Exploring Mediation Practices in the Malaysian Construction Industry: A Systematic Literature Review

Mediation was introduced to Malaysian construction industry in 1998 through PAM Contracts to improve the dispute resolution process but the development, implementation, and awareness were slow. Therefore, this research aims to examine the practice and development of mediation in construction industry and subsequent implementation in Malaysia. The objectives are to identify the current development and issues in mediation practice in Malaysian construction industry. The systematic literature review (SLR) of previous research on dispute resolution and mediation, specifically on the development and impact, was adopted. The results showed several available guidelines and methods used in mediation but further examination of the procedural rules was not identified. There was also no uniformity, standard, reinforcement, and proper structure for the methods to operate effectively. Moreover, the absence of emphasis and promotion contributed to a lack of knowledge and awareness among industry players. This was considered unfortunate due to the potential of mediation for parties in Malaysian construction industry.

Alternative dispute resolution; Construction dispute; Mediation

Dispute resolution is a continuous and significant component in construction industry. This could be associated with the identification of 23 common by (Yap et al., 2019). The 5 most critical were reported to include changes of design during construction, cost overruns, late completion, competitive tendering procedures, and late payment. Many disputes are irrecoverable through insurance and this can lead to disruption in the project cashflow. (Hatmoko et al., 2021) examined the risks and insurance coverage for projects in Indonesia and classified the issues into low-occurrence risks such as disputes among workers and delays in solving problems. Another classification was moderate occurrence risks in the form of late payment and mismatch cost estimates with the capability to cause typical disputes in construction. Payment issues such as delays in interim payment to the contractor often lead to conflicts between contractors and clients (Ismail et.al., 2023). The issues could have a significant financial impact on the projects and the parties, leading to the need for mitigation solutions with subsequent advantages.

The role of justice in dispute resolution cannot be overlooked. For instance, studies have shown that perceptions of fairness, whether distributive, procedural, or interactional could significantly influence cooperation among parties involved in construction disputes (Lu et al., 2017; Mohd Danuri et al, 2016; Aibinu et al., 2011). In addition, (Illankoon et al., 2022) observed that the causes leading to the claims to form a dispute, and the effective ADR methods are largely dependent on the perspective of the stakeholders. It has been suggested that a fair tendering process, coupled with transparent mediation practices, can enhance collaborative efforts and reduce the likelihood of disputes. In particular, the procedural fairness of tendering processes has been linked to improved outcomes in public-private partnerships, indicating that fairness in tendering can lead to more effective dispute resolution (Ismail et al. 2017; Zhang, 2010). The importance of mediation is underscored by the need for effective communication which includes all elimination of communication noises that could disrupt the mediation, and trust-building between clients and contractors, which can be facilitated through better-prepared tender documents and ongoing dialogue (Sabri and Torp, 2022; Portere, 2021).

Disputes can be reduced through proper systematic planning and risk management practices. For example, (Jabar et al., 2019) reported the possibility of reducing the planning, coordination, implementation, and monitoring of IBS project through systematic framework. This is due to the possibility of the activities potentially leading to disputes between the parties based on the differences in objectives. Industry players mostly believe that project owners aim for the completion of the project in budget and time allocated using the best of qualities and workmanship but the primary objective of the contractor is to obtain maximum profits (Mohd-Danuri, 2020). The difference in objectives can lead to dispute which requires resolution as the remedial mechanism. Another important observation is that there is a need for a structured dispute resolution mechanism in the process of globalizing construction business. (Utama et al., 2019) investigated the motivation for internationalization enterprises and hypothesized that several critical hindrance factors could impede strategic decisions for a company to pursue internationalization. An example is the lack of insurance coverage for disputes between parties which is capable of affecting construction players and the effectiveness of mitigating issues. In addition, (Bhuiyan, 2019) observed that ADR tends to generate less escalation and ill-will between parties. Therefore, there is a need to determine attractive dispute resolution (DR) mechanisms for construction industry. Hence, the government urges for the strengthening of legal framework to be established and maintained to support the development of ADR in Malaysia (Azri Roslan, 2024). (Dhotre, 2021) classified the mechanisms into traditional DR or litigation, hybrid DR which focused on a cross-over between two alternative methods, and Alternate Dispute Resolution (ADR) such as Med-Arb: a hybrid of the mediation and arbitration) (Goel, 2016; Barough et al., 2013; Yates, 2010). Specific ADR is also required to match different scenarios and types of disputes and one that best suited to the relevant dispute (Okudan and Çevikbas, 2022; Feehily, 2016), leading to the need for mediation to accommodate construction industry. Conversely, current ADR system does not guarantee prevention of significant cost and time extensions, resulting to negative perception towards the whole ADR system within the construction industry (Gandu et al., 2023; Sinclair, 2016) calls for further improvement of ADR systems and frameworks. Evidently, continuous research on ADR topics are prevalent.

