Losing the argument but getting your way: Ultimate victory

Anglian Water decided its dispute with Laing O’Rourke Utilities ought to go to arbitration because it was unhappy with the outcome of round one, the adjudication. So be it. But Anglian Water nearly found that the adjudicator’s interim decision was wholly final and binding. It’s all to do with the dispute procedure in the NEC Engineering and Construction Contract.

Laing O’Rourke is the design-and-construct contractor for a number of tanks at Anglian’s Saltfleet sewage treatment works on the Lincolnshire coast. Their dispute must have been a tad tricky because the adjudicator was a very senior queen’s counsel. Nevertheless, Anglian is insisting onre-running the adjudication in front of an arbitrator and it’s perfectly right to do so. Right because arbitration, like litigation, is the big dig instead of adjudication’s light probe.

Anglian first argued that the NEC’s adjudication rules do not comply with the statutory rules in the Construction Act and therefore the adjudication result was null and void

Let’s look at what happened. The adjudicator’s decision arrived on 24 February. The disappointed party then had four weeks to issue a “notice of dissatisfaction” to the other party and also to refer the dispute to the final tribunal, in this case arbitration. If it fails to act in those four weeks, the adjudicator’s decision becomes cast in stone. Laing O’Rourke, which was perfectly content with the result of the adjudication, argued that the four-week deadline had passed.

Anglian’s first argument was that the NEC’s adjudication rules do not comply with the statutory rules in the Construction Act, and therefore the adjudication was null and void. The argument is that the NEC makes adjudication mandatory: no party can arbitrate or litigate unless or until that dispute has first been to adjudication. But the Construction Act does not say adjudication is a must - it’s only a right; it’s a choice. Everyone in parliament in 1996 was satisfied that new adjudication did not bar anyone going to the “standard” places, such as the court or arbitration. Adjudication is not supposed to be a fetter on the court, but the NEC turns that on its head.

The High Court would not accept this argument. Nothing fettered the adjudication itself, it said, so it was all good.

Anglian’s second argument was that since the NEC rules (in NEC2) were non-compliant with the Construction Act, all the rules fell away, so there was no condition precedent to arbitration and therefore the four-week time limit disappeared. This argument failed as well. The judge said all that was required was that the adjudication be conducted according to the rules. The fact that it blocked the bypass to arbitration or litigation was nothing to the point.

In the end anglian got home on the snakes and ladders board. The rescue ladder was a clause in the arbitration act 1996

Then came one of those arguments as to whether the notice of dissatisfaction and the notice of arbitration had been properly served. Laing O’Rourke said no. Anglian said yes. A fax with all the information and formal notice went to Laing O’Rourke’s solicitor on 22 March, inside the four weeks. But the NEC’s rules lay down the law for the what and where of sending such notices. Seemingly, the formal place for communication with Laing O’Rourke was at St Neots in Cambridgeshire.

The fact that notices were received by all the correct people at Laing O’Rourke did not trump the NEC rule. The judge observed that on several cases the time and place for the receipt of a notice started time running for important matters. It makes sense to lawyers to have a point of certainty. The point is lost on builders or road makers.

In the end, Anglian got home on the snakes and ladders board. The rescue ladder was a clause in the Arbitration Act 1996 that says that if an arbitration provision fixes a timeframe to do something, the court has the power to extend time on the grounds that “it is unjust to hold either party to the strict terms of the proviso in question”. Well, said the judge, Anglian thought it had achieved effective service when it sent the documents to Laing O’Rourke’s solicitor and to the chiefs at Laing O’Rourke head office, so heigh-ho, the time for service was extended. And now the arbitration can begin.

Oh, and one other thing - could NEC take a fresh look at that four-week rule? Bit of a tank trap.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple