Regulations and policy commentary: One out, all out

No, not a cry for solidarity from a trade union rep, but in this instance an important point for all those who enter construction contracts - employers, main contractors, subcontractors alike. If you thought that by careful drafting you had ensured any adjudication would take place on your terms only, think again.

As most will by now be aware, since 1998 all construction contracts must contain certain minimum payment and adjudication provisions and if they do not, terms will be implied into the contract to rectify the situation. The terms that are implied are drafted by the government and are to be found in the Scheme for Construction Contracts (the Scheme).

If your contract does not comply with the minimum payment provisions required by statute, the terms in the scheme are available and can be selected and inserted into the deficient construction contract to rectify the situation.

If your contract does not comply with the minimum adjudication provisions required by statute, however, the situation is different and could have a dramatic impact on your rights that may be altered significantly, whether you like it or not.

All of the adjudication provisions will be out, not just the offending one and the scheme adjudication provisions are inserted in entirety to replace the now-redundant contract adjudication rules.

Earlier this year, it was widely reported that this situation had caught out a number of industry players. The Construction Industry Council (CIC) produces its own set of rules, the CIC Model Adjudication Procedure, and in a judgement of the Technology and Construction Court (TCC) in January this year, the CIC rules for adjudication were effectively rendered invalid in their entirety because of just one offending clause.

Good times, bad times

This was not an end to it. As you might expect, the government's standard forms, the GC/Works suite, contain provisions for adjudication. Good times! Rather embarrassingly for the government, however, another judgement by the TCC in February this year also rendered the government's adjudication provisions invalid. Bad times!

In both cases, the judge decided that a similar clause, which effectively provided that the adjudicator's decision shall be valid even if issued after the time allowed, did not comply with the minimum statutory requirements. Rather embarrassingly, such statutory minimum requirements were brought into force, as you might have guessed, by the government in 1998.

You might have thought this would all be sorted out by now, but surprisingly this is not the case. The GC/Works standard forms have not been amended. The CIC did address the problem in the fourth edition of its rules, but earlier additions of the CIC rules are still in circulation and will be for some time.

I am aware of at least one major national contractor that incorporates the first edition of the CIC Model Adjudication Procedure into its bespoke contracts. As a result, the provision inserted by that contractor to the effect that the referring party, win or lose, must accept liability for the adjudicator's fees and expenses, will fail.

Altering standards

While the GC/Works and the CIC rules are both fairly even-handed, where the party drafting the contract has altered the standard rules in its favour, the impact of a change to the scheme could prove significant, for example, where additional provisions saddling the referring party with liability for all of the other party's costs have been added.

It might be worth establishing whether the adjudication provisions in your construction contract comply with the minimum requirements of statute. If they do not and, in particular, if they incorporate the GC/Works rules or earlier versions of the CIC rules, the balance of risk could be about to change.

You have been warned again - if the adjudication provisions in your contract do not comply in full, it could be a case of one out, all out.