August 30, 2021
The LPC Australian Road Series has explored the finer details of the contractual documents and material which underpin road projects in Australia. Throughout the series, valuable insights have been provided into the operation of major road projects, but it remains critical to understand how proposed dispute resolution process operate where disputes arise during the delivery of a project.
Road Projects in the Future
Moving forward, we can continue to expect to see a boom in the Australian road’s infrastructure market. Increasing demand for high-capacity road networks, coupled with the positive impact’s infrastructure has on economic growth, is likely to mean state and federal governments will heavily invest in such projects.
For those in Queensland, the State Budget for 2021-22 has a $13 billion commitment to upgrading priority sections of highway which will see the progressive undertaking of various highway related projects in urban and regional areas.
The increasing number of road projects which can be expected in the coming future underpins the importance of ensuring contractual frameworks are correct for the project. Specifically, the growing value and number of projects brings into question the dispute resolution process which the parties provide for at the contract drafting and negotiation stage.
Dispute Resolution Processes
Road construction contracts in Australia can be drafted in such a way which provides various avenues under which disputes may be resolved. In addition to general processes such as meetings between party’s applicable project groups and executives, contracts may also provide for dispute resolution processes including:
- expert determination;
- dispute avoidance board (DAB);
- arbitration; and
- litigation.
A contract may further provide a specific order which parties must undertake the processes in, which processes are binding, and other procedural factors influencing the processes operations.
Increasingly, contracts provide for a two-stage process, after relevant meetings and negotiations have occurred. Generally, this provides for a less formal process, followed by a more formal and faciliatory process. This may include a dispute first being referred to either an expert determination or DAB process, followed by the dispute being subject to either arbitration or litigation.
Expert Determination v DAB
Expert determination and DAB each provide an ad hoc dispute resolution process which the parties may engage in.
Expert determination and DAB both benefit from the fact that they can be conducted in parallel to the project being undertaken and may require limited ongoing submissions from the parties. This is further assisted by the fact the parties can determine and govern the process under which the expert determination and DAB occurs through either the project contract, or a separate agreement.
As compared to expert determination, the DAB process can offer the benefit of the board being aware of the project on an ongoing basis and familiar with the specifics of the project. This can, in some instances, reduce the time taken for a decision to be provided under the contract. Conversely, having a DAB across a project can increase costs, which is increasingly apparent on smaller projects. Further, ongoing DAB disputes, occurring in parallel with the works, can present a distraction to project staff, resulting in further delays to the works.
Arbitration v Litigation
Arbitration and litigation are each formal processes which can be highly faciliatory in nature. These processes are often far more expensive compared to alternative dispute resolution processes and eliminate the autonomy and discretion the parties otherwise have.
Both arbitration and litigation are governed by specific sets of rules and procedures which must be followed throughout the process. While litigation and arbitration are both subject to legislative requirements and rules, parties to arbitration proceedings can select the rules which apply to the matter, offering increased flexibility as opposed to the often-strict requirements of litigation. Furthermore, arbitration can be kept confidential and out of the public spotlight, which is not a luxury afforded to parties in litigation and my therefore form a critical consideration in the approach preferred by the parties.
However, while litigation proceedings can be appealed where a party disagrees with a decision, such a process is not provided under arbitral schemes. Instead, parties must engage in court proceedings to set aside the arbitral award, which is then be followed by litigation. In such circumstances, any cost or time benefit which may be attributed to arbitration is lost, with costs continuing to accrue and the parties being subject to litigation despite already having undergone arbitration proceedings.
Monetary Caps
Contracts are also increasingly being drafted to provide monetary limits for which disputes proceed to certain dispute resolution processes, and if decisions from such processes will be binding. However, this can create additional uncertainty, and results in convoluted dispute processes which cannot be easily understood by either party.
Further, where a dispute includes various claims, it must be understood if such monetary limits is applicable to each individual claim, or the total quantum of a collective number of disputes which are all referred to a dispute process together.
Where clear drafting of monetary limits has not occurred, this creates additional uncertainty if a dispute arises and may, in some circumstances, form the grounds of further disputes.
Preferred Processes
Our experience suggests simplified processes which encourage the use of alternative dispute resolution, such as a DAB or expert determination, prior to court or arbitral proceedings can be beneficial to all parties. Where a dispute can be resolved through an alternative dispute resolution process it can resolve matters efficiently and at a significantly reduced cost.
The specific processes which will be preferred for a project are often dependent on various considerations, including any project specified factors which will influence disputes, the projects value, and the respective party’s preferences for certain processes.
Importantly, it is critical dispute resolution mechanisms are clearly drafted and agreeable to the parties. While parties may not contemplate a relationship breaking down or the potential for a dispute to arise, it can be critical to protecting a party’s interests where such circumstances do arise.
These considerations can also influence the contractual model which the parties seek to adopt for the project. However, regardless of the contractual model adopted, legal support and advice with respect to the dispute resolution mechanisms can be critical to ensuring the success of a project. Where disputes can be addressed in an efficient manner throughout the project, it can ensure the focus remains on achieving project objectives.
LPC Lawyers
The LPC Lawyers team have a wealth of experience across contractual drafting and dispute process. Through leveraging our experience and knowledge, we provide our clients tailored advice to ensure agreeable contractual frameworks. Through providing clients assistance across the duration of a project’s lifecycle, we can assist in ensuring a project’s successful and efficient delivery.
If you have any questions about your current or future projects, please do not hesitate to contact LPC Lawyers for a discussion on how we can assist you.
The contents of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Ryan Bryett
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