The Power of Adjudication

The Power of Adjudication: A Quick and Cost-Effective Solution to Resolve Disputes

Adjudication is just one of the dispute resolution methods available to parties should a dispute arise.  It is generally regarded as a quick, cost-efficient way to resolve disputes as compared to the alternatives.

It is often used in construction disputes.  The Housing Grants Construction and Regeneration Act 1996 provides parties to a construction contract with a right to refer disputes to adjudication. Some contracts will make adjudication a necessary step before other forms of dispute resolution.

What is it?

The process of adjudication is relatively simple.  A third party is appointed to act as an adjudicator.  They usually possess specialist legal or industry knowledge that is relevant to the dispute being referred.

The party referring the dispute sets the parameters of the adjudication. Once the adjudicator is appointed a timetable for the exchange of submissions is agreed. The default position is that the adjudication should be completed within 28 days. This period can be extended and regularly is.

Adjudication is often thought of as existing only to resolve payment disputes (the “pay now, argue later” approach). However complex, high-value disputes, including claims of professional negligence, can be referred to adjudication.

What happens afterwards?

The adjudicator’s decision is temporarily binding on parties.  In other words, it is enforceable until the dispute is finally determined by any subsequent litigation. Many disputes resolved by adjudication do not end up being the subject of further litigation.

There are very limited grounds for challenging the enforcement of an adjudicator’s decision. One such ground is that the adjudicator has acted outwith their jurisdiction.  Gilson Gray recently acted for a party in challenging an adjudicator’s decision on the basis it was arrived at in excess of his jurisdiction (Engenda Group Limited v Petroineos Manufacturing Scotland Limited [2024] CSOH 36).  It was successfully argued that the dispute referred to the adjudicator was the same dispute that had previously been referred to the same adjudicator in a previous adjudication.  It having been determined, he had no jurisdiction to determine the same dispute in any subsequent adjudication.

The advantages and disadvantages

The primary benefit of adjudication is that the party referring the dispute can obtain an enforceable decision in a very short period of time and at a fraction of the cost of other forms of litigation. They have an alternative to litigation where a decision takes many months to materialise and at a significant cost.

There are other tactical advantages.  The referring party sets the scope of the adjudication and will normally have prepared their case in advance effecting the referral.  The responding party is at a relative disadvantage: they are required to formulate a response in a considerably shorter period.

Normally an adjudicator has the power to determine who pays their fees.  Beyond that, adjudication is generally a cost-neutral arena and parties pay for their own legal costs.  Whether that is advantageous or not depends on the circumstances.

The primary disadvantage of adjudication is the risk of an adverse finding from what is perceived as ‘rough justice’: the truncated timeline, the relative disadvantage of the responding party, and the restricted level of inquiry. That is compounded by the very limited scope for challenging an adjudicator’s decision.

Whilst far from flawless the process of adjudication has proven a useful tool for those in the construction industry faced with a counterparty that would otherwise wait to see whether the dispute is litigated.

Gilson Gray frequently acts in adjudications and subsequent litigations or arbitrations.  Should you wish to discuss an adjudication, please contact Fraser Cameron.