A Guide to Adjudication for Commercial Disputes

Summary

• Parties to qualifying construction contracts can use adjudication without obtaining fresh consent from the other party.
• Adjudicators normally decide within 28 days of referral, so businesses should prepare clear payment calculations and supporting evidence before starting.
• Parties generally must comply with the decision while pursuing any final resolution through court proceedings, arbitration or agreement.
• This guide explains construction adjudication, costs and enforcement for businesses in England and Wales.
• LegalVision’s disputes and litigation lawyers advise businesses on disputed construction payments, preparing evidence and enforcing adjudication decisions.

Tips for Businesses

Save original emails, dated photographs and site records in one accessible folder. Give each supporting document a clear reference number. Record submission deadlines and nominate someone to monitor incoming correspondence. Obtain separate estimates for advisers, the adjudicator and possible court enforcement.

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On this page

• What is adjudication?
• Which contracts qualify for adjudication?
• How does the adjudication process work?
• What is an adjudication award?
• Why choose adjudication for a commercial dispute?
• Are there any downsides to adjudication?
• How is an adjudication award enforced?
• Can you challenge an adjudication award?
• Adjudication vs arbitration vs litigation
• Key Takeaways
• Frequently Asked Questions

Construction adjudication in the UK allows an independent adjudicator to decide a construction contract dispute without a full court trial. The Housing Grants, Construction and Regeneration Act 1996 gives parties to qualifying construction contracts a right to adjudication. Adjudicators normally decide within 28 days of referral, although permitted extensions can lengthen the process. Adjudication decisions generally bind both parties until a court, an available arbitration process or an agreement finally resolves the dispute. This article explains eligibility, adjudication deadlines, costs, enforcement, challenges and how to organise evidence for a construction payment claim.

What is adjudication?

Adjudication is a form of alternative dispute resolution, meaning a way to resolve disputes outside a court trial. An independent adjudicator considers the evidence and decides the dispute. Construction businesses often use it to resolve disagreements about payment, defective work or contractual responsibilities.

You may hear it described as “pay now, argue later”. A party ordered to pay usually needs to comply before pursuing a final decision elsewhere. This can help a contractor meet its own bills while the wider disagreement continues.

The applicable rules therefore depend on the contract and the dispute. Check your dispute resolution clause before choosing a route.

Adjudication is often less formal than arbitration, but it still requires evidence and a fair procedure. LegalVision’s disputes and litigation services cover options for resolving business disagreements.

Which contracts qualify for adjudication?

The Housing Grants, Construction and Regeneration Act 1996 gives parties to qualifying construction contracts a right to adjudicate contractual disputes. Working in construction does not automatically bring every agreement within the Act. You need to check the work covered, the contracting parties and any exclusions.

Contracts covered by the Construction Act

Qualifying construction operations include building, alterations, repairs and decoration. They also include site preparation and installing systems such as heating, lighting and power. Architectural, design and surveying services connected with construction operations can also qualify.

An oral agreement can qualify. Parliament removed the general writing requirement through the Local Democracy, Economic Development and Construction Act 2009. The change applies to contracts entered into from 1 October 2011 in England and Wales.

Keep quotations, instructions and emails even without a signed contract. You may need them to establish what the parties agreed and who owes payment.

“Treat the payment calculation as part of your evidence, not simply the amount you want to recover. A clear link between each disputed charge and the supporting records helps the adjudicator follow your case.”

Exclusions and the Scheme for Construction Contracts

The residential occupier exclusion concerns contracts principally for work on a home that a contracting party occupies or intends to occupy. It does not exclude every contract involving residential property. For example, a subcontract between construction businesses requires its own assessment.

Other exclusions cover specified operations, including drilling for oil or natural gas and extracting minerals. The Act also distinguishes supplying materials from supplying and installing them.

The Scheme for Construction Contracts (England and Wales) Regulations 1998, as amended, supplies default adjudication rules. These apply when a qualifying contract lacks compliant adjudication provisions. Check the relevant version and contract date before relying on the Scheme.

