Due to the high-pressure nature of the industry, construction projects often give rise to disputes. Resolving disputes in the Courts can be time-consuming and costly and this is, of course, undesirable due to the “winners-takes-all” nature of litigation as well as the often very technical nature of the disputes themselves. Construction contracts therefore often make provision for disputes to be settled by alternative means. One such method that has become increasingly popular in recent years is arbitration. The intervention of an arbitrator, as well as the cross-jurisdictional application of such a provision, is a useful means to achieve resolution expeditiously.
The parties are free to agree to the rules which will govern the resolution of the dispute and there are national and international bodies which regulate arbitrations and set standards for such proceedings and this gives the parties comfort that the disputes will be professionally and expeditiously resolved.
Despite the fact that arbitrations are often the most efficient way of resolving disputes, there is also scope for abuse, as the referral of a dispute to arbitration requires both parties to cooperate to a certain degree and, if one party wishes to delay the matter, they can do so (at least in the short term) by refusing to cooperate with the process. It is for this reason that there are certain exceptions which provide for circumstances in which the parties to a contract with an arbitration clause can still approach a Court directly.
Because arbitrations are governed by the agreement between the parties, these exceptions vary from contract to contract, however there are three main instances in which a party to such an agreement can approach a Court directly.
These general exceptions are the following:
- When the dispute itself is urgent in nature and the relief sought needs to be expedited, such as an application for an urgent interdict, the parties can approach a Court directly for such relief on an interim basis.
- When a claim for payment has been certified in terms of the contract, the party to whom payment is due may proceed to Court to compel the other party to make payment thereof instead of referring the dispute to arbitration.
- When a party was induced to conclude the contract due to fraudulent conduct by the other party and the contract has thereafter been validly cancelled, the innocent party cannot be compelled to submit to an arbitration process in accordance with that agreement.
It is essential to ensure that your construction contracts provide for a robust arbitration process in order to ensure that any disputes are resolved impartially, efficiently and cost-effectively but it is just as important to ensure that you cannot be compelled to proceed with an arbitration process where such process would prevent you from obtaining effective and appropriate relief.
By Reece Maharage
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).