| Article Index |
|---|
| Arbitration vs. Adjudication: UK |
| Final decision ? |
| Cost of adjudication |
| Cost comparison |
| Timetable compared |
| All Pages |
Final decision ?The parties may agree to accept the decision as finally determining the dispute, but without such agreement decision is binding only provisionally “until the dispute is finally determined by legal proceeding, by arbitration, or by agreement.In the case of arbitration clause agreed in contract, there is not statutory requirement of preceding adjudication, that means, that parties can refer its dispute directly to arbitration and as we propose in last section of this blog this arbitration could be in fact cheaper, and streamlined more than adjudication. But also in the case of agreement about finality of adjudication decision, there is as Salmond says, wide range of challenges against enforcement of such decision. Unfit for open market ? With regard to the provisions of EU Treaty and specifically right to settlement, and right to cross-border services adjudication seems to be not fit for construction contracts with contractors or subcontractors based in other EU member states not familiar with adjudication.Even if such a party is willing to adjudication (and for example is not insisting on direct access to the arbitration) enforcement of adjudication decisions which is subject to broad challenges in the UK enforcement proceeding may be almost unfit to enforcement proceedings in continental european countries. Bearing in mind number of private limited companies registered with Companies House, which are only shelf companies of continental (mostly Central and Eastern European owners), this will be other problem of finality of decisions of such adjudication.
Costs of adjudication compared with arbitrationAs for individual adjudicators Elliot (2006) describers medium hourly rate at 100 ₤, whilst “experienced construction lawyer will charge much more”. Costs of adjudication could be “substantial” but purportedly “still very much less of arbitration or litigation costs. This appearance is based on arbitration prices of some arbitration centres, which are really high, but also on the underestimate of adjudication nominating bodies charges.According to the Milligan, McShane (2012) “The Cost of Adjudication: How much? & When?” (based on Based on a paper submitted by Glasgow Caledonian University Adjudication Reporting Centre for the COBRA 2011 Conference) overall adjudicator costs for case the most popular band range was between ₤ 2,500 and ₤5,000, very closely followed by the range ₤15,001 to ₤ 20,000 . According to Report No 10 of the Adjudication Reporting Centre at GCU recent (2010) hourly rate oscilates between ₤ 151 – 175, while findings of Report No 11 and 12 evidence growth of mean hourly rate to band rate ₤ 176 – 200 and the second “popular” rate in the 2012 was over ₤ 200 (33 % of the sample, raising from 12,8 % in the previous year). In a separate sample of 240 adjudications, 70% of the total was charged at more than ₤175 per hour with half of those charged at over ₤ 200. In the Report No. 7 (published in august 2005) ARC emphasized that growth of hourly rates is also due the lawyers acting more and more as adjudicators (most of them charging more than ₤ 200 at hour). In the adjudications where lawyers were not adjudicators, on the other side most common experts involved were lawyers, again raising the costs of adjudication. We can (if somewhat crude) conclude that if lawyer adjudicator is not appointed this could led to appointment of lawyer as expert for adjudicator, while, if lawyer adjudicator is appointed, then charges probably will be at hourly rate over £200. Comprehensive data of ARC also reveals that adjudications taking 26-50 hours were most common in the year 2002 (Report No 4) while in the year 2000 (Report No 2) adjudications taking up to 20 hours and taking 21-50 hours were at par (each category with 42,8 per cent of adjudications). Mean adjudicator costs as early as in the year 2001 ( Report No 3) were ₤ 3,369. From the published relatively stable hours of performance (time budgets) of adjudications with gradual growth of hourly rates (from the year 2002 with most common range ₤ 76-100, followed by range ₤ 101-125 to the 2012 ranges ₤175-200 and over ₤ 200) we can in turn compute approximately mean adjudicator costs in the year 2012 as nearly twice that in the year 2001 (leaving aside slow rise of hours taken by adjudications). In contrast to the adjudication, arbitration, especially institutional is bound by fees tables proposed by arbitration institutions, mainly related to subject of dispute. In adjudication we have not such scheme, but we can use data about most common sum in dispute. In the ARC Report No 12 researchers from Glasgow Caledonian University provide us with the range ₤10,000 - ₤50,000 as the most common., (consistent with previous years) and range ₤100,000 - ₤250,000 as second most common (since the year 2008). Via these data set we can propose cost comparison model, based on the computing of four model causes, with the subject of the claim with ₤ 10,000, 50,000, 100,000 and 250,000 and compare the overall fees (without review or setting aside procedures) between mean costs according ARC, and costs of arbitration facilitated by JSM PCA with place of arbitration (seat of arbitration tribunal) in the Zurich, Switzerland.
