Climate change and industrialisation to drive future construction disputes

Out-Law Analysis | 28 Feb 2022 | 11:16 am | 5 min. read

Construction dispute resolution has the innovations and processes in its toolbox to be able to adapt and successfully meet the challenges of a new wave of construction disputes.

We can expect more disputes prompted by climate change, increased use of data and the disruption to industry norms caused by industrialisation – while at the same time, better use of data and further innovation in online dispute resolution will increase efficiency.

We have already seen how construction disputes are soaring in number yet are being resolved more speedily and cost effectively. We have examined the latest developments in dispute boards, arbitration, specialist construction courts, adjudication and alternative dispute resolution (ADR), as well as the innovations being deployed in each.

We now look to the developments of the future, and predict five ‘ones to watch’ trends for the construction dispute resolution of tomorrow.

Climate change

Unless the environmental commitments made at COP26 and beyond have a material effect, then climate-driven disasters will continue to have a major impact on built assets worldwide. Incidences of failing infrastructure, collapsing buildings and damage due to severe weather incidents will lead to an increasing number of disputes over the construction of those assets, and any alleged defects.

In its recent report on emerging trends in infrastructure, KPMG noted that vast investment in new assets will be needed as the world “moves from talk to action” on climate change. This will be accompanied by ever more exacting environmental regulations and construction standards which are essential to achieve national and international climate change targets, imposed by a complex mix of legislation, case law, contracts and codes of practice. Many years of experience of changing regulations and standards shows that it takes time for designs, materials and workmanship on site to adapt to these new requirements. In the meantime, we can expect to see new disputes over compliance, defects, completion and the cost and time of compliance.

Tiered and bespoke dispute resolution clauses

As we have seen from this series, the construction industry has the best equipped dispute resolution ‘toolbox’. Over the next few years, we expect to see increased deployment of these tools – and, importantly, in a tiered, multi-stage process.

Morris Neal

Neal Morris

Partner, Head of Construction Advisory & Disputes

The industrialisation of construction is quickly moving from concept to a topic impacting on current projects and beginning to re-shape the industry

For example, we can expect to see more legislation to allow for initial, temporarily binding adjudication in many more jurisdictions. In the longer term, we may also see an expansion of the use of adjudication beyond ‘payment only’ disputes to cover issues such as defects, professional negligence and third party warranties. I also predict the increased use of ADR techniques, especially mediation, as its benefits become more widely appreciated globally. That use may even be increasingly mandated, whether through the use of legislation or court orders.

As the increased use of dispute boards has shown, contracts are likely to provide for multi-tiered dispute resolution processes involving dispute boards, ADR and even adjudication before ‘final’ resolution in the courts or by arbitration. Many major employers are drafting their own bespoke early resolution processes to try to nip disputes in the bud – for example, Network Rail in the UK. Increased use of collaborative contracting procurement forms will further encourage tiered procedures designed to preserve relationships. This is not, however, a completely new approach, as I know from my own experience coming to terms with the Hong Kong Airport Core Programme multi-tiered procedures as a young lawyer in the 1990s, including non-binding ‘recommendations’ from mediators.

As with all complicated tools, it will be essential for dispute resolution professionals to master their use and best strategic combinations if they are to secure their clients’ commercial objectives cost effectively.

Virtual dispute resolution

Despite the loosening of Covid-19 pandemic restrictions, the continued use of technology will mean many forms of dispute resolution will remain online at different stages. Any doubt in my mind on this was dispelled by recent news the specialist construction court in England and Wales, the Technology and Construction Court, will in future generally hold all hearings of less than half a day virtually. Although the advantages of ‘in person’ trials should not be overlooked, the logistical and cost saving advantages of avoiding travel and the diary issues so often experienced by key witnesses, expert counsel and parties mean virtual dispute resolution is here to stay.

Moreover, as technology continues to develop, we will see increasingly complex and flexible applications making multi-channel communication, real-time document sharing and virtual reality engagement the new norm. Much as the humble Post-it transformed in-trial communication between the legal team and its advocate early in my career, these technological developments will be the new tools that will have to be mastered to succeed in the online construction disputes of the near future.

Data as a cause of disputes and a resolution tool

The industrialisation of construction is quickly moving from concept to a topic impacting on current projects and beginning to re-shape the industry.

I foresee two potential impacts on disputes. First, the requirement for flexible, ‘whole life’ assets is seeing digital become embedded in both the construction of new assets and the re-purposing of existing ones. Such rapid change and development – particularly in novel, technologically advanced areas – can in practice lead to disputes over quality, time and cost. The ‘drive for data’ and the industrialisation of construction techniques will lead to a new wave of disputes, at least in the medium term, as the technology becomes established and forms of procurement develop to be able to deal with the new risks – and opportunities – it creates.

At the same time, the availability of so much more hard data – from the assets themselves, and from the industrialised construction process – will lead to exciting and far-reaching developments in resolving disputes over all types of issues. We will be able to rely less on after the event, factual witness testimony and cross-examination, and even independent expert opinion, but on building information modelling (BIM) and other data from the actual progress of onsite work and offsite manufacture. If a rugby player’s gumshield can now be used to measure the force of head impacts in order to manage and prevent concussion, we will soon be able to analyse – by way of real-time data rather than opinions – what the disruptive effects of change actually were. This will create a new skillset and form of expertise for dispute resolvers in the very near future.

New market entrants and disruption to the old ways of working

One other big change which industrialised construction, and the increased importance of construction data, will bring is the entry to the industry of new players. This will be essential for the technological skills and ability to invest which industrialised construction will demand, but these new market entrants will have a different approach to risk allocation than the current players and their collaborative input will require new forms of procurement, contracting and project management.

As with all fast-paced change, these developments will in practice lead to disputes over responsibilities, ownership, time, money and quality; which will need to be resolved swiftly and cost effectively.

Additional research by Charlie Chetwood of Pinsent Masons.

Industrialised Construction
Transforming infrastructure performance needs a new approach. Industrialised construction can improve productivity and deliver efficient and low carbon infrastructure through digital and modern methods of construction. We investigate the opportunities and challenges.
Industrialised Construction
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