Conceptual approach to assessing the economic efficiency of out-of-court settlement of construction disputes

Abstract

The paper is focused on the potential of conciliation mechanisms as an integral component of investment and construction projects delivering in terms of out-of-court disputes resolution, taking into account their diversity and the presence of a public element. The main goal of mediation approaches is emphasized — to reduce conflict component in both economic activity as a whole and in the construction industry. Concept approach towards cost-effectiveness evaluation of out-of-court disputes resolution is represented revealing the levels of mediation approaches development (legislative enshrinement, regulatory and consulting activity, sphere of education, the structure of contracts) and structuring the costs of litigation: litigation fee, expenses for conducting a construction expertise focusing on economic, technical, financial, value assessment and examination, expenses for the services of a representative (legal assistance) and indirect costs which are mostly related to time period. Furthermore, essential factors which have an impact on cost-effectiveness evaluation are highlighted: the amount of litigation fees, the duration of proceedings, inflationary processes, fee exemptions and refund and type of a contract. An important conclusion is made in the article that even in case of winning, court proceedings without the use of mediation technologies at the early stages (referral to conciliation rooms) is not an effective way to settle disputes. The findings and results can foster constructive partnership while delivering projects and taking preventive measures in order to reduce significantly the level of conflicts in investment and construction sphere.