Adjudication – A Global Affair

Adjudication schemes similar to the scheme for Adjudication first introduced in England and Wales in 1996 by the Housing Grants, Construction and Regeneration Act are now to be found in many countries including Australia, New Zealand, Malaysia and Singapore. Proliferation of mandatory statutory Adjudication reflects a global construction industry and the reach of influence of British contractors.

The primary objective of many if not all of the statutory schemes for Adjudication is to alleviate the cash-flow problems that can have disastrous consequences for contractors. The common thread joining all of these mandatory schemes is a procedure (ranging from 7 to 45 days) leading to interim decisions to be enforced pending final resolution by arbitration or litigation.

Predating the advent of statutory Adjudication, FIDIC and ICE forms of contract permitted all disputes to be resolved by dispute resolution boards (DRBs) on a temporary basis with the decision becoming final unless challenged within a specified time.  The rapid spread of DRBs since the 1960s has a great deal to do with the influence of the World Bank and FIDIC. However, it appears to have been slow to develop in the UAE and United Kingdom with the most notable examples in the United Kingdom being the Independent Dispute Avoidance Panel for the Olympics and Transport for London’s 2015 Conflict Avoidance Panel which reviews major areas of disagreement and issues non-binding recommendations. Major delivery partners such as Laing O’Rouke, Costain, Taylor Woodrow and BAM have all agreed to use it.

Dispute Adjudication Boards (DABs) are different from DRBs. They were introduced into Clause 20 of the FIDIC forms of contract in 1999 and are used as an intermediary step to try and resolve the dispute, before, and in an attempt to avoid, arbitration. Rather than acting in an advisory capacity, the DAB’s decision has a binding effect on the parties, unless or until it is subject to an arbitral award. DABs are appointed in different ways, with the 1999 FIDIC red and 2008 gold books providing for ‘full-term’ DABs, appointed before the contractor commences the works. Despite the many different procedures available, the appointment of full-term DABs under FIDIC must be seen as one of the most promising developments in the international construction industry, as it is designed to improve upon the deficiencies of traditional construction project-site dispute resolution.

The disadvantage of a full-term DAB is that problems can arise where the wrong people are appointed.  One can virtually taste the fear in a room of construction lawyers when they are asked to imagine the appointment of domestic ‘panel’ Adjudicators to a full-term DAB for the decommissioning of a nuclear power station where the programme of works is measured in decades. Nevertheless, the system works well, but this may be because of the calibre of the people who are at present appointed to DABs.

If the use of DRBs and DABs in the UAE and UK is to spread, then the standard of appointments must be uniformly high. A member of a DRB or DAB must always act fairly and impartially if the process is to work successfully. This means that they cannot act as an advocate for, or represent, the party that nominated them. Assuming the members of the DRB or DAB are independent, there appear to be two key features which help make the process work. First, each party must always be given a reasonable chance to put their case, and to respond to the other party's case. Second, and perhaps more important for an effective full-term DAB, is the need to publish well-reasoned decisions with rational explanations that persuade the parties that the DAB has properly considered the points raised and has come to a sensible conclusion. The better and more convincing the reasons given, the more likely it is that parties will accept the decision and avoid going forward to arbitration.

If a list of guiding principles could be prepared for domestic Adjudicators who are appointed to DABs, the first one would be that every decision must explain in a careful and lucid manner, the reasons why a party has not succeeded. It is only by doing this that a full-term DAB will retain the confidence of the parties throughout the period of the contract. Domestic Adjudicators are sometimes more focused upon the decision, than explaining the reasons for their decision to the party who has not succeeded.