Arbitration is used to settle claims outside court. It is meant to be faster and cheaper than litigation. An arbitrator is independent, impartial and selected by the disputing parties.
But arbitration costs are potentially so great that firms are resolving construction disputes through the courts using litigation, says the Construction Confederation.
Arbitration can take up to nine months. An arbitrator's or arbitration panel's fees can rise to £1,000 per person per day. Disputing parties also need to hire a venue at a further £750£1,000 per day at central London prices.
The number of arbitrators has fallen by over 10% since 1998 when adjudication was introduced, reports the Royal Institute of Chartered Surveyors. Adjudication requires cases to be resolved within 28 days.
Yes - Mark Clinton, solicitor at Nicholson Graham & Jones
Technically, arbitration is flawed as it is not perfect for every situation. But we are not interested in technicalities and arbitration is not substantially flawed.
Like a forgotten toy, some of us seem to have cast arbitration aside in favour of a new game - adjudication and litigation. But arbitration is an established, well tried and tested method of resolving construction disputes and was overhauled and modified as recently as 1996. It is still far too valuable a tool to simply dismiss.
Flexibility - the arbitration procedure can be tailored to the size and conditions of each dispute as it arises. The procedure is proportionate, effective and cost effective.
A decision from experienced practitioners - disputes can be referred to an expert in the field.
Privacy - having your exclusion clause publicly held to be unenforceable and unreasonable, as in litigation for example, is entertaining to the rest of us but may be pretty damaging to your business. The idea that all publicity is good is doubtful, particularly in court. Public bickering damages business relationships.
A final and binding decision - arbitration awards are very difficult to appeal against.
An enforceable decision - awards can be readily enforced through the courts, sometimes more easily than court judgements in foreign jurisdictions.
Arbitration hardly needs further defence. But it is an enduring, effective and internationally recognised means of resolving differences, backed by the authority and power of the court.
However, in many ways arbitration's greatest strengths can also be its weaknesses. Its flexibility, combined with tribunals which are not formed from the ranks of trained judges, can offer the opportunity for abuse to those so inclined. This should not be seen as a flaw so much as a challenge to the profession.
The real problem is with the way arbitration is used. Are people flawed? Now there is a question.
No - Sonal Jogi, senior consultant at claims specialist Trett Consulting
Arbitration has been used to resolve construction disputes for well over a century. Its principal advantages are that it is private and parties involved in a dispute do not have to air their dirty laundry in court. An arbitrator will be an experienced construction specialist. And in theory arbitration is quicker and cheaper than litigation.
In reality, however, arbitration has often been an expensive and drawn out process. The Arbitration Act 1996 addressed this major flaw, setting out in Section 1(a): 'the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense'.
Five years later it can still cost more to pursue a small claim through arbitration than the claim itself is worth.
Parties need to agree the appointment of an arbitrator or panel of arbitrators as fast as possible to minimise delays. The arbitrator or arbitrating panel then needs to maintain strict control over the time taken to submit evidence. Inability to stamp out delay and the continuing disparity between arbitration costs and settlements won put many people off making a claim in the first place. If the aims of the 1996 Act are to be realised a timetable is needed at the outset of each case.
However, the Housing Grants, Construction & Regeneration Act 1996 has brought us compulsory adjudication, which has arguably overtaken arbitration.
Adjudication requires disputes to be resolved within 28 days.
Adjudication is not flawless - it does not lend itself well to the resolution of large, complex disputes - but does have the advantage of a much lower cost and a fixed time constraint. By its nature the system is more costeffective and works well for smaller claims and on clearly defined issues.
Another flaw is that the 1996 Act allows the arbitrator to judge whether they themselves are fit and proper to do the job once they have been appointed.
There are no clear ground rules for procedure or the submission and evaluation of evidence, resulting in wide variation from tribunal to tribunal and case to case.