1. What is Adjudication?
Adjudication is a judgmental process. The contractual rights and the facts at issue in a dispute are considered by an independent third party, who is paid by those in dispute, and he gives a decision which is temporarily binding - a similar process to Arbitration but with out the difficulty associated with finality.
In Northern Ireland, adjudication is a statutory right for many construction contracts because the Construction Contracts (Northern Ireland) Order 1997 applies to them. Otherwise, it is a contractual right to have a dispute decided by an independent party who is either agreed or nominated. Crucially the decision is reached quickly and it is binding on the parties at least on an interim basis. Adjudication is often described as fast but rough justice.
2. How does the Adjudication process work?
The first stage (as with any judgemental process) is to crystallise the dispute. Usually this is by one party making a claim for or about something which is rejected or not accepted by the other and which the original is determined to maintain.
The first formal step it to notify the other side that the matter is going to be referred. This can be done by a simple letter although some contracts have some formal requirements for the notice (such as the nature of the redress sought and the time and place the dispute arose). Then an adjudicator is appointed either by agreement or by an Adjudicator Nominating Body (such as the CIArb). Most ANB’s require a fee to be paid for this. The dispute is then “referred” to him. This involves giving the adjudicator all the information the Referring Party things necessary for him to understand and decide the dispute. The appointment process must allow an adjudicator to be appointed and the dispute referred with 7 days – a very short period.
The adjudicator then has 28 days to reach his decision. He sets his on procedure but he must give both sides a fair hearing and an opportunity to answer contentions made against them. The period can be extended by 14 days by the Referring Party or longer by agreement between the parties. Because adjudication is only a temporary measure to ensure cash flow it is not confined by the strict rules of natural justice that make arbitration and litigation slow and expensive.
Once the decision is reached, the parties must comply whether or not they object to the decision and pursue the matter through arbitration. It is a “pay now argue later” process.
3. Where is adjudication appropriate?
Adjudication is most commonly used in the construction industry to decide contractual disputes. In the UK, adjudication is by far the most popular method for resolving contentious construction issues.
It is ideally suited to technical or single issue problems but can be used for anything.
4. Industry Suitability to Adjudication
Adjudication is most often used in the Construction industry. However, it can be used in almost any situation where a fast temporarily binding result is desired.
5. Time and Costs
The timescale for adjudication is short - 28 days or 42 usually although longer if the parties agree. Therefore it is relatively inexpensive. Typically £2,500 to £6,000 for Adjudicator fees would be common for a typical construction dispute.
6. Final and Binding
An adjudication is not finally binding but the decision must be obeyed in the interim. So it is pay now argue later. However, over 95% of issues referred to adjudication do not result in arbitration or litigation. It is very successful.
In Northern Ireland, where adjudication is on a statutory footing, the only way to challenge a decision is to show it was made without the necessary jurisdiction or it was arrived at unfairly. Both are difficult challenges and rarely succeed.