When things go wrong in the construction industry, they can lead to project delays, significant financial losses and prolonged disputes. Choosing the right path for resolving disputes is key to minimising these impacts. The two main options are traditional construction litigation and alternative dispute resolution (ADR). Understanding the key differences between these is crucial for anyone in the construction sector.

This article will compare ADR vs. litigation, breaking down the processes and pros and cons of each. We’ll look at specific ADR methods like arbitration and mediation so you can make an informed decision when faced with a construction dispute. By exploring these options, you can find a cost-effective and efficient way to settle disputes and potentially preserve valuable business relationships.

Construction litigation is the formal legal process of resolving legal disputes through the court system. It involves filing a claim and having the case heard by a judge, and sometimes a jury, who will ultimately issue a binding judgment. This is often seen as the traditional and most adversarial way of handling disagreements.

The litigation process is highly structured and governed by strict civil procedure rules. It starts when one party files a claim, commencing court proceedings. This is followed by several stages, including the disclosure of evidence (extensive discovery), the exchange of witness statements and formal hearings. All parties involved must stick to the court’s timetable and rules.

Binding and enforceable

One of the main advantages of litigation is that court decisions are binding. This is enforceable under UK law, and courts have broad powers to compel compliance.

Right of appeal

If one of the disputing parties believes the court has made an error, they have the right to appeal to a higher court. This is a safety net that is not available in ADR methods.

Power to Set Precedent: Court decisions are public and can set a precedent. This can be strategically important for companies facing similar future disputes across multiple projects.

Cost and time

The court process is slow and expensive. Legal fees, court costs and expert witness expenses can add up quickly. Cases can drag on for months or even years.

Adversarial nature

The adversarial nature of litigation can irreparably damage business relationships. The focus is on winning, not collaborating, which makes it challenging to maintain business relationships after a dispute.

Lack of confidentiality

Court proceedings are public. All documents and judgments become part of the public record, which can be a big problem if the dispute involves commercially sensitive information.

Lack of industry expertise

Judges are legal experts but may not possess the specialist knowledge to understand the technical intricacies of complex construction disputes fully. This can be a risk when the case hinges on detailed industry knowledge.

Alternative dispute resolution (ADR) refers to a range of methods used to resolve legal disputes outside of the formal court system. These methods are generally more flexible, faster and less confrontational than litigation. The aim is to find a mutually acceptable solution with the help of a neutral third party.

Why is ADR popular in the construction industry?

ADR has become increasingly popular in the construction industry because it offers a practical way to resolve disagreements without resorting to a full-blown court process. It allows parties involved to have more control over the process, often leading to cost savings and quicker resolutions.

The two primary forms of ADR in construction are arbitration and mediation. Each offers a different approach to dispute resolution.

Construction arbitration

Construction arbitration is a private process in which an independent arbitrator (or a panel of arbitrators) is appointed to hear the dispute and render a binding decision. This decision is referred to as an arbitration award.

The arbitration process in the UK is governed by the Arbitration Act 1996, amended on August 1^st to become the Arbitration Act 2025. The parties determine the procedural rules, which are often outlined in their construction contracts. The arbitrator reviews evidence and hears arguments in a less formal setting than a courtroom before issuing a final arbitration award.

Confidentiality

Unlike litigation, arbitration is a private and confidential process. The proceedings and the award remain out of the public domain, protecting sensitive business information.

Expertise of the arbitrator

Parties can choose an arbitrator with specific industry expertise in construction law or engineering. This ensures the decision-maker understands the technical complexities of the dispute.

Speed and cost-effectiveness

Arbitration is generally faster and more cost-effective than litigation. With more flexible scheduling and streamlined procedures, it can resolve disputes in a fraction of the time.

Global enforceability

An arbitration award is often easier to enforce internationally than a court judgment, thanks to conventions like the New York Convention. This is a significant advantage for commercial disputes involving international parties.

Limited right of appeal

The finality of an arbitration award is both a strength and a weakness. The grounds for appealing a binding decision from an arbitrator are minimal.

Costs can still be high

While often cheaper than litigation, arbitration is not without cost. The fees for the arbitrator and the administration of the process can be substantial, especially in complex cases.

Adjudication is one of the most common and important dispute resolution methods in the UK construction industry. Frequently required by legislation—specifically the Housing Grants, Construction and Regeneration Act 1996—adjudication is a statutory right for parties to construction contracts. It provides a rapid mechanism to resolve disputes, usually within 28 days from when the adjudicator is appointed.

