Breaking up disputes

Adjudication is a procedure for resolving disputes without resorting to lengthy and expensive court procedure. It has become increasingly popular in construction contracts as a fast and efficient means of resolving disputes.

Adjudication is now a statutory requirement in Malaysia, and Qatar is considering making it mandatory for its World Cup projects.

The system allows parties to resolve disputes on an interim basis, meaning work can continue pending (possible) later litigation or arbitration.

There are two main sets of adjudication provisions – one drawn up in FIDIC’s 1999 Red Book; the other was created under NEC 2005 rules.

FIDIC (The International Federation of Consulting Engineers) has a three-member Dispute Adjudication Board, compared with a single adjudicator used by NEC.

FIDIC’s board can therefore potentially provide a more diverse set of skills. However, NEC can be amended to include more experts. For example, under NEC the London Olympic Delivery Authority appointed 11 different adjudicators.

Both forms consider the adjudicators’ decisions to be binding. If neither party serves a notice of dissatisfaction of the adjudicator’s decision, it becomes final.

Nevertheless, a decision can be revised by litigation/arbitration if either party does dispute it.

Under FIDIC, parties can jointly refer a matter to the board for a non-binding opinion. This can provide an opportunity for amicable settlement. A negative side is that this may result in a lengthier process in resolving a dispute. NEC does not envisage this role for the adjudicator.

FIDIC also provides an opportunity for amicable settlement by asking a dissatisfied party not to start arbitration before 56 days have passed from serving their notice.

However, anecdotal evidence suggests that parties seldom reach a settlement during this period and this may only delay cases. Under NEC, the dissatisfied party can start arbitration immediately after serving the notice.

Furthermore, the FIDIC board has 84 days to issue its decision – NEC’s adjudicator has four weeks. FIDIC, therefore, seems to have taken a slower route, despite adjudication being intended as a way of speeding up dispute resolution.

NEC provides a number of rules which seem to be beneficial in terms of efficiency and clarity – either party should be aware of communication between the adjudicator and the other party and the adjudicator should follow the contractual compensation event mechanism in its assessment of time and cost liabilities.

NEC also says that the adjudicator cannot be called as witness in subsequent proceedings – a provision that can help create trust and confidence for the parties in the adjudication process.

Adjudication is a fundamental and inseparable part of NEC. Under FIDIC, adjudication is a preferred method from which the parties can choose to depart and give the engineer its traditional role. NEC’s approach, with its decision-making process within four weeks, facilitates dealing with disputes as they arise, ensuring that most, if not all, of the disputes have been resolved by the completion date.

FIDIC’s approach is reasonably fast, but slower and more time-consuming than that of NEC. However, it seems more inclined to give parties the opportunity to deal with their differences on an amicable basis.

With the Government of Abu Dhabi having adopted adjudication into its conditions of construction contracts, it is likely that other emirates, particularly Dubai, will follow suit, moving towards a more adjudication-friendly environment.

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