Mean adjudicator costs were calculated at hourly rate ₤ 200 (as fit for lawyer adjudicator without data about expert lawyer costs and concurrently consistent with the two main ranges from Report No 12, considering that from among these ranges one is without upper limit) for the case A with extremely low 15 hours budget, for the case B with 25 hours for C with 40 and for D case 50 hours. ANB fee is calculated as ₤ 300. Spot exchange rates of Bank of England (last three years average ) was used for calculations from EUR (1,1842 EUR for one Pound sterling, and 0,8456 Pounds for one Euro). Table No 1: Case costs comparation in ₤
|
Case summary |
Mean adjudication costs |
JSM PCA (EUR in parenthesis) |
|
A Claim sum |
10,000 |
10,000 (11,842) |
|
Fees (without expert+representatives) |
3,300 |
809.35 (957,1) |
|
B Claim sum |
50,000 |
50,000 (59,200) |
|
Fees (without expert+representatives) |
5,300 |
2,825.14 (3,341) |
|
C Claim sum |
100,000 |
100,000 (118 420) |
|
Fees (without expert+representatives) |
8,300 |
4, 327.44 (5,117.6) |
|
D Claim sum |
250,000 |
250,000 (296,050) |
|
Fees (without expert+representatives) |
10,300 |
7,319.3(8,655.75) |
Timetable to the decision compared According comprehensive sources, most adjudications are decided in compliance with Construction Act time limits or in the other words (numbers for 2012) 44 % within the 28 days 37 % in 42 days since referral, but this may be also evidence as to “consistent trend towards longer adjudications” (conclusion of ARC Report No 12). In arbitration time periods binding for arbitrators or arbitration centre are not very typical, but for arbitration facilitated before JSM PCA there is provision in its Rules ( Section 11b Time limits for decision) which reads as follows:(1) JSM PCA, arbitrator and secretary are bound by time limits for decisions, as follows: a) on the procedural motions, taking the evidence, place of arbitration and rules of proceeding – within ten days from the day of delivery of the motion, b) on the objections and challenges, excepting the objection on lack of jurisdiction, on which the Tribunal shall decide in the decision on the merit within thirty days from the day of delivery of the motion, c) on the merit, within sixty days from the day of delivery of the Request for arbitration, d) on the merit, within fifteen days from the day of delivery of the due Request for Arbitration concerning the Bill of exchange. (2) Time limit set up in the subsection 1), point c) shall be prolonged in the case of lack of cooperation of third persons, no more than up to thirty days. Other time limits should not been prolonged. Prima facie one this limits are long, but quite short limits set up in Construction Act has been concepted for purpose (which clearly failed) to uphold adjudication in course of works ( that means before completion of the construction).Moreover, in fact most of arbitration before PCA JSM are completed in 45 days, and most of delays are delays with delivery of the award, which is ex lege finally binding. In situation, when most of adjudications are to be enforced, which can take time counted in months not days, (and such enforcement could be stayed by court on the basis of next-step arbitration or court proceeding) it is not so clear if time limits differing between 28-42 days for non final resolution and 60-90 days for final resolution could be reasonable dettering from “arbitration first” proceeding. Arbitration firstArbitration first is such management of arbitration clause, which open space to the parties to referral to arbitration in construction cases without precondition of adjudication. While adjudication is mandatory proceeding, if arbitration clause does not word by word states precondition of adjudication, any party have right to start arbitration. While opposing party will try for adjudication, there is good reasons to consider, that arbitration with empowered enforcement and possibility of counter-claim shall prevail. In other modelled situation, concurrently pending arbitration and adjudication shall cumulate in the arbitration if adjudicator issues decision against party who referred case to the arbitration. In case of construction contract based only on default mandatory rules on adjudication (whithout agreement on finality of the adjudicator decision) one hard can see practical reasons for opposing party to rely on nonbinding adjudication in situation when arbitration has been started in such cost effective and spead manner as JSM PCA rules offers to the parties.