In South Africa’s construction industry, disputes between contractors, sub-contractors, and employees are commonplace. At STBB, our construction lawyers frequently handle disputes concerning delays, variations, payment disagreements, and defective work. When disputes arise, the parties often need to decide whether to resolve them through adjudication or arbitration. While both are forms of alternative dispute resolution (‘ADR’), they differ significantly in procedure, cost, and finality.
Adjudication in construction disputes
Adjudication is designed to provide a fast, interim decision on disputes. It is commonly used under the standard form JBCC and NEC agreements in South Africa. An adjudicator, who is usually an industry expert, is appointed to make a determination within a short period (often 28 days).
The key features of adjudication include:
- Decisions are made quickly to keep projects moving;
- An adjudicator’s decision is final, but not binding. While it is enforceable immediately, it may later be challenged in arbitration or court; and
- Adjudication facilitates cash flow protection by ensuring that contractors are paid promptly, even if disputes continue in another forum.
Notably, adjudication is particularly useful for resolving payment disputes and preventing work stoppages on site.
Arbitration in construction disputes
Conversely, arbitration is a more formal process where an independent arbitrator – or panel – hears both parties’ evidence and makes a final and binding award. It is commonly chosen for the following key reasons:
- Arbitration awards are final and therefore have the same effect as court judgments and are rarely appealable;
- Arbitrators are expert decision-makers who often have legal and technical construction expertise; and
- Proceedings are private, unlike court litigation.
On the downside, arbitration is generally slower and more expensive than adjudication, which makes it more suitable for complex construction disputes that require a detailed and final resolution.
Choosing between adjudication and arbitration
In practice, parties do not always choose between the two. Many construction contracts provide for adjudication first, followed by arbitration if either party is dissatisfied with the finding. This staged approach balances the need for immediate cash flow with the certainty of a final decision.
For construction professionals and stakeholders in South Africa, understanding the distinction between adjudication and arbitration is critical. Whereas adjudication provides quick, enforceable relief, arbitration delivers a final and binding resolution. Ultimately, the right choice depends on the nature of the construction dispute, the urgency of cash flow, and the need for finality.
For expert legal assistance, contact our skilled and experienced construction law attorneys at construction@stbb.co.za.
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