Quasi-Judicial Decision Making in a Construction Context | Key Trends

Construction & Conflict

In relation to the current trends in Ireland, a recent KPMG report notes that:

In Ireland, a similar trend exists, albeit on a local scale, as the number of cases referred to the Construction Contracts Adjudication Service (CCAS) has more than quadrupled since 2018. In terms of state-sponsored infrastructure projects, the Irish Government is commissioning hundreds of construction projects associated with its Project Ireland 2040 plan and investing in major energy infrastructure such as the Celtic Interconnector. Market commentators observed that Ireland continues to recover after the shock of COVID-19 but the country still faces challenges, one of which is ‘Difficult contractual and legal conditions’, reflecting the current market issues of inflation and managing cost risk share amongst suppliers and contractors.

Disputes in construction contracts often arise due to their inherent incompleteness, as unforeseeable events can lead to conflicts. These complexities are compounded by factors like multiple stakeholders, unique project requirements, fluctuating costs, and the potential for insolvency. Both globally and in Ireland, there has been a notable increase in construction-related disputes.

The Development of Construction Dispute Resolution Mechanisms

Various techniques for resolving construction disputes have evolved, ranging from negotiation and third-party intervention to more adjudicative processes. The history of arbitration in Ireland dates back to 1698, with modern standard construction contracts often favoring this approach. Conciliation, a more recent development, aims for amicable settlement, while mediation is increasingly preferred for its efficiency and ability to preserve relationships. Statutory adjudication, introduced in Ireland in 2013, is favored for its quick resolution, especially in payment disputes.

Since its introduction to the UK in 1998, adjudication has been widely used in the country and has led to a marked decline in arbitration and other dispute resolution methods in the UK. Despite the lack of finality, relatively few adjudicators’ determinations are subsequently referred to ‘arbitration’ or ‘litigation’. Since 1998, adjudication has spread to Australia, New Zealand, and several countries in Southeast Asia. The approach adopted is very similar to the UK model except that in some of the Australian States its use is restricted to payment disputes only.

Arbitration & The Irish Legal System

Arbitration is often chosen for construction disputes due to its confidentiality, finality, and the expertise of arbitrators. The Irish legal system shows deference to arbitration, frequently staying court proceedings to allow for arbitration.

In Galway County Council v. Samuel Kingston Construction Limited [2010] 3 I.R 95, O’Donnell J. stated that:

There are many areas where specialist arbitrators enjoy considerable advantages over reviewing courts and it is correct that courts should acknowledge this and approach the determination of such arbitrators with something which can, I think, properly be called deference. That normally occurs however where proceedings necessarily touch on an area within the arbitrator’s specialist expertise, and not where, as here, issues of law are involved.

The Growth of Mediation

Mediation’s popularity in construction disputes is growing as it is quick, cost-effective, and less damaging to business relationships. It is the preferred method among many in the Irish construction industry.

According to the Irish Law Reform Commission’s Report on Alternative Dispute Resolution: Mediation and Conciliation (2010), a survey carried out by the Irish Construction Industry Federation revealed that the preferred method of resolving construction disputes was mediation (52%), followed by conciliation (45%) and arbitration (3%).

Conciliation: Pivotal Precondition in Irish Construction Contracts

Conciliation is similar to mediation but involves issuing a binding recommendation if a settlement is not reached. It is widely used in Ireland for its cost-effectiveness and speed in resolving disputes.

Many standard form construction contracts in Ireland require the parties to engage in conciliation before referring a dispute to arbitration, litigation, or other forms of dispute resolution.

If the parties’ contract requires them to engage in conciliation before referring their dispute to arbitration or another form of dispute resolution, the parties must do so. In Achill Sheltered Housing Association CLG v. Dooniver Plant Hire Limited [2018] IEHC 6 the High Court held the appointment of an arbitrator to be invalid on the grounds that the matters referred to arbitration had not, prior to the referral, first been submitted to conciliation as required by the contract.

Adjudication

Adjudication stands out for its temporary binding nature, distinguishing it from arbitration. The Construction Contracts Act 2013 introduced statutory adjudication in Ireland, targeting quick resolutions in payment disputes. It is often described as providing “rough justice” due to its expedited nature compared to traditional litigation.

In Aakon Construction Services Limited v Pure Fitout Associated Limited [2021] IEHC 562, Simons J. noted in relation to the role of an adjudicator at paragraph 6 that:

 “To assist in achieving compliance with the tight timeframe, the legislation allows an adjudicator to take the initiative in ascertaining the facts and the law in relation to the payment dispute. The role of an adjudicator is thus more inquisitorial than that of a court.”

The 2013 Act does not designate a decision of an adjudicator as final and conclusive. Rather, pursuant to subsections 6(10) and (11); it is envisaged that an adjudicator’s decision may be superseded by a subsequent decision reached in arbitral or court proceedings.

Future Trends

Despite the increasing number of construction companies becoming insolvent, a recent report from EY Ireland notes that:

“Construction output in Ireland is forecast to grow at the strongest rate among 19 European countries, expanding by 3.2% this year [2023] and 4.4% in 2024. This comes at a time when total construction activity in Europe is expected to fall by 1.7% in 2023 and 2.1% in 2024 as macroeconomic uncertainty, interest rate increases and tightening credit conditions impact the construction sector across the continent. In Ireland, the level of new housing completions is now expected to meet or exceed national targets, with completions estimated at 31,000 in 2023 and 33,450 in 2024.

Ireland is the only country forecast to see strong growth next year, up 7.9% during this period. The civil engineering sector in Ireland is forecast to grow by 2.4% in 2023 and 13 5.3% in 2024, while the non-residential sector will grow by 2.9% and 2.6% over the same two-year period.”

There should also be increased activity in the construction sector with the proposed Trans-European Transport Network Project 2040, and the increase in offshore wind farms, to name but a few. The increase in construction projects will naturally lead to more disputes.

Based on the foregoing, and experience to date; some key trends to note:

• The construction sector in Ireland is expected to grow, leading to an increase in disputes.
• There is a rising trend towards adjudication, reflecting a preference for faster, more cost-effective dispute resolution methods.
• Renewable energy sector disputes may increasingly turn to adjudication.
• Mediators in construction disputes are often lawyers, while arbitrators come from a variety of professional backgrounds, including law.

In summary, the trend in construction dispute resolution is moving towards methods such as mediation, conciliation, and adjudication, which balance the need for quality decisions with speed and cost-effectiveness. This evolution reflects the changing dynamics and requirements of the construction industry, particularly in the context of Ireland.

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The views expressed above are the author’s own and do not reflect the views of The Bar of Ireland.

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