How does the adjudication process work?

The adjudication process moves from a notice to an appointment, a referral and a decision. The statutory timetable requires quick preparation from both parties.

Before starting, organise the contract, correspondence, payment records and evidence supporting your position. The following steps describe the usual statutory route.

Notice of adjudication

The referring party, meaning the party starting the process, serves a written notice of adjudication. It identifies the dispute and the outcome sought. Under the Scheme, the notice also identifies the parties and explains where and when the dispute arose.

Describe the disagreement accurately. For example, distinguish a claim for unpaid work from a claim about the cost of correcting defects. Check the applicable service requirements and keep evidence showing how and when you delivered the notice.

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Appointing the adjudicator

Follow the appointment procedure in the contract or the Scheme. This may involve an agreed adjudicator or an adjudicator-nominating body that selects a suitable person.

The statutory timetable aims to secure both appointment and referral within seven days of the notice. You therefore need to prepare the referral before starting. Check any nomination fee and the proposed adjudicator’s terms of appointment.

Referral and response

The referral sets out your full case and supporting documents. Send it to the adjudicator and the other party within the applicable deadline. Explain how the documents support the decision you want.

The responding party then presents its position within the timetable the adjudicator sets. There is no single statutory response period for every case. Identify disputed facts clearly and attach the documents supporting your answer.

The adjudicator’s decision (within 28 days)

Under the Act, the adjudicator normally decides within 28 days of referral. With the referring party’s consent, the adjudicator can extend that period by up to 14 days.

That allows a decision within 42 days of referral. A longer period requires both parties’ agreement after referral.

The adjudicator decides the referred dispute within their authority. Speed does not give them permission to disregard a material defence. Record any agreed extension so everyone works to the same deadline.

What is an adjudication award?

An adjudication award is the adjudicator’s decision on the referred dispute. It may require payment or decide what the contract requires a party to do.

The available remedy depends on the dispute and the adjudicator’s powers. Read the decision carefully for the required action and deadline.

The decision is temporarily binding. It generally remains binding until the parties settle or obtain a final determination through court proceedings or an available arbitration process. They can also agree to accept the adjudicator’s decision as final.

Adjudication decisions are not routinely published like court judgments. However, later enforcement proceedings can bring details into public court documents or judgments. Do not assume the entire dispute will remain confidential.

Why choose adjudication for a commercial dispute?

Adjudication can provide a practical route when your business needs a decision without waiting for a full trial. Its value depends on the issue, available evidence and likely expense. Compare the amount at stake with the cost of presenting your case and collecting any award.

Avoid the cost of litigation

A court claim can require extensive preparation and management time. Adjudication may resolve the immediate disagreement without that commitment. However, allow for possible enforcement costs if the other party does not comply.

A statutory legal right (construction)

For a qualifying dispute, either contracting party can invoke the statutory right without obtaining fresh consent from the other. Check eligibility before serving notice. The right concerns disputes arising under the contract, rather than any disagreement between the businesses.

Speed (a 28-day decision)

A defined timetable can help you plan around a disputed payment. It can also support settlement discussions once both parties understand the evidence. Preparation time comes before referral, so the decision period does not measure the entire exercise.

An expert decision-maker

An adjudicator may have experience in construction, surveying or law. That expertise can help with technical documents and valuation disputes. Consider the subject matter when using an agreed appointment process.

Cost-effectiveness

A shorter process can cost less than a full trial, but adjudication has no universal fixed price. Budget for your advisers, any nomination charge and the adjudicator’s fees.

You usually pay your own legal costs, even if successful. The parties can make an effective written costs agreement after the notice of adjudication. The adjudicator’s own fees are a separate issue, governed by the applicable rules and agreement.

The referring party’s advantage

The referring party can prepare its evidence before serving notice. Use that time to check the claim, organise records and identify missing documents. You still need to frame the dispute properly and allow the other party a fair opportunity to respond.

Are there any downsides to adjudication?

