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COULD ADJUDICATION BE IMPROVED? Despite much initial scepticism, adjudication is regarded as a success. Within a couple of years of the introduction of the process it became, and still remains the principle means of dispute resolution in the UK construction industry. One consequence has been a dramatic decline in the use of both arbitration and litigation, and in the case of arbitration it is now unusual for construction disputes to be resolved in this way. Despite the initial scepticism of its critics, very few disputes have proceeded beyond adjudication, in most cases the parties live with the decision. One reason for this success is the willingness of the courts to enforce an adjudicator's decision. Only a very few decisions are not enforced due to jurisdictional or procedural irregularities. This is the case even if the adjudicator has made an error in law. In fact provided the adjudicator has answered the right question it does not matter if he has arrived at the wrong answer, the decision will still be enforced. It is perhaps not for nothing then that adjudication has been classified as rough justice. The apparent success of adjudication does have another side to it. Although only a minority of cases proceed to the courts a considerable body of case law has accrued over the last eleven years. In parallel with this and as a consequence, the process has become more legalistic and inevitably more costly. There has also been a change in the way the process is being used to that which was intended by Latham. It is clear that the legislation was intended to provide for a method of quick and cheap dispute resolution, primarily at site level so that the parties could address their differences and then move on with the project, what we have come to know as a job site process. However, as the costs have risen, so too have the stakes. In my own experience and I think those of many other adjudicators, the majority of referrals now concern final account disputes, some of which can be of extraordinarily high value and complexity. Some have said that this is not what adjudication was intended for. Certainly the time scale for the process could be a restricting factor, but in reality many parties will agree to extend time, meaning that a high value and complex dispute could take many months to resolve. Some commentators have observed that this process is akin to arbitration, with all the problems of costs and time that this has historically implied, but without the certainty brought about by a final and binding decision and the ability of the parties to choose and agree the tribunal. In adjudication, unless the adjudicator is named in the contract, it can be a lottery as to who is appointed and even if the adjudicator is named, there is no provision for him to monitor the project and so the adjudicator undergoes a steep learning curve every time a dispute is referred. In addition, the process is inherently adversarial from the beginning. The referring party can take as much time as it wants to formulate a claim, remember the Construction Act enables it to be referred at any time. However, the responding party will have only a limited time to respond, and in the case of complex referrals this could be a real problem, and one which has commonly become to be known as "ambush". Also, some parties have successfully imposed a condition that obliges one party to pay all the costs of the adjudication whether or not that party is successful. It is likely that this latter provision will be prohibited if the legislation is amended as planned. In my view none of this is what Latham intended when adjudication was first put forward as a means of resolving disputes simply, quickly and cheaply in the now well know Latham Report. Then it was envisaged that adjudication would be used for single issue disputes during the course of the project. If a dispute arose and adjudicator would be appointed to quickly and cheaply decide it, the parties were then free to move on with the project. The process was intended to be much more akin to a "job site" process than it has become. Is there then a way to improve adjudication as it currently stands to enhance the success it already enjoys? I think that the primary way this might be done is to re-establish it as a job site process, in other words a process that can be used to resolve disputes as the job proceeds. A further improvement could be made by allowing for dispute avoidance provisions. This is where it becomes of interest to those of us interested in dispute boards and the possibility of dispute avoidance inherent in that process. The inclusion of a standing DAB on a project provides not only for adjudication as a means of resolving disputes but also a means of avoiding them in the first place. This procedure has been well established in some of the FIDIC contracts but the FIDIC provisions would not comply with the provisions of the UK Construction Act without modification. The time allowed for the adjudicator's decision, being one. However, this has been addressed by the ICE . It has published a set of Dispute Board procedures, based on the FIDIC provisions, which can be used for international contracts and an alternative that is compliant with the UK Construction Act. This procedure allows the dispute board to actively help avoid disputes and to encourage the parties to settle their own differences without recourse to formal dispute resolution procedures. If that does not work the dispute then proceeds to be decided by adjudication in the normal way. So, given the demonstrable success of Disputes Boards internationally, why has there been no rush to adopt such a procedure in the UK? The main reason has to be the established use of traditional adjudication and the perception, despite growing scepticism, that it is a quick and cheap method of dispute resolution. Another reason might be the concern that many parties will have: that the use of a dispute board is expensive, which it is, but usually not more so than the disputes themselves, especially as the costs and time taken for adjudication increase, and particularly where the board consists of one rather than three members. It is also a matter of education: many of those involved in construction in the UK are unaware of the dispute board process. There is another more fundamental problem that is raised and that is one of jurisdiction. It is accepted in UK adjudication that the adjudicator cannot take part in any other proceedings, such as a mediation which might (but usually does not) precede an adjudication because this might make him party to information that could taint an adjudication decision. If a losing party could demonstrate to a court there was a perception of bias, there could be a risk that the adjudicator's decision would not be enforced. Some, including myself, think this risk is slight, especially if properly trained dispute board members conduct the dispute avoidance procedures transparently and in front of both parties at the same time. It was this concern that led the Olympic Development Authority to separate the functions of its Independent Dispute Avoidance Panel (IDAP) and its dispute resolution panel made up of adjudicators. So, even this is not what we would truly call a dispute board, but a hybrid system which has as yet been untried. There is another, final, problem to be overcome. In the UK, although there are disputes between employer and main contractor, they are often between main contractor and subcontractor. UK adjudication procedures are equally and readily applicable to these disputes (and equally implied into the contracts if not expressed adequately), in a way in which dispute board procedures are not so readily incorporated. For instance, how do you involve a subcontractor in the selection of dispute members, or do you just leave the board to be imposed on them? The problems though are not insurmountable, provided the parties to the contract and subcontract are able to perceive the benefits. The adjudication process in the UK has certainly been successful, both in reducing problems with delayed payment and in reducing the workload of the courts but it is questionable whether it has improved what has always been an adversarial industry and whether it has actually reduced the number of disputes overall. However I believe the procedures could be improved to allow dispute avoidance to become part of the job site process, so that fewer disputes have to be dealt with by the more formal process of adjudication in the UK in the future. (This is an abridged and amended version of a paper give to the Dispute Resolution Board Foundation at its recent Annual Conference in Washington on 4 and 5 October 2008) Murray Armes |
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