Perspective
Conflict ManagementPublic Construction

What will you choose: arbitration or alternative dispute resolution?

Written by
Niels Heldgaard
Attorney-at-law / Mediator / Co-Head of Molt Wengel
Published
9 September 2026

Every day brings stories of new disputes caused by price increases and delays in building materials, and they drain considerable resources from parties in the industry who are already under heavy pressure.

But rather than seeing each other as opponents and fighting over the choice of index, allocation of risk and the start date for calculating compensation, the parties should turn to mediation or conciliation. Their energy is best spent on keeping the project moving.

Forside sten

Construction projects are often hit by conflicts. At the moment, it is above all the extraordinary price increases on materials, and the knock-on effects on time of shortages of those same materials, that are creating disagreement and challenging planned and ongoing projects. Who bears the responsibility, and who has to pay, when everything becomes more expensive than expected?

And what do we do when materials cannot be obtained on time and construction is delayed? These questions often lead to disputes that are costly for all parties.

But when agreement is hard to reach, alternative dispute resolution such as expedited decisions, expert determination, conciliation or mediation is an obvious choice. The different forms not only increase the chance of moving forward with the project with fewer or shorter delays, but also save the parties a great deal of resources and contribute to better project delivery.

The Danish model for mediation

When mediation is mentioned, the first reaction is often that it sounds interesting, but that the method cannot be used in the specific case. After all, the lawyers have already spoken to each other, and they did not reach a settlement or resolve the dispute, the argument goes.

That is a classic misunderstanding, because mediation means that a mediator facilitates a conversation between the parties. The conversation should not be filtered through the lawyers, as the idea behind the mediation model is that the parties themselves find a solution to the dispute.

The parties often bring their lawyers to the mediation meeting. That is a very good solution, but the starting point is that it is the parties, not the lawyers, who talk and find the solutions. The mediator’s role is therefore to facilitate the conversation and help the parties reach agreement, if possible.

Everyone risks losing

At the moment, it is particularly price increases on materials such as steel, timber and concrete that are challenging progress, but other materials are also affected. Many conflicts concern who is to bear the risk of the project becoming more expensive, the documentation for the claims, the consequences for the project’s schedule and, not least, a lack of liquidity.

One example could be that, during the execution phase, the contractor finds that the original calculation for the project is no longer accurate because of price increases on materials. The contractor therefore – justifiably – sends a claim to the client, expecting payment of the extraordinary costs it has already incurred. The client rejects the claim and therefore also payment, as the client considers the claim unjustified or the documentation insufficient. The client’s rejection puts a strain on the contractor’s liquidity, as the supplier or subcontractor has already been paid.

Clarifying whether the contractor’s claim is justified can easily take several weeks or months, and with price increases of up to 5-10 percent on many materials, this creates an untenable financial situation for the contractor – and therefore also for the client’s project.

An escalation of the conflicts about payment for extraordinary price increases and indexation of contract sums can lead to a lack of liquidity in the project, and in the worst case the contractors risk going bankrupt. If that happens, the project faces an even greater challenge, which benefits neither the contractors nor the clients. In the current market, it will not be cheaper to have the projects completed by a new contractor – quite the contrary.

I believe that many of the disputes that end up in arbitration – for example concerning additional work, defects and time claims – could be resolved faster and with value for both parties if the parties used alternative dispute resolution.

In short: trust and dialogue are concepts that also work in the construction industry.

How can mediation help in the current cases?

Fortunately, in many cases the parties manage to talk things through, get payment made and thereby secure liquidity. In the example above, however, the challenge may be that the client does not trust that the contractor’s claim has been calculated correctly and genuinely contains only costs actually incurred and the agreed profit. If that situation arises, a facilitated dialogue between the parties can help loosen up the dispute and give the client the necessary confidence that the contractor has calculated its claim in accordance with the terms of the parties’ agreement and, for example, AB 18.

The trust needed to resolve the dispute can sometimes be difficult to establish through the lawyers, as the parties do not exchange information directly and build the trust needed to handle current and any future disputes.

Once the dialogue has gone wrong and the solution ladder in AB 18 § 64 has not brought the parties closer to a solution, our advice is that AB 18 § 65 on mediation and conciliation should not just be read and “skipped”, but genuinely considered as an option.

In the current situation, where there are no new awards from the arbitral tribunals taking a position on the level of documentation required for disputed claims relating, for example, to extraordinary price increases – and where some may be nervous about overly rigid case law in the area – the time is right to think in terms of alternative dispute resolution, which reduces the waste of both resources and time.

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