Adjudication requires concentrated work over a short period, which can put pressure on a small team. The responding party may have little time to gather records. The parties may also incur further costs if the underlying dispute later goes to court or arbitration.

A quick decision is not a guarantee of payment. Before starting, consider whether the other business could meet an award and whether further recovery steps would be worthwhile.

How is an adjudication award enforced?

If the other party does not comply, you can seek a court order enforcing the decision. In England and Wales, construction adjudication enforcement commonly proceeds in the Technology and Construction Court, known as the TCC. It uses an expedited procedure, rather than retrying the entire construction dispute.

The enforcement procedure

The Technology and Construction Court Guide explains how to ask the court to enforce an adjudicator’s decision requiring payment. You generally start a court claim and ask the judge to decide it without a full trial.

You will need witness statements and supporting documents, including the notice that started the adjudication and the adjudicator’s decision. You can ask the court to shorten the deadlines. The judge will set the next steps and a hearing date.

Defending enforcement

A defendant must follow the court’s directions for evidence and written legal submissions. A skeleton argument is a written outline of the legal arguments.

The court generally enforces a valid decision despite ordinary errors of fact or law. A disagreement about valuation is therefore different from a defect in the adjudicator’s authority or a materially unfair procedure.

Can you challenge an adjudication award?

You can seek a final determination of the underlying dispute through court proceedings or, if available, arbitration. That is different from resisting enforcement of the adjudicator’s decision. There is no general appeal allowing you to suspend payment merely because you disagree with the result.

A lawyer can assess which route addresses your concern before you incur further costs. Keep the notices, submissions and correspondence needed to explain what happened.

The two grounds to challenge (jurisdiction and natural justice)

The principal grounds for resisting enforcement are lack of jurisdiction and a material breach of natural justice. Jurisdiction means the adjudicator’s legal authority to decide the dispute. Natural justice means a fair process before an impartial decision-maker.

Authority problems can include an invalid appointment or a decision made outside the scope of the referred dispute. Whether a contract or an existing dispute can be established may also matter.

These are the principal grounds, rather than an exhaustive account of every enforcement issue. For example, insolvency can affect whether a court enforces a decision or postpones payment under its judgment.

Adjudication vs arbitration vs litigation

Adjudication can provide an interim answer, while arbitration or litigation can determine the underlying dispute finally. Your contract may influence which route is available, including the arbitration process for commercial disputes. Compare the following features before choosing a process.

Key Takeaways

Adjudication gives parties to qualifying construction contracts a quick way to resolve disputes, usually within 28 days of referral. Decisions are binding until final resolution. Check your eligibility, prepare evidence and budget for costs. If the other party does not comply, you can ask the court to enforce the decision.

Frequently Asked Questions

What makes adjudication faster than other dispute resolution methods?

The statutory timetable keeps the process short. The normal decision period runs from referral, with extensions permitted. The adjudicator often works from written evidence, although meetings or a hearing may be needed.

How much does adjudication cost?

There is no single standard price for adjudication. Budget for the adjudicator, any nomination charge and your advisers.

You usually bear your own legal costs, even if successful. Ask for estimates based on the dispute’s complexity.

Is an adjudication decision legally binding and enforceable?

An adjudication decision is generally binding and enforceable pending final resolution. The parties normally need to comply despite disagreement. A court can enforce it, although recognised objections and particular circumstances can affect enforcement.

What happens if the losing party rejects the decision?

Rejecting the decision does not, by itself, remove the obligation to comply. The successful party can seek enforcement. The losing party may pursue a final determination through court proceedings or an available arbitration process.

What construction work qualifies for statutory adjudication?

Qualifying work includes building, repairs, decoration, site preparation and installing building systems. Some professional services also qualify.

Exclusions apply, including certain contracts with residential occupiers. An oral agreement can qualify, so check the work and contract date.

On what grounds can you challenge an adjudication award?

The principal enforcement objections concern the adjudicator’s authority or a materially unfair procedure. Simply disagreeing with the decision is usually insufficient. Seeking a final determination of the underlying dispute is a separate route, and does not automatically suspend compliance.