Constructing the Team executive summary made 30 recommendations, one of which was the bold statement "Adjudication should be the normal method of dispute resolution." 20 years on, has that turned out to be the case?
Sir Michael Latham recommended that adjudication should be incorporated "forthwith" within the JCT suite of contracts. NEC was ahead of the pack with provision for an early type of adjudication at that time already. The report was quite clear that:
- there should be no restriction on the issues to be placed before an adjudicator for decision;
- there should be no cooling off period before the adjudicator can be called in;
- an adjudicator is a neutral decision maker;
- In the event that parties cannot agree on a person to adjudicate the Presidents of the appropriate professional bodies should be tasked with nomination;
- either party should have the right to adjudicate;
- an adjudicator should have scope to determine issues between clients and main contractors; contractors and subcontractors; and subcontractors and sub-subcontractors equally; and
- decisions should be implemented at once even if subsequently overturned by the courts or an arbitrator
The 1996 Act mirrors and incorporates almost all of these recommendations. Section 108 gives a party to a construction contract the right to refer a dispute arising under that contract to adjudication. Every construction contract requires to contain a provision whereby
- either party can refer a dispute to adjudication at any time;
- a timetable should be set out with the object of securing the appointment of an adjudicator and the referral of a dispute within 7 days of a notice;
- a decision should be reached within 28 days (although can be extended by 14 days with the consent of the Referring Party);
- an adjudicator should act impartially;
- he or she is enabled to take initiative in ascertaining the facts and the law; and.
- the decision of an adjudicator is binding until finally determined by legal proceedings or arbitration.
It goes without saying that the standard form suites of contracts were amended to take account of these changes. However, if a construction contract does not contain provisions in these terms (and provide for the adjudicator to correct his or her decision for typos, and exclude liability for anything done or omitted by the adjudicator unless in bad faith) the relevant Scheme for Construction Contracts applies. There are three Schemes for Construction Contracts, one for Scotland, one for Northern Ireland and one for England & Wales. They are however in almost identical terms.
It is almost impossible to know whether adjudication is now the "normal method of dispute resolution" in construction contracts as there is no centralised record of how many adjudications are ongoing at any given time. Visibility only tends to come if parties are dissatisfied with the outcome of an adjudicator's decision, and have the stomach and funding for another bash by way of referring the dispute to litigation. There have been around 700 reported decisions of the courts, on matters related to adjudication, in Scotland, England and Northern Ireland since the regime came in 20 years ago. That equates very roughly to 35 per year.
This is of course only a barometer of court actions which result in decision and takes no account of adjudicator's decisions which are challenged by way of arbitration, referred to court and settled extra-judicially or where parties agree to mediate or negotiate a global settlement. The fact of a referral to adjudication does not prohibit settlement as between the parties prior to a decision being reached. The statistic also makes no reference to adjudicator's decisions where parties are content, or if not content, prepared to live with the outcome, particularly if based on an interim certificate or assessment under the contract which can be addressed further through the operation of the contractual mechanisms. In our experience the majority of referrals fall into the latter two categories. It's safe to say that adjudication is the "go to" form of dispute resolution on large commercial projects, except of course where the contract runs smoothly and no disputes arise. Sadly that is a rarer situation than it might be, despite the partnership approach which was promoted all those years ago.
The Oxford English Dictionary definition for normal is "conforming to a standard; usual, typical, or expected." It's safe to say adjudication is none of these things. Our own view though is that adjudication certainly shows no sign of slowing down and to that end Sir Michael's aim, as delivered by the Act, may well have been delivered.