Statutory adjudication (under the Housing Grants, Construction and Regeneration Act 1996 (as amended)) [the HGCRA] (which was itself founded upon contractual mechanisms under industry standard forms) is, almost certainly, one of the most significant and successful legislative exports of the United Kingdom.

By Andrew Burr[1] and Narudee Chuekitkumchorn[2]

UK adjudication procedure

Procedure under the UK adjudication régime is reasonably flexible (by contrast with some other jurisdictions), permitting longer timeframes, compared to the more rigid and prescriptive certification process elsewhere. This flexibility aligns with the rôle of adjudication as a speedy dispute resolution mechanism, involving a two-stage process, which commences with the issue of a notice of adjudication, followed by a referral notice.

• Initiation of adjudication

Either party can initiate the adjudication process under the UK scheme, which benefits both parties to construction contracts, including employers, who have the statutory right to refer a dispute arising under their contract to adjudication.

 Selection, or nomination, of the adjudicator

The selection, or nomination, of an adjudicator can be agreed upon by the parties involved, or it can be made by an adjudicator nominating body [ANB] agreed upon by the parties. If the parties cannot agree upon an adjudicator, or an ANB, the claimant has the right to choose any ANB to nominate an adjudicator. This approach offers flexibility, allowing the parties to select an adjudicator whom they trust or, if necessary, rely upon an ANB to make an impartial nomination

• Timeframes of adjudication

There is no timeframe for the claimant to prepare their adjudication claim. This is considered a disadvantage, by some, because the claimant may ambush the respondent with volumes of carefully-drafted claim documents, leaving the respondent with limited time in which to respond. Such ambush tactics were reported to be rampant, particularly in the early years of the operation of the UK régime; despite being acknowledged by the court as undesirable, these tactics were given judicial approval in London & Amsterdam Properties Limited v Waterman Partnership Limited, as not amounting to procedural unfairness. However, since most modern construction contracts in the UK now require contractors and sub-contractors to notify claims within a set timeframe, the problem with ambushes appears to have been mitigated.

The adjudicator has typically 28 calendar days from the referral notice to render a decision. The definition of “day” as a calendar day (including weekends and public holidays) has been criticised, since it can exacerbate the pressure upon the respondent. Other jurisdictions, like New Zealand and New South Wales, Australia, mitigate this by defining “day” as a working, or business, day and by implementing moratorium periods during industry shutdowns, such as around Christmas, or New Year.

• Enforcement of the adjudication decision

Under the UK régime, an adjudicator’s decision needs to be enforced through the courts. A party seeking enforcement must apply for summary judgment, the landmark case of Macob Civil Engineering v Morrison clarifying that adjudicators’ decisions would be enforced through summary judgment, solidifying this as the proper enforcement avenue. The UK courts have consistently supported such enforcement, adhering to the principle of “pay now, argue later.” Provided that the adjudicator has acted within their jurisdiction and complied with natural justice principles, their decision will be enforced, even if there are errors in law, or fact. This robust judicial support aligns with Parliament’s intention to make adjudication a swift and effective dispute resolution mechanism.

Worldwide story

The current state-of-play with regard to the global update of adjudication is, as follows:

Attempted synthesis

Any effort to synthesise these developments is fraught with difficulty, but the following summary is attempted:

1. Most adjudication schemes worldwide seek to outlaw “pay-when-paid” (or “pay-when-certified”) provisions and replace these with a statutory right of the claiming party to appoint an adjudicator to determine payment claims;
2. Some jurisdictions exclude claims under certain types of construction contracts (such as residential, or complex, contracts, or under a certain value);
3. Certain jurisdictions (such as those in Australia, generally) are more restrictive as to appointing bodies and the qualifications of and CPD requirements for adjudicators;
4. Numerous institutional bodies (such as the BAC, CIArb and ICC) and contract drafting entities (such as FIDIC) have climbed abroad the adjudication bandwagon, and
5. Local courts worldwide have generally been fully supportive of the “short, sharp, shock” process of arriving at a speedy adjudication decision and encourage enforcement.

 Potential problems under the law

Even though statutory adjudication generally shares the several goals of supporting the “pay now, argue later” principle, in order to ensure swift resolution of construction disputes, differences in specific details may lead to potential enforcement issues.

Thailand’s proposed Bill, for example, addresses several concerns related to adjudication proceedings in construction contracts. Since adjudication cannot be avoided, efforts to by-pass adjudication are not permissible, since the termination of a construction contract does not exempt any party from pursuing adjudication proceedings. Another aspect is the absence of a time limit for the creditor to initiate adjudication claims. This implies that the creditor can start proceedings, whenever the payer defaults, without facing a specified deadline. Moreover, this Bill also prevents debtors from refusing adjudication proceedings. Ignoring the debtor’s claims will only hasten the proceedings and displease the adjudicator. However, the Bill imposes a strict timeline of seven days for debtors to prepare and submit their defence upon receiving a claim. Extensions are not permitted. This might pose practical challenges, since many payment applications in Thailand often lack sufficient supporting documents, making it challenging for debtors properly to evaluate interim payment applications and prepare a defence within the given timeframe.

Meanwhile, The Singapore adjudication régime has the disadvantages of its predecessor, the New South Wales régime. One notable disadvantage is the inclusion of a final payment claim within its scope. There are strong arguments against the inclusion of final payment claims within the scope of the adjudication régime, which are worth highlighting. Since the intention behind the policy objectives of the Singapore legislation is to minimise disruption to the progress of work as a result of payment problems, the fact that disputes concerning final payments occur at the end of the project may be regarded as insignificant in the context of the contractor’s cash flow and thus less likely to affect the completion of projects.

 Lesson to be learned

Against the above backdrop, it is, perhaps, possible to derive the following lessons from the global odyssey thus far:

• Ensure clarity in the policy objectives;
• Security of payment legislation is intended to protect cash-flow (“the lifeblood of the construction industry”); but should there be a distinction as between sums claimed, or sums certified as properly due?
• Should consultancy agreements, as well as mainstream construction contracts, be included?
• Should there be any exclusions? See the Irish approach to PFI contracts and residential dwellings;
• To what extent should freedom of contract be removed? See the reforming approach in Mauritius and Thailand;
• Should ANBs be state-, or industry-, based bodies? Should there be monitoring of quality and standards and what mix of professional disciplines is required for adjudicators?
• How important is cross-border harmonisation in the increasingly-global construction industry? What time periods and service requirements are necessary? Would legislation-compliant standard form contracts assist?
• Beware disparate parochial pressures, such as those which have plagued the eight Australian state jurisdictions, pressures which may come to the fore under a federal scheme, such as in the USA;
• Discourage lobbying by diverse interest groups, seeking to turn security of payment regulation into a “political football”, and
• The “hasten slowly” approach (in Canada, Hong Kong and Thailand, for example) provides a model to ensure that these policy goals can be fully articulated, examined and interrogated with all stakeholders.

A “work in progress”, perhaps, but nonetheless, a job well done, thus far!

 Andrew Burr Adjudicator, Arbitrator and Barrister, 16 Marina One Chambers.¹

 Narudee Chuekitkumchorn  Lawyer, Bangkok, T

[1] Adjudicator, Arbitrator and Barrister, 16 Marina One Chambers.

[2] Lawyer, Bangkok, Thailand.