Adjudication took over from arbitration as the favoured form of dispute resolution because it was quicker. But fast-track arbitration could have the last laugh, writes Daniel Atkinson
THE IDEA of adjudication is to achieve the quick and efficient resolution to a dispute. Most of the time it does this pretty effectively: many adjudicators' decisions are accepted as the last word on a dispute and no further steps are taken.
However, it is now well established that an adjudicator's decision only has a provisional effect.
And although the Construction Act states that the parties can agree to accept an adjudicator's decision as final, this is rarely adopted in practice.
Hence the decision can always be challenged in court.
Before the introduction of adjudication in 1998, the construction industry's favoured means of dispute resolution was arbitration, a process which still has many advantages over adjudication. The main benefit of arbitration is that it produces an award which has a high degree of finality - there is limited recourse to the courts from an arbitrator's award.
The second important benefit is that the process of arbitration allows the full case to be developed, analysed and presented. It does not suffer from the problems of the 28-day timescale imposed upon the adjudication process.
Another benefit of arbitration is that the winning party is able to recover its costs from the losing side; in adjudication it is not.
There are, of course, disadvantages to arbitration, the main one being the cost involved. This is mainly due to the time that the process can take if, as usually happens, it mimics court proceedings too closely.
But it appears that cost is becoming less of a disadvantage in arbitration as trends in adjudication seem to show an increase in costs.
In recent adjudication cases with which I have been involved, the parties were represented by counsel on both sides and one-day hearings were held with full transcript plus cross-examination of witnesses and experts. The process was difficult to distinguish from arbitration. Moreover, although adjudication's 28-day rule is still beyond the reach of the arbitration process, fast-track arbitration can produce decisions far quicker than the traditional procedure.
Since it is up to the parties to agree the rules of arbitration within the confines of the Arbitration Act 1996, it is quite possible for them to adopt their own fast-track procedure. They should therefore be able to enjoy the best of both worlds, achieving the thoroughness and finality of the arbitration process with many of the advantages that accrue from the rapid procedure seen in adjudication.
There is a lot that can be learned from the experience of adjudication that could easily be applied to today's arbitrations. Fast-track arbitrations have been successful in the past: the JCT Arbitration Rules 1988 successfully provided such a procedure (though not encouraged by lawyers since they were too far removed from the familiar court proceedings).
The 1988 JCT rules provided a 'full procedure' in which the arbitrator would make his decision in about 200 days. Now, with the experience gained from adjudication this could easily be reduced to 150 days without affecting the quality of the process.
The success of arbitrations under the JCT Rules was built on two pillars. The first was a rule which required the parties to submit 'statements of case'.
Such statements are more extensive than the documents normally prepared for court proceedings and more informative. They set out the propositions of law with supporting arguments and they clearly set out the contentions of fact.
The statement of case had to include a list of all documents that the party considered necessary to support any part of the relevant statement and a copy of the principal documents on which its case would rely. In each document the relevant passages had to be clearly identified.
In practice this meant that a party was required to state the legal principles on which it relied, supply copies of the relevant legal authorities, state the facts to support its contentions and provide all the documents on which it relied, including witness statements.
The discipline required to prepare a statement of case in the fast-track timescales ensured that the parties focused on the issues between them and allowed the arbitrator to do so too at an early stage in the process.
This is precisely what the 28-day period in adjudication aims to achieve.
The second pillar of success of the JCT Rules was the power of the arbitrator to proceed without submissions if the timetable were not followed.
If a party did not serve a statement of case (which includes a statement of defence) within the relevant time the arbitrator issued a seven-day warning. If within seven days of the notification the relevant statement was not received the arbitrator was entitled to proceed without the statement.
If the relevant statement was subsequently served it was to have no effect. (The only proviso was if the arbitrator was satisfied that there was a good and proper reason why an application was not made for an extension of the time for service as required by the rules and why the statement was not served within seven days of his notice).
If it was the claimant that had not served its statement of case, the arbitrator was required to make an award dismissing the claim and ordering the claimant to pay his fees and the other party's costs.
To my mind it is clearly time for the lessons of adjudication to be incorporated in the rules normally adopted in arbitration and published by the various institutions.
But there is no reason why the parties should not agree their own fast-track procedure at contract formation. The JCT Rules 1988 provide a useful model which, with modification, could lead to 150-day arbitrations.
Arbitration, unlike adjudication, results in a decision that has a high degree of finality.
The winning party in arbitration can recover its costs whereas in adjudication it cannot.
The JCT Rules 1988 introduced procedures for 'fast-track' arbitrations. These required the submission of 'statements of case' and permitted the arbitrator to proceed if either party failed to submit its statement.
The lessons learned through adjudication could help in the development of even faster arbitration procedures.