Why adjudication is illegal

The Adjudication provisions of the 1996 Construction Act are generally regarded as good news because they reduce a number of current disputes in the industry and resolve quickly and cheaply many of those that remain. Adjudication itself, however, is under major threat. That threat arises out of the Human Rights Act 1998, which became law last November.

Some explanation is necessary. First of all, we need to take a quick look at the Human Rights Act itself. This incorporates the European Convention on Human Rights, setting out the basic rights that we take for granted in a democratic society. Those whose rights have not been respected have been able to complain to the European Court of Human Rights. As a result, a substantial body of case law has built up.

The act requires the English courts (and other public authorities) to do two things. First, to act in a way that is compatible with the convention and secondly, as far as possible, to interpret legislation in the same way. English courts are to "have regard" to decisions of the European Court, which represents the best available guide as to the meaning of the convention.

This takes us on to the convention itself. Article 6 deals with the right to a fair trial. Much of it is concerned with criminal proceedings. So far as civil disputes are concerned, article 6 provides that: "… everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly …" Among those who resolve civil disputes are adjudicators. When an adjudicator makes a decision, the parties must comply, including making a monetary payment. A party that refuses can be compelled by the court to make payment. So, how does adjudication measure up to the requirements of the convention ? Obviously, fairness is essential. The European Court has held that this requires "equality of arms" – that is, that each party should have the opportunity to put its case under conditions that do not place it at a substantial disadvantage to the other side.

Unfortunately, this will often be infringed by the 28-day time limit for a decision laid down in the 1996 Construction Act. The respondent may well have insufficient time to prepare its answer to the claim, and will thus be at a substantial disadvantage to the referring party, which will usually be able to take as long as it wishes to prepare what will often be a complicated case. The inequality is exacerbated by the requirement of the convention that any hearing must be held "within a reasonable time".

In addition, the adjudicator may have insufficient time to complete his investigations before arriving at the deadline for a decision, and will be forced to come to a conclusion based on a general impression.

In short, the provisions of the Construction Act are likely to produce decisions considered to be "unfair" under the convention.

The problems do not end there. The current practice of adjudication is also inconsistent with the convention in the following respects:

• The convention requires a hearing. The standard forms typically leave the question of whether to hold a hearing to the discretion of the adjudicator

• The Human Rights Act may nullify certain provisions of construction law

• An adjudicator’s decision may be vulnerable to challenge

• Legislation must be amended

• The hearing must be in public. This would be a major change. Representatives of the press could be present

• The convention requires adjudicators to be independent. Many adjudicators are appointed at the instigation of one of the parties. The adjudicator often has some kind of relationship with the appointing party, if only as adjudicator in a number of other contracts or subcontracts involving the appointing party. Accordingly, he may not be regarded as independent

• The convention says that judgment must be pronounced publicly – that is, made available to the public. In addition, the European Court has held that a judgment must contain full reasons to allow the losing party to decide whether to take the matter further. Some standard forms forbid this.

Many adjudication proceedings could thus breach the convention in a number of ways. Does that really matter? The answer is that it does, particularly in relation to the enforcement of decisions. Remember that the Human Rights Act does not allow courts to act in a way that is inconsistent with the convention. That would mean that courts would be compelled to refuse to enforce adjudicator's decisions where the procedure was not compliant with the convention.

As a result, there would be widespread uncertainty as to the enforceability of individual decisions. That would be disastrous. A favourable decision in adjudication would simply become a passport to further litigation in order to decide whether the loser's rights had been infringed. If that were so, enforcement would be refused. The credibility of the whole adjudication concept would be eroded.

These difficulties must be headed off before they become a problem. Ideally, the Construction Act should be amended so as to require all construction contracts to contain adjudication provisions that are compatible with the convention. If these requirements were not met, an amended statutory scheme could operate in default.

The minimum requirement would be to amend the Construction Act to confer on the adjudicator the discretion, independent of the parties, to extend the time available for delivering a decision. The amendment of standard forms would be necessary so that decisions under those forms would not be open to challenge.