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Arbitrators need to get a grip

Legal matters

The cause of construction arbitration has been dealt a double whammy recently. For nearly 15 years construction arbitrators have enjoyed (if that is the right word) what might be described as something of a monopoly on delay and loss-and-expense claims.

This was created by the Court of Appeal's decision in nrha v Crouch. Part of the Court of Appeal's thinking in reaching the controversial view that only arbitrators, not judges, could reconsider architects' certificates, including extensions of time, was that the overworked construction judges were so bogged down with protracted delay claims that the wait for a hearing date was becoming a scandal. Despite complaints from commentators and lawyers as to the wisdom of the decision, the industry has seemed able to live with the fact that if it wanted to challenge an architect's certificate it had to go to an arbitrator: and construction arbitration thrived.

At a stroke the House of Lords has changed all that. As far as certificates are concerned, there is no difference between a judge or an arbitrator. Construction judges are now expecting an increase in their workload; arbitrators should prepare themselves for a downturn.

If that were not enough, the jct has made arbitration optional. The notes to Amendment 18 explain that the litigation option has been included to overcome the problems caused by Crouch. On the one hand this seems strange, since it has done nothing to address these problems during the 15-year reign of Crouch - not even taken advantage of a piece of legislation introduced to allow the parties to an arbitration agreement to agree that a judge could have the same powers as an arbitrator, if they preferred litigation.

On the other hand, it is ironic that the jct should implement these changes within months of the House of Lords doing away with the problem entirely. Some might think that the jct's radical change of heart, so long after the event, has nothing to do with Crouch and more to do with a loss of confidence in arbitration.

If construction arbitration is on its knees, are there any champions out there to save the day? Well, there might be, and if there are, they now have a powerful weapon at their disposal in the form of the new Arbitration Act 1996. Courageous and innovative arbitrators are needed, who will step off the well-trodden path of conventional arbitration, with its predictable and expensive obstacles of discovery, comprehensive experts' reports and written evidence, all of which go into a melting pot from which the handful or so of substantive issues are plucked a short time before the real battle, a kind of trial by cheque book, otherwise known as the hearing.

Instead, arbitrators should respond to Lord Saville's injunction to 'get a grip' and, using the creative provisions of the new act, adopt procedures which readily identify the real issues in dispute, are geared to ensuring that only evidence relevant to those issues is prepared and, if necessary, heard, while all the time keeping a weather eye on the cost of the whole thing.

Initiatives, defined by the new act, should be implemented by arbitrators, who should consider, for example, whether to set a budget for recoverable costs for the various stages of the arbitration. Professor John Uff qc, primary author of the Construction Industry Model Arbitration Rules (cimar), has suggested an overall budget of between 10 and 25 per cent of the amount in dispute. The reputation of arbitration is more likely to be saved if the parties are left bearing the impression of the arbitrator's grip, than with that familiar sinking feeling of: 'Oh no, here we go again'.

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