Mediation is a widely used form of Alternative Dispute Resolution (ADR) in the UK construction, infrastructure and energy industry. It provides a structured (yet informal) process where parties can negotiate a resolution to their dispute with the assistance of a neutral third-party mediator. This method is often considered a more collaborative and cost-effective alternative to litigation or arbitration, but it is not without its limitations. 

My colleagues Mark Woodward Smith, with his article on Mediation – advantages and disadvantages, and Eric Webb and Duncan Anderson, with their article on Mediation in Construction Disputes, have already considered this topic. However, in this article we examine in the current climate the advantages and disadvantages of using mediation in the context of UK construction, infrastructure and energy disputes (named construction disputes within this article for brevity).

Advantages of Mediation in Construction Disputes

One of the key advantages of mediation is its efficiency. Unlike court or arbitration proceedings, which can take months or even years, mediation can often be completed within a single day or over the course of a few days. This is particularly beneficial in construction disputes, where delays in resolving issues can have a significant impact on ongoing projects and relationships between stakeholders and often the solvency of the parties. By reducing the time required to reach a resolution, parties can also save substantially on legal costs and other associated expenses.

Another significant advantage is the preservation of the business/commercial relationships between the parties. The construction industry often involves a lot of long-term collaboration among contractors, subcontractors, and clients, and the business relationships are often crucial to a party’s business strategy. Litigation can irreparably damage these relationships. Mediation, by contrast, fosters a cooperative approach, encouraging parties to work together and gives them control in finding a mutually acceptable solution. This is especially important in disputes where parties may need to continue working together on current or future projects.

Mediation also allows for more flexible outcomes. Unlike a court judgment or arbitral award, which is typically limited to monetary compensation or other rigid remedies, mediation enables the parties to craft creative solutions tailored to their specific needs. For example, the resolution could include adjustments to project timelines, alternative payment arrangements, or agreements on future work for a settlement on specific terms. We often see settlements on ongoing projects that include additional KPIs being introduced  to ensure both parties are satisfied with the work and the relationship going forward.

Confidentiality is another significant benefit. Similar to adjudication, mediation is private, and the details of the discussions, as well as the eventual settlement, remain confidential. This is particularly advantageous in construction disputes, where there are multiple parties and/or the parties may wish to avoid the reputational damage or commercial risk associated with public litigation.

Disadvantages of Mediation in Construction Disputes

Despite its advantages, mediation is not without its challenges. A critical limitation is that mediation is a somewhat voluntary process. While parties will be required to participate in some form of ADR by Pre-Action Protocol for Construction and Engineering Disputes 2nd edition (the Pre-Action Protocol) if they wish to issue a claim, there is no obligation to reach an agreement and other forms of ADR may be more suited to a party’s approach. If mediation is the chosen method and one party is unwilling to negotiate in good faith or refuses to compromise, the mediation may fail, leaving the dispute unresolved. In such cases, parties may have to resort to adjudication, litigation or arbitration, incurring additional costs and delays.

Another disadvantage is that mediation does not result in a binding decision unless the parties reach and formalise an agreement. This contrasts with court proceedings or arbitration, where a binding judgment or award is issued and can be enforced. Consequently, there is always a risk that mediation will not lead to a resolution, requiring parties to invest further time and resources in resolving the dispute. 

The success of mediation also depends heavily on the skills and experience of the mediator. In construction disputes, which often involve complex technical and contractual issues, it is essential to appoint a mediator with expertise in the construction industry. A lack of industry-specific knowledge on the part of the mediator could hinder the process and reduce the likelihood of a satisfactory outcome. In multi-party disputes, the parties also need to identify a mediator that is capable of managing this dynamic to ensure that an acceptable decision/settlement is reached between all the parties. 

Conclusion

Mediation offers significant advantages for resolving construction disputes in the UK, particularly in terms of cost, speed, flexibility, and the preservation of relationships. However, its reliance on the willingness of parties to negotiate, its non-binding nature, and its dependency on mediator expertise means that it may not always be the most suitable option for every dispute.

Given the Pre-Action Protocol requires parties to attempt some form of ADR prior to escalating a dispute to litigation, it is always worth assessing if mediation is a suitable forum for settling issues on a project. However, before opting for mediation, parties should carefully consider the specifics of their case, the dynamics between the parties, and the potential benefits and limitations of the process.