Arbitration as a dispute resolution mechanism in the construction industry is always a good thing, right?

It might be tempting for some industry participants who are understandably concerned with noted downsides tied to contractual spats playing out in court to emphatically agree with that above-posed query.

And yet unqualified endorsement of arbitration can backfire for some industry principals who put absolute faith in the process and believe that it always confers optimal results.

Take construction subcontractors, for instance. They often agree to a contractual clause insisted upon by a general contractor imposing mandatory arbitration as the sole vehicle for resolving disputes.

The simple fact that it is often general contractors insisting upon arbitration in lieu of litigation as a dispute resolution process might reasonably speak loudly to many subcontractors. Here are a few reasons why:

  • Cost savings can be illusory, with arbitration-linked fees materially exceeding what many subcontractors contemplate
  • Limited discovery, which can erode a subcontractor’s ability to meaningfully probe and uncover key facts
  • Curbed procedural safeguards as compared with a courtroom process
  • Arbitrator bias in favor of owners and general contractors, even if playing out in an unintended and subconscious way

Construction contracts are often drafted by general contractors and presented to subcontractors as essentially finished and after-the-fact products.

Candidly, though, there are often important contractual improvements a subcontractor can secure via a timely and exacting review from a proven construction law legal team.

We welcome contacts to our firm and the opportunity to provide further information.