REUTERS | Jumana ElHeloueh

The interim-binding nature of an adjudicator’s decision

Cast your mind back to 1996. I’m not thinking about football and England hosting the European Championship, but rather when what became the Construction Act 1996 was being debated in Parliament. One of the issues which troubled the House of Lords was the extent to which an adjudicator’s decision would be binding; should it be forever (with limited rights to appeal, like in arbitration), just until practical completion or something in the middle?

Since the Act came into force, it has been accepted that adjudicators’ decisions are binding until the matter is finally resolved (by agreement, the courts or an arbitrator) (section 108(3) and paragraph 23(2) of the Scheme for Construction Contracts 1998). Often the matter ends there, after the adjudication. The concept of “temporary finality” has developed, and we’ve had countless cases dealing with all aspects of an adjudicator’s jurisdiction, applications to stay proceedings and such like, which touch upon this issue of “temporary finality”.

But one area is less clear. What happens if you have the following scenario:

  • There are two consecutive adjudications between the same parties on a contract.
  • A different adjudicator is appointed on each dispute.
  • The referring party in adjudication number two was the responding party in adjudication number one.
  • The responding party in adjudication number one has refused to pay up, and in the inevitable enforcement proceedings, it has challenged the first adjudicator’s jurisdiction to reach a decision.
  • In its submissions, the referring party in adjudication number two ignores the first adjudicator’s decision, arguing that the adjudicator lacked jurisdiction to make the decision.

In that situation, the parties and the adjudicator are bound by the first adjudicator’s decision, pending the decision of the court. However, the scenario raises many more issues than simply the binding nature of the first adjudicator’s decision. For instance:

  • What if the responding party in adjudication number two argues that the second adjudication should not have been started until the court had dealt with the issue? While most people would accept that the right to refer “at any time” means exactly that, there may be merit in the process being delayed, but could parties agree a short hiatus once the matter is referred to the courts, rather than delaying altogether? Is a hiatus in proceedings a charter for parties to make frivolous challenges to delay the inevitable?
  • Until the outcome of the court case is known, it is very difficult for the parties to present their arguments in adjudication two, since they may need to set out an alternative case, allowing for the court to go either way on the question of the first adjudicator’s jurisdiction.
  • You can’t refer the same dispute to more than one adjudication. What if matters that have been raised in adjudication number two were, in fact, dealt with by the first adjudicator? How do you know whether that has happened until the court decides whether the first decision is valid?

In my view, the second adjudicator has to assume that he is bound by the first adjudicator’s decision and deal with the issues as he finds them before him in his adjudication. If that means he decides matters one way, and then that is wrong because the court says so, isn’t that just a reflection of the risks inherent in adjudication?

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Share this post on: