CONCILIATION EXPLAINED

CONCILIATION EXPLAINED

Conciliation is a process which is similar to mediation for resolving disputes. Harry Fehily reconciles when to use this alternative dispute resolution method

In Brief: Conciliation is an alternative dispute resolution method. In Ireland, conciliation is primarily used for the resolution of disputes in the construction industry. Whether or not, given the recently introduced adjudication system for construction disputes, it continues to be used by the construction industry, it should still be recognised as a viable, efficient and cost-effective dispute resolution system in its own right and widely adopted in other areas.

WHAT IS CONCILIATION?

Conciliation is a process for resolving disputes. Similar to mediation, the conciliator seeks to facilitate a settlement between the parties. Conciliation and mediation may have different features in different jurisdictions. In Ireland, conciliation is primarily used for the resolution of disputes in the construction industry where the key distinction between it and mediation is that if the conciliator is unable to facilitate a settlement between the disputing parties, he/she is required to issue a recommendation which will be binding on the parties unless it is rejected by one or other of them within a specified time.

BASIS FOR CONCILIATION

As with mediation and most other forms of alternative dispute resolution, conciliation is entirely dependent on the agreement of the parties to adopt it.

Many standard form construction contracts (e.g. RIAI, IEI, SCS and CIF) require the parties to engage in conciliation before referring a dispute to arbitration, litigation or other form of dispute resolution. The majority of construction disputes are settled at this stage of the process.

PREREQUISITE TO ARBITRATION

If the parties’ contract requires them to engage in conciliation before referring their dispute to arbitration or other form of dispute resolution, the parties must do so. In Achill Sheltered Housing Association CLG v. Dooniver Plant Hire Limited [2018] IEHC 6 the High Court held the appointment of an arbitrator to be invalid on the grounds that the matters referred to arbitration had not, prior to the referral, first been submitted to conciliation as required by the contract.

FEATURES OF CONCILIATION

Conciliation is a voluntary process and, unless and until terms of settlement have been agreed and signed, either party can withdraw from it.

The process is private and confidential.

The process is conducted on a “without prejudice” basis, meaning that any documentation or information furnished by one party to the other in the course of the conciliation cannot be used in subsequent litigation.

The process allows the parties the opportunity to arrive at a mutually agreeable resolution of their dispute rather than having a determination of their dispute imposed on them by a third party as would result from other dispute resolution methods, such as litigation or arbitration.

Information and documentation shared privately with the conciliator cannot be passed to the other party without express permission.

ADVANTAGES OF CONCILIATION

The potential advantages of conciliation are the following:-

• it can save time and costs for the parties, their advisers and their insurers;
• the parties have control over the outcome;
• the parties can introduce any issues into their discussions with a view to finding a consensus and are not limited by the rights and wrongs of the particular dispute;
• the privacy of the process helps guard against reputational damage; and
• insofar as there may be any continuing relationship between the parties, that relationship is usually not put in jeopardy (contrasting with litigation and arbitration where the adversarial nature of the proceedings forces the parties to be confrontational and can seriously damage, or indeed make impossible, any future working relationship between them) – a point of considerable importance in a small country like Ireland where, for example in the construction industry, a dispute may involve a range of different parties from different disciplines some of whom may be engaged in other unrelated projects at the same time.

THE CONCILIATOR’S RECOMMENDATION

Where the parties have been unable to reach agreement, the conciliator will proceed to issue a recommendation. The recommendation will usually be given without reasons. It will contain the conciliator’s opinion as to how the dispute is best resolved and, unless the parties’ contract provides otherwise (such as is the case with the new public sector contracts where the recommendation is required to be based on the parties’ rights and obligations under the contract), does not have to be limited in its scope.
Statistics

Anecdotal information would suggest that conciliators involved in construction disputes have hitherto achieved success in about 80% of cases, whether by way of settlement or recommendation. However, conciliation as a first step in the resolution process of such disputes may well be affected by the adjudication system introduced in Ireland by the Construction Contracts Act, 2013 which came into force on 25 July 2016 and which has been designed to provide a quick, enforceable interim determination of payment disputes arising under construction contracts. To what extent remains to be seen.

CONCLUSION

Conciliation has been a very successful means of resolving disputes in the construction industry. Whether or not, given the recently introduced adjudication system, it continues to be used by the construction industry, it should still be recognised as a viable, efficient and cost-effective dispute resolution system in its own right and there is no reason why it should be confined to the construction industry and not be more widely adopted.

This is the fifth article in our alternative dispute resolution series. The other four in the series can be viewed here:-
1. Mediation Explained
2. Arbitration Explained
3. Adjudication Explained
4. Expert Determination.