Mediation is focused on achieving an amicable solution between the disputing parties through tolerance and interest instead of rights and is often achieved through a structured negotiation process aided by a skilled third party, i.e. mediator. It differs from other dispute resolution methods, such as adjudication and arbitration, which are more confrontational and directive, allowing lesser room for negotiation. Mediation is promoted as a method that encourages parties to speak freely, peacefully, and in a proper manner under negotiation-based discussions while keeping the proceeding cheap with a high level of confidentiality (Md Shah et al., 2019) allowing flexibility during the negotiations and mediation (Muigua, 2019). In Malaysian construction industry, mediation is recognized and the provisions related to the procedure can be found in standard forms of contract. 

ADR method was introduced initially through Malaysia Mediation Centre (MMC) in 1998 as an alternative to archaic and adversarial arbitration. The fact that mediation existed in communities long before it is modernized and used in its current format is quite compelling. In Islamic communities, the used of sulh (the Arabic terms for negotiation, compromise of action and mediation) to resolved disputes within the community (Hoque and Zarif, 2020; Arifin and Abdul Rashid, 2012) has major similarity with the Western style mediation in terms of motivation and determination for reconciliation and compromise (Allie, 2020).  Fast-forward to the future, it is observed that mediation has been the modern problem-solving mechanism for over 20 years (Abraham, 2023). The format includes the option of applying several mediation approaches which includes facilitative (Abdullah, 2015; Tembo et al., 2010), evaluative (von Feigenblatt, 2021; Folger and Bush, 2014) narrative (Urbanová et al., 2019; Price, 2007), transformative (Ong, 2022; von Feigenblatt, 2021; Brunet et al., 2011), therapeutic (von Feigenblatt, 2021; Erickson, 1997), and appreciative (Sandu 2014).

Mediation is mostly defined as a voluntary and highly confidential dispute resolution process without prejudice conducted by a third-party aiding disputing parties to arrive at an amicable settlement using a structured form of assisted negotiation (Mohd-Danuri, 2020; Abdullah, 2015; Mohamed, 2013; Ismail et al., 2010). It is regarded as an ideal dispute resolution method that motivates parties to arrive at a self-determined settlement through a flexible form of assisted negotiation, exceptionally handy when the conflict is about family matters or neighbourhood disputes (Wei, 2023; Rafti, 2019). (Choy et al., 2016) observed that mediation works on the idea of volunteerism, negotiation-based, and compromise and a good option for parties looking for and ADR that promotes dialogue, negotiation, or third-party intervention as an alternative to using force or aggressive measures to resolve a dispute (Rahman, 2012). Mokhtar (2022) and (Aboluwarin et al., 2022) endorsed mediation to be a powerful tool and most suited in solving out disputes that requires high confidentiality as mediators have the unconditional obligation to keep the neutrality and secrecy (Chesca, 2015). The method has tremendous potential in resolving civil, matrimonial, consumer, and commercial disputes due to its non-confrontational and "win-win" nature (Yong, 2023; Mohamed, 2013) reported that up to 90% of cases were managed through mediation in the UK, US, and Singapore to avoid proceeding to the trial stage while successfully reducing backlogged cases and managing to speed up the disposal of cases in court. 

