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Lord Howie of Troon moved Amendment No. 153:

Page 60, line 27, at end insert ("and the other party is under a corresponding obligation to submit to such a procedure").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 158 and 162 which are also in my name.

This amendment is self-explanatory and self-evident. There seems very little point in having a right to refer to a dispute if the other party to the dispute is not obliged to defer to the procedure. That is more or less the point which my noble friend Lord Williams raised a short time ago, to which he receive a somewhat encouraging reply from the noble Lord, Lord Lucas. I hope that the noble Lord will take the same view of Amendment No. 153. It is a matter of right and obligation.

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Amendment No. 158 is more meaty. Clause 105 is probably--I think certainly--the most important clause in the Bill since it deals with the speedy resolution of disputes, which is the best way to achieve speedy construction and the saving of costs in the construction industry.

However, throughout the industry the clause is regarded generally as inadequate and confusing. As I said on Second Reading, the draftsman of the Bill appears to have confused--and continues to confuse in relation to the scheme with which we shall deal later--arbitration and adjudication. They are separate matters and should be kept separate. The only supporter of the clause as it stands appeared to be the Government. Even the Law Society is against it.

As I reminded the House on Second Reading, adjudication is not a new idea, although the noble Earl seemed to think that it was. Traditionally in the construction industry, the adjudicator is either the engineer or the architect. He acts in a quasi-judicial way, trying to resolve disputes so as to expedite the contract, leaving at the end, after he has made a decision in each dispute, the possibility of the parties going on to arbitration, which is a different matter. It is different because the arbitration cannot be appealed against except on points of law, whereas the decision of the adjudicator--the engineer or architect--can be appealed against. That is the whole idea of the backstop of arbitration or even the courts.

In Amendment No. 158 I have asked that the adjudicator should be an independent individual rather than a company or a partnership. I go on in paragraph (e) to require that the decision is to be implemented and:

    "be final and binding upon the parties unless and until it is revised by an arbitrator".
That means that the decision must be accepted and acted upon. It is not "can be" or "may be" but "must be". I then go on to provide that where a decision includes payment, that must be discharged within a very short time limit so that the injured party is not injured further by undue delay.

I turn now to Amendment No. 162. Subsection (4) relates to the scheme to which we shall turn later and refers to an Arbitration Act which has not yet been passed. The Arbitration Act is entirely irrelevant to the adjudication process. It has nothing whatever to do with it, although in their scheme the Government are trying to impose a modified form of arbitration when it should be adjudication.

An adjudicator's decision does not involve an arbitral award and it cannot be enforced as such. I am told that there is a legal case, Cameron v Mowlem, in relation to that. Moreover, I remind the Minister that this part of the Bill is wholly unacceptable to the industry. It seems to me rather weird that a Bill which seeks to help the industry includes provisions which the industry will not accept. Perhaps the Government are trying to impose them on the industry against its will.

It is extremely important that the adjudicator should be immune from prosecution. He must be indemnified. If he is not, he will not come forward. He must be

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protected against making a decision which may be slightly mistaken. He must have that protection. That is the same protection which the arbitrator has. Why should an arbitrator be indemnified but an adjudicator not? There is no answer to that question. The two should be treated in exactly the same way.

I do not want to delay the Committee but Clause 105 is the most important part of the Bill. If the Government wish the Bill to work--as I am sure they do--it is essential that it should work in harmony with the industry and not against the grain. I beg to move.

Viscount Ullswater: The noble Lord, Lord Howie of Troon, is right to say that Clause 105 is a very important part of the Bill. I believe that what is required on the face of the Bill is an outline of what adjudication clauses in contracts should include. That would not allow parties to a contract just to strike out adjudication clauses when preparing a contract, which I understand happens at present. Indeed, Clause 105 would not allow such a practice to take place.

It must also be the intention of the clause to deal with disputes in a limited time in order to keep the work on the contract flowing. That is another reason for having a dispute resolution process by adjudication rather than necessarily referring everything to arbitration or to the courts at a later stage. I understand that adjudication takes place now and that this is to make certain that the contracts about which we are talking should provide the opportunity for an adjudicator to do his work.

