Understanding adjudication and arbitration: Fast paced decision making

Adjudication is a dispute resolution mechanism that applies to the UK’s construction industry.  Parties to construction contracts cannot contract out of the adjudication procedure.  It is a 28 day procedure allowing for a decision to be made which can then be enforced by the Technology and Construction Court (TCC).

Arbitration is a type of voluntary alternative dispute resolution governed by the Arbitration Act 1996.  All parties must agree to submit the dispute to arbitration for it to commence.  The arbitrator’s decision is final and binding.

Recent cases emphasise the need for parties to understand these processes prior to utilising them to ensure that each party prepare successfully.  In this series of articles, we look at a number of these cases to help you avoid mistakes and make the best dispute resolution decision.

Fast paced decision making

In the recent case of Amey Wye Valley Limited v The County of Herefordshire District Council, the TCC considered the enforcement of an adjudicator’s decision.

A dispute arose out of an adjudicator’s decision in relation to price adjustment due to inflation.  The District Council entered into an agreement with Amey for the repair and maintenance to the highways and roads of Hertfordshire.  The agreement provided a method to calculate the price adjustment however the parties could not agree on how to apply it.

The parties resolved the dispute themselves on 21 July 2005 which set out a price increase mechanism (VOP3); however upon needed to utilise VOP3, the parties could not agree on the adjustment required or what the wording actually meant.

The parties referred the dispute to adjudication in order to determine what VOP3 meant.  Neither party served a notice of dissatisfaction within the set period.  Therefore the adjudicator’s decision became binding upon the parties.

The parties subsequently could not determine the financial consequences of the decision and they referred the issue for a second adjudication.  The second decision was that Amey was to pay the District Council the sum of £9,500,632.43.

The District Council commenced enforcement proceedings in the TCC.  Amey argued that the second decision was inconsistent with the first decision, and that as the adjudicator had made a mistake of fact, the adjudicator’s decision was outside of his jurisdiction.  In the alternative, the decision should be severed to correct the error made by the adjudicator.

Fraser J of the TCC stated that the adjudicator had been acting within his jurisdiction and that he was entitled to make errors in arithmetic when making his decision.

The case shows that the TCC will not go behind an adjudicator’s decision to correct a mistake as to fact or law unless there are exceptional circumstances, such as in Amey Birmingham Highways Limited v Birmingham City Council, where Amey took the decision to obtain a final determination of the dispute rather than force the City Council to take enforcement proceedings, stating that the adjudicator had made an error in law with consequences of between £25m and £35m.  The court agreed with Amey and the adjudicator’s decision as not binding on the parties.

In the present case, Fraser J went on to state “errors of fine detail are part of the process effectively accepted by Parliament as a consequence of the process of adjudication” and that “the ‘right’ answer is secondary to the parties having a rapid answer”.

Parties should therefore be aware that, unless there are exceptional circumstances, there are only two matters that the court can consider when enforcing an adjudicator’s decision:

1. Whether the adjudicator was acting within his jurisdiction.
2. Whether the decision was reached in accordance with the rules of natural justice.

This is a very interesting decision as it sets out that the TCC will not amend or review an adjudicator’s decision making process even where it is wrong in fact or in law in order to uphold the process as a quick method of solving disputes.

For more information please contact Alexandra Withers