(Benston and Farkas, 2018) showed that mediation as a financial risk-averse and party-controlled dispute resolution mechanism capable of allowing the parties to control their money and emphasize compromise. This definition triggers millennials to significantly prefer mediation over litigation. Moreover, a new generation of construction players believes that effective project teams rely on trust, cooperation, and continuous teamwork compared to the competitive relationships and ineffective communication often reported in traditional projects (Jupir et al., 2023). This clearly shows the possibility of mediation serving as the preferred dispute resolution method of the future. The belief also foreshadows the need to prepare both the method and the industry players for future undertaking in its practice. The use is observed to be disregarded and less popular, leading to the question related to the reason why an ideal dispute resolution mechanism such as mediation fails to gain usage among construction players. Therefore, this research aims to analyze the current mediation practice, specifically with a focus on the development in construction industry and implementation in Malaysia, through systematic literature review (SLR).

The research objectives are (i) to examine the current development of mediation practice in Malaysian construction industry and (ii) to identify the prevailing issues. The intention is to contribute to the focus on procedural law in the implementation of mediation procedures in Malaysian construction industry. This research is the preliminary phase to show the need for a thorough investigation into the procedural rules in order to improve the implementation of mediation in the industry.

Overview of Mediation in the Construction Industry

As of February 2025, 58 countries have signed Singapore Convention on Mediation 2019. The convention aims to provide binding legal certainty to mediation agreements on international business disputes for countries that have signed the convention and observed to encourage the development of international mediation (Wei, 2023; Kim and Choi, 2023; Wongsawangsiri, 2023;  Gerungan et al., 2023). This particular development encourages further exploration on the potential of mediation in many industries including construction industry. 

The body of literature surrounding mediation practices in the construction industry reflects the complexity and multifaceted nature of disputes that arise within this sector. Mediation has been established for a long time in Indonesia and Malaysia, but existing legislation may be a bit backward and not modern according to the current modernization trend (Nasrul et al., 2024). There are also lack of mediation awareness and knowledge within the industry as the depth of information is insufficient and have not reach the practitioners and public enough (Ahnuar, 2023; Gregory-Stevens et al., 2016) This synthesis presents a selection of relevant studies that explore various aspects of mediation, alternative dispute resolution (ADR), and their implications for the construction industry. Mediation is increasingly recognized as a preferred method for resolving disputes in the construction sector due to its potential for cost-effectiveness and time savings. (Ustuner and Tas, 2019; Isa and Emuze, 2015) emphasize that negotiation and mediation are favored over litigation in the Nigerian construction industry, highlighting the importance of these methods in improving stakeholder relationships and reducing conflict escalation. Similarly, (Musonda and Gambo, 2020) discuss how partnership dynamics can mediate the effects of procurement strategy factors on sustainable housing development, underscoring the role of collaborative approaches in enhancing project outcomes.

The theoretical underpinnings of mediation practices are also explored in the literature. (Stone-Romero and Rosopa, 2010) provide insights into research design options for testing mediation models, which can inform the development of effective mediation strategies in construction projects. Furthermore, the work of (Chong and Zin, 2012) identifies various dispute resolution methods, including mediation, and discusses their applicability in managing conflicts that arise during construction projects. (Chan and Suen, 2005; Ng and Banaitis, 2017) discuss the management of dispute resolution for international construction projects in China and Hong Kong, highlighting the detrimental effects of unresolved disputes on project performance and relationships, and emphasizes the necessity of effective mediation practices in managing complex international projects as well as the importance of adapting mediation practices to local contexts and industry needs. (García, 2017; Tserng and Teng, 2009; Cheung and Yiu, 2007) conduct a study on mediator tactics and styles in construction disputes, identifying key factors including cultural that influence mediation outcomes, which provides valuable insights into the strategies that mediators can employ to enhance the effectiveness of the mediation process. These studies highlight the necessity for practitioners to be well-versed in different resolution techniques to select the most appropriate method for their specific context.

