Balancing established methods with emerging technologies in Alternative Dispute Resolution
The construction industry, with its extensive array of intricate projects and multifaceted stakeholder interests, relies heavily on Alternative Dispute Resolution (ADR) as an essential tool. ADR is a term that encompasses techniques for resolving disputes outside of litigation. This includes arbitration, adjudication, expert determination and mediation. It is designed to resolve disputes with greater efficiency and flexibility and at a lower cost than the courtroom, while also potentially preserving professional relationships.
Author: Robert Dean, Associate Director, Abu Dhabi, UAE.
While arbitration can be confrontational and may not always be fast-paced or lower cost than litigation, adjudication, on the other hand, is often quicker and less confrontational. This makes adjudication an approach that can adapt to the dynamic, fast-paced nature of construction projects and the varying needs of the parties involved.
Adjudication is a method often favoured for its speed and efficiency, aimed at providing a temporary resolution to allow work to continue. Indeed, the process was introduced as a method of dealing with disputes as and when they arose on live projects quickly and cheaply to allow the works to remain unaffected and the parties to continue working together. However, the speed of adjudication, combined with the jurisdiction of the adjudicator and the conduct of the parties, means that the outcome of an adjudication may not be as foreseeable or reasoned as an arbitral award or court judgement.
Traditional ADR methods each differently address the unique challenges of construction disputes. My role often involves assisting expert witnesses, particularly in the context of arbitration, where I have observed its unique blend of judicial formality with the flexibility crucial in construction contexts.
Expert determination, focuses on decisive, expert- led judgments. Mediation, meanwhile, relies on collaboration, promoting mutually beneficial solutions and maintaining business relationships.
Each method contributes distinctively to dispute resolution. While the ideal outcome is to preserve project integrity and encourage collaborative relationships, the reality in the construction industry can be complex, with varied results. The effectiveness of each approach largely depends on the specific context, complexity, size, scope and dynamics of the dispute at hand.
As we contemplate the future role of technologies like blockchain in ADR, it is interesting to note the rise of hybrid ADR approaches, such as Med-Arb, in certain sectors and regions.
While we continue to value the established methods of ADR in the construction sector, it is also important to recognise the emerging innovations that are beginning to influence industry practice. Emerging technologies like blockchain are entering the scene. Blockchain is a decentralised, digital ledger that records transactions across multiple computers and ensures that the recorded transactions cannot be altered retroactively. This technology, while not yet mainstream in construction dispute resolution, suggests a future where digital, decentralised decision- making could enhance transparency, efficiency, and global applicability.
The use of smart contracts, which are computer protocols designed to facilitate, verify, and enforce the performance of a contract, could significantly impact construction dispute resolution processes. These contracts can reduce the scope for disputes by providing smoother, objective contract administration and automated payment processes. The source of many construction disputes can be traced back to parties’ basic misunderstanding of the contract they have entered into, compounded by a range of contract administration failures or errors. Smart contracts have the capability to function as unbiased, trustworthy, and consistent contract administrators, resulting in a reduced margin for error and increased transparency.
Information within the smart contract will be captured and registered on a distributed ledger between the relevant parties, producing a robust and reliable audit trail of past events that will reduce scope for disagreement if a dispute does arise. Such contracts would further avoid many of the current snags and disagreements that result from contract non- compliance and misinterpretation throughout the life-cycle of the project. However, developing the smart construction contract in the first place will be no small undertaking – standard construction contracts need to provide for risk allocation and administration of a wide range of physical, economic, and legal issues.
As we contemplate the future role of technologies like blockchain in ADR, it is interesting to note the rise of hybrid ADR approaches, such as Med-Arb, in certain sectors and regions. This may result in a change to standard dispute resolution practices. Med-Arb merges mediation's focus on collaborative resolution with the decisive nature of arbitration. The process starts with mediation and, if unresolved, transitions to arbitration for a binding decision. This approach, offering a blend of collaboration and decisiveness, presents an innovative option for complex construction disputes.
Alongside these developments in ADR methods, the role of Artificial Intelligence (AI) is becoming increasingly significant. The integration of AI into ADR suggests a future where technology not only supports, but enhances dispute resolution.
In the construction industry, known for its complexity and multi-layered challenges, AI can revolutionise how disputes are managed. By leveraging data analysis, predictive modelling, and algorithmic decision-making, AI can offer deeper insights, predict potential conflicts, and even suggest resolutions. This could streamline the dispute resolution processes, making them more efficient and effective, particularly regarding intricate construction projects with numerous variables and vast data sets.
However, the integration of technologies like blockchain and AI in ADR is not without its challenges. Practical issues such as scalability, data security and the need for industry-specific customisation pose significant hurdles. The construction industry requires tailored solutions that these technologies are still adapting to. Moreover, the legal and regulatory frameworks surrounding blockchain and AI are evolving, necessitating cautious navigation. Understanding and overcoming these challenges is crucial for the effective implementation of these technologies in construction dispute resolution.
While embracing these technological advancements, it is crucial to recognise the enduring relevance of traditional ADR methods such as arbitration, adjudication, expert determination, and mediation in the construction industry. These time-tested practices, deeply rooted in legal and contractual expertise, continue to be the backbone of dispute resolution internationally. The integration of technologies like blockchain and AI should be viewed as complementary tools, enhancing rather than replacing the established practices of these ADR methods. Maintaining the balance between tradition and innovation is key to addressing the diverse and complex nature of construction disputes, ensuring that the solutions remain grounded in practical, industry-specific realities.
In conclusion, the ADR landscape in construction is poised for significant evolution. Traditional methods like arbitration, adjudication, expert determination, and mediation form the foundation but are now on the cusp of being augmented by technologies like blockchain and AI. While these innovations promise to bring greater efficiency, transparency, and adaptability, their integration is still in the early stages.
As we stand now, the construction industry has the opportunity to leverage these tools, shaping a future where dispute resolution is transformed to meet the complexities of modern construction challenges. It is pertinent to mention, in the spirit of embracing innovation, that the drafting of this very article was assisted by artificial intelligence.
This approach not only highlights the use of new technologies in our field but also underscores how they complement our established practices. By investing in understanding the potential and limitations of these tools, construction parties can navigate the transformation effectively, ensuring that they are well- equipped to harness the benefits of these advancements while mitigating potential risks. The future of construction dispute resolution lies in the successful integration of tradition and innovation, and the industry must be prepared to embrace this change.
This article was written for issue 27 of the Diales Digest. To view the publication, please visit: www.diales.com/diales-digest-issue-27