The dispute landscape has changed significantly since the millennium. Post-COVID, further changes have been signalled within the UK. Following a consultation launched last year by the Ministry of Justice, the Government has committed to fully integrate mediation as a key step in the court process for small civil claims valued up to £10,000 (25 July 2023). The Law Commission published its final report on the review of the Arbitration Act 1996 (5 September 2023) following two consultations. Further, the UK has become a signatory of the Singapore Convention on Mediation (3 May 2023).

Against this backdrop, is there an opportunity to revisit and evolve arbitration and adjudication to better meet users’ needs? In short, is it time for dispute revolution?

Looking at litigation

In recent decades it might be said that the Access to Justice platform initiated by the Civil Procedure Rules in 1998 opened a new era for litigation – if somewhat blighted by the loss of legal aid and assistance for all forms of civil action. The latter arguably allowed exploration of Conditional Fee Agreements (CFA), Damaged Based Agreements (DBA), One-way Costs Shifting (OCS) and Fixed Recoverable Costs (FRC) for higher value claims which in turn, for the consumer at least, has made the cost of going to the law even greater.

Evolution of the small claims track has made it uneconomic for litigants to engage lawyers, particularly with very little available access to legal support. Those on the fast-track fare little better because of the application of FRC which limits the legal costs the successful party may recover, and which is now set to be extended to cases on the multi-track of up to £100k in value. This combined with front-loaded costs and the need for cost budgeting, cost assessment, pre-action protocols, court fees and sanction regimes makes the attraction and true access to litigation pretty unpalatable. Whilst FRC provides certainty, it is difficult for litigants to ascertain how much it costs to get to that point.

Post-COVID, the reality is that the judicial system shows that disputes will take between 30 and 50 weeks to progress to trial from allocation (taking into account regional variations). Therefore, if time is one of the imperatives, arbitration and adjudication have undeniable appeal.

One bright beacon is the use of the Technology and Construction Court (TCC) which specialises in streamlined processes and case management practices. Efficiencies come with judges well versed in technical evidence, expert opinions and industry standards – which mirror many of the benefits that should be accessible through arbitration.

Advocating for arbitration

Domestic arbitration in the UK has fallen out of favour, commencing with the conjunction of the Arbitration Act 1996 and the Housing Grants, Construction and Regeneration Act 1996 HGCRA) and the advent of adjudication offering what was seen to be inexpensive and fast construction dispute resolution. When combined with the standard forms of building contract such as JCT (moving away from the arbitration default mechanism) and leaving the choice between litigation and arbitration to the user, the trend appeared cemented. That said, arbitration still has many advantages when compared to litigation.

The process is not subject to CPR which means:

• No pre-action protocol.
• No fee to commence proceedings (beyond a fee for appointing an arbitrator charged by a nominating body (typically £300 – £400).
• No costs budgeting (therefore no front-loading of costs).
• No fixed recoverable costs rules.
• No test of proportionality as such (but costs must be reasonable).

Therefore, there is greater potential for a full order for costs as opposed to a fixed or partial recovery.

However, under the Arbitration Act 1996, there is the potential for costs to be capped by agreement.

When it comes to costs, the arbitrator is paid “on the meter”. Pleadings and processes are very similar to litigation but can offer parties the benefit of being able to determine how they might innovate and focus the dispute. Ultimately though, the cost of arbitration is not going to be dissimilar to litigation.

The time dynamic has always left arbitration open to the criticism of having ‘soft’ time limits and a malleable timetable not subject to automatic sanctions as in CPR. It was often necessary to apply for sequential orders to remedy a default, leading to timetable creep or proceedings going to sleep. Naturally this leads to an impression of increased expense and what was originally envisaged as a more efficient and swifter process can end up lagging behind litigation and be just as or even more expensive.

Arbitration does have the potential to offer clear time advantages over litigation and still provide the rigour and procedural satisfaction that complex and higher value disputes might deserve.

Also, arbitration may have more flexibility in respect of more specialist and technical disputes within industries and disciplines than either litigation or adjudication.

