It sounds good when it is set out like that. The difficulty is that adjudicators are not there to do what is just. They are appointed to sort out the rights and wrongs of the dispute under the contract. They have no right or power to go outside the contract, however just they may feel it would be to do so.
Arbitrators and judges are in a rather different position. An arbitrator has a specific power under section 49 of the 1996 Arbitration Act to "award simple or compound interest from such dates, at such rates and with such rests as [they] consider meets the justice of the case". Judges were given the power to award interest by the 1981 Supreme Court Act.
Some claimants, and even some adjudicators, think that paragraph 20(c) of the Scheme for Construction Contracts does much the same thing for adjudicators. The scheme is the bundle of rules for playing the adjudication game that will apply if the parties to the contract have not chosen any other bundle. The scheme says that the adjudicator can decide what interest is to be paid. But it makes clear that the adjudicator must have "regard to any term of the contract relating to the payment of interest". If there is no such term, the adjudicator cannot invent one.
Adjudicators are not there to do what is just; they must sort out the rights and wrongs of the dispute under the contract
This does not mean that a claim for interest in an adjudication is always doomed. If the parties have made express provision for interest on overdue payments, the adjudicator will be able to deal with it. For example, if the parties have signed up to a JCT contract or DOM/1 or similar, the contract will provide for interest on overdue sums. Unless the contract has been amended, this will run at 5% over the base rate when the payment became overdue.
Even if there is no express mention in the contract documents, there may still be a contractual right to interest because of the 1998 Late Payment of Commercial Debts (Interest) Act. This implies a term into many contracts that debts arising under the contract carry simple interest. The act applies to contracts between two small businesses, and contracts involving supplies of goods or services by small businesses to large ones – but not contracts for supplies by large to small businesses, nor to contracts between large businesses (a "small" business is one with 50 or fewer employees). Any contract caught by the act that does not give a "substantial remedy" for late payment will automatically have a term implied that interest will be payable at 8% over base.
Finally, the parties may have given the adjudicator power to deal with interest by selecting a particular set of adjudication rules. The model adjudication procedure from the Construction Industry Council gives the adjudicator power to direct payment of interest "as he considers appropriate". Meanwhile, the Technology and Construction Solicitors Association rules say that the adjudicator can award interest "as may be commercially reasonable". Curiously, the adjudication rules for the government contract GC/WKS/1 seem to be the only set that use the word "justice" in the same sentence as "interest".
John Redmond is head of construction at solicitor Osborne Clarke in Bristol.