Construction mediation and arbitration are both forms of alternative dispute resolution (ADR) which are becoming increasingly popular in the construction industry. Construction contracts are embracing the advantages that come with ADR including the ability to pick an expert moderator or arbitrator and a faster process that is generally less costly than litigation. The choice of venue is outlined in the construction contract, so it’s important to know the difference between the choices and what that means for you.
Mediation is often the first step to try and resolve a dispute before moving on to arbitration or litigation. Certain jurisdictions will even require mediation before granting a jury trial in an effort to work out some conflicts without the court system.
Mediation is a structured discussion between the different parties that are facilitated by a mediator who is a neutral party, but often an expert in the field. Everyone comes together and presents their arguments to the mediator and share the outcome they desire. Each side will present evidence to back up their claims. The mediator listens to both sides and then attempts to figure out where the common ground is to resolve the dispute in a manner that is agreeable to both parties. Unlike other forms of dispute resolution, the mediator does not make a final decision. Instead, he is responsible for helping the parties find common ground by helping each party listen to the other side and suggesting possible solutions. These proceedings are often informal and occur in the mediator’s office or other comfortable location.
Mediation is non-binding, meaning that the decision reached in the mediation cannot be legally enforced. This allows the parties to move towards other avenues of dispute resolution if they cannot agree on the outcome of the construction mediation.
Arbitration is similar to mediation procedurally where both sides present evidence and share their desired outcome, but different in that the decision made by the arbitrator is binding and enforceable. Conducted by a single arbitrator or a panel of experts, each party has the opportunity to share their side of the argument. The arbitrators then review and analyze the evidence submitted, based on the rules agreed upon for the arbitration, and from their ruling. In many ways, it is similar to a court hearing, but much more informal.
Once a ruling is issued, both parties are legally bound by the ruling and it will be enforced by courts. It is also difficult to appeal a ruling from a construction arbitration case. This is generally only successful in cases of bias or fraud. If a construction contract contains arbitration as the ADR method selected, then their ruling on the dispute will be binding. In these cases, it helps to have a lawyer familiar with ADR review the rules under which the arbitration will be conducted to ensure they’re fair to you in regards to selecting the arbitrator and the rules under which evidence can be submitted. In some states, there is a requirement to do nonbinding arbitration in certain situations before they can proceed to traditional litigation.
Find an attorney like the experienced counsel at National Lien & Bond who understand the different options available for construction mediation and arbitration to help you draft or understand a contract. They can also help you choose a qualified expert construction arbitrator and present a complex case to help you get the best outcome possible. ADR procedures are a great way for construction businesses to save time and money, but you need to fully understand what the options are before agreeing to one form or the other.