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Arbitration and mediation are two extremely useful forms of alternative dispute resolution that have found wide popularity within the construction industry. The RICS DRS can provide you with advice and help in utilising these forms of dispute resolution.
Arbitration
Arbitration is a procedure whereby two parties in dispute agree to be bound by the decision of an independent third party. The arbitrator fulfills a role similar to that of a judge, though many of the procedures can be considered less formal. The arbitrator bases their final decision based on evidence and arguments submitted by the parties.
What are the benefits of arbitration?
Quick and efficient
Arbitration is private and usually informal, even though the parties can be professionally represented by a chartered surveyor or solicitor/barrister. Most property or construction disputes can be settled quickly and fairly by arbitration.
Professional
A chartered surveyor arbitrator will be able to understand the problems faced by the parties in a property or construction dispute. The arbitrator’s decision is final and binding. Having referred a dispute to arbitration, a party cannot thereafter refer the matter to the courts
How are arbitrators appointed?
An essential feature of arbitration is that those in dispute must agree between themselves that they will be bound by the decision of the arbitrator. Agreements to refer disputes to arbitration are often made in a lease or contract. But if not, a separate agreement can be made by the parties after the dispute has arisen.
Application is made to the RICS DRS for the appointment of a suitably qualified arbitrator.
How much does arbitration cost?
Arbitration is generally quicker and cheaper than going to court.
An administrative fee of $250.00 excluding GST is charged by the RICS DRS for each application. Following the appointment, the arbitrator will contact the parties to advise them of a the general procedure for dealing with the dispute and, at that stage, will set out the fees to be charged. There are no guidelines on the level of arbitrators’ fees and the RICS DRS does not recommend specific fees.
An arbitrator can decide who pays the costs of the arbitration, including his or her fees and those of the parties. It may be decided that both parties pay equal amounts or, if one party is entirely successful in the dispute, the unsuccessful party may be required to pay all the fees.
Mediation
Mediation is the name given to a confidential process whereby parties to a dispute invite a neutral individual to facilitate negotiations between them with a view to achieving a resolution of their dispute.
Why mediation?
If your negotiation leads to a conclusion with which you are happy then you do not need to mediate. However, negotiations sometimes end in deadlock. A mediation session can break that deadlock.
Negotiation tends to be confrontational. The parties perceive themselves to be opponents and each wants a “win”. A mediator will try to shift the dynamics of the negotiations away from positional bargaining towards principled negotiation where the parties view each other as collaborators in a problem-solving exercise.
Furthermore, the discussions with the mediator are private. The parties can share confidences with the mediator so as to reveal their true interests. The mediator therefore achieves a unique overview of the dispute and can help identify ways in which the parties can satisfy their needs.
Benefits of mediation
Since the mediation process is conducted on a “without prejudice” basis, the parties to mediation really have nothing to lose. If anyone is unhappy with the way the mediation is going, they have the option of abandoning the process. Nothing has to be revealed to the other side unless you want it to be.
If for some reason, mediation fails then the parties can turn to or return to litigation or arbitration. The preparation that you or your advisors have done for the mediation will still be useful.
Flexibility
Mediation is non-binding in the sense that entering into the process is voluntary, it involves no commitment to settle and the mediator has no power to impose a solution. However, when a mediated agreement is reached, it is normal for the mediator to set down the terms of the agreement in writing. The parties then sign the written agreement with the intention that it becomes a legally binding contract.
High success rate
It is estimated that that the mediation success rate exceeds 90%.
It works because it provides an opportunity for the parties to work together in a constructive manner towards settlement. It also offers the chance to bring into discussion elements quite outside the original dispute which can frequently lead to a resolution where both parties gain from the agreement.
A further attractive feature of the procedure is that mediation can be conducted on a confidential basis away from the glare of publicity.
What cases are suitable for mediation?
Any dispute is suitable for mediation provided the parties to it are willing to try. Some cases are more suitable than others. Experience shows that multi-party disputes are particularly suitable for mediation perhaps because they are often complex and the cost of sorting them out through more traditional techniques can be very high. The process is also suited to disputes between parties that have along term relationship to protect.
Examples of suitable cases include:
- Valuation, including rent reviews
- Building works
- Commercial landlord and tenant rights and obligations
- Joint ventures and development agreements
- Disputes over residential leasehold obligations and restrictive covenants on title including contractor/employer and contractor/sub-contractor relationships
- Partnership disputes
- Land boundaries
- Professional negligence claims
How are mediators appointed?
Application is made to the RICS DRS for the appointment of a suitably qualified mediator.
How much does mediation cost?
Mediation is generally quicker and cheaper than going to court.
An administrative fee of $250.00 excluding GST is charged by the RICS DRS for each application. Following the appointment, the mediator will contact the parties to advise them of a the general procedure for dealing with the dispute and, at that stage, will set out the fees to be charged. There are no guidelines on the level of mediators’ fees and the RICS DRS does not recommend specific fees.
Unless the parties agree otherwise, the fees and expenses of the mediator will be borne by the parties in equal shares and will normally be paid before the proceeds starts.
Because the mediation process is fast and efficient, it is unusually inexpensive and considerably cheaper than going to court.
