The Transformation of Construction Disputes: The past decade reveals evolution in arbitration and resolution practices

By Michael A. Marra of The American Arbitration Association

Over the past decade, the field of construction dispute avoidance and resolution, particularly arbitration, has evolved significantly in response to the complexities of global construction projects and advances in technology. The American Arbitration Association (AAA), the leader in construction dispute resolution, understands the evolution reflects a broader shift towards more efficient, flexible, and technologically integrated approaches to dispute resolution, shaped by emerging challenges and the need for more specialized expertise in resolving construction disputes. To that end, the AAA continues to evolve its processes and roster to meet those demands.

Early 2010s: Traditional Approaches and the Shift Towards ADR

In the early 2010s, construction dispute resolution was heavily reliant on traditional litigation, a process often criticized for being time-consuming, costly, and adversarial. During this period, there was a notable shift towards alternative dispute resolution (ADR) methods, including arbitration, mediation, and conciliation. These methods were favored for their potential to offer more confidential, flexible, and less adversarial processes compared to litigation. Arbitration, in particular, became a preferred choice in international construction contracts due to its binding nature and the enforceability of awards under the New York Convention 1958.

Mid-2010s: Integration of Technology and Specialization

By the mid-2010s, the construction industry began to embrace technological advancements, leading to the integration of digital tools in dispute resolution processes. This period saw the rise of building information modeling (BIM), which significantly impacted dispute avoidance by improving collaboration, documentation, and transparency among project stakeholders. BIM’s ability to create detailed digital representations of physical and functional characteristics of places facilitated better decision-making and reduced the risk of disputes arising from miscommunication or lack of information.

Additionally, there was a growing trend towards the specialization of dispute resolution professionals. As construction projects became more complex, the need for arbitrators, mediators, and experts with specific knowledge in construction-related fields (such as engineering, architecture, and project management) increased, including the need for construction lawyers with technical expertise, a significant portion of the AAA Roster. This specialization ensured that disputes could be assessed more accurately and resolved more efficiently, based on a deep understanding of the technical issues at hand.

Late 2010s to Early 2020s: Emergence of Dispute Avoidance Mechanisms

Towards the late 2010s and into the early 2020s, the focus shifted from not only resolving disputes but also to actively avoiding them. This period saw the emergence and adoption of dispute avoidance processes such as Dispute Boards (DBs) or, more recently, the AAA Dispute Avoidance and Resolution Boards (DARBs). These mechanisms involve the appointment of independent experts or panels to oversee project progress, identify potential disputes early, and facilitate their resolution before they escalate. This proactive approach has been instrumental in reducing the time and costs associated with dispute resolution and maintaining better relationships between parties involved in construction projects.

The COVID-19 Pandemic and Beyond: Virtual Dispute Resolution and Sustainability

The COVID-19 pandemic accelerated the adoption of virtual dispute resolution processes. Virtual hearings and digital submission of evidence became commonplace, ensuring that dispute resolution could continue effectively despite global lockdowns and travel restrictions. This shift is likely to have a lasting impact, with virtual elements remaining integrated into dispute resolution practices for reasons of efficiency and accessibility.

Looking forward, sustainability issues are poised to become a significant focus in construction dispute resolution. As the industry grapples with the challenges of climate change, resource scarcity, and sustainable development, disputes related to environmental compliance, green building certifications, and sustainable materials are expected to rise. Arbitration and ADR mechanisms will need to adapt to these challenges, possibly through the incorporation of specialized expertise and considerations of sustainability in the resolution process.

In conclusion, the last decade has seen a significant transformation in the landscape of construction dispute avoidance and resolution. The shift towards ADR, the integration of technology, the emphasis on specialization, and the proactive approach to dispute avoidance have collectively enhanced the efficiency and effectiveness of dispute resolution in the construction industry. As we move forward, the continued evolution of these mechanisms will be crucial in addressing the challenges of an increasingly complex, globalized, and environmentally conscious construction landscape; the AAA processes will continue to evolve to meet the industry’s needs.

Michael A. Marra is Division Vice President for the American Arbitration Association–International Centre for Dispute Resolution® (AAA-ICDR®), where he leads all business development and outreach activities across the organization. Marra is responsible for the strategic expansion of the AAA-ICDR dispute resolution services worldwide, highlighting the AAA-ICDR’s experience and reputation as the industry leader in providing fair, efficient, and effective dispute resolution services. Marra also serves as liaison to the AAA’s National Construction Dispute Resolution Committee (NCDRC) He can be reached at [email protected] or 215.731.6136.