CLC issue new Guidance on dispute resolution in the construction industry
COVID-19 continues to cause significant disruption and delay to the construction industry. Whilst things are slowly returning to normal and construction sites are resuming work, there are concerns that the effect of the pandemic on projects may result in long-running and costly disputes arising. Accordingly, the Construction Leadership Council (CLC) have issued guidance in an effort to promote a more pragmatic approach to dispute resolution.
The CLC Guidance
On 7 May 2020 the CLC published its COVID-19 Contractual Best Practice Guidance. The CLC guidance places a significant emphasis on collaborative engagement to resolve issues as and when they arise, noting that a lack of proper, fair and reasonable administration of construction contracts in the COVID-19 landscape may have a significant and detrimental effect on an industry which is expected to play a central role in the recovery of the economy.
The CLC guidance complements and is largely an extension of the Cabinet Office's guidance note on responsible contractual behaviour in the performance and enforcement of contracts impacted by COVID-19. Key points from the CLC guidance include:
1. Collaboration: The CLC guidance encourages a collaborative approach between parties to work towards the successful delivery of projects. To assist parties, the CLC provides pro-forma letters to facilitate collaborative discussions. These letters are marked 'Without Prejudice and Subject to Contract' and the CLC encourages the use of this term to avoid potential misunderstandings. Helpfully, the CLC provides a brief explanation of these terms and their practical operation to assist those who may not be familiar.
2. ADR: ADR is a key mechanism for resolving disputes in the field of construction. The CLC guidance encourages the use of ADR to resolve disputes in an economic and pragmatic way, highlighting the lengthy and costly nature of litigation as a mechanism for resolving disputes. Useful information is provided on without prejudice meetings, mediation and adjudication as alternative routes to resolving disputes in a collaborative and cost-effective manner.
3. Termination Triggers: Parties are encouraged by the CLC to waive any relevant termination triggers in contracts, such as those which arise by way of delay or prevention.
The overarching takeaway from the CLC guidance is that parties work together to resolve disputes amicably, swiftly and at minimal cost and disruption.
To help facilitate the collaborative approach advocated above, the CLC released further guidance on 14 July 2020 providing suggested contractual amendments for construction companies to utilise during the pandemic.
Wider Effect of CLC Guidance
The principle of collaboration promoted by the CLC is eminently sensible. During the unprecedented economic fallout caused by COVID-19 it is more important than ever to avoid expensive and time-consuming litigation as a method of dispute resolution.
The cost-saving message at the heart of the CLC guidance also brings to fore the need for construction companies to be pro-active in identifying potential claims and pursuing them economically. Recovery actions for claims arising from breaches of statutory, common law and contractual duties represent an important way for construction companies to claim damages for unnecessary and potentially faultless losses. By embracing the collaborative and pragmatic ethos promoted by the CLC such action can hopefully be completed swiftly and at minimal cost, providing greater security to the cash-flow of construction companies.
RPC have market leading expertise in the fields of construction and recoveries, and are well placed to help identify, pursue and settle potential recovery actions as pragmatically and economically as possible. See our Construction and Recoveries pages for further information on how to get in touch and discuss how we can assist.