Adjudication

What is Adjudication?

Adjudication is best described as either a contractual or statutory procedure for a swift and interim dispute resolution. It is provided by a third-party adjudicator who is independent to the dispute and generally agreed by the parties in dispute. It is a form of alternative dispute resolution that is commonly used in construction disputes.

How does it work?

Adjudication is often subject to a strict timetable, and it is therefore important that you understand your obligations and requirements.

Decisions that are made are generally binding and there is a limited right to appeal. The award in respect of legal costs is at the discretion of the adjudicator unless the contract does not permit this.

Should parties to a construction contract not agree to adjudication, then one is imposed by statute (under the housing grants, Construction and Regeneration act 1996 and the Local Democracy, Economic Development and Construction act 2009)

If the matter is to be handled under contractual adjudication procedures, it must comply with Section 108 of the Housing Grants, Construction and Regeneration Act.

Generally, the process can take up to 28 days and the decisions made are binding. Given the timescale you can see why this is a preferred option for most parties.

Section 108 of the Act

The requirements for adjudication are that all construction contracts should provide an explanation setting out the requirements. However, if the contract does not comply with the requirements, then the statutory scheme will apply. A party can therefore look to rely upon either its contractual obligation or the statutory obligation.

Powers of adjudicator

• To decide and order payment of sums due under the contract.

• To decide whether interest should be paid

• To open up, revise and review certificates unless the contract provides that they are final and conclusive.

Advantages

• The parties can select the expert after reviewing and considering his/her experience.

• The expert has scope to raise queries and act as an investigator

• It is not a formal setting and there are rarely requirements for lengthy legal submissions

• Less expensive and therefore makes commercial sense

• Quite a flexible approach for parties to agree to.

Disadvantages

• The expert has power to make decisions which may not be supported by statute

• The expert's determinations can be enforced.