Advantages of adjudication

Adjudication is arguably the champion of speed. It is a statutory right under construction contracts subject to the HGCRA, designed to produce a temporarily binding and enforceable decision. But adjudication is equally available as a contractual right which, based on experience, will be treated no differently by courts on enforcement.

These are the essential features of adjudication:

• Determination by an experienced panel adjudicator selected by agreement of both parties or appointed on application to an independent body by the referring party.
• Paper-based procedure with hearing if required by the parties or deemed essential by the adjudicator.
• 28-day process capable of being extended by agreement of the parties and adjudicator to 42 days.
• Decision delivered by fixed date with brief reasons (or full reasons if requested by either party).
• Decision is temporarily binding. I.e. until the subject dispute is finally determined by agreement or litigation or arbitration and must be complied with in the interim as a matter of contract.
• Provided the decision is valid, meaning it is one within the adjudicator’s jurisdiction and not reached in breach of the rules of fairness (natural justice), it is enforceable in court by summary judgment.
• Execution of the judgment may only be stayed upon very limited grounds.

There is no costs recovery (ever) in statutory adjudication. The adjudicator decides who bears payment of their fees. The SC&L Adjudication Scheme provides for the possibility of costs recovery. Without suggesting this is desirable, it is an option as a contractual right which the parties may decide upon.

Adjudication does not fit every dispute scenario but it is undeniable that it has provided a model that could be adopted and applied to arbitration.

Many will be familiar with the eternal construction triangle of achieving optimum Time / Cost / Quality and this equally applies to disputes where one dominating factor may compromise the others. There is a need to explore and understand fast track or expedited arbitration rules as an attractive and real world option which provides disputes with the rigour and considered awards combined with timescales which are commercially attractive.

A creative solution to user needs?

Most organisations now have expedited rules for arbitration. For example, RICS have provided expedited arbitration rules since 2015. The International Chamber of Commerce (ICC) provides Expedited Procedure provisions, and UNCITRAL offer Expedited Arbitration Rules (2021). So there appears to be recognition of the need for a more considered approach to awards but under expedited timescales which is more digestible for parties using dispute resolution processes.

From the other perspective, adjudication can equally be re-positioned to enhance the quality side of the triangle to include provision for:

1. A face to face hearing.
2. A longer time limit for determination of the dispute (some heavy-weight adjudications last for 6 months).
3. The award to be final as well as binding thus finally resolving the dispute.
4. The ability to ask for and be awarded costs (perhaps where the award is intended to be final).

Could the solution lie between a re-shaped adjudication and expedited arbitration to provide a blueprint for a commercially aware dispute resolution hybrid? One which builds on the benefits of adjudication and overcomes some of the disadvantages of traditional arbitration, indeed taking arbitration back to what it was intended to be: a quick, efficient and specialist procedure for resolving disputes with the minimum of cost and expense. It would avoid the constraints of litigation, and at least entitle the successful party to seek its reasonable costs and not be limited to a fixed recovery.

In doing so, might arbitration be restored to its rightful place as a safe and sensible alternative to litigation and a natural evolution of adjudication?

Read the full article on Ciarb’s website.

About the authors:

Kenneth T. Salmon MCIArb is a qualified solicitor in England, Wales and Eire. He is a Ciarb qualified and CMC accredited Mediator and Chair of Education at Ciarb North West Branch. Kenneth is a construction specialist currently working as a consultant to Slater Heelis Limited. He has extensive experience of all forms of dispute resolution including arbitration, adjudication, expert determination and mediation.

Marcus Cato FCIArb, MICE, CEng is MD of McComb Partnership Ltd in UK and Rwanda and founding Committee Member of the newly formed Ciarb Rwanda Branch. He has over 25 years’ experience in international construction and engineering disputes resolution as a certified commercial mediator and qualified arbitrator. Marcus has over 20 years’ experience in working as a party representative and in managing adjudication disputes for large and small clients in all aspects of construction and process engineering.

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