Exactly how far does an English adjudicator's jurisdiction reach?
Adjudicators' jurisdiction crops up frequently in this column. Showing that you had none is a good way of avoiding paying. One way for the claiming party to avoid the risk of pursuing an adjudication, which it subsequently transpires is unenforceable, is to ask the court in advance for a declaration about jurisdiction. That course of action, which the judge welcomed as sensible and pragmatic, was adopted by a claimant in a recent case, Comsite v Andritz (April 2003). It was a particularly prudent course of action given the murky jurisdictional waters facing Comsite.
Comsite, sub-subcontractor to Andritz, installed building services to a sludge-drying plant being built in the Isle of Wight for Southern Water. The judge hearing the matter had no idea what the parties' dispute was, and had no need to know in order to deal with the particular questions Comsite wanted answered.
Optimistically, the contract between the parties said that all disputes arising from the interpretation or execution of the contract were to be settled amicably. Unsurprisingly, the contract drafter foresaw the need to provide a fall-back position. Andritz is an Austrian company, and the contract went on to say that any dispute not happily settled was to be dealt with by the Austrian court in accordance with Austrian law.
Comsite asked the English court whether the Housing Grants Act applied to its contract with Andritz; in other words, could it have an enforceable adjudication?
The first question for the judge was whether she could deal with Comsite's question at all, given the parties' agreement that disputes should be dealt with by the Austrian court. The judge decided that she could. The particular dispute she was being asked to deal with was whether or not the Act, and thereby the adjudication scheme, applied to the contract. That was not a question of either the interpretation of the contract or the execution of the works. It followed that it was outside the category of disputes the parties had agreed to refer to the Austrian court.
She then considered whether, if there was an adjudication, the English court would be able to enforce any decision made by the adjudicator. If not, there would be little point in Comsite starting one. The judge concluded that the English court would be able to enforce an adjudicator's decision, which would be binding unless or until there was a final resolution.
While an Austrian court would deal with any final resolution of the dispute, that did not preclude the English court enforcing a temporary decision. In reaching this conclusion the judge neatly sidestepped interpreting the contract itself to mean that it referred only to final resolution of disputes (interpretation being a matter for the Austrian court). Instead, she relied on matters outside the contract, namely a comparison of the position where there is an arbitration and an adjudication, and an EC regulation.
Andritz then argued that Comsite's works were not construction works for the purposes of the Act, hence the Act did not apply. The assembly or installation of plant, where the primary purpose of the site is water treatment is exempt from the workings of the Act.
Although Comsite was installing building services, such as lighting, gas supply and fire alarms, rather than the actual drying plant itself, Andritz argued that without those services Southern Water would be unable to operate the plant. In other words, the services installed by Comsite were integral to the plant, and therefore within the exemption.
But the judge distinguished between services directly integral to the drying plant, and services to the building that contained the plant. She decided that the services Comsite installed were not in any real sense part of the plant. Just because Southern Water needed the building services in order to operate, did not make those services integral to the plant. It followed that the works were subject to the Act.
So Comsite got declarations that its works fell within the Act and that it could refer a dispute under its contract with Andritz to adjudication. If it does so, while other jurisdictional hurdles may appear in its path, it can at least proceed with the comfort of having eliminated some potentially tricky questions up front.