Construction Dispute Resolution by Adjudication


The Housing Grants, Construction and Regeneration Act 1996

Since the introduction of the Housing Grants, Construction and Regeneration Act 1996, adjudication is commonly the first (and often the last) formal step in resolving construction dispute in the UK. In Common usage, this Act is often referred to as the ‘Construction Act’. Under this Act adjudication is regulated by the Scheme for Construction Contracts[1] but agreements under statute, private finance initiative contracts, finance agreements and development agreements are excluded from the scope of the Act by the Construction Contracts (England and Wales) Exclusion Order 1998. In November 2009 the Local Democracy, Economic Development and Construction Act 2009 received Royal Assent. Part 8 contains amendments to the Construction Act. The key changes outlined are:

Changes to adjudication rules:

  • Construction contracts are no longer required to be ‘in writing’
  • Introduction of a statutory slip rule to England, Wales and Scotland
  • Parties can no longer agree who pays the costs of the adjudication before Notice of Adjudication is given.

Changes to payments:

  • Elimination of ‘pay when certified’ clauses that link to other contracts
  • New payment notices and the replacement of withholding notices
  • Improvements to the statutory right to suspend for non-payment
  • Outlawing a contractual provision whereby a payment notice triggers the due date.

There are also two important changes made relating to the Government’s power to make exclusion orders and to adjudication costs.

Ordinarily in England and Wales, adjudication will be implied into a contract under the Construction Act if:

  • it is a construction contract,
  • the project is not restricted to domestic building.

Binding and Final Construction Dispute Resolution Procedures

Litigation and arbitration are similar in that both involve resolving construction disputes before a tribunal whose decision is binding (and final, unless successfully appealed to a higher court). Adjudication – under the Housing Grants, Construction and Regeneration Act – has similarities but is subject typically to severe time constraints and the extent to which the findings of the adjudicator are binding are more limited.

Under these statutory provisions, adjudication may be likened to fast arbitration. Allowing for differences in terminology such the substitution of ‘adjudicator’ and ‘adjudication’ for ‘tribunal’ and ‘arbitral proceedings’, it is similar to arbitration and much of section 42 of the 1996 arbitration act applies. Strict time constraints are imposed in view of which it is sometimes said to offer quick but rough justice - letting the ‘heat’ out of the dispute while the contract is completed. The adjudicator’s decision is binding and the parties must comply with it until, if either of them wishes, the dispute is finally resolved by arbitration or litigation. Confidential documents remain confidential, other than to the extent that the adjudication proceedings require disclosure of them.

Unlike arbitrators and judges, adjudicators generally cannot award costs unless the adjudication agreement provides for this. In broad terms, all parties to the dispute are jointly and severally liable for the adjudicator’s reasonable fees and expenses.

Adjudicators have no liability for their actions as adjudicators, unless they act in bad faith.

[1] The Scheme for Construction Contracts (England and Wales) Regulations was introduced by Statutory Instrument made by Parliament early in 1998. Part I of the Scheme provides rules for the conduct of adjudication. Similar regulations have been introduced for Scotland. The England and Wales Regulations were introduced for Northern Ireland by an Order in Council to the Northern Ireland Act 1974, as the Scheme for Construction Contracts in Northern Ireland Regulations (Northern Ireland) 1999, which came into operation on 1 June 1999.