Adjudication, Arbitration & Litigation

Question 1

284. What is adjudication?

Answer 1

• Was developed to allow for construction contract disputes to be resolved more quickly and cost-effectively than resolution through arbitration or litigation
• Its objective is to provide a fast-working solution to an issue (pending the outcome of, or without the need for, a more formal dispute resolution procedure) so that the parties can quickly resume or continue work under the contract. This is a binding decision

Question 2

285. Can you explain how the adjudication process works in terms of timeframes?

Answer 2

1. Following the crystallisation of a dispute. Either party can serve notice on the other party of its intention to refer the dispute to adjudication.
2. Within 7 days of the issue of the notice, the referring party (the party commencing the proceedings) must serve upon the other party its Referral (its statement of case). If the referral is not served within that time, the adjudication will likely be void.
3. The Referral must contain a detailed explanation of the referring parties claim in respect of the dispute identified within the case notice, along with any supporting documentation.
4. Within that 7-day period, the referring party must secure the appointment of an adjudicator. This will either be a person named in the contract or, if no-one is named, by using the nominating body identified in the Contract.
5. Following the appointment, the adjudicator will set out a timetable; this will usually permit the other party to issue a response to the Referral.
6. The Adjudicator must make his decision within 28 days for the Referral.

Question 3

286. Can the decision period of 28 days be extended?

Answer 3

Yes, it can be extended by 14 days to 42 days by mutual agreement of both parties.

Question 4

287. Is the adjudication process binding?

Answer 4

Yes, unless the Adjudicator acted outside of their jurisdiction or was biased towards one party.

Question 5

288. Is there an appeals process with adjudication?

Answer 5

There is no appeals process; however, the parties can take the same dispute to litigation (or arbitration if the contract contains an arbitration agreement).

Question 6

289. What if a building contract does not contain provisions for adjudication?

Answer 6

Adjudication became a legal right in relation to construction contracts in the UK when the construction act came into force in 1996

Question 7

290. Who pays for adjudication?

Answer 7

• Both parties are jointly liable for the adjudicator’s fees
• The adjudicators can usually decide who is to pay the fees and reasonable expense

Question 8

291. What is arbitration?

Answer 8

• Arbitration is basically a lawsuit but without the court involvement
• The parties agree (either in a contract or before a dispute arises or, through a subsequent agreement to avoid a lawsuit) to submit their dispute for arbitration rather than pursue a lawsuit in court
• The parties agreement gives the arbitrator the power to issue a decision as to the parties right and obligations and such decision will be legally binding on all parties

Question 9

292. What are the advantages of arbitration?

Answer 9

• The process is private – there is no public record of any proceedings although not necessarily confidential
• Speed compared to litigation
• The parties can agree on an arbitrator with relevant expertise in the matter
• The arbitrators award can be enforced as a judgement of the court

Question 10

293. What are the disadvantages of arbitration?

Answer 10

• The parties must bear the costs of both the arbitrator and the venue
• Limited appear rights
• If the matter is complicated but the amount of money involved is modest, then the arbitrators fee may make arbitration uneconomical

Question 11

294. What is litigation?

Answer 11

• Involves one of the parties commencing a claim in the civil courts
• The courts have inherent jurisdiction to hear a dispute in respect of almost anything
• The nature, complexity and value of the dispute will determine which court will hear the dispute

Question 12

295. What are the advantages of litigation?

Answer 12

• Judges can compel the parties to comply with time frames and have powers of sanctions for non-compliance
• Judges have the power to make orders and provide interim relief to protect a parties position pending the final judgement
• The are defined rights of appeal in cases where errors or fact or law made

Question 13

296. What are the disadvantages of litigation?

Answer 13

• Potentially greater cots if the dispute is not well managed or the other party seeks to delay the proceedings.
• Potentially a longer period to obtain a judgement
• Proceedings are generally conducted in public
• Judgement will be subject to appeal.