Alan Philip Brady BL

In relation to the current trends in Ireland, a recent KPMG report notes that:

Disputes in construction contracts often arise due to their inherent incompleteness, as unforeseeable events can lead to conflicts. These complexities are compounded by factors like multiple stakeholders, unique project requirements, fluctuating costs, and the potential for insolvency. Both globally and in Ireland, there has been a notable increase in construction-related disputes.

The development of construction dispute resolution mechanisms

Various techniques for resolving construction disputes have evolved, ranging from negotiation and third-party intervention to more adjudicative processes. The history of arbitration in Ireland dates back to 1698, with modern standard construction contracts often favouring this approach. Conciliation, a more recent development, aims for amicable settlement, while mediation is increasingly preferred for its efficiency and ability to preserve relationships. Statutory adjudication, introduced in Ireland in 2013, is favoured for its quick resolution, especially in payment disputes.

Since its introduction to the UK in 1998, adjudication has been widely used in the country and has led to a marked decline in arbitration and other dispute resolution methods in the UK. Despite the lack of finality, relatively few adjudicators’ determinations are subsequently referred to ‘arbitration’ or ‘litigation’. Since 1998, adjudication has spread to Australia, New Zealand, and several countries in Southeast Asia. The approach adopted is very similar to the UK model except that in some of the Australian States its use is restricted to payment disputes only.

Arbitration and the Irish legal system

Arbitration is often chosen for construction disputes due to its confidentiality, finality, and the expertise of arbitrators. The Irish legal system shows deference to arbitration, frequently staying court proceedings to allow for arbitration.

In Galway County Council v. Samuel Kingston Construction Limited [2010] 3 I.R 95, O’Donnell J. stated that:

The growth of mediation

Mediation’s popularity in construction disputes is growing as it is quick, cost-effective, and less damaging to business relationships. It is the preferred method among many in the Irish construction industry.

According to the Irish Law Reform Commission’s Report on Alternative Dispute Resolution: Mediation and Conciliation (2010), a survey carried out by the Irish Construction Industry Federation revealed that the preferred method of resolving construction disputes was mediation (52 per cent), followed by conciliation (45 per cent) and arbitration (three per cent).

Conciliation: Pivotal precondition in Irish construction contracts

Conciliation is similar to mediation but involves issuing a binding recommendation if a settlement is not reached. It is widely used in Ireland for its cost-effectiveness and speed in resolving disputes.

Many standard form construction contracts in Ireland require the parties to engage in conciliation before referring a dispute to arbitration, litigation, or other forms of dispute resolution.

If the parties’ contract requires them to engage in conciliation before referring their dispute to arbitration or another form of dispute resolution, the parties must do so. In Achill Sheltered Housing Association CLG v. Dooniver Plant Hire Limited [2018] IEHC 6 the High Court held the appointment of an arbitrator to be invalid on the grounds that the matters referred to arbitration had not, prior to the referral, first been submitted to conciliation as required by the contract.

Adjudication

Adjudication stands out for its temporary binding nature, distinguishing it from arbitration. The Construction Contracts Act 2013 introduced statutory adjudication in Ireland, targeting quick resolutions in payment disputes. It is often described as providing “rough justice” due to its expedited nature compared to traditional litigation.

In Aakon Construction Services Limited v Pure Fitout Associated Limited [2021] IEHC 562, Simons J. noted in relation to the role of an adjudicator at paragraph 6 that:

The 2013 Act does not designate a decision of an adjudicator as final and conclusive. Rather, pursuant to subsections 6(10) and (11); it is envisaged that an adjudicator’s decision may be superseded by a subsequent decision reached in arbitral or court proceedings.

Future trends

Despite the increasing number of construction companies becoming insolvent, a recent report from EY Ireland notes that:

There should also be increased activity in the construction sector with the proposed Trans-European Transport Network Project 2040, and the increase in offshore wind farms, to name but a few. The increase in construction projects will naturally lead to more disputes.

Based on the foregoing, and experience to date; some key trends to note:

• The construction sector in Ireland is expected to grow, leading to an increase in disputes.
• There is a rising trend towards adjudication, reflecting a preference for faster, more cost-effective dispute resolution methods.
• Renewable energy sector disputes may increasingly turn to adjudication.
• Mediators in construction disputes are often lawyers, while arbitrators come from a variety of professional backgrounds, including law.

In summary, the trend in construction dispute resolution is moving towards methods such as mediation, conciliation, and adjudication, which balance the need for quality decisions with speed and cost-effectiveness. This evolution reflects the changing dynamics and requirements of the construction industry, particularly in the context of Ireland.

• Alan Philip Brady BL is a practising barrister. This article first appeared on the Law Library website.