Same Arena, Different Rules

Tim Horner
Construction disputes rage on both sides of the pond – in England it’s all about adjudication, in the U.S. it’s all about liens. Here we take a brief look at some of the approaches and the differences.

Some differences between the U.S. and U.K. approaches to dispute resolution, with particular reference to Texas law.

Adjudication under English Law

The most important method of U.K. construction dispute resolution is statutory adjudication under the Housing Grants, Construction and Regeneration Act 1996 (HGCRA).

The 28-day HGCRA approach is popular with contractors and sub-contractors. However it can be a nightmare for employees and owners who get ten days to respond to detailed claims.

U.S. approach to 'alternative dispute resolution' (ADR)

Statutory adjudication is not available in the U.S. generally. As in the U.K. however, the U.S. court system has to reduce its workload.

The U.S. favors ADR over the cluttering of its courts. TV programs, such as "Judge Judy", where real cases are heard by a paid private judge, are an example of an ADR 'court' and the privatization and commercialization of disputes.

These are legally binding arbitration agreements, where the 'judge' gains jurisdiction over the parties through a ‘non-negotiable' contract. The judges are not bound by rules of procedures, evidence or even proper etiquette.

This approach is actually based in law and is partly reflected in how courts look at disputes and manage the process.

Impartial officials

In many of these alternative forums, the original court can appoint an 'Impartial Third Party' to officiate if the parties disagree.

In Texas, for example, mediation is by far the most common form of ADR ordered. Jeffry S. Abrams has written a guide to the development of compulsory mediation in Texas.  Referencing a U.K. conference where compulsory and voluntary mediation was discussed, he said: "All of those commenting from the U.K. felt that mediation should not be compulsory. All of those from the U.S. felt that it should."

The essential difference is that in the U.S., at least in Texas, courts may order the use of ADR measures such as mediation. In England (and Europe) it may not be so clear, unless you are looking at adjudication under a construction contract. By not taking a judge's ‘encouragement', litigants in England take the risk that the judge, at the end of the trial, may not look favorably on the party's costs in the final award.

Mechanic's liens

This is the U.S. and Texas answer to non-payment in construction disputes  A contractor or sub-contractor has the right to place a legal lien on the property where the work was undertaken but payment is not forthcoming.

Liens are effective in speculative commercial projects, because:

  • many funders stipulate that the borrower must personally underwrite any liens held on the property on completion of a project

  • the sale of a property with a valid lien attached can be troublesome

Many construction attorneys and professionals practice in this area and a good summary of the procedures can be found in the article Perfecting Lien Rights.

An essential part of the U.S. contract manager's job at completion of the project is to get a Waiver of Liens from all the contractors and sub-contractors who worked on the project, prior to releasing the completion notice and final account.

In summary

There are a lot of similarities between U.K. and U.S. disputes. Employers and contractors still fight over money; the courts are too busy to deal with so many commercial cases and seek to push these off to the private sector. The rules of the playground are different, however. In England it's all about adjudication, in the U.S. it's all about liens, but ultimately the parties just want to get a fair deal for their endeavors.

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