CONSTRUCTION ARBITRATION: THE PROS AND CONS.

• Author: Strickland, Jason T.
• Position: 2018 LAW JOURNAL

Many construction projects end in disputes and many of these disputes are resolved through arbitration, a process by which the parties agree to submit their case to a third-party neutral, an "arbitrator," who acts as a judge and jury.

What is Arbitration?

Arbitration is often confused with mediation and with a lawsuit. Each involves different forms of dispute resolution.

Mediation is a settlement conference in which the parties meet and use a third-party neutral, a "mediator," as a settlement facilitator. The mediator has no power to force settlement. The parties mediate because of a court or contract requirement, or because they feel the mediator will be able to facilitate an otherwise unobtainable settlement.

A lawsuit is conducted in a court and usually is initiated by a plaintiff filing a complaint, in which the plaintiff will ask for some form of relief from the defendant. The court is a government institution from which the parties are entitled to seek a decision as to their dispute.

Arbitration is a lawsuit without court involvement. The parties agree (typically in a contract before the dispute arises) to submit their dispute to arbitration. The agreement empowers the arbitrator to decide the dispute. Unlike mediation, the arbitrator's decision is binding. Frequently parties will mediate and, if unsuccessful, then arbitrate.

Arbitration Versus Lawsuits

The following are the major distinctions between arbitration and court litigation:

Decision Process

In a lawsuit, the dispute is decided after a trial before a "finder of fact," usually a jury. The judge administers the trial and decides questions of law. Although the judge may hear some construction cases, they are a small subset of the total cases he or she hears. Similarly, a typical juror will not be a construction expert.

In arbitration, the arbitration agreement controls the process. There is a private arbitrator (or a panel) who acts as both the judge and the jury. The arbitrator is chosen based on the subject matter of the dispute; e.g., construction arbitration will have a construction lawyer as the arbitrator. This reduces the effort necessary to "educate" the arbitrator and better suits the arbitrator to render a decision.

Rules

Arbitration is less formal than a lawsuit. The rules of evidence and civil procedure are not strictly enforced and an arbitrator has wide latitude to frame the process. Typically, the parties and the arbitrator will agree to a scheduling order...