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Consequences of Losing an Adjudication.

Posted on 11/06/2017 · Posted in Adjudication

Adjudication is a form of alternative dispute resolution introduced in the UK in 1996 by the Housing Grants, Construction and Regeneration Act (the Construction Act) as a compulsory method for resolving disputes in the construction industry, such as cases involving cost recovery, delay and disruption.

Adjudication is often preferred to the formal litigation route as it is a quick and relatively inexpensive process in comparison. A primary objective of adjudication as a route to dispute resolution is to provide a fast working solution to an issue so that parties can quickly resume or continue to work under their contract, with the process typically taking place over a 28 day period from the selection of the adjudicator to the final decision.

As a result of these cost and time efficiencies, adjudication is a popular choice for disputing parties, but what about the party who loses the adjudication?

An adjudicator’s decision will be final and binding until such time as the decision is overturned by a judge or arbitrator following a trial, but in the vast majority of cases the parties will accept the adjudicator’s decision and move on. Courts are also keen to uphold the adjudication process to ensure that it remains an effective and efficient way of resolving disputes in the construction industry, so will generally uphold a decision that an adjudicator makes. There are only very limited circumstances in which a party may avoid paying up (if this is the adjudicator’s decision) and that’s when either the adjudicator is shown to have no jurisdiction i.e. if there is no contract in writing between the parties, or if the adjudicator is shown to be biased and as a result there is a breach of natural justice.

When anger rises, think of the consequences.”
Confucius

Ultimately therefore the most likely consequence for the losing party of an adjudication is that they must pay the sum instructed by the adjudicator, even if they feel the decision is a wrong one. Because a decision is usually made within 28 days from the start of the adjudication process, the losing party may be liable for considerable sums of money over a very short timescale which can have significant – sometimes even fatal – consequences for their business. Even if the losing party does attempt to beat the odds and have the adjudicator’s decision overturned or not enforced by going to court, the cost of enforcement is usually comparatively low when compared to the financial implications of a full trial.

A losing party may also not only take a large financial hit, but a reputational one too, and for large construction contracts where there may be more than one adjudication between the same disputing parties, it may muddy the waters for future adjudication hearings in terms of what can and cannot be raised.

Expert Evidence is a professional firm concentrating on the four main areas of dispute resolution; acting as expert witnesses in financial litigation, mediation, arbitration and adjudication. The firm has a civil, criminal and international practice and has advised in many recent cases. Areas of specialisation include banking, lending, regulation, investment, and tax.

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Disclaimer – Please confirm any of the above views with your solicitor. Expert Evidence takes no responsibility or provides any guarantee that the views above are correct for your particular case or jurisdiction.