John O'Brien
IT NEVER CEASES TO AMAZE ME that many of the professional people I meet have no idea that some of the biggest commercial contract disputes in this jurisdiction are fought, settled or decided behind closed doors. In fact, I recall at least one lawyer making the cringe-worthy statement that “if one fails to settle in Arbitration, one can always go to court”.
Wrong. You Can’t
This is the reality of alternative dispute resolution (ADR) — all hearings, whether conciliation, mediation, arbitration or adjudication, take place behind closed doors and in total confidence, with no public access, no reporters, and gagging clauses common. No ‘verdicts’ are published — in fact, only the parties to a dispute and their representatives are aware of the existence of the dispute.
The confidentiality of the ADR process is something that we as professional practitioners are obliged to take very seriously. But confidentiality brings both positive and negative effects, not just for parties to the process but the construction industry at large.
The positive effects are, firstly, that parties can wash their dirty linen safe in the knowledge that the public will never know the outcome of the dispute nor their private business and its commercially sensitive information.
Secondly, ADR has the benefit of having a construction industry expert sitting in the chair to assist in resolving disputes in this most complex field.
Thirdly, the final, heavy-duty tier of ADR is arbitration, and it is both final and binding. The dispute is over. No appeal, no challenges and, most important, no additional costs to the parties (the only exception being in a very limited set of circumstances of misconduct by the Arbitrator, for which there has yet to be a successful application to the High Court under the 2010 Arbitration Act). Arbitration gives closure to commercial entities in dispute, allowing them to move on with their business.
Negative Consequences
But l’ve also seen instances of negative consequences from this in camera system, and I group them under two headings:
Firstly, the ADR process loop is never closed — unlike a dispute that has been referred to court and where a judgment has been published. In such circumstances, the court’s control loop is essentially closed where published judgments permit sub-contractors, main contractors and employers to evaluate the standing of their dispute in law. This allows the aggrieved party to consider if there really is a cause of action, and if not, it can stand down its army and retreat before wasting a lot of time, effort and money. With ADR, there is no publication of either judgment or argument.
Secondly, ADR is open to abuse by respondents with deep pockets who can avoid public accountability and possible reputational damage behind the closed doors of the arbitration chamber.Such respondents may, for example, deploy strategies of frustration in order to deplete the war chests of even the strongest of claimants and try and beat them into commercial surrender — regardless of how strong their entitlement is.