The challenges associated with implementing mediation in the construction industry are significant (Agapiou, 2015; Artan et al., 2016). (Alshahrani, 2017) notes that while litigation and arbitration are common, ADR methods, including mediation, offer a more collaborative approach to resolving disputes. This sentiment is echoed by (Lingasabesan and Abenayake, 2022), who discuss the opportunities and challenges of conducting virtual ADR methods in the Sri Lankan construction industry, emphasizing the need for adaptability in mediation practices. (Saeb et al., 2018) further elaborate on the critical factors for selecting neutral parties to support ADR methods, indicating that the choice of mediator can significantly influence the resolution process. Further, (Leung and Hui, 2020) summarize stakeholder perspectives on construction mediation in Hong Kong, emphasizing the importance of mediator experience in enhancing the mediation process.

Moreover, the role of precontract negotiations in mitigating disputes is highlighted by (Aibinu, 2009) who argues that early engagement among project participants can reduce the likelihood of conflicts arising during construction. This proactive approach aligns with the findings of (Amoah and Linde, 2022) who emphasize the importance of effective project management practices in minimizing disputes.

The study also observes the development relating to court-annexed mediation and multi-tiered dispute resolution options. Court-annexed mediation (or judge-led mediation, court-assisted mediation or court directed mediation), refers to mediation proceeding where active judges and judicial officers taking on the role of mediator to litigating parties after filing for action in the courts as an effort by the judiciary to clear court cases backlog (Choy et al., 2016;  Abdul Wahab, 2013). This common judiciary practice is seen to be advantageous in non-construction disputes (Hussin and Ismail, 2015) but the application in construction disputes requires further scrutiny.  Meanwhile, multi-tiered dispute resolution process incorporating alternative dispute resolution (ADR) as intermediate step before arbitration is an option to eliminate possible biasness in normal single- tiered dispute (Cheung and Li, 2019) should be adequately examine too. 

The literature also addresses the integration of technology in mediation practices. (Ojiako et al., 2018) and (Albornoz and González, 2012) examine the implications of online dispute resolution (ODR) platforms, suggesting that technology can facilitate mediation processes and enhance accessibility for stakeholders. This is particularly relevant in the context of the ongoing digital transformation within the construction industry. (Matel et al., 2021; Portere and Morevs, 2020) also explore the intersection of machine learning and technological mediation in cost estimation practices, and the possibility and necessity of developing artificial intelligence systems in mediation suggesting that technology can enhance mediation processes in construction.

The review of relevant literature is focused on the comprehensive exploration of the existing body of work to identify gaps (Xiao and Watson, 2019). The data retrieved on the same topic would assist in identifying the issues, establishing the problem, and formulating questions to develop future research in addition to the provision of answers raised in the research reviewed containing the same theme.

SLR is based on the clear formulation of the question, identification of relevant research, appraisal of the quality, and summarizing the evidence explicitly (Khan et al., 2003). The method is often applied due to the rational, direct, straightforward, and simplistic nature. It is relevant to the objective of this research and considered sufficient to handle a small number of literatures, leading to the preference compared to other methods. In addition to designing a better-structured review, this type of systematic method can assist in recording and tracing analytical reviews conducted as contributions to future research. (Khan et al., 2003) identified the five steps associated with SLR to include 1. framing questions for a review, 2. identifying relevant work, 3. assessing the quality of research, 4. summarizing the evidence, and lastly 5. Interpreting the results. The process of extracting and obtaining relevant and credible literature includes identifying and screening literature, filtering through eligibility, and inclusion (Xiao and Watson, 2019). These are necessary to ensure only relevant topics are included. The stages are further presented in Figure 1 and also applied in this research as follows. 

The first step was to frame the preliminary question with a focus on the research conducted in the past 15 years and in Malaysian context. The justification for the time frame was due to the fact that the dispute resolution industry was observed not to be dynamic and the progress was considered quite slow. This showed the possibility that the research conducted in the past 10 years might still have relevance in terms of the process, procedures, and governing rules in the current period. 

Figure 1 SLR Search Strategy

In the second step was to identify relevant works through the search conducted using the keywords alternative dispute resolution > mediation > mediation in construction > mediation practices. At this preliminary step, the literature search was implemented using Open Access, SCOPUS, Web of Science (WoS), and Google Scholar databases. The results showed a total of 4,643 records with only 9 from WoS and none was related to the topic. Moreover, 702 were on mediation and only 169 articles were found to be usable references. The exclusion of books, dictionaries, legal documents, regulations, and government documents reduced the number to 89 current publications related to mediation in construction. An important observation was that the search on WoS was not filtered or limited because only a few pieces of literature were published on law, specifically on the theme of research and the subject. Therefore, the search was expanded to any indexed and some selected non-indexed publications to obtain a preliminary overview of the current dynamics in dispute resolution. The next step was to assess the quality of the remaining literature and only 18, including articles and research, focused on mediation practices.

