Just say no

Adjudication is not only about construction contracts. There is another contract present in every adjudication, and yet little seems to be said about it. It is the contract between the parties and the adjudicator. And although adjudicators work hard to sort out the construction job, they often risk causing serious problems with their own appointment.

Most adjudicators are appointed after an application to an adjudicator nominating body, or ANB, such as the RICS or the Chartered Institute of Arbitrators, and without any discussion about the conditions of appointment. This is the way that the contractual relationship comes about.

The parties have a contract for construction works. If they have not provided for adjudication in that contract, the statutory Scheme for Construction Contracts is implied, and that allows either party to ask an ANB to appoint an adjudicator. When the claiming party applies, it does so on its own behalf and also as agent for the other party.

The ANB then asks an adjudicator to accept the appointment. It is not doing so for itself, because otherwise it would be responsible for fees. It too is acting as an agent, this time for the parties. If the nominee accepts, there is a binding contract between the parties and the adjudicator. If adjudicators are only prepared to accept appointments on their own terms, they must say so at that stage. In practice they never do, because the appointment process is rapid and there is no time for such detail.

The adjudicator can charge only a reasonable fee – this is valuable protection against huge costs being run up

The ANB tells the two parties who the adjudicator is, and off they go. It is too late to start worrying about terms of appointment – but nevertheless, that is the moment that many adjudicators choose to mention them. Sometimes the standard terms they want to impose run to several closely typed pages.

Parties tend to sign these terms and conditions assuming that they are a requirement of the adjudication process. They are not. On the contrary, they can be dangerous, and should not be signed without very careful thought. Here's why:

• The conditions may state that the adjudicator can decide their own jurisdiction. Without the express agreement of the parties, adjudicators cannot make binding decisions on jurisdiction. It may be absolutely against the interests of the responding party to sign such a term – it may prevent a legitimate defence to enforcement.
  
• The conditions may say that the adjudicator can decide wider issues than appear in the notice of adjudication. Such a conflict between the scheme and the terms of appointment is likely to lead to serious and expensive litigation.
  
• The adjudicator may include a term that they will be able to make a decision on a "fair and reasonable" basis if there is insufficient time to make a decision on legal entitlement. This is not what adjudication is about. The adjudicator is supposed to decide contractual entitlement. This gives more potential for argument on enforcement, and more cost.
  
• The conditions are almost certain to contain an hourly charging rate, without any limit on the time that the adjudicator will spend. The scheme only allows the adjudicator to charge a reasonable fee, and the charging rate is only one factor in the calculation. This is valuable protection against huge fees being run up by the adjudicator.
  
• Without express agreement, the adjudicator is not entitled to security for their fees. Indeed, the RICS tells its appointees that it is inappropriate to seek a lien over the decision, but many of its adjudicators expect the parties to allow them to hold the decision as security for payment.