Practical Law

It was way back in May 1998 that statutory adjudication first became a reality in the UK. Back then, I suspect everyone wondered what would become of what was a new way of resolving construction disputes. Almost 14 years on, adjudication has become the construction industry’s method of choice for resolving disputes large and small. I imagine few people give as much thought now as they once did to the question “why should you adjudicate?”.

However, the pros and cons of adjudication are on my mind because I am giving a talk about them in the Republic of Ireland. You see, they don’t have a statutory scheme yet and are still unsure about what the process will mean to them and their construction industry.

It seems strange to go back to basics, but these are a few of my thoughts on the benefits of the process, and some of the downsides. I’m sure others will have their own views, not least those who think the process is unsuitable for the more complex and high-value disputes and are advocating a return to arbitration as a way of resolving those sort of construction disputes.

Pros of adjudication

The pros include factors such as:

• It lowered the entry level to formal dispute resolution, giving every party an opportunity to have its dispute resolved by an independent third party.
• It is faster than what we had before, even after the Arbitration Act 1996 was introduced.
• Each party bears its own costs, which ensures a lower costs risk than either arbitration or litigation, where the loser generally pays the costs.
• It is the only (and therefore the final) stage of dispute resolution in the majority of instances, which ensures cash flows in the industry (on the whole), and not always out to solicitors and the plethora of individuals that “support” them.
• The process is wholly supported by the TCC and appellate courts.

Cons of adjudication

The cons could be said to include:

• It’s “quick and dirty”, but that could be perceived as a benefit too!
• It is open to abuse by the parties, with the use of things like ambush tactics in large and complicated matters.
• The process has become more complicated as time has passed. For example, Michael Latham and the authors of the Construction Act 1996 and the Scheme for Construction Contracts 1998 could never have envisaged how often parties would instruct experts or barristers, or how regularly we would get past the exchange of a referral, response and a reply. The Scheme doesn’t even provide for a response, although I’m not sure how that sits with natural justice rules these days!
• Policing adjudicators can be problematical. Too often in recent months I have written about another adjudicator’s breach of the rules of natural justice. This surely has to stop as it casts a shadow over the process and creates an environment of uncertainty for the parties. It also vastly increases their costs.
• Low value disputes can be priced out, as the process rarely is “quick and dirty” anymore.

What would be my conclusions and recommendations?

It’s a great way to resolve construction disputes, but learn from our experience over the last 13 years. Take a cold hard look at the body of English and Scottish case law that has developed and take the best bits from it, perhaps making the process more prescriptive than here. For example:

• Why have more sets of rules than the statutory Scheme?
• Be clear in your drafting to get rid of Tolent clauses.
• Set clear guidance for adjudicators about what is or isn’t a breach of the rules of natural justice. Again use our case law to develop this.