Very often, contracting parties in construction projects find themselves in disputes regarding a variety of issues with the most common being disputes related to extensions of time, non-payment or an incorrect assessment of an entitlement by the project manager, principal agent or similar quasi-judicial party. Adjudication has, historically, being a way to resolve this.
The reasons for selecting adjudication is due to its characteristics, such as:
- The process is fairly simple and the goal is to achieve a swift and cost-effective decision;
- The adjudicator is an independent third party belonging to a professional body; and
- The adjudicator’s decision is binding and enforceable but can be challenged by subsequent arbitration or litigation.
However, in recent years we have seen a departure, through amendments to the general conditions of contract, from adjudication being chosen as a forum for dispute resolution. The reasons for this vary from the very informal nature of the process to the limitations imposed given that the disputes are often decided on the papers and rarely involve the hearing of oral evidence. It is for these reasons that adjudication proceedings are typically referred to as “quick and dirty”.
Notwithstanding this, adjudication proceedings still have a very important role to play in the resolution of disputes in construction projects. The proceedings are a binding yet provisional resolution to a dispute pending final determination by way of arbitration or litigation. The NEC3 suite of contracts, intended to promote partnering and collaboration between the contractor and client, refer to decisions of the adjudicator as matters that need to be discharged as contractual obligations. This means that the parties must adhere to the decisions of the adjudicator as they otherwise would to any obligation contained in the construction contract.
To this end, if an adjudicator finds that an employer is to make payment to the contractor, the employer must make this payment despite them wishing to refer the decision to an arbitral tribunal or litigation.
The speedy nature of adjudication proceedings is not without risks for the parties. If the decision of the adjudicator is that the employer should make payment to the contractor, it is not improbable to imagine a situation where, upon receipt of a payment, a contractor may choose to simply never return to site to complete the works included in the construction agreement. Given the current economic climate in which many construction contractors are operating, this remains a very real risk. There is also no provision that obliges a contractor to provide security in cases where payment is made following an adjudicator’s decision. The legal principles or consideration regarding the provision of security would apply, should an employer demand security from a contractor.
It should also be noted that despite the risks that may follow an adjudicator’s decision, parties should, as far as possible, seek to resolve their disputes in the most efficient and cost-effective way possible to ensure that the objectives of the construction agreement are met at all times.
Adjudication proceedings provide a very efficient manner in which parties can resolve their disputes. Some of the typically observed procedures of dispute resolution are at times dispensed with in order to ensure that a dispute is brought to finalisation, albeit on an interim basis. As long as the parties are committed to the objectives of their construction contract, adjudication remains a very important and practical dispute resolution forum.