Adjudication - an overview

Adjudication is intended to be an inexpensive and efficient method of resolving disputes relating to construction projects. It is a statutory dispute resolution procedure implied into all “construction contracts”, by the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the ‘Construction Act’). Under the Construction Act, all parties to a “construction contract” can refer a dispute to adjudication at any time.

If the parties’ construction contract fails to provide for adjudication in accordance with the Construction Act, the adjudication provisions contained in Part I of the Scheme for Construction Contracts (England and Wales) Regulations (the ‘Scheme’) will apply.

The process is commenced when the ‘referring party’ serves a notice of adjudication. The notice of adjudication is particularly important as it will ‘frame’ the dispute. The adjudicator’s jurisdiction will be limited to the matters identified in the notice, meaning that the adjudicator cannot decide upon any matters not included in the notice. There is no opportunity to amend the notice during the course of the adjudication so it is important to get it right first time.

Within 7 days of service of the notice of adjudication, the referring party must serve a referral notice, setting out the details of its case and the documents on which it intends to rely.

In between serving the notice of adjudication and the referral, the referring party will also need to apply to the relevant nominating body to appoint an adjudicator. If the adjudication has been commenced under a standard form construction contract the relevant nominating body will often be listed in the contract. In the absence of a specified nominating body, the referring party can apply to any ‘nominating body’, as defined in the Scheme.   

The adjudicator will be an independent third party who will decide the dispute. Once appointed, the adjudicator will set an initial timetable for the process. This will often include how long the responding party has for its response, following the service of the referral. The response is the responding party’s opportunity to respond to the claim made against it.

The adjudicator may also grant permission for further submissions, including a reply and rejoinder. There is no automatic right for additional submissions however, and the parties will be prevented from making endless submissions.

Once the referral has been served, the adjudicator is required to reach their decision within 28 days. This period can, however, be extended by up to 14 days with the referring party’s consent, and an additional 14 days (i.e. 28 additional days) with both parties’ consent.

This adjudicator’s decision will be what is known as ‘temporarily binding’. This means that the decision will be binding until the dispute is determined by a higher tribunal, i.e. by way of court or arbitration proceedings.  In other words, the adjudicator’s decision will be binding and the parties must comply with it but either party can subsequently ask a court or arbitrator to review the decision, once it has been complied with.

In relation to costs, unlike with litigation, the orthodox position is that each party will bear their own costs regardless of the result. The adjudicator can, however, decide which party should be responsible for their fees, with the usual position being that the losing party pays.

Notwithstanding any decision as to the adjudicator’s fees, both parties will remain jointly and severally liable.