Geoff Brewer of Brewer Consulting examines an adjudicator's judgement of his own jurisdiction

The case of Nordot Engineering Services Limited -v- Siemens plc gives a timely reminder to parties undertaking adjudication to choose their words carefully in communications with the adjudicator.

Nordot was engaged as a sub-contractor to a joint venture between Siemens and Powergen at Cottam Power Station in Nottinghamshire. The project was for the construction of a gas turbine electricity generation plant, where the exhaust gases would be used to provide additional steam generation.

The parties were in dispute over the appropriate payment for various items of plant and equipment supplied by Nordot. The dispute centred upon whether there was an agreement as to a particular set of rates to apply to the work. Nordot commenced adjudication by giving notice pursuant to the requirements of the 1996 Construction Act. Siemens objected and said that the contract that was in existence between the parties was not for "construction operations" within the meaning of the 1996 Act.

Upon receipt of the referral notice, Siemens wrote to the adjudicator referring to Section 105(2)(c) of the Act. This section excludes from construction operations certain activities, including "the assembly, installation or demolition of plant and machinery, or erection or demolition of steelwork for the purposes of supporting or providing access to plant and machinery, on a site where the primary activity is power generation". Siemens contended that the work that Nordot had carried out on the project was purely mechanical works on power generation plant, pressure piping, assorted equipment and access platforms to the machinery. It argued that the work carried out by Nordot was expressly excluded from the provisions of the Act by operation of Section 105(2)(c).

The adjudicator referred this letter to Nordot's solicitors who replied two days later asserting that the work carried out by Nordot clearly fell within the Act. On the same day Siemens replied, noting that it disagreed with the contents of Nordot's solicitor's letter. It argued that Nordot's work fell fairly and squarely within the exclusions contained within Section 105(2)(c) and offered to provide a detailed list of all activities that Nordot had undertaken on the project to support its position. Tellingly, however, that letter contained the phrase "we will however abide by your decision in this matter and will comply with whatever direction you deem appropriate".

The adjudicator then informed both parties that he had concluded that Nordot's submission was correct and that the statutory adjudication procedure should apply as referred. He confirmed that he would proceed to deal with the matters referred to him as adjudicator.

In due course, Siemens submitted its response to the adjudicator, in which it again raised the question of the jurisdiction of the adjudicator. It made a number of submissions as to why the contract which existed between the parties was not in fact a construction contract within the meaning of the Act. Despite these complaints, the adjudicator proceeded to deal with the matters in dispute and ordered that Siemens should pay Nordot a sum in excess of £100,000 plus VAT.



Siemens refused to pay and the matter came to court for enforcement of the adjudicator's decision under Part 24 of the Civil Procedure Rules. His Honour Judge Gilliland QC remarked that he was being asked to deal with two points. The first question was whether the parties could enter into an agreement to bind themselves to accept the decision of an adjudicator where the Act does not give the adjudicator power to decide the matter. Second, if the parties can enter into such an agreement, whether in this case they did in fact do so.

Counsel for Siemens referred to the case of Palmers -v- ABB Power Construction Limited, in which there was a dispute as to whether there was a contract at all. Judge Thornton had noted that it was clearly appropriate for the court to intervene in such cases. He stated that there is no statutory power given to an adjudicator to resolve disputes about his jurisdiction. Accordingly, only when the court had declared the existence of a relevant contract could an effective adjudication be possible.

Judge Gilliland was unimpressed with this line of argument. He could see no reason as a matter of law why parties could not agree to abide by the decision of a third party, if they so wished. If parties, with their eyes wide open, entered into an agreement to the effect that the adjudicator will decide a question and the parties will be bound by that decision, there seemed to be no good reason why the court should not give effect to that agreement. There could be no public policy against such agreements and the mere fact that the system of adjudication is established by statute did not, according to Judge Gilliland, make any difference.



Judge Gilliland then considered the letter in which Siemens had noted that it would abide by the decision of the adjudicator. The correct and fair reading of that letter was that there was a voluntary submission of the question of jurisdiction to the adjudicator for his decision and the parties agreed to be bound by that decision. The letter had been written with knowledge of the provisions of the Act and it could not be regarded simply as a matter of oversight or an incautious statement by an inexperienced businessman. Accordingly, the adjudicator's decision was to be enforced.