One of the most significant features of UK construction law is the statutory right to adjudication. Introduced by the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Construction Act”), adjudication was designed to address a long-standing problem in the industry: cash flow.
Adjudication is a non-court dispute resolution process which involves parties appointing an independent decision-maker (usually a lawyer or construction professional by background) to provide a decision on a dispute or disputes between the parties.
Adjudication is commonly used to resolve disputes over payment, delay and defective works on ongoing and past construction projects.
The construction industry has traditionally been vulnerable to payment delays and protracted disputes. Historically, parties were largely bound by the dispute resolution processes contained in their contracts – often court or arbitration. These processes can be lengthy, which could result in projects being delayed or parties becoming insolvent while disputes are resolved.
The Construction Act introduced adjudication as a rapid, immediately binding dispute resolution procedure. The intention was simple: keep the money flowing, keep the project moving and allow recourse to the courts or arbitration for certain matters of law, jurisdiction or issues with enforcement.
Adjudication is therefore often described as “pay now, argue later”. Parties can re-argue the matter at court/arbitration later, but a decision that a sum should be paid is binding in the interim.
The right to adjudicate arises automatically in any contract that qualifies as a “construction contract” under the Construction Act, whether or not the contract itself provides for adjudication as a dispute resolution method.
For more information on whether your contract qualifies as a “construction contract”, see our previous article on the subject.
The Construction Act provides that a party to a construction contract has the right to refer a dispute to adjudication “at any time”.
For Employers under construction contracts, this helps keep projects moving towards completion. For contractors and sub-contractors, this keeps cash flowing.
The Construction Act sets out minimum requirements for an adjudication procedure. These include:
If the contract does not comply with these requirements, the Scheme for Construction Contracts applies. The Scheme is a statutory set of adjudication rules which effectively “fills the gaps” or replaces non-compliant provisions.
There are a number of advantages and limitations to the statutory right to adjudication, including the following:
In high-value or technically complex disputes, adjudication can feel like conducting litigation at sprint pace. It is important to take advice when faced with a notice of intent to start an adjudication or when considering serving such a notice.
The statutory right to adjudication is one of the defining features of modern construction law in the UK. It has fundamentally shifted the balance of power in projects and provided a rapid and enforceable remedy for disputes – particularly in relation to payment.
For employers, constructors and sub-contractors, understanding when the right arises and how it operates in practice is crucial.
Our specialist Contentious Construction team regularly represents parties who are referring or responding to adjudications. We pride ourselves on our expertise, industry knowledge and our straightforward advice.
If you have any queries relating to adjudication or any other issues arising from ongoing or previous construction, engineering or energy projects, please contact Ryan McCuaig or a member of our Contentious Construction team.
