John Rushton, solicitor at Rowe and Maw, gave us considerable insight into the application of the Adjudication provisions in Part II of the Housing Grants, Construction and Regeneration Act (The Construction Act), and the differences between it and the Arbitration Act. As many arbitrators are becoming involved in the adjudication process, his theme was, "will adjudication sound the death knell of arbitration?".

The Arbitration Act has a much greater scope than the Construction Act which, as John pointed out, applies only to Construction Contracts but excludes the process plant industry.

Similarities there were; while the Construction Act did not define adjudication and the Arbitration Act did not define arbitration, the aims and duties laid down were similar. Both Acts aim to promote the concepts of impartiality on the part of the decision makers, expedi-tion and avoidance of unnecessary expense. Both processes are underwritten by a written contract, and the the powers given to the adjudicator and the arbitral tribunal are very similar. Neither is liable for their decisions unless they act in bad faith.

However, the differences are probably more important.

1 All arbitrations are governed by the Arbitration Act, whereas only adjudication of disputes under construction contracts are gov-erned by the Construction Act.

2 Adjudication is a right, not an obligation. Arbitration cannot be by-passed if there is a dispute and the contract provides for arbitration.

3 Parties to construction contracts are entitled to devise their own scheme for adjudication, provided that it complies with the eight principals laid down by s.108 of the Act. Parties to an arbitration have a great deal more freedom to manoeuvre.

4 The Construction Act requires that an adjudicator act impartially. The Arbitration Act requires the tribunal also to act ". . fairly and impartially as between the parties and adopt procedures suitable to the particular case . . . so as to provide fair means for the resolution of the matters failing to be determined". "Fairness" and "impartiality" are not necessarily the same. The imposition of an absolute time limit for the making of an adjudicator’s decision smacks of unfairness, given that a dispute may be complex or voluminous, and (with the best will in the world) require more than 28 days to resolve satisfactorily.

5 Some adjudicators will struggle with the idea that they might not be required to observe the principals of natural justice, because many of them are arbitrators as well. Whilst the adjudicator must, of necessity, act inquisitorially, the arbitrator should not, without the parties’ express consent.

6 Adjudication is a holding process; arbitration is not. An adjudicator’s decision is binding pending litigation, arbitration, or subsequent agreement. An arbitrator’s award is final, subject only to the parties’ limited rights of appeal or to have it set aside or remitted.

7 an adjudicator’s decision cannot be enforced as a judgment, whereas a tribunal’s award may be enforced in the same manner as a judgment or order of the Court to the same effect.

John quoted two cases of interest. Firstly, the decision of HHJ Peter Bowsher QC in Dixons Group plc v January Andrew Murray-Oboynski in October 1997.

The contract provided that certain disputes would be referred to a firm of chartered accountants for determination. It stated that the accountants’ decision would be "final and binding on the parties save in the case of manifest error". Judge Bowsher ruled that, as there was no evidence as to what basis of determination had been applied by the expert, it could not be shown that he had failed to follow his instructions. A manifest error was one . . that may easily be seen by the eye or perceived by the mind". There was no such plain and obvious error on the face of the expert’s determination, and the terms of the agreement did not contemplate an error which might be manifest after a lengthy enquiry.

There is a virtually complete lack of accountability of an adjudicator to anyone. Yet his decisions could have a profound effect on the work which the Employer has initiated. Also, the Court is now required (by s.9(1) of the Arbitration Act) to stay any proceedings in respect of a ". . matter which, under the agreement, is to be referred to arbitration", unless it is satisfied that the relevant clause is void, inoperative or incapable of being performed (s.9(4)).

In Halki Shipping Limited v Sopex Oils Limited (1997), 1WLR 1268,

Mr Justice Clarke ruled (and the Court of Appeal later confirmed) that if one party failed to pay any sum due under a contract containing an arbitration clause, a "dispute" had arisen (whether or not the claim for payment had been expressly or implicitly denied), with the consequence that it had to be referred to an arbitrator, not dealt with by the Courts.

It has therefore been argued by many that, if an adjudicator’s decision is not honoured by the successful party, then the successful party is bound to refer the matter to an arbitrator. Such an argument seems flawed, since it does not seem that that dispute arises under a contract containing an arbitration clause, but rather as a result of an adjudicator’s decision in respect of such contract. If that interpretation of s.9 is incorrect, the onus will be on the arbitrator to make an interim award at the earliest opportunity. He will not be entitled to make a provisional order for the payment of money, pursuant to s.39, unless both parties have consented to him doing so. It is unlikely, once the dispute has arisen, that the likely payer will give such consent.

John Rushton concluded his stimulating and elegant talk by summarising the key differences between adjudication and arbitration as:

Finally, he suggested that the narrow ambit of the Construction Act, taken with these differences, means that the arbitration will survive, but the really weak claims may well fall at the fence of adjudication. The absence of enforcement procedures alone, taken with the powers expressly bestowed on arbitrators by the 1996 Act, might mean that the bell is tolling for adjudication in many cases, rather than for arbitration.