More often than not the dispute resolution process related to construction contracts commences after the works are completed.

Lawyers are instructed, voluminous correspondence is produced and extended statements of claim are drafted all in preparation for a grand trial or arbitration the cost and duration of which can be substantial.

As in most aspects of a dispute resolution process, deciding when to commence arbitration/litigation proceedings involves consideration of various benefits and drawbacks, the most prevailing ones of which are set out below.

Benefits

* Increased pressure on employer

The threat of a dispute resolution process would start with the referral of a dispute to the engineer and end up with the appointment of an arbitration panel or the filing of a court action before local courts.

This procedure can apply substantial pressure on the employer, who would be above all interested in finalising the works as quickly as possible to avoid penalties arising from relevant project finance.

Contractors stand many chances of resolving disputes in their favour if they commence arbitration proceedings as quickly as possible after a dispute (that merits its resolution by way of arbitration/litigation) arises.

* Early commencement of dispute resolution

The second major benefit of commencing arbitration/litigation prior to work completion is that the chances of successfully resolving the dispute in question are increased if it is dealt with shortly after it is formed and not left to augment through the passage of time, increase of costs etc.

In all probability the dispute resolution process if commenced swiftly, will not run its full course as the attention of both parties will be focused on the dispute at an early stage and, in view of the overriding purpose of finalising the works, it is almost certain that the parties will seek to eliminate the prospects of progressing with an arbitration or litigation to the best of their ability.

In any event, it is advisable that legal assistance is sought as soon as a dispute arises whether arbitration/litigation proceedings will be commenced or not.

This is because at an early stage, legal assistance may provide the parties seeking to resolve the dispute with a clear understanding of the legal position and the issues at stake as well as the strengths and weaknesses of any potential claim including the ultimate likely outcome of an arbitration award or final court judgement.

Drawbacks

* Dispute resolution process may affect progress of works

One important element within the duration of the works is the relationship between the parties. Very often the offended party may legitimately become reluctant to commence full arbitration/litigation proceedings for fear of damaging the all-important relationship with the employer.

In addition, commencing the dispute resolution early will not necessarily guarantee that such dispute will be successfully resolved to a satisfactory degree for both parties. If such satisfactory resolution does not take place, the parties' relationship may be damaged to such a degree that termination of a contract may also be envisaged.

This will ultimately have delay repercussions, which will affect both the employer in terms of finalising the works in the envisaged time frame and the contractor in terms of obtaining swift certification of applications for payment ultimately leading to issuance of final certificate of payment.

If the relationship with the employer is damaged substantially, from the commencement of arbitration or litigation proceedings prior to the completion of works and without principled negotiation having taken place, it is possible that also the cash flow of the contractor may be substantially affected ultimately resulting in more money being spent in the pursuit of its claim than is being recovered through the progress of the works.

* Quantification of claims may be difficult to finalise prior to works completion

A practical difficulty in successfully commencing arbitration/litigation prior to work completion is simply the fact that the quantum of the various heads of claims involved would not be finalised until works are completed, costs are assessed, man hours and materials/bills of quantities measured and adjusted.

In addition, the possibility of further heads of claim arising that may be disconnected with each other at a later stage of the works is always a real one. Therefore, it may prove to be substantially costly if arbitration has commenced on a number of claims and before the arbitration proceedings are concluded - and also prior to the works being completed - if further disputes occur.

These would give rise to the need to commence additional arbitration proceedings especially if the defending party does not agree to the inclusion of such further heads of claim to the current arbitration proceedings. This can be obstructive both to the resolution of disputes and to the financial exposure involved with such resolution.

In short, deciding when to commence arbitration/litigation is a fine balancing act between:

* The need to ensure that disputes are identified and resolved swiftly, and

* The common aim to complete the works with little or no interruption and as efficaciously as possible.

This fine balance is best achieved when a decision to commence any dispute resolution process is made not as an act of aggression or threat but as a prudent and reasoned conclusion reached through a thorough and principled negotiation process that has identified the issues that can be resolved amicably and those that require the intervention of a mediator/arbitrator or the court.