Out-Law Guide | 23 Nov 2018 | 12:48 pm | 3 min. read
This guide was last updated in November 2018
In the UK, statutory adjudication is a mandatory right in disputes arising under 'construction contracts', as defined in section104 of the Housing Grants, Construction and Regeneration Act of 1996 (Construction Act). Less commonly, parties may also agree to refer disputes to adjudication through contractual agreement.
This guide deals with the adjudication procedure in the Construction Act and how it compares to other forms of dispute resolution common in the construction industry.
Adjudication is a very quick process in comparison to other more formal methods. The adjudicator has 28 days to decide the dispute once it has been referred to him. This period can be extended to 42 days by the referring party, or longer by the agreement of both parties. With limited rights to challenge the decision even if it is wrong, adjudication is often termed "quick and dirty" justice.
In comparison to adjudication, the timeframe for mediations depends upon the parties' agreement. Mediations are usually fixed for one or two days initially but complex, multi-party disputes can result in much longer mediations.
Litigation and arbitration
Litigation and arbitration can take years to conclude depending on party and court or tribunal availability. In litigation the procedural timetable is fixed by the court; in arbitration it is largely agreed between the parties. While these processes may be objectively viewed as more thorough than adjudication in terms of the ability of the tribunal to give due consideration to the issues, a significant time invested is required by both parties.
Only one dispute can be referred to an adjudicator at any one time. Combined with the quick timetable and the fact that hearings and meetings between the parties are rare, the cost of adjudications is usually low compared to other more formal processes.
The parties are able to agree that the adjudicator's fees and expenses can be allocated between the parties, provided the term is set out in writing and is contained in the construction contract, but the parties can only agree that the adjudicator has power to allocate the parties' costs if the agreement is made in writing after the notice of adjudication is given. In practice, this often means that parties bear their own costs of adjudication.
Costs are usually low and consist primarily of the mediator's fees, any venue hire costs and the legal fees in preparing and attending the mediation.
Litigation and arbitration
These are both expensive processes because they run for a long time and because of the procedures involved.. In litigation the costs of the disclosure and trial phases of the dispute are usually the most expensive as these involve very time-intensive exercises and the engagement of third party disclosure providers or counsel. Such processes do not feature in adjudications. However, the advantage these processes have over adjudication is the prospect of recovery of some or all of a party's costs from the other side.
The process is less formal than arbitration or litigation. Strict rules of evidence do not apply and the parties produce only the documents that they rely upon.
Rules of procedure are selected by the parties and are usually the rules of the adjudicator nominating body, such as RICS or TECSA. The adjudicator must also abide by the rules of natural justice in conducting the adjudication and arriving at a decision. The adjudication process and decision is confidential unless it becomes the subject of enforcement proceedings or a challenge in court or through arbitration.
Mediation an be as informal as the parties wish. The parties produce only those documents that they wish to support their negotiating position. Mediation is private, confidential and conducted on a 'without prejudice' basis.
Arbitration is more formal than adjudication but less formal than litigation. Strict rules of evidence do not apply but the arbitral rules agreed by the parties usually dictate the process of production of evidence and, in contrast to adjudication, the disclosure process usually involves the production of categories of documents requested by the other party. Arbitration is confidential unless the subject of court intervention.
This is the most formal dispute resolution procedure. In the UK the process is governed by the Civil Procedure Rules which are rigid and applied strictly. Strict rules of evidence are imposed. For example, rules of disclosure provide that a party must produce all documents that both support and are adverse to its case, though the courts of England and Wales are currently running a number of disclosure pilots in this regard. All court documents and the judgment are public and accessible.
Usually monetary, time related remedies or declaratory relief are sought in adjudication. The adjudication process is not deemed suitable for parties seeking creative remedies or for overly complex technical or factual disputes.
The remedies or resolutions available in mediation are wide ranging. The parties need not confine themselves to strict legal remedies and the parties can be creative in reaching an agreement on a solution suitable for their needs.
The remedies available in arbitration are wider than adjudication but more restricted than mediation. The remedies requested must be legal remedies capable of being performed, subject to rules or laws surrounding the arbitration and enforcement of certain issues. Creative remedies are not possible.
The remedies sought in litigation must be legal remedies and cannot be creative. However, the court has wider powers than those of an adjudicator or arbitrator and can grant additional remedies such as injunctions, orders relating to security and witness summons etc.