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How to tell your adjudications from your arbitrations

legal matters

When Sir Michael Latham in his 1994 review of construction contracts - the influential Constructing the Team report - first suggested that it would be a good idea to incorporate provisions for adjudication into most building contracts, some legal commentators asked: 'What is adjudication?' They were familiar with litigation and arbitration. If they needed any help in deciding whether or not a particular dispute resolution process was in fact an arbitration, Mustill & Boyd, one of the leading texts on the subject, devoted an entire chapter to the necessary elements of an arbitration. Arbitration can be described, in summary, as a consensual process resulting in a rights-based, binding decision from a fair and impartial tribunal.

The commentators came to grips with other methods of dispute resolution as they evolved. Mediation is consensual but, importantly, non-binding and, even more spookily for us lawyers, not rights-based. Both expert determination and early neutral evaluation can result in considered, but preliminary, views which the parties may opt to be binding if they choose.

As each new process arrived, the commentators were able to recognise its jurisprudential foundations and label it accordingly. But not so with adjudication. Such definitions as were supplied ranged from the convoluted ('It is a binding summary interim decision-making process by an independent third party') to the Delphic ('It is what it is'). In the flurry of activity to gain government approval for the scheme, to set up the Adjudicator Nominating Bodies (anbs) and qualify adjudicators, increasingly the question 'What is adjudication?' elicited the response 'who cares!' and, for a while, the questioners fell silent.

They knew, however, that the question of could not remain unanswered forever. If you do not know what an adjudicator is empowered to do, how can you say that he has done the right (or wrong) thing? Furthermore, adjudication does not operate in a legal vacuum. There is an entire network of statutory provisions which may help, or hinder, the process. Without knowing where it slots into the network, it is not easy to say how the law can assist.

For example, a main contractor wants to start an adjudication against the developer for money not paid. The developer goes into administrative receivership. In order to start legal proceedings against a company in administration you need first to obtain the leave of the court under the Insolvency Act 1986. Is adjudication 'legal or other proceedings' as defined by the Act? This question was considered recently in Straume v Bradlor Developments. The contractor, Straume, wanted to start adjudication without going first to the court. It argued that adjudication was akin to expert determination or independent certification. The judge did not agree and said that adjudication constituted a quasi-legal proceeding like arbitration. He found, in fact, that adjudication was a form of arbitration. Straume could not, therefore, start an adjudication without the court's approval.

This decision flies in the face of something that the Court of Appeal said about adjudication under the dom/1 sub-contract. In the Cameron v Mowlem case, the Court of Appeal said that the decision of an adjudicator had 'an ephemeral and subordinate character' and was clearly not the same thing as an arbitrator's award. If adjudication is indeed a form of arbitration it has consequences for those who contract with other member states of the EC.

The right to adjudication is still part of contracts with European parties, irrespective of the stated law of the contract, if the works are to be carried out in England or Scotland. Thus a German contractor carrying out work in Scotland for an English employer can start an adjudication. Should the successful Germans go to the courts in England, Germany or Scotland to enforce the adjudicator's decision? Here the Civil Jurisdiction and Judgments Act 1982 comes in. It is designed to simplify disputes between member states. But - and here's the rub - the Act does not apply to arbitration. So if adjudication is arbitration, then disputing member states can choose their forum and leave it to the other side to make out the rather unattractive argument that some other court is better qualified to deal with the problem.

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