42 MARKET COMMENTARY
INTERNATIONAL ARBITRATION 1/3LY
A S WI TH THE UK , THERE ARE SERIOUS CONCERNS ABOUT THE QUAL I T Y OF SOME ADJUDI C ATORS ; DESP I T E THE IR DI VERSE BACKGROUNDS , MANY DO NOT HAVE THE REQUI S I T E SK ILLSE T AND /OR EXPERIENCE .
Successes Adjudication has been almost too successful in the UK, as parties can refer all sorts of disputes to adjudication, including complex ones that are unsuited for such a fast-track procedure. The majority of disputes referred to adjudication take place betweenmain contractors and domestic subcontractors and involve either final account disputes or failure to complywith payment provisions. The success of adjudication in the U.K. has had a significant corollary on the use of other means of resolving construction disputes. In the 10 year period between 1995 and 2004 (with adjudication being introduced in 1998), the number of claims issued in the Technology and Construction Court (TCC) fell by an astonishing 80% and domestic construction arbitrations have halved during a similar period. Challenges The introduction of adjudication in the U.K., however, has not beenwithout its challenges. One of themain issues with adjudication in the UK is the continued paucity of good quality adjudicators. Whilst there are a number of career adjudicators, most have little practical, on-the-ground experience and those that do often lack formal training and sometimes the legal expertise to grapple with interpreting contractual issues. As a result, depending onwhich part of the industry the adjudicator comes from, there is often perceived or actual bias. Another unintended consequence of introducing such a fast-track process is the re-emergence of ambush tactics, whereby referral notices are served before a holiday period or as a surprise to the defending party, which leaves them little time to defend their case. The condensed timeframe is also problematic because it removes the opportunity for disclosure and only rarely allows time for the examination of witnesses or experts. This erodes both the reliability and the quality of decisions. The partiesmay by consent extend the adjudication for long periods, with numerous successive statements of case being exchanged. In such situations, the costs of adjudication can be significant but, unlike in arbitration, the successful partywill not recover themajority of its costs. Lastly, only a single disputemay be referred to adjudication at any time. This has the unsatisfactory effect that consequential disputesmay arise out of the same project and be referred successively to adjudication. There are notable differences with procedure between arbitration and adjudication: whereas arbitration awards are generallymade following a quasi-judicial process involving a hearing, witness and expert evidence and of course proper document disclosure; this is not true of adjudication. Arbitrations are also intended to be binding, with only limited opportunities for appeal. In arbitral proceedings, like court proceedings, the costs will generally follow the event so the successful partywill recover themajority of its costs. This is not true of adjudicationwhich is only interimbinding andwhere costs are harder to recover.
AUSTRALIA’S STATE-BA SED STATUTORY REGIMES Characteristics of the Australian regimes
The panel conversation then turned to the Australian regime. Australia is unique in that each state and territory has its own adjudication regime, resulting in an inconsistent and often confusing combination of approaches. Beth Cubbitt, Partner in Clyde&Co’s Perth office, noted that no two state or territory systems are truly uniformbut that two broadmodels can be identified. The “West Coast” model, comprising of Western Australia and the Northern Territory, ismore closely alignedwith the UK regime. Adjudicators are encouraged to adopt more evaluative approaches and are not restricted to documents provided by the parties. The “East Coast” model, comprising NewSouthWales, Australian Capital Territory and Queensland, has created a statutory right to payment, whereby a respondent who fails to respond to a payment claim provides the claimant with a default right to payment. Unusually, in the East Coast model, nominating authorities for adjudicators tend to be private bodies which often take a portion of the adjudicator’s fees as a condition of appointing their chosen adjudicator. The types of disputes to which adjudication applies continue to be limited to payment disputes (thereby preventing a party fromclaiming damages in an adjudication) and, in the case of the West Coast model, adjudication cannot be used for contracts involving a broad range of work related to discovering and processing oil, gas andminerals (as well as extraction, which is excluded in all Australian regimes). Challenges The existence of multiple regimes has created an obvious disharmony in the system. In the East Coast model, given that for-profit nominating adjudication bodies are entitled to take a portion of the adjudicator’s fees, it is in an adjudicator’s interest to find in favour of the claimant. This creates a clear potential for bias. As Beth noted, in 2013 80% of the challenges to adjudication determinations led to quashing of the determination for bias and breach of natural justice. As with the UK, there are serious concerns about the quality of some adjudicators; despite their diverse backgrounds, many do not have the requisite skillset and/or experience. More generally, and similarly to the UK, the limited timeframe for resolving disputes can create unreliable determinations by the adjudicator.
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