Mediating Construction Disputes: Overcoming Power Imbalances

Summary. Power imbalances are often at play in disputes and can present serious challenges for both sides in terms of finding a path to resolution. However, the mediation process, directed by the mediator, is an effective way to minimise the potential harmful impacts of differing levels of power.

Top tip.  Be open to utilising focussed discussions, with different combinations of people, to help move beyond initial assumptions on certain issues.

Overview.

Power imbalances can pose a significant challenge in resolving construction disputes. When one party holds a dominant position in terms of resources, expertise, or bargaining power, reaching a fair and mutually agreeable settlement can be difficult.

This blog delves into a real-life case that exemplifies the challenges and, more importantly, the solutions for overcoming such imbalances in construction mediation.

The Case

The dispute was far from typical. It involved a claimant who had gone insolvent and a respondent with a formidable team of experts and resources available.

A series of adjudications had already taken place, each involving extensions of time and legal disputes. The legal fees had escalated into the hundreds of thousands of pounds, and the claim itself amounted to over £2 million. Adding to the complexity, neither party had a direct role in constructing the property in question and one side had significantly more resources available than the other.

The Mediation Process

Addressing the power imbalance in this mediation was critical and required a creative and dynamic approach. The mediator began by exploring the history of the dispute, seeking to understand the true underlying interests of the parties, and moving beyond their stated positions.

During a joint session, the mediator used a screen to display the final accounts of both parties. This visual representation allowed for a more objective assessment of the numbers and helped the parties to see each other’s perspectives more clearly.

While the mediation didn’t reach a settlement on the day, the parties now had a better understanding of the situation.

With this, they were able to re-evaluate their positions and started to engage in focused, smaller-scale discussions with the help of the mediator.

The Power of Mediation

Mediation, compared with other dispute resolution processes is a highly effective way to address power imbalances between parties. Disputes in the construction sector are particularly susceptible to this dynamic with large corporations undertaking work with much smaller entities.

While the so-called ‘powerful’ party may wish to exploit its capabilities over the other side, this is not in the interest of finding a mutually beneficial and sustainable resolution.

For the so-called ‘weaker’ party, mediation is an opportunity, with the help of the mediator to address some of the differences in resources available.

The mediator, as a neutral party, will work in the interests of both sides to ensure, first and foremost, that a respectful and effective dialogue and exchange of information is going on. They are responsible for creating an environment where both parties, whether in joint session(s) or via shuttle negotiation feel comfortable in sharing the perspectives without fear of reprisal should the dispute progress to more formal routes.

The mediator will also be able to reality test each side, for example, getting the ‘dominant’ side to question whether a heavy-handed approach is in fact in their interest in terms of finding a way forward or eventually recovering costs. For example, if the other side goes bust, they will be unable to complete the project.

Equally, where there is one side that is stacked with experts and the other without, the mediator may find it useful to pair the two principals together to explore purely commercial interests, or the two legal teams to focus on one issue. This can remove the potential intimidation at play if both sides were sitting opposite each other.

Conclusion

Power imbalances are common in disputes. However, mediation’s flexibility allows this potential barrier to resolution to be overcome, ensuring parties focus on the real and long-term implications of the conflict.

Watch Eve Pienaar discuss the case here: