The evolving role of arbitration in construction disputes

The evolving role of arbitration in construction disputes

To what extent is arbitration being used to resolve construction disputes? Hamish Lal, construction partner at Akin Gump Strauss Hauer & Feld, suggests that while statutory adjudication and the existence of the Technology and Construction Court (TCC) has made arbitration less common on UK projects, the use of arbitration on international projects has increased significantly.

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How common is the use of arbitration in resolving construction disputes?

The tangible impact of statutory adjudication on construction projects in the UK, coupled with the existence of the specialist TCC, means that arbitration is not often used to resolve construction disputes in UK projects. One cannot over-emphasise the profound effect of statutory adjudication on UK projects and the fact that adjudication is often treated by the parties to be the final stage in the dispute resolution process. UK projects concerned with nuclear decommissioning or offshore wind are two notable exceptions and provide examples of where arbitration is preferred and often used. Where adjudication is not mandated by statute one will see arbitration as the preferred final and binding dispute resolution process. Put simply, it is the impact of statutory adjudication that has ‘killed’ domestic arbitration in the UK. In summary, one cannot foresee that position changing.

In contrast, arbitration is very often used to resolve high value disputes in international construction contracts, engineering, procurement and construction (EPC) contracts and drilling contracts. The primary reasons for this are:

  • a tangible and common apprehension about local courts
  • a shared desire to have the dispute resolved on a final and binding basis by an experienced, specialist and partly party-nominated tribunal
  • a perception that tribunals are more likely to make awards based on a consistent and uniform understanding of how major construction contracts operate

To what extent has this changed over the last few years?

The use of arbitration to resolve construction disputes in international projects has increased significantly over the last three years. This is because a number of large, high value and complex infrastructure projects and hotel and tourism projects, procured or commissioned by various Gulf-seated sovereign wealth funds, have now reached the ‘dispute stage’. Compl

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