QUESTION

Litigation and Arbitration are both methods of dispute resolution in construction. Discuss the
difference between Litigation and Arbitration.
1.1 Introduction
Construction disputes happen fairly often; they are a reality on every construction project and
could happen at any point in time during the design or construction phase of the project.
Construction disputes vary in nature, size and complexity, but they all have a common thread;
they are costly both in terms of time and money and are often accompanied with the destruction
of individual and good working relationships. Indeed, it is this tendency to destroy relationships
and increase time and cost of construction projects, that has provoked a common interest of
researchers in different countries to understand the nature of the causes of construction disputes
in order to formulate measures to prevent or minimize their occurrence or resolve them swiftly,
efficiently and in a cost effective manner if they happen. (Stipanowich, & Henderson, 2003)
1.2 Difference between Litigation and Arbitration as Dispute Resolution Methods
Much distinction can be made between the process of litigation and arbitration. No Dispute
commented that there is little procedural difference between the two processes.
1.2.1 Litigation
Litigation is often the final resolution step should previous procedures have failed in achieving a
desirable outcome. Although, where either party believe that the law will provide the best form
of defense, they may choose to expedite informal/non-binding mechanisms and elect to proceed
directly to formal court proceedings should the contract allow. (Stipanowich, & Henderson,
2003)
Litigation involves the determination of the dispute in a court before a judge and involves a
complex process requiring the use of significant resources generally including the use of legal
representation. The court of law in which the dispute is heard depends on the size of the dispute
in monetary terms. Additionally the jurisdiction and procedures of each court is governed by a
strict set of court rules. Of particular importance for construction disputes is the introduction of
Building Case lists in a number of states. This system is designed to allow building cases to be
isolated and assigned by a specialist list of judges. Once the case is entered by application, the
particular judge that administers that list will give directions for the further management of a
proceeding. This allows the judge to identify at the earliest possible stage the key issues in the
dispute and attempt to resolve those issues which may determine the case. The advantages of
using building lists are;
 i. Removes unnecessary legal technicalities in documentation and presentation, Ensures
issues are clearly defined between parties
ii. Establishes procedures for the hearing of particular issues
iii. Allows technical issues to be assessed by a technical expert and confines proceedings in
court to the determination of legal and non-technical issues
Much commentary has been focused on the negatives of litigation. Steen & MacPherson (2000)
stating that “Litigation is simply too time consuming, costly and acrimonious for most industry
participants” and if commenced such a process should be used as a last resort. Due to delays for
court hearings and time required to carry out the formal processes creates excessive time
disadvantages over other dispute resolution techniques. Lathlaen (1991) stated that litigation
requires “too much law, too little justice, too many rules, too few results”. (Stipanowich, &
Henderson, 2003)
However it must be recognized that litigation can still be considered as the most effective form
of dispute resolution where one party does not wish to resolve the dispute, there are substantial
legal implications, the proceedings are difficult to control or there are substantial allegations of
dishonesty. Another distinct advantage is that the process is determined by fact and law ensuring
that emotion is not a factor in the decision. (Stipanowich, & Henderson, 2003)

1.2.2 Characteristics of Litigation

i. Involuntary - a defendant must participate (no choice)
ii. Formal and structured rules of evidence and procedure
iii. Each party has the opportunity to present its evidence and argument and cross-examine
the other side - there are procedural safeguards
iv. Public - court proceedings and records are open
v. The decision is based on the law
vi. The decision can be final and binding
vii. Right of appeal exists
viii. Losing party may pay cost
1.3 Arbitration
Arbitration is the submission of a disputed matter to an impartial person (the arbitrator) for
decision.
1.3.1 The Process of Arbitration
Arbitration is typically an out-of-court method for resolving a dispute. The arbitrator controls the
process, will listen to both sides and make a decision. Like a trial, only one side will prevail.
Unlike a trial, appeal rights are limited. (Sherwyn, et al, 2009)
In a more formal setting, the arbitrator will conduct a hearing where all of the parties present
evidence through documents, exhibits and testimony. The parties may agree to, in some
instances, establish their own procedure; or an administrating organization may provide
procedures. There can be either one arbitrator or a panel of three arbitrators. An arbitration
hearing is usually held in offices or other meeting rooms. (Wani, 2011)

The result can be binding if all parties have previously agreed to be bound by the decision. In
that case, the right to appeal the arbitrator’s decision is very limited. An arbitrator’s award can be
reduced to judgment in a court and thus be enforceable. In nonbinding arbitration, a decision
may become final if all parties agree to accept it or it may serve to help you evaluate the case and
be a starting point for settlement talks. (Wani, 2011)
How and When Arbitration Is Used: A common use of arbitration is in the area of labor
disputes - between fire fighters and the city in wage disputes, for example. You will usually be
represented by an attorney in arbitration. Many contracts have clauses which require that
disputes arising out of that contract be arbitrated. You may have seen such a provision when you
applied for a credit card or opened a retirement account or other account with a stock broker.
You may want to explore using this process if you and the other side agree that the problem
needs to have someone make a decision but you do not want the expense of going through the
court process. If you agree to arbitrate or sign a contract with an arbitration clause, you should
understand that the arbitrator may make the final decision and that you may be waiving your
right to a trial in court. (Steen and herson 2000)

Who Provides This Service: Many attorneys, other professionals or professional associations
offer their services as arbitrators. Typically your attorney will select the arbitrator based upon the
particular type of the dispute. In complex and highly technical cases, often an arbitrator who is
knowledgeable in that field is chosen. Usually fees are charged. Some courts offer court-
sponsored, nonbinding arbitration and have specific procedural rules to follow.
1.3.2 Characteristics of Arbitration
i. Can be used voluntarily
ii. Private (unless the limited court appeal is made)
iii. Maybe less formal and structured than going to court, depending on applicable arbitration
rules
iv. Usually quicker and less expensive than going to court, depending on applicable
arbitration rules
v. Each party will have the opportunity to present evidence and make arguments
vi. May have a right to choose an arbitrator with specialized expertise
vii. A decision will be made by the arbitrator which may resolve the dispute and be final
viii. Arbitrator’s award can be enforced in a court
ix. If nonbinding, you still have the right to a trial (Steen and Pherson 2000)

1.4 Conclusion
Therefore it is necessary to determine which process methods works best for you, and how to
incorporate that process in your construction projects. In my opinion the best manner of doing
that is determining that in advance with the parties prior to entering into any agreement so that
there is no doubt as to what process or processes are to be followed. In my view there is no doubt
that the alternate dispute resolution process has definite advantages over the court system, both
in the area of economics and in timeliness of results.
References

Sherwyn, David, Tracey, Bruce & Zev Eigen, (2009) "In Defense of Mandatory Arbitration of
Employment Disputes: Saving the Baby, Tossing out the Bath Water, and Constructing a
New Sink in the Process", 2 U. Pa. J. Lab. & Emp. L. 73
Wani, Hilal Ahmad (2011). "Understanding Conflict Resolution" (PDF). International Journal of
Humanities and Social Science Volume 1: 105.
Stipanowich, T.J. & Henderson, D.A. (2003), "Mediation and mini-trial of construction
disputes", Building Research & Information, vol. 21, no. 3, pp. 162-166.
Steen D.K and Mac Pherson (2000) "A Behavioural analysis of construction Dispute
negotiation" Construction Management and Economics, vol. 15, no. 6, pp. 505