Construction Dispute Resolution Methods Explained

The parties discuss the dispute directly, without a third party, and try to agree a settlement. Negotiation is quick, cheap and private, and the parties keep full control of the outcome. Most construction disagreements are settled this way.

Many contracts make negotiation a formal first step. For example, NEC4 includes a stage where senior representatives of each party try to resolve the dispute before it goes further. Negotiations are often held on a “without prejudice” basis, so that offers cannot later be used as evidence. The QS often leads the commercial side of negotiations, particularly on the value of variations and the final account.

An independent mediator helps the parties negotiate a settlement. The mediator does not decide the dispute. They help each side understand the other’s position, test the strengths and weaknesses of their case and explore options. Mediation is confidential and without prejudice, and the parties sign a mediation agreement setting out the terms.

Mediation can be arranged quickly and often takes only a day or two. Any settlement is recorded in a binding agreement. It suits disputes where the parties want to preserve their relationship, or where the cost of a formal process would be out of proportion to the sums at stake.

The courts now strongly encourage mediation and other ADR. Following the Court of Appeal’s decision in Churchill v Merthyr Tydfil County Borough Council (2023), and amendments to the Civil Procedure Rules from 1 October 2024, the courts in England and Wales can order parties to take part in ADR. They can also take an unreasonable refusal into account when deciding who pays the costs.

Under the Housing Grants, Construction and Regeneration Act 1996, as amended, a party to a construction contract has a statutory right to refer a dispute to adjudication at any time. An independent adjudicator decides the dispute quickly. The usual timetable is as follows.

• A notice of adjudication is served, and an adjudicator is appointed.
• The referral is served within 7 days of the notice.
• The adjudicator reaches a decision within 28 days of the referral. This can be extended by 14 days with the referring party’s consent, or longer if both parties agree.

The adjudicator’s decision is binding and must be complied with. If necessary, it can be enforced through the courts, which usually do so quickly. But it is only temporarily binding. Either party can later have the dispute finally decided by litigation or arbitration, or the parties can settle it by agreement. In the meantime, the decision stands. That “pay now, argue later” principle keeps cash moving during the project.

Some points for QSs to note:

• The statutory right does not apply to every contract. Contracts with residential occupiers, and some process plant and other excluded operations, fall outside the Act.
• Each party usually bears its own costs, so even a successful party rarely recovers the cost of an adjudication.
• Where a payer has failed to give a valid payment or pay less notice, the notified sum must be paid. The payer generally has to pay it before it can start a separate adjudication about the true value of the work.

Adjudication was meant to be informal, but larger adjudications now often involve detailed submissions and expert reports.

The parties agree to appoint an independent expert, such as a QS, engineer or accountant, to decide a specific issue. It suits disputes about valuation, measurement or technical matters, such as the value of a final account or whether a plant meets its performance tests.

Expert determination is usually quick and private. It depends entirely on the parties’ agreement, which sets out the procedure. The expert’s decision is normally final and binding, with very limited grounds of challenge, for example where the expert has not answered the question they were asked. That finality is both its strength and its risk. The IChemE forms of contract make particular use of experts for technical disputes, as our guide to IChemE forms of contract explains.

A dispute board is a panel, usually of one or three independent experts, appointed at the start of a project. It stays involved throughout, visiting site, keeping up to date with progress and helping the parties deal with issues before they become disputes. Dispute boards are common on large infrastructure and international projects.

Their status varies between contracts. Under FIDIC’s 2017 editions, the Dispute Avoidance/Adjudication Board (DAAB) gives informal assistance and also makes decisions that are binding unless and until they are revised by agreement or arbitration. Under NEC4, Option W3 provides a Dispute Avoidance Board that makes recommendations, with a tribunal deciding the dispute if a recommendation is not accepted.

Arbitration is a private, binding alternative to the courts. It only applies if the parties have agreed to it in writing, usually through an arbitration clause in the contract. One or more arbitrators, often with construction expertise, hear the evidence and make a final award.

Arbitration is confidential, which matters to many parties. Awards are final, with very limited rights of appeal, and they can be enforced internationally under the New York Convention. That is why arbitration is standard on international projects and under FIDIC. It can, however, be as slow and expensive as litigation on complex disputes.

In England and Wales, arbitration is governed by the Arbitration Act 1996, as updated by the Arbitration Act 2025, which came into force on 1 August 2025. The 2025 Act clarified the law governing arbitration agreements, set out a statutory duty for arbitrators to disclose possible conflicts of interest and gave arbitrators a power to decide issues summarily.

Where the contract does not provide for arbitration, final resolution is through the courts. In England and Wales, most significant construction disputes are heard in the Technology and Construction Court (TCC), a specialist court within the Business and Property Courts. The TCC also enforces adjudication decisions.

Before issuing a claim, parties must normally follow the Pre-Action Protocol for Construction and Engineering Disputes. The claimant sends a letter of claim setting out its case. The defendant responds, usually within 28 days, and the parties meet to try to resolve or narrow the issues. Failing to follow the protocol can lead to costs penalties.

Litigation produces a binding, public judgment, with rights of appeal. It is usually the slowest and most expensive route, and the courts now expect parties to have considered ADR first.

In England and Wales, most claims worth up to £10,000 are dealt with on the small claims track of the County Court. The process is simpler and cheaper, and parties often represent themselves. It suits small domestic and trade disputes, but is rarely relevant to commercial construction projects.