The summary of the evidence was based on the research onion and the analysis managed to show the problems and issues in mediation practices, including the rules, procedures, and methods. The main results were related to three issues, including mediation in construction, mediation paradoxes, and the inconsistency in mediation practices. The interpretation of results led to the identification of the need for a specific mediation practice for construction industry. However, the hindrance was the negative perception of the current practice because of the minimal development, lack of consistency, paradoxes, and absence of standardizations. It is concluded that further scrutiny is required on the current practice with SLR conducted to assist in determining the problems and developing a framework for the research. Moreover, a more detailed SLR is proposed to have a more holistic view and capture a larger context in the research area.

Behavior SLR led to the identification of the following literature for further analysis. Table 1 shows the summary of the general important results of this research.

Table 1 Summary of Important Results from SLR based on Timeline

The results were discussed based on the two main observations, including a) the current development of mediation and b) issues related to the practice. Each observation had some themes identified to be recurring and consistently mentioned throughout the literature as presented in the following Figure 2.

3.2. Current Mediation Development

i) The potential of mediation as ADR in construction industry (t1)

Mediation was generally observed to have vast potential for exploration (Ismail et al., 2010). According to (Benston and Farkas, 2018), the concept has the potential to be explored in construction industry due to its positive values, suitability, and acceptance by the current generation of stakeholders. This has contributed significantly to the promotion of mediation practices in Malaysian construction industry but the development is observed to be slow.

ii) Current practice of mediation (t2)

The current mediation practices in Malaysia governed by Mediation Act 2012 (Act 749) were praised by (Hasan et al., 2022) and reported to be structured and comprehensive. However, several varieties of practices were identified (Komurlu and Aditi, 2017; Brooker, 2011), including substance-oriented, process-oriented, and relationship-oriented styles (Ooi, 2017). Some methods have also been applied while others are yet to be fully explored. Facilitative mediation is reported to be the purest mode (Abdullah, 2015; Tembo et al., 2010) and evaluative generally has better potential in construction industry (Trushell et al., 2016; Tembo et al., 2010) but both methods have not been fully explored in Malaysia. The other methods such as transformative, therapeutic, and narrative also need to be considered (Komurlu and Arditi, 2017; Brooker, 2011). 

iii) Perception of industry players towards mediation (t3)

Parties engaging in mediation need to be consensual and have the objective of reaching an agreeable amicable solution as well as willing to compromise and participate in the negotiation process. In addition to the right attitude (Schulz and Turnbull, 2012), successful mediation needs to be premised on the social and cultural aspects of the communities where the parties live and exist (Ooi, 2017). This is necessary because successful mediations are related to a particular custom and environment (Agapiou, 2018). In construction industry, parties often prefer mediators with technical construction backgrounds for them to be more interested in the outcome of the process (Leung and Hui, 2022). The results showed that construction mediation should be customized to the context of the industry to ensure successful implementation, specifically in Malaysia. 

iv) Mediation failures (t4)

The method has been applied successfully in some parts of the world but identified to be less preferred in others (Agapiou and Clark, 2012). For example, (Trushell et al., 2016) specifically reported the absence of knowledge, varieties of practices, lack of consistencies, as well as negative perceptions and attitudes as the reasons for the failure of mediation in Scotland. The failure in the UK was associated with the non-existence of broad agreement on mediation process form to be adopted (Agapiou, 2018). These factors contributed to the lack of acceptance and implementation and the trend was consistent in the dispute resolution process.