If a contract has that intention and the procedures include what is set down in the Bill, then the rather more draconian measures that we have seen outlined in the draft scheme of construction contracts will not come into play. As the noble Lord, Lord Howie, indicated, they are very much more draconian; indeed, the process is very close to a form of arbitration. That seems to me completely the right approach. It will encourage the industry to act responsibly in knowing that adjudication, in the first instance, can be an interim form of settlement. At the same time, the final result can be argued at arbitration or in the courts at the end of the contract. It will not withdraw that right.

I believe that it would be in the interests of both sides to provide for a quick way of resolving disputes. I say that because the scheme, as I mentioned, is much less flexible for later alteration. Therefore, if you do not have the right form of adjudication on the face of the Bill, the scheme would provide another form which is, as I said, much less flexible.

I believe that my noble friend the Minister should look carefully at Amendment No. 153 which would at least get both sides to the table. I am also attracted to paragraphs (c), (d) and (e) of Amendment No. 158 tabled in the name of the noble Lord, Lord Howie of Troon, as I believe that there is a requirement for the adjudicator to be an independent person. Again, paragraph (e) would encourage the parties to a contract to settle the matter satisfactorily rather than leave matters unresolved. Therefore, I give a certain amount

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of encouragement to the noble Lord, Lord Howie of Troon. I hope that my noble friend the Minister will do likewise.

Lord Rodgers of Quarry Bank: I join with the noble Viscount, Lord Ullswater, in expressing my support for Amendment No. 158. I do not want to speak for long on that amendment, but I believe, as the noble Viscount rightly said, that it begins to open up the whole question of Clause 105 and why it is that a recommendation made in the report of Sir Michael Latham--a report which was so widely supported--seems to have been lost in translation. That has produced much opposition to the clause. I am sure that the Minister is aware of that fact. I hope that he will be emollient when given the chance, take the clause back and look at it again to ascertain whether it implements the decision of Latham in the way intended.

Perhaps I may give Members of the Committee an anecdote. Some years ago I had responsibility for rooms that were available for dinners and receptions. A construction firm entered into a contract for an evening reception and everything was settled. The price per head was agreed; the attendance was expected; and there was no complaint about the quality of the drinks or the service. However, when the bill for the evening was returned it was only paid to the extent of two-thirds of the total. The matter was brought to my attention and I had to decide what should be done. I was asked to write to the chairman of the firm to express deep concern. It was then that the message came to me that it was always the practice of that firm in the construction industry to withhold some part of every bill on principle and to leave it open to negotiation at a later stage. Great surprise was expressed that I had been upset by such a normal practice. However, when the firm learnt that that was not the custom in the catering business, the rest of the bill was promptly paid.

I mention that example because it is a matter upon which Sir Michael Latham put his finger and which won very general applause. I refer to the way that very substantial sums of money are regularly withheld, occasionally for a good reason but often for no reason at all. It was on that account that Sir Michael Latham put forward the proposals on adjudication which are included in the clause.

I do not want to discuss all the matters that are wrong with the provisions. Indeed, there is great confusion about the clause in the minds of those who have read the Bill concerning adjudication and arbitration. A great deal of support exists for the idea of adjudication and the consequences which follow, especially in relation to an appeal. If the Minister has not had an opportunity to take full account of the views of the industry, I hope that he will do so in the light of what has been said this evening. It is a most important part of the Bill. It must be right. There may be very good reasons why the department would like to make some changes to the Bill. I hope therefore that it will pursue that course and not be put off by others who might see advantages in leaving the clause as it is.

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6.45 p.m.

Lord Berkeley: Listening to the noble Lord, Lord Rodgers of Quarry Bank, I wondered whether the work he carried out as regards the rooms would be covered under Clause 103 as being a "flat", a house, a "dwelling" of multiple occupancy, or whatever. It would be an interesting academic exercise.

I turn now to Amendment No. 153. I believe there is some confusion as regards Clause 105. I have received many representations from the industry. Is it the Government's intention that any party to a construction contract within the long definition in Clause 102 should be able to go for adjudication? If that is the case, is the other party to the contract required to join in the adjudication? Or is it optional? I believe that I know the answer. However, I hope that the Government will consider clarifying this part of the Bill so as to make the legislation simpler for those we are trying to help have an easier contractual life.

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