This Article originally written for members of CAASA looks at the status and history of construction adjudication around the world and particularly in Africa.
Readers, and members of CAASA should by now be familiar with the principles of construction adjudication. This article aims to touch on some of the key points, origins and principles of adjudication schemes. It then goes on to look at what the response of different countries and jurisdictions has been to adjudication.
We conclude with some comments from the author of the leading text on the subject, Mr James Pickavance of Jones Day. We are indebted to James for much of the research behind this article taken from his book and for his closing comments.
The Early Days
Statutory adjudication appears to trace its routes back to the ‘Latham’ report published in the UK in the early 1990s. The UK Government commissioned a report into reducing perceived problems in the construction industry. Headed by Sir Michael Latham, the report ‘Constructing the Team’ outlined some key elements that should be legislated for.
Among Latham’s conclusions were that, “parliament should enact legislation to ensure that the payer paid the whole sum applied for unless it notified the payee of its contrary intention within a fixed period of time”. Also that, “where parties do fall into dispute, they have available to them a dispute resolution process that facilitates a quick and inexpensive platform for hearing the dispute”.
The aim was to ensure that cashflow was not unduly restricted. Also, ensuring that disputes arising during projects should not lead to the withholding of monies to the extent that companies fell into insolvency.
Statutory construction adjudication in the UK became law in 1996, and its popularity has continued since. The success of the UK scheme has been such that many other countries have sought to replicate it with their own, similar schemes. Each has slight differences to the UK scheme. As an example, the Irish system is quite strict in that only “payment disputes” may be referred to adjudication.
Countries that we are aware of who currently have a statutory adjudication in place include the following:
- UK in 1996
- Australia over the following decade
- New Zealand 2002
- Isle of Man 2004
- Singapore 2005
- Malaysia 2012
- Ireland 2013
- Canada 2019
- Hong Kong – making progress, with first steps in 2021
Principles & Court Responses
Pickavance notes that:
“While the detailed implementation of statutory and contractual regimes varies from market to market, the base concept remains the same – an accessible, inexpensive, timely mechanism to resolve payment disputes and maximise cash flow through a decision making process that is binding on both parties, either until the completion of the contract or until it is revisited in final determination.” (Pickavance, 2016)
The key elements of most schemes around the world include:
- A system enshrined in law (statute).
- Available to all involved in a construction contract.
- With a binding decision (until overturned).
- Resolved within a 28-day period (subject to agreement to extend).
The courts, in countries where these schemes exist, tend to be supportive of it, rarely overturning the decisions of adjudicators unless there has been an obvious mistake or breach of ‘natural justice’.
Even in one of the more recent additions, Ireland, the courts have responded robustly. Anecdotally, there was a feeling that Statutory Adjudication might not be popular. This was due to the existing prevalence of conciliation. However, the courts there recently noted that a, “Court may declare an adjudicator’s decision unenforceable only on the grounds of lack of jurisdiction or breach of natural justice”.
The robust response, speed of resolution and the fact that adjudication is enshrined in law appears to have given many parties confidence in the system. This in turn has led to increasing popularity. Pickavance observes Coulson J’s comment that, “the popularity of adjudication was such that, in its first 10 years, it generated the equivalent of 100 years of case law”.
Africa
As readers will be aware, there is no country at present that operates a statutory construction adjudication scheme in Africa. However, contractual adjudication is becoming ever-popular.
Under the popular FIDIC contracts, even where statutory adjudication does not exist, an adjudication framework is present. The contract forms include a mandatory adjudication and dispute resolution process. Admittedly, the Dispute Avoidance and Adjudication Board (DAAB) system under FIDIC operates differently and to a different timescale than most statutory schemes. Nevertheless, it provides some comfort to those wishing to resolve disputes during the life of a construction project.
Even before the latest editions of FIDIC, the Swiss courts had determined that the Dispute Adjudication Board process was a pre-requisite to arbitration. In the 2017 form, the federation tightened up the dispute avoidance and adjudication process. This now ensures that non-final determinations by an engineer are able to be enforced at Arbitration.
Pickavance suggests that South Africa will be one of the next to adopt statutory adjudication. However, even now, South African courts have stated they will only interfere in contractual adjudication decisions in exceptional circumstances.
As Pickavance observes, “it would seem that any argument to the effect that contractual adjudication should be treated differently from statutory adjudication might be difficult to win”. From the South African experience, it would appear that this is a truism that holds. Even in a country where statutory adjudication does not exist.
Several African countries have considered or at least discussed the need for a statutory adjudication scheme. In Zambia, Mary Maputa notes, “in a developing country like Zambia with massive construction projects going on, the enactment of adjudication law will enhance the resolving of construction disputes faster and will lead to many disputes being resolved before getting to either arbitration or Court”.
The Future for Africa, And Final Observations: James Pickavance (Partner, Jones Day)
As far back as the 1970s and 1980s in the United Kingdom, it was recognised that a fast-track route to dispute resolution was needed for construction. Since the 1990s, statutory adjudication has grown in popularity around the world. The popularity of the DAAB system in the FIDIC is also clear, as are similar solutions such as those developed by the RICS in recent years.
As Maputa observes, a similar system would be helpful in African jurisdictions. The old maxim of ‘justice delayed is justice denied’ rings loud in the ears of both claimants and defendants who have experienced the litigation process in countries without such a mechanism in place. Some jurisdictions have already made clear their willingness to support contractual adjudication. The introduction of schemes backed by statute would surely then be helpful for speedy dispute resolution, successful business and continuity of cashflow.
Should you need more help with dispute resolution please visit us at https://damian-james.com/dispute-resolution/ .