Scrabster entered into a contract with Mowlem in respect of the construction of a new breakwater quay and associated works as part of a new ferry terminal. The contract was subject to the ICE Conditions of Contract, fifth edition.
Certain disputes arose and an adjudication was commenced. The adjudicator’s decision went largely in Scrabster’s favour.
Clause 66 of the contract provided that the decision of any adjudicator would be final and binding, unless within three months of the adjudicator’s decision, either party referred the matter to arbitration for final determination. The contract made specific reference to the fact that any arbitration was to be conducted in accordance with the Scottish Arbitration Code.
Mowlem issued what purported to be a notice of arbitration, attempting to refer the matters considered at the previous adjudication to arbitration.
Scrabster argued that the notice of arbitration failed to comply with the provisions of the Scottish Arbitration Code, in that the notice did not include details of the nature of the claim, the nature of the remedy sought and did not include details of a proposed arbitrator.
If Scrabster’s arguments succeeded, it would have meant that, by virtue of the fact that Mowlem would be out of time for serving another notice of arbitration, the adjudicator’s decision would have been final and binding.
Scrabster therefore requested a declaration that the notice issued by Mowlem was invalid and of no effect.
The court held that the words in the contract that any arbitration was to be “conducted in accordance with the Scottish Arbitration Code” referred to the carrying on of the arbitration rather than any prescribed procedure as to how such arbitration should be commenced.
The court further held that Scrabster had considerable difficulty in suggesting what prejudice it had suffered because of the absence of compliance with the relevant code.
Scrabster’s request for a declaration was therefore refused.
Contact Fenwick Elliott on 020 7421 1986 or NGould@fenwickelliott.co.uk
*Full case details
Scrabster Harbour Trust vs (1) Mowlem Plc trading, Outer House, Court of Session 23 March 2005*
An interesting case, which illustrates the potential for problems that emanate from provisions that allow for the decision of an adjudicator to become final and binding. Parties to agreements should consider carefully whether or not such provisions should be included.