Adjudication first principle

Adjudication is now an incredibly popular way of sorting out contractual differences. It is proving to be fast and fair, like many in the industry had hoped. But one potential sticking point is jurisdiction: does the adjudicator actually have the power to resolve your dispute?

No problems
If the disputants get things right at the start of adjudication, there should be no problems with adjudications being ignored on the basis of jurisdiction. It is now accepted that the court will usually enforce by way of summary judgment a decision by an adjudicator with jurisdiction to make that decision.

Where an adjudicator does not have jurisdiction to make a decision in the first place, or where there is a dispute as to whether he had jurisdiction, then an application for summary judgment to enforce an adjudicator's award is likely to be dismissed.

If adjudicators answer the right question in the wrong way, their decision is binding. However, if they have answered the wrong question, their decision may be null and void. This situation was brought home to me recently when I was trying to enforce an adjudicator's award that was challenged on grounds that the adjudicator had exceeded his jurisdiction.

The issue I addressed pertained to the referral notice of an adjudication over payment certificates. There were two applications. While one application stated the cumulative total due for works done under the contract, the balance related to the £200 of works done since the other application. The argument centred on whether the adjudicator had jurisdiction to decide how much of the cumulative total was due, or whether his jurisdiction was limited to deciding to the balance.

The court found that the adjudicator had jurisdiction to decide how much of the cumulative total was due. The wording of the notice of referral was sufficiently wide to permit this, as it referred to the total sum due under the contract and not just the sum due under the latest application. Moreover, the referral notice asked the adjudicator to decide what, if any, sum was due under the contract in the adjudicator's own discretion, regardless of the amount included in the applications. In other words, the notice of referral gave the adjudicator jurisdiction to make the decision he had.

This result emphasises the importance of getting your notice of referral right, particularly when you are asking for a specific and limited remedy as opposed to a general claim for monies due under the contract. If you are going to adjudicate on specific issues, it is critical that your terms of reference to the adjudicator be clear and that you understand the adjudicator's range of powers, whether these are granted under the statutory scheme or under the rules of a nominating body that is identified within the contract.

If adjudicators answer the right question in the wrong way, their decision is binding. However, if they have answered the wrong question, their decision may be null and void

In many cases an adjudicator is not required to give reasons for his decision. This can lead to frustration when a party cannot determine why it has lost - particularly where some form of declaration is sought on issues such as whether a contract has been wrongfully determined.

The right questions
My own view, subject to commercial considerations, is that brief reasons are often helpful. However, the approach to each adjudication must be judged on its own merit, and it is always important to ask before commencing an adjudication what the party is seeking to achieve. If the wrong question is asked, the right answer may not, in real commercial terms, achieve anything.

Here are some tips to consider before commencing an adjudication: Before you start, decide what you want to achieve. In particular, if you are seeking both a decision on an issue and entitlement to money as a result of the outcome of such issues, ask both questions.

Make sure your notices of adjudication and referral are drafted carefully, particularly if the facts are relatively complex. Seeking professional advice at this point in the adjudication is prudent.

Try and ensure that an adjudicator's award is clear by asking the adjudicator to answer specific questions.

Finally (and this is as much a plea to adjudicators as to the parties participating in the adjudication), if a money award is sought, make it as clear as possible what is being asked for and what is being awarded.