes, believes that the real benefit of contracted mediation may be that those involved in a project know they have access to professional mediators at any time, which can be very reassuring and moderate their behaviour on site. He says: "Most sensible people want to finish a project without the risk of the acrimony that arbitration and litigation typically engender."
Worth a try? If you agree that prevention is better than cure …