An arbitration case might offer a way forward for the courts when asked to decide whether ‘arising under’ or ‘in connection with’ best applies to a jurisdiction challenge under the Construction Act
Time after time there is a “jurisdiction challenge” immediately an adjudication gets under way. As the adjudicator I don’t mind one bit. As I see it, the jurisdiction challenge is just another part of the dispute but with a difference. Some challenges are silly, a try on; some challenge the adjudicator’s adjudicating skill.
Great stuff. The difference is that some jurisdiction challenges have been regarded from the outset as outside the ordinary scope of adjudication in line with the wording of the Construction Act. To wit, the Construction Act says that “a party to a construction contract has the right to refer a dispute arising under the contract for adjudication”.
Notice the words “arising under”. So if the challenger cleverly says go away, Mr Bingham, you can’t adjudicate because there is no dispute, we have taken it that deciding that jurisdiction is not a matter “arising under” the contract, it is merely “in connection” with the contract. Do you see the difference? The adjudicator still makes a decision whether to continue but it is taken to be a non-binding decision. All that may not now be the right approach.
The words “arising under” are, according to the Court of Appeal, not to be read so narrowly. The case is called Fiona Trust vs Privalov (24.01.07) and is an arbitration case, not adjudication. The courts in adjudication matters look very hard at arbitration cases for guidance and the Court of Appeal says that the debate about the width of the phrase “arising under” and “arising in connection” is both technical and sterile. Hurrah.
Go back to basics. To decide the right to arbitrate or adjudicate you must first decide what matters are governed by the arbitration clause. The same goes for adjudication, save that what governs that game is cast in stone in the act of parliament we call the Construction Act. The heart of the dilemma in Fiona v Privalov was that previous high-level cases had taken different views about the meaning of phrases in arbitration clauses. Some clauses said disputes “arising out of” or arising “in connection with” had a wider meaning than “arising under”. Others said these expressions should be treated as the equivalent of each other.
For nine years we have lived cheek by jowl with examples of jurisdiction challenges. We know the arguments but it is up to you to run them
The Court of Appeal said: “For our part we consider that the time has now come for a line of some sort to be drawn and a fresh start made at any rate for cases arising in an international commercial context”, observing that commerce would be surprised by all these nice distinctions drawn in the cases. And it added: “If businessmen did want to exclude (for example) disputes about the validity of a contract, it would be comparatively simple to say so.
“As it seems to us, any jurisdiction or arbitration clause in an international commercial contract should be liberally construed.”
It’s now up to the courts to figure out what the Fiona arbitration case does for adjudication. It may well be that inviting the adjudicator to go away invites him to make a binding decision since the challenge may easily be a dispute “in connection” but is indistinguishable in law from “arising under”.
If your opponent complains that no adjudicator can act because this is not a construction operation, or not a contract in writing, or not a dispute, or out of time, the adjudicator’s decision may now be a binding decision, not a “mere observation”.
And can adjudicators cope with such technical issues? Oh dear me, yes. For nine years we have lived cheek by jowl with umpteen examples of jurisdiction challenges. We know them inside and out. We probably know the arguments already but it is up to you to run them. Adjudicator competence in this territory is very high. Now it is up to the courts to examine Fiona in the context of adjudication.
One other thing: I wrote to parliament when the Construction Act bill was going through its stages for adjudication, explaining that it would be useful to make clear what was meant by disputes “arising under the contract”. They said thank you … so did I.
Tony Bingham is a barrister and arbitrator.