Achieving effective resolution in construction disputes

In the construction industry, disputes often arise as a result of differing perspectives, priorities, objectives, and interests of contracting parties.

When a dispute occurs, it is crucial to understand what the concerned parties want in order to make an informed decision on the appropriate resolution method.

Senior Lecturer in Construction Law at Universiti Sains Malaysia (USM), Dr Zul Zakiyuddin Ahmad Rashid, said this in a live webinar on “There is a dispute. So, what’s next?” organised by the School of Technology & Engineering Science (STE) as part of the Industry Expert Lecture Series on 28 May 2023.

Dr Zul is Senior Lecturer at the School of Housing, Building and Planning, USM.

He discussed the various alternative dispute resolution (ADR) techniques – negotiation and mediation methods that promote mutual understanding of both parties, and arbitration and adjudication methods which are more confrontational in nature and involve a neutral third-party making a legally binding decision to resolve the dispute.

Stressing the importance of assessing the disagreement and its potential impact on the project, Dr Zul said, “Those who put the success of the project above their interests and rights indicate their willingness to evaluate their options to create a win-win situation for all.”

He explained that negotiation and mediation methods emphasise collaborative problem solving, direct communication and voluntary agreement between the parties involved.

Understanding various ADR methods.

“Negotiation is focused on achieving an outcome that is acceptable to all parties involved,” he stated.

He also underscored the need to formally document the negotiation decision. “If you fail to make it official by way of a mutual settlement agreement, the decision is as good as lip service.”

While mediation is a powerful ADR tool, choosing the right mediator or knowing when to use it can be a little challenging. Dr Zul explained that mediators do not solve disputes, rather, they guide parties towards gaining a better understanding of the dispute and available resolution options.

“The role of the mediator is to offer perspectives to both parties in understanding the stakes, the potential benefits, and the best and worst options.”

Mediation is a powerful ADR tool.

Speaking about arbitration, Dr Zul said that the arbitrator’s decision is known as the award, and is a final and binding resolution to the dispute. Arbitration decisions made in Malaysia are enforceable in over 160 countries.

He reminded that when signing a contract that contains an arbitration clause, the signatories have no option but to follow the arbitration process in the event of a dispute, unless they agree to waive the clause and instead proceed with litigation.

He also highlighted the Construction Industry Payment and Adjudication Act (CIPAA) 2012 that provides a statutory adjudication process to resolve payment disputes. While the process typically takes approximately five months, losing parties have the option of challenging the CIPAA decision at the High Court level, seeking a deferment to payment.

Arbitration decisions made in Malaysia are enforceable in over 160 countries, says Dr Zul.

Dr Zul said disputants should consider factors such as privacy and confidentiality, legal enforceability, cost implications, availability of resources and expertise, the nature of the dispute, relationship preservation, control and involvement, and speed and efficiency when choosing the appropriate ADR method.

Earlier, he outlined six common intentions parties often have when resolving disputes: seeking a fair resolution, protecting their rights and interests, preserving professional relationships, minimising cost and time, achieving a sustainable solution and preserving the reputation of all parties involved.

Some factors to consider when navigating dispute resolution.

There are no right or wrong options in ADR, as the suitability of each method depends on the needs of the parties involved, he emphasised.

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