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Construction Arbitration: Booming Market or Market Failure?

Melissa Yeo

The inclusion of arbitration agreements in construction contracts is the new normal.  Large or small, complex or simple, arbitration is an undeniably popular method of dispute resolution in the construction industry.   One of its key benefits is said to be the ability to choose your decision maker.  This feature of arbitration is particularly attractive in the context of a construction dispute, where a deep understanding of complex matters of design, engineering, delay and disruption is required and is not guaranteed in the litigation context.  But just how many highly experienced, construction savvy arbitrators are out there servicing this rapidly expanding market?  More importantly, how available are they to deal with the vicissitudes of a construction dispute?  This paper will draw upon economic theory, including market failure, to explore this particular aspect of construction arbitration.  It will ask delegates to consider whether parties are truly getting what they bargain for when they choose arbitration as their method of dispute resolution under a construction contract.  If not, what steps do we as an industry need to take to ensure that they do.