Dispute resolution in construction

RICS Dispute Resolution Conference 28 January 2014

Early intervention: Key challenges and new ways forward

Martin Burns BA (Hons) LL.B (Hons) BarristerHead of ADR Research & DevelopmentRoyal Institution of Chartered Surveyors

www.rics.org/drs

Why avoid disputes?

Disputes are often the result of minor issues escalating over time into more serious issues. When this happens:

•Meaningful negotiations can stall and positions become entrenched

•Lots of people, capital and resources can be thrown into the fray again and again, with little or no success

•People who have got on well may no longer speak to each other, except through intermediaries

•Costs can mount out of control

•The dispute spreads and people not originally involved can get drawn in

•Eventually the small issue which started the whole thing can end up being all but forgotten and no one can remember why there is a dispute in the first place

The problem with courts (and other dispute resolution methods)

They often come too late. By the time litigation or DR has got started lots of time and money has usually been spent on lawyers and claims consultants

Timely completion of the project will have been jeopardised

And then, when court action or DR has finished:

•Relationships will have been damaged, sometimes irrecoverably

•Reputations and brands will have suffered – (negative press)

•One or both sides will still be unhappy

•Everyone is seriously “out of pocket”

Key challenges

Reducing corporate legal spend (a big motivating factor)

Preventing potential problems from escalating into dispute that ultimately require litigation

Resolving disputes that do arise quickly and inexpensively

Encouraging cooperation and equitable risk allocation.

Concentrating on fixing problems rather than fixing the blame – or separating people from the problem

Recognising that it is in everyone’s interest to co-operate and share allocation of risks associated with disputes

Prioritising collaborative negotiating as soon as dispute arise

New ways forward

Conflict avoidance, and early intervention which focusses on solutions

Essential ingredients for avoiding disputes:

•Early identification of problems/issues

•Early action to deal with them •Focus on issues

•Structured communications – facilitated by neutral parties

New ways forward

•Making conflict avoidance routine - Building sensible dispute avoidance/resolution provisions into contract documents

•Encouraging people to take ownership and responsibility for resolving issues - Focussing on professionalism, objectivity, respect

•Facilitating communication between parties - Managing expectations, being realistic, focussing on issues and on finding solutions

New methods Conflict Avoidance Panels

•Contractual mechanism to avoid and control disputes

•Focuses on preventive techniques, including incentives to encourage cooperation

•Provides equitable risk allocation and encourages early resolution

•Can be standing or called on when needed (“pay as you go”)

•Provides for issues to be reviewed by independent panel (CAP) which makes non-binding recommendations

•Encourages parties to take ownership of issues, (CAP recommendations are reasoned and parties who decline to accept recommendations must themselves explain why).

New methods Early Neutral Evaluation (ENE)

When contemplating litigation parties routinely ask the same questions: 1.Do I have a good case? 2.Am I throwing good money after bad?3.Should I settle, and if so, for how much? 4.If I go ahead with court proceedings, how can I improve my chances of winning?5.What will a judge or arbitrator decide on issues of law? 6.How will the judge evaluate the facts? 7.What will be the judge’s final ruling?

ENE ensures parties have crucial pieces of information from a neutral person who “has been there, done that”. This will help them to make informed decisions, and properly assess risks associated with going to court

ENE offers a fast, effective and inexpensive way dealing with issues early and ending disputes before they escalate

Dispute BoardsIncludes both Dispute Review Boards (DRBs) and Dispute Adjudication Boards (DABs)

Usually standing boards that exist throughout the lifetime of the contract

DB members will usually be drawn from different professions

Procedure for DB will usually be set out in contract and generally includes: •Regular site visits•Project documentation reviews•Identifying problem issues early and enabling early action to deal with them•Power to examine all disputes•Power to make recommendations or decisions

Benefits of conflict avoidance and early intervention methods

•Help to identify problem issues early and enable early action to deal with them

•Ensure parties are focussed on dealing with the problem issues

•Encourages structured communications, and a “no blame” culture

•Create a collaborative environment where all parties work together to actively seek solutions to problems

Businesses that regularly use conflict avoidance and early intervention techniques can function more nimbly because they can dedicate capital and employee resources to their actual business needs

RICS Dispute Resolution Service Martin BurnsSurveyor Court Head of ADR Research and DevelopmentWestwood Way [email protected] CoventryCV4 8JET –020 7334 3806F- 020 7334 3802 E- [email protected]/drs