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Lord Berkeley: I wish to speak to my Amendment No. 162A. My objective in tabling the amendment is similar to that of the noble Lord, Lord Williams of Elvel. It concerns a worry that many noble Lords expressed during the Second Reading debate as to whether the adjudication was binding or interim and, if it were the latter, at what stage could either party seek arbitration or some other means of resolving the dispute.

We must remember that we are looking at contracts which have a wide span--the largest perhaps like Waterloo Station, which has been mentioned ad nauseam

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this evening as a good example. If the steel roof of the noble Lord, Lord Howie, with its glass had been made six inches too big for the foundations and there had been some adjudication, that would have been fine, but I do not believe that anybody could have expected the contractual dispute to have been resolved in four or even eight weeks. So I personally am convinced that there has to be an option for the adjudication to be revisited, perhaps at a time that one might define as "after substantial completion of the contract", or some such wording. It is not quite so important whether it is a requirement to revisit it. With small contracts I am sure that the two parties could agree that the adjudication was final and binding.

I received my amendment from the Law Society of England and Wales (as distinct from that of Scotland). I do not believe that it has proposed this amendment as a means of increasing lawyers' fees, which is a subject about which we have had much discussion. I believe that it is a genuine attempt to draw out the problem and try to have drafted in the Bill with the utmost clarity whether the decision has to be interim or may be interim or whether there is an option for either party to seek arbitration or some other means of resolving the dispute and when that can take place.

The noble Lord, Lord Lucas, gave us some explanation earlier this evening. As I said, I tabled the amendment basically so that we could have a resolution of the problem and, I hope, clarity. On that basis, I hope that the noble Lord will agree to look again at this amendment.

Lord Lucas: As the noble Lord, Lord Williams, said, to some extent we have already covered the substance of these amendments. The Committee will be aware that we accept the principle behind the point on immunity for the adjudicator.

Amendment No. 160 also suggests that the adjudicator should be able to have regard to codes of practice published by the Construction Industry Board. We are very sympathetic to the suggestion that the adjudicator should be a best practice operator. There is nothing in this legislation which would prevent an adjudicator having regard to appropriate codes of practice. If parties wished to make doubly sure by putting a reference in the contract, that is up to them. They may even choose to insist that certain guidelines are followed. However, we do not feel that this should be a matter for primary legislation.

With regard to the amendment of the noble Lord, Lord Berkeley, and that part of the amendment of the noble Lord, Lord Williams, which refers to it, the effect would be to make an award binding and to put that system into the Bill. We are well aware that many people would like adjudication to resolve disputes only until practical completion of the contract. They would like it to be possible to re-open an adjudicator's decision once the work was out of the way. We have no problem with that. Parties would be free to make that clear in their adjudication agreement under the contract. There is nothing in the Bill which says that adjudication should

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be either one way or the other. We show no preference in the Bill. We do, of course, show preference in the scheme. But that is the subject of a later discussion.

However, we are not prepared to forbid agreement to the contrary; that is, to insist that adjudication could never be permanent. Some in the industry see the advantage of knowing where they stand once an adjudicator has ruled. But not everyone may be prepared to agree to submit to a process which makes temporary decisions but denies them access to the courts, sometimes for years. It would not be right to force them to do so.

I hope, therefore, that the noble Lords will feel able to withdraw their amendments.

Lord Williams of Elvel: Before we finish this discussion, with regard to the first point, I accept that it may not be right to put on the face of the Bill the matter of enabling the adjudicator to have regard to the codes of practice issued by the Construction Industry Board. Nevertheless, there is a case--I may have to return to this point at another stage--for putting the codes of practice issued by that board, which, after all, is the overseer of the whole arrangement, into a slightly special category rather than in just any other code of practice that happened to be around or any other piece of guidance that may have been issued by any other non-statutory body.

I am in some difficulty on the question of the nature of the adjudicator's finding. In practical terms, if there is a dispute between two parties to a contract and if they go to adjudication, the adjudicator will make up his mind and say, "Right, this is the answer." What then happens? Presumably, the payments are made according to whatever the adjudicator has found. Those payments are made under the adjudicator's finding, which is, therefore, to that extent, binding.

What happens when someone says, "Yes, but in the contract we did not actually say that the adjudicator's decision would be binding, but that it would be binding subject to, say, Clause 53(4)(b) of the contract", and so on? What would be the status of any such decision? I am still unclear and I believe that my noble friend Lord Berkeley is unclear, whether the Government want an adjudicator's finding to be binding and payments made accordingly subject to something else, or whether the Government are, as the noble Lord, Lord Lucas, seemed to say, rather neutral about whether or not the adjudicator's finding should be binding and that should be something left to the contract. Can the noble Lord help me on that point?

Baroness Hamwee: Before the noble Lord replies, perhaps I may add that I am increasingly unclear also. The noble Lord, Lord Williams, put the issue very sharply. Adding to my own lack of understanding is Clause 105(4)--a clause to which we shall turn in a moment--which states that:


    "The scheme may apply ... the provisions of the Arbitration Act".

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It seems to add to the optional nature of everything that is being done, which was indeed the point made by the noble Lord, Lord Berkeley, and my amendment earlier today.

Lord Berkeley: I do not believe that there is any situation in which the adjudication could be made binding on all contracts. If there is a serious problem, one cannot expect disputes worth tens or hundreds of millions of pounds to be resolved in four weeks. I do not know whether there is a category of dispute which could be made binding or whether the wording should perhaps be more on the lines of the amendment put forward by the noble Lord, Lord Williams, to discourage people from revisiting the adjudication. That matter does need clarification and resolution. If we in this House have trouble understanding the provision this evening, I worry about the industry applying it in the future.

8.30 p.m.

Lord Lucas: Our position is clear; we do not mind what people agree so long as what they agree is within the terms of the Bill. The Bill does not specify binding or any other particular form of the finding being unbound. We recognise that certainly with regard to major contracts it would be surprising to find arrangements which allowed a dispute involving £1 million or £100 million to be settled in 28 days by a single individual choosing his own evidence and having no form of appeal. However, whatever is provided in the contract, most contracts provide a standard clause which states that the decision is binding until practical completion. If nothing is stated in the contract, as things stand at present adjudication will be binding. Therefore, we expect that, as the provisions stand in the Bill at present, if nothing is stated in the contract, adjudication is binding. If something is stated in the contract to make it less than totally binding, that will be acceptable so long as it is within the terms of the Bill.

Baroness Hamwee: Does the Minister mean "binding" when he says that it will be binding until practical completion, or does he mean that it is an issue which will not be revisited until after practical completion, which is very different from being binding?

Lord Lucas: No. I mean binding as in, "will be settled", and that is the end of it unless you have a dispute which can be taken to the court. That is a strictly limited category connected with errors of law and misbehaviour.

Lord Howie of Troon: That is where the Minister has us worried. There is confusion between adjudication and arbitration. One cannot have a situation in which the adjudicator's decision is binding and can be sorted out only on a point of law, which is what the Minister said. The adjudicator's decision must be subject to revisitation, not only on points of law but on whether he was correct in his decision in terms of the contract and the context in which the contract was carried out.


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