As the Scottish construction industry reopens and adapts to its “new normal”, it is a given that we will see similar Covid-19 related disputes on the rise. With some developments facing significant delays and businesses seeking payment, parties to a construction contract want to know whether they are entitled to extensions of time, money or both. Where parties can't agree on extensions of time or sums due, these discussions can quickly become contentious.
It has become clear that developers and contractors alike are seeking quick resolutions. Whether that be to keep a project moving or to ease cash flow concerns, the new normal calls for parties to take a more collaborative approach to dispute resolution. This approach has even been endorsed by the Scottish Courts recently. Here are a few dispute resolution options we may start to see more of in the construction industry as a result of this.
Starting with negotiations, the Scottish Government has called on parties to construction contracts to show flexibility in negotiations and resolve disputes amicably. The guidance states that: "Where matters arise on site during the period in which national pandemic mitigation measures apply, which either party feel could escalate to become a dispute, they should look at implementing an appropriate conflict avoidance procedure to seek to “head off” such issues in order to maintain site progress and regular cashflow."
Given more formal routes of dispute resolution are working through a backlog of cases, parties should now consider early commercial negotiations where possible, and take a flexible approach to dispute resolution in order to keep projects and cashflow moving.
Adjudications were always intended to be a fast track dispute resolution process and have continued to be utilised heavily during the Covid-19 pandemic. The Construction Act sets out a tight timetable for adjudications: the adjudicator's decision must be made within 28 days of service of the referral notice. It is possible to extend this timescale, and in practice adjudications can take much longer than 28 days. However in recent times, we have seen a trend whereby parties try to stick to the 28 day timetable and to agree fixed fees for adjudications. With remote adjudications becoming the norm and hearings being hosted by video link or conference calls, parties can get a decision from an adjudicator within a month. This is an attractive option to employers and contractors alike, allowing parties to resolve disputes in a faster, fee controlled manner.
Where parties are seeking a commercial settlement to their dispute, remote mediations are assisting parties reach agreement. Mediation can be a quick and often more cost effective method of dispute resolution. The mediator is an independent third party who will not make decisions about the dispute, but can focus parties' minds on achieving a mutually acceptable resolution. Mediation is a consensual process which allows both parties to take a collaborative approach to dispute resolution without ever entering a courtroom.
To keep projects moving, disputes need to be resolved quickly and it is clear that remote, digital processes are crucial to this. Employers, contractors and the professional team alike face Covid-19 challenges and making greater use of early negotiations, 28 day adjudications and remote mediation, will allow projects to continue and keep cashflow moving.