Adjudication – fit for purpose – or is there another way?
It has been nearly 20 years since the world was introduced to statutory adjudication through the pithily titled Housing Grants Construction and Regeneration Act 1996 and save for minor tinkering around the edges it has not changed. In this article, we look at whether adjudication is still fit for purpose and the alternatives to adjudication, are they better suited to resolving construction disputes. In particular we give a brief overview of the 100 day arbitration procedure, dispute boards, and the ICC expedited procedure which is aimed at claims below $2 million and where the award is delivered within 6 months.
Before we do the key positives and negatives of adjudication. It is quick (normally 28 days from Referral to decision and almost always completed within 2 months), decisions are interimly binding and therefore can be overturned by the court or by an arbitrator, is fairly cheap (depending on the adjudicator and the complexity of the issues) and the costs of representation in the adjudication are not recoverable. Adjudication has been adopted not just in the UK but in a large number of jurisdictions around the world and is spreading. It has the other great advantage of being provided for by statute so it cannot be avoided. It’s greatest disadvantage is that the costs of representation at the adjudication is not recoverable and therefore there is a limited disincentive to adjudicating a bad case or indeed from serial adjudication. All in all adjudication has been a success story.
If you are within England and Wales you have access to the 100 day arbitration procedure, a voluntary procedure put forward originally by the Society of Construction Arbitrators, and often put forward by arbitrators on low value and less complex cases. The 100 day procedure is almost as quick as adjudication, gives you greater control over the nomination of the arbitrator, is binding and allows the arbitrator to determine who pays the costs of the arbitration. The cost of the arbitrator is roughly the same and indeed the overall cost of the arbitrator is often comparable to that of an adjudicator.
Dispute Boards are not something you see in the UK or in most countries with adjudication, however, it is a well used form of dispute resolution in areas where the FIDIC form is used on a regular basis. Standing or Ad-hoc dispute boards are a contractually agreed form of dispute resolution provided for within the terms of the contract and can, like arbitration, consist of either a single or panel board. Dispute Boards are used on various different types of construction projects from construction of major road and infrastructure projects to chemical works and to major project like Olympic Games.
Finally, the ICC has introduced its expedited arbitration procedure designed specifically for low value dispute to which the ICC arbitration rules apply. It applies to cases with a value of less than $2 million. Essentially, it gives the arbitrator, or arbitration panel, far greater flexibility as to the procedure that they follow, for example, there is no need for a rigid set of directions or indeed a hearing. In other words, it gives the arbitrator the same flexibility as adjudication and all to be concluded within 6 months of delivery of the file to the arbitrator. The two great advantages of this process are the binding nature of the award and the recoverability of the costs of the arbitration.
So, there are alternatives in use in various parts of the world that take different and proportionate approaches to the resolution of construction disputes. All of them take longer than an adjudication and are, most likely, cleaner and safer than adjudication, are binding and allow you to recover your costs if you win. But, they are not as quick as adjudication.
In the UK, at least, we have adjudication a quick method of dispute resolution which while interim is fully supported by the Courts that gives parties access to justice that they might otherwise not have and more often than not is in reality final as it close enough to the answer to be acceptable to all the parties. Adjudication has been with us for nearly 20 years and in that time, it has achieved what Sir Michael Latham’s 2014 report “Constructing the Team” intended, to keep the money flowing in the construction industry. It may not be perfect, but, where would we be without it – a truly qualified success.
For more information on adjudication and other forms of dispute avoidance and resolution both in the UK and internationally take a look at our website or contact the author.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.