The Royal Institution of Chartered Surveyors (RICS) has launched a new arbitration service for construction and engineering disputes. The service, launched in November, aims to offer fixed timelines for arbitrations with proportionate costs to allow greater deliberation for more complex disputes compared to the much shorter statutory adjudication process and to provide more cost effectiveness than full blown litigation. Although, on 1 October 2015 the Technology & Construction Court launched a two year scheme for Shorter Trials and Flexible Trials which is expected to reduce the costs of litigating in those cases where the schemes are likely to apply and may prove as attractive as the new arbitration service.
So what is the new arbitration service?
The new arbitration service offers two schemes as follows:
The Fast Track Arbitration Service
- The Fast Track Arbitration Service is aimed at resolving disputes with a maximum value of £100,000.
- There will be an administration fee payable to RICS of £350 which is a recoverable cost.
- According to RICS, it "strives to achieve final and binding arbitration awards that are better value than County Courts judgments and are without the enforcement and other issues related to the temporary nature of adjudication decisions."
- Awards are to be published within 6 months.
- Arbitrators appointed under this service have a maximum hourly rate of £175 and a capped number of hours for which they can charge (60 hours unless there is a counterclaim).
- Parties will be able to recover costs under this service, albeit those costs will be capped at £5,000 or 20% of the value of the claim plus the value of any counterclaim.
- Parties can agree to use this service even where their contract does not provide for arbitration by way of a RICS ad-hoc arbitration agreement.
The Select Arbitration Service
- The Select Arbitration Service is aimed at resolving disputes with a minimum value of £100,000.
- There is no administration fee payable.
- It is meant to provide "a viable alternative to the Technology and Construction Court to determine high value, complex disputes" offering particular advantages in relation to costs and timeframes.
- Awards are to be published within 12 months.
- Arbitrators appointed under this service are required to provide an estimate of their fees at the outset which they must update throughout the arbitration (they will not, however, be subject to capped fees as they are under the Fast Track service).
RICS will appoint a panel of arbitrators according to its Criteria for Inclusion on RICS Panels of Construction and Engineering Arbitrators. Arbitrators will be chosen from appropriate professions including surveyors, lawyers, engineers and architects and will be regularly assessed to ensure that they remain up to date with relevant law and practice.
The Fast Track Service aims to be a workable alternative for disputes that do not come within the scope of adjudication or where parties are reluctant to adjudicate or to litigate. There are many reasons why this new arbitration service may be preferable. For example, there is more time than adjudication to give full consideration to the evidence which, in complex cases, is likely to be preferable to the rough and ready approach of adjudication and ends in a final and binding decision. The Select Arbitration Service will be able to complete proceedings within twelve months unlike normal TCC litigation. The issuing fee is also considerably less; there is no need to rack up costs following a pre action process before issuing a claim; and, crucially, the process is private and confidential.
The success of these schemes remains to be seen. Some commentators have expressed scepticism, comparing it to the 100 Day Arbitration Procedure launched by the Society of Construction Arbitrators in 2004 which has not enjoyed widespread uptake across the sector. However, that scheme was launched relatively soon after the introduction of adjudication in 1998 and several years before the Jackson Reforms and other developments in civil litigation. The RICS new arbitration service will now have to compete with the Shorter Trials Scheme and the Flexible Trials Scheme recently launched in the TCC which erodes away some of the advantages that the RICS new arbitration service provides. It just may be that timing is all.
If you would like to discuss this article or the new arbitration service in more detail please contact Bevan Brittan partner Marie-Claire O'Hara who specialises in construction and engineering dispute resolution (contact details below).