The New Pre-Action Protocol for Construction and Engineering Disputes

22 November 2016

A second edition of the Pre-Action Protocol for Construction and Engineering Disputes (“the new Protocol”) came into force on 9 November 2016. It applies to all construction and engineering disputes to be heard in the English Technology and Construction Court, and replaces the previous edition which had been in place since 2007.

What is the Technology and Construction Court (“TCC”)?

The TCC is the part of the Queen's Bench Division of the High Court which handles disputes concerning building, engineering and surveying, normally over £250,000 in value, and challenges to arbitral decisions in construction and engineering disputes. It is common for energy related disputes to be heard in the TCC.

The TCC Guide, which provides guidance on conduct of litigation in the TCC, expects all parties to have complied in substance with the provisions of the Protocol subject to certain exceptions.

The impact of the new Protocol

The new Protocol is intended to provide a quicker, shorter and less expensive pre-action phase, with a greater emphasis on proportionately than the previous edition. The changes intended to achieve this include:

  1. Allowing the parties to opt out of compliance by agreeing to do so expressly in writing;
  2. The parties no longer needing to provide “full” information, but only an “outline” of their case or sufficient information to allow the parties to understand each other’s position and make informed decisions about how to proceed. Pre-action correspondence should be brief and proportionate and experts’ reports are not expected;
  3. The parties needing only to make appropriate attempts to resolve the matter (as opposed to settling) unless litigation cannot be avoided. Accordingly, the general aim is for the parties to “usually” meet;
  4. Amending the timing of certain steps and clarifying when the process is concluded in order to reduce the time taken;
  5. Restricting the likelihood of costs sanctions to exceptional circumstances, such as a flagrant disregard or very significant disregard for the terms of the new Protocol; and
  6. Adding a new Protocol Referee Procedure, which, if the parties agree to apply it, allows for a Protocol Referee to be appointed if a party does not comply with the new Protocol. Either party may apply for the nomination and appointment of a Protocol Referee and set out the nature of non-compliance and the directions sought, following which the other party may respond. The Protocol Referee will provide a written decision within 10 days, which is binding and must be complied with until the dispute is determined by legal proceedings or agreement. This new procedure does not exist in any other pre-action protocol in the English courts.

Comparison to other forums

The Commercial Court, which can also hear construction and engineering disputes but limited to those concerning ships and drilling units, has no specific pre-action protocol. However, the Admiralty and Commercial Courts Guide (“the Guide”) states that the Practice Direction on Pre-Action Conduct and Protocols to the Civil Procedure Rules applies to claims in the Commercial Court and should "usually" be observed. This contrasts with the requirement for parties to apply the new Protocol unless the parties have agreed not to. Like the new Protocol, the Guide does not require or expect the parties to engage in "elaborate or expensive pre-action procedures”, encourages “restraint”, and provides for pre-action letters to be "concise" with only "essential" documents being supplied.

In arbitration, where disputes of this nature are also heard, the parties are free to agree in the arbitration agreement any pre-action steps that are to be observed and the English courts will, subject to certain conditions, try to uphold such clauses. Arbitration agreements usually specify the seat of the arbitration (which determines the law governing the procedure of the arbitration), and may incorporate institutional arbitration rules, such as the London Maritime Arbitrators’ Association Terms, the International Chamber of Commerce’s Rules of Arbitration or the London Court of International Arbitration’s Arbitration Rules. If the seat of arbitration is in England, the Arbitration Act 1996 will apply, under which there are no prescribed pre-action steps. The institutional arbitration rules listed above do not include any pre-action steps either. As such, the pre-action requirements in arbitration are likely to be limited, if any.

We will wait to see how the new Protocol affects the cases coming before the TCC in terms of their preparation and/or their early settlement.

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