The changing profile of nomination in construction dispute resolution

The 25 July 2020 was the fourth anniversary of the enactment of the Construction Contracts Act 2013, (CCA 2013) on 25 July 2016. The activity in adjudication nomination in the first two years under the new act was understandably low. ¹ In the third year to 25 July 2019 and fourth year to 25 July 2020 there was a significant increase in nomination activity through each of the six primary nominating bodies, namely the Construction Industry Federation, the Chartered Institute of Arbitrators, the Society of Chartered Surveyors of Ireland, the Royal Institute of the Architects of Ireland, Engineers Ireland and the Construction Contracts Adjudication Service. The number of reported nominations, by nominating body and dispute method, for the third and fourth years since enactment of the CCA 2013 is set out in the table below.

Table of dispute resolution nomination / appointment ⁸ from the primary dispute resolution boards for 2018 / 2019 (in brackets) and 2019 /2020, ^{9 10}

The four most prevalent dispute resolution methods, apart from Negotiation and Litigation, are Mediation, Conciliation, Adjudication and Arbitration. Although there is evidence of dispute method variants such as Med-Rec Conciliation ¹¹, their use is comparatively rare. In undertaking an analysis of data it should be noted that the nomination data does not reflect the full extent of dispute resolution activity. This is because there are many dispute resolution procedures where the independent third party, to either facilitate or impose a dispute decision, is mutually agreed between the two parties in dispute. As a result there is no necessity to refer to a nominating body for the nomination of the independent third party.

The author estimates, through anecdotal discussion with leading practitioners, that as much as one quarter to one third of all disputes are undertaken through party agreed nomination. The opacity of these procedures, in seeking to preserve confidentiality, means that accurate total data is unobtainable. However the reported nomination data from the primary nominating bodies, which represents the majority of dispute resolution nominations, provides trends as an indicator of overall activity.

A comparison of total dispute board nominations, across all dispute methods, 100 in 2018 / 2019 and 71 in 2019 / 2020 would seem to suggest that there is an overall reduction in activity. But this comparison should be considered in the context of what appears to be a rising number of party agreed nominations. This reflects an increasing prominence of some of the more established dispute resolution practitioners being requested to assist parties in dispute through mutual agreement.

Particularly conspicuous is the reduction in total nominations across all of the nominating bodies particularly for the CIF reducing from a total of 33 to 7 nominations, a reduction of circa 80% and the RIAI from a total of 24 to 15 nominations, a reduction of circa 60%. In parallel, there has also been a significant reduction across each dispute method, in the case of Mediation -85%, Conciliation -55% and Arbitration -28%.

The only dispute method to have seen a rise in activity is Adjudication, with an increase of 15%. The reasons for this trend may reflect what appears to be an increasing interest in Adjudication, which provides the certainty of a decision being made at a reasonable level of cost within a short defined period of time. These characteristics are not all available to the other three primary dispute methods

The most important trend illustrated by the data is the increasing share of the CCAS in Adjudication nomination, to which its remit is limited, compared to the total number of nominations across all methods of dispute resolution. In 2018 / 2019 the share was 42% which has significantly increased in 2019 / 2020 to 68% or over two thirds of the total nominations across all bodies. The reduction in nominations across all nomination bodies, with the exception of the CCAS, would seem to indicate an increasing preference for Adjudication and a reduction in other methods, particularly Mediation for resolving construction industry disputes.

The right to adjudication to resolve a dispute, as facilitated by the CCA 2013, available for just over four years is a relatively recent innovation. With the passage of time there is now a greater awareness and preparedness to engage in Adjudication through nomination by the CCAS in seeking a swift and relatively economic resolution of disputes in the construction industry. It will be interesting to see if the identified trends continue through the current 2020 / 2021 year.