3.3. Issues Related to Mediation Practices

i) Lack of Knowledge and Authority (t5)

The lack of awareness and knowledge related to mediation in construction industry led to the popularity of the practice. The implementation is very low in Malaysia because construction practitioners are unsure, misinformed, or perhaps have no idea of mediation and the process required. This was observed from the fact that only 8 cases were resolved through mediation in 2021 compared to 117 in Arbitration and 657 in Adjudication (Ahnuar et al., 2023). Mediation is considered highly suitable for construction industry but there is a criticism that the method lacks finality (Rahmat and Rahim, 2020). There are information on the types, methods, and accessibility to mediation in Malaysian construction industry but the depth is insufficient and mostly not known

to the practitioners and public due to a lack of awareness and knowledge (Ahnuar et al., 2023). Another observation was that there were no provisions or initiatives to promote the practice (Ahnuar et al., 2023). This is observed from the fact that the main construction contract used in the industry such as Public Work Department Forms of Contract does not have specific provisions on mediation. 

Figure 2 SLR Results Based on Themes

ii) Varieties and Lack of Consistency (t6)

Previous observations showed that different forms of mediation were practiced in entirely different legal and cultural environments by mediators with several types, levels of training, and experience, leading to inconsistency. This is in addition to the variety of styles and mediation methods available. There is presently no standard national system or law related to mediation practice and operating as a mediator in Malaysia (Rahmat et al., 2022). Therefore, the practices vary, causing more confusion and contributing to the lack of implementation despite the potential in resolving disputes. 

iii) Negative Perception and Attitude (t7)

The idealism of mediation as being cost-effective, capable of providing amicable solutions, and ensuring fairness or justice was not accurate (Agapiou, 2018; Hoffman, 2002). The high risk of having more latent expenses, and lengthy trials with potentially low conclusive outcomes (Dahlan et al., 2021) is also not attractive to disputing parties, particularly the clients. Therefore, the multiple negative experience from the revelation of mediation paradoxes only hinders parties from adopting the practice. The same trend is observed in Malaysia and this shows the need for the government to allocate resources to promote a uniform standard. The effort can be achieved by providing a legislative framework to regulate and implement a national standard of mediation practices (Lau and Ali Mohamed, 2020).

Mediation offers negotiation platforms and promotes compromise for the parties to achieve agreed solutions based on interests compared to other forms of dispute resolution, such as adjudication and arbitration. The outcome is consensual and this shows the possibility of a positive outcome and retention of a better relationship between the parties. However, these values are often overlooked due to the surrounding issues and negative perceptions associated with ambiguity and lack of knowledge. The trend shows there is a need for consistency, provision of a better structure, regulations with defined finality, and improvement in the current legislations suitable for industry. These are needed to explore a particular mediation practice in Malaysian construction industry.

In conclusion, the small number of research found showed only a limited literature focused on the process, procedure, and development of mediation in Malaysia. The trend showed that there was an inadequate examination of the concept and recommended more research to ensure the presentation of more information to construction players and the public. Moreover, sufficient analysis had not been conducted on the substantive and procedural law on mediation toward developing a consistent practice. This showed the need to explore the procedural rules and regulations to develop a practice structure. Several guidelines used by different institutions were not analyzed and compared sufficiently. The same trend was identified for mediation methods recommended to be implemented in the industry without adequate analysis. This showed the need to comprehensively examine different mediation practices and discuss possible legislative changes in construction contracts to ensure incorporation. Moreover, a comprehensive analysis of mediation and subsequent potential in resolving different types of disputes in Malaysian construction industry was not available. Future research should consider the suitable procedural rules that could be applied in Malaysian and global construction industry. Improvement in the adoption and practices related to mediation in Malaysian construction industry should also be considered.

The authors appreciatively acknowledge the financial support provided by Massufei Sdn. Bhd. via a Private Grant (PV097-2023) to publish this paper.

Author Contributions

Ahmad Arzlee Hassan is a PhD candidate who works on this topic, Mohd Suhaimi Mohd Danuri is a supervisor for the PhD candidate, Umi Kalsum Zolkafli @ Zulkifly is a supervisor for the PhD candidate, Muhammad Hadi Mustafa is a co-researcher of the private grant, Mohammed Ali Berawi is a research collaborator who provides advise on the overall contents of the paper, Lee Wei Yang provides essential support through the private research grant and advise about the research.

Conflict of Interest

The authors declare no conflicts of interest.

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