The Adjudication Process:
Adjudication begins when one party (often the subcontractor or supplier) serves a Notice of Adjudication to the other party. An independent adjudicator is then appointed. Both parties submit their evidence and arguments, often in writing, and there may be a brief meeting or site inspection if needed. The adjudicator reviews all submissions and evidence and issues a decision within the tight statutory timeframe.

• Speed: Adjudication is much faster than litigation or arbitration, making it especially useful when cash flow or progress on the construction project is threatened.

• Binding (but Temporary) Decision: The adjudicator’s decision is binding on the parties until and unless it is overturned by arbitration or litigation, ensuring that projects can continue moving forward.

• Cost-Effective: The process is generally less expensive than court proceedings due to limited hearings and tight deadlines.

• Specialist Expertise: Adjudicators are often construction industry professionals, ensuring a strong understanding of technical details and contract issues.

• Reduces Work Stoppages: Because decisions are enforceable quickly, parties can resolve disputes and keep projects on schedule.

• Temporary Nature: The decision is only temporarily binding; it can be challenged in later arbitration or litigation.

• Compressed Timeline: The short timescale, while helpful for urgency, can make it challenging to gather and present complex evidence.

• Limited Flexibility: There’s less opportunity for in-depth oral arguments or exploration of complicated issues compared to arbitration or litigation.

Adjudication’s prominence reflects the realities of the UK construction sector, where keeping works moving is essential and disputes need a fast, practical solution. For many construction professionals, it’s the first—and often most effective- method for resolving issues before more formal proceedings are considered.

Early Neutral Evaluation

In this process, an independent third party with relevant expertise provides a non-binding assessment of the merits of the case. This gives the parties a realistic view of their positions, which can encourage a settlement.

Beyond arbitration, other forms of ADR exist, such as adjudication and early neutral evaluation.

Mediation in construction

Mediation is a flexible and non-binding dispute resolution process. An impartial third party, the mediator, facilitates discussions between the disputing parties to help them reach an agreed solution.

The mediation process

The mediator does not impose a decision. Instead, their role is to guide the conversation, clarify issues and help the parties explore options for settlement. The process is voluntary, and any party can walk away if a mutually beneficial outcome cannot be found.

Preserves relationships

Because it is collaborative rather than adversarial, mediation is very good at preserving business relationships. This is a big plus in an industry built on long-term partnerships.

Control and flexibility

The parties have complete control over the outcome. A settlement is only reached if both sides agree to it, resulting in a mutually acceptable solution.

High success rate

Mediation has a high success rate in resolving disputes. The informal setting encourages open communication, which often leads to a breakthrough that would not be possible in a formal legal process.

Not legally binding

The outcome of mediation is not binding unless the parties formalise their agreement in a separate contract. If one party refuses to comply with the agreed terms, it may be necessary to take further legal action.

Relies on cooperation

Mediation only works if both parties are willing to negotiate in good faith. If one side is intransigent, the process will not work.

Choosing between ADR and litigation depends on several factors specific to your construction dispute.

When to choose ADR

ADR is often the best choice when:

• You want to preserve relationships.
• Confidentiality is key.
• The dispute involves technical issues that require specialist knowledge.
• You need a faster, more cost-efficient solution.

When litigation may be necessary

Litigation may be the only option if:

• Your contract has no dispute resolution clause.
• The other party will not engage in ADR.
• You need to set a legal precedent.
• A court order is required to enforce compliance or prevent immediate harm.

Preventing disputes in the first place

The best way to handle a dispute is to prevent it from happening. Clear communication, fair contracts and proactive management are key. Having a well-defined, multi-tiered dispute resolution clause in your contracts can provide a clear roadmap for addressing disagreements before they escalate into complex legal issues.

In the construction industry, disputes are a fact of life. But how you choose to resolve them can make all the difference. While construction litigation offers a structured legal process and an enforceable court judgment, it’s expensive, time-consuming and adversarial.

Alternative dispute resolution (ADR) provides a flexible, confidential and often more collaborative alternative. Whether through the binding decision of arbitration or the facilitated negotiation of mediation, ADR gives parties the power to find solutions that are faster and less damaging to their commercial relationships. By considering the nature of your dispute and your goals, you can choose the right path to navigate conflict and get your project back on track.