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Lord Lucas: My Lords, we have now had several opportunities to debate Clause 112, which provides for the appropriate Minister to make a scheme for construction contracts. I hope I need not explain again why we are proposing the power to make such a scheme. However, it might be worth reminding noble Lords that we made it available to the House primarily to illustrate the relationship between the Bill and the scheme and to show what sort of things the scheme needs to cover.

Proposals for the scheme were, as my noble friend Lord Ferrers made abundantly clear when he introduced it, a first shot, a starting point, something to build on. We were not particularly surprised to find that they attracted criticism in Committee. For one thing, as a mechanism designed for use only when a contract is inadequate and for use across a very diverse industry, the scheme must be all things to all men. Such compromises are rarely attractive on first acquaintance. We are also well aware that many had a problem with a procedure which was binding unless parties agreed otherwise. We explained why we adopted that approach, but appreciated that it did not sit easily with current practice in the industry.

It gave me especial pleasure to say, as I did before supper, that we concluded that it would be right that disputes which are subject to scheme adjudication could normally be reopened at practical completion of the contract and that we propose to amend the scheme proposals when we consult, following Royal Assent, because otherwise I would have been faced with the inevitability of going down before the noble and learned Lord, Lord Ackner, as I have seen so many other Ministers do on earlier Divisions.

What concerns me rather more today is that certain noble Lords opposite do not seem fully to have grasped the significance of subsection (2) of Clause 112, which reads,

It is an enormous task to consult the whole of the construction industry. There are some 120 or more major trade groups within the industry, and we propose to consult all of them. We will also consult the major clients and client groupings, and specialists such as construction lawyers, insurers and academics. For the

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original consultation exercise on fair construction contracts, the Department of the Environment sought the views of around 1,500 institutions, companies and individuals. The exercise planned to follow Royal Assent on the scheme for construction contracts would be on a similar scale. But the noble Lords whose amendments we are considering would like to settle the scheme for construction contracts now, and impose something upon the industry which it has little chance to consider.

The scheme as it stands is in no state to be incorporated in the Bill. It is a document which is entirely open to discussion with the construction industry. We have not laid our life on the line on any aspect of it. It is an illustration of what a scheme has to do. It draws the industry's attention to the points that need to be addressed and we look forward to long and fruitful discussions with the industry so as to produce a scheme that is attractive to them. There is no way in which we can do that. Distinguished as the House is this evening, it is a very small House compared with the number of people in the construction industry with whom we must consult and the time available to us is limited compared with the time we intend to take.

It would be entirely inappropriate to embed into the Bill this scheme or any other possible version of it that we might dream up in the next few weeks and months. That would simply solidify something that would need to be completely changed by secondary legislation shortly thereafter and might well have been settled by secondary legislation anyway. We have no intention of implementing any scheme before a proper consultation exercise has been conducted. Because we were asked to do so by noble Lords, we produced a draft to demonstrate the sort of things which the scheme must cover. However, this is neither the time nor the place for settling matters of detail.

I recognise that noble Lords have legitimate concerns about the general shape of the scheme. By introducing amendments that relate to it, they are giving us an opportunity to consider their concerns and to indicate how they would have us adjust our proposals for the scheme. That strikes me as quite right and proper. On that basis, I am happy to offer some comments on the suggestions put forward by the noble Lord, Lord Howie, in Amendments Nos. 179 to 196.

On Amendments Nos. 179 and 183, the noble Lord conceded in Committee that complete independence may not always be desirable in an adjudicator. The Bill would require him to be impartial, and we believe that is clearer and more helpful from a legal point of view than specifying matters of spirit.

We have heard the noble Lord's arguments on Amendment No. 180 several times. What he outlines here may be relatively easy to achieve by contract, but will require careful consideration before we embark on a statutory instrument. However, we propose to provide for a resolution procedure where the dispute may be reopened on practical completion.

Amendment No. 181 would prohibit a firm or organisation from acting as an adjudicator. We have always believed that the adjudicator should be a single

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individual and, when it comes to drafting the scheme proper, we will make sure that neither a registered company nor a partnership can act as an adjudicator.

Amendment No. 182 concerns the right of a party to question an adjudicator's jurisdiction. We believe this is something for which we must provide. If the scheme were silent on the point parties would be much more likely to question jurisdiction in the courts. The section which the noble Lord, Lord Howie, would have us delete would reduce the prospect of court intervention rather than encourage it, as he seems to fear.

I mentioned Amendment No. 183. Amendments Nos. 184 and 185 concern time limits. These are clearly detailed matters on which we would like to take the views of the industry.

Amendment No. 186 would remove the right for an adjudicator to rule a dispute unsuitable for adjudication. This would be entirely inappropriate. It is a general rule of law that any tribunal required to adjudicate something can and should consider whether the matter brought before it is appropriate for decision by that tribunal.

Amendments Nos. 187 and 188 concern detailed procedural matters which should be left to industry consultation.

Amendment No. 189 would have the effect of restricting an adjudicator to consideration of material presented to him, rather than letting him decide procedures. However, we would not wish to restrict an adjudicator's ability to investigate cases without first considering the views of the whole industry.

Amendments Nos. 190 and 191 appear to concern the right of an adjudicator to award interest, but in fact they would have no effect upon the scheme description as drafted, short of removing the reference to an arbitrator. In Committee the noble Lord criticised us for lifting parts of the Arbitration Bill and "shoving" them into the scheme, but now we find him completing the process for us. Perhaps there are parts of the Arbitration Bill that he likes more than others.

What the noble Lord, Lord Howie of Troon, outlines with Amendment No. 192 will require most careful consideration. However, I would like to point out that our proposals for primary legislation are quite consistent with the intent of the amendment. Scheme details must await full consultations with the industry.

Amendment No. 193 affects paragraph 30 of the draft proposals for the scheme, which would allow an adjudicator to come to a provisional decision while he completed his deliberations. Clearly, any such decision would have to be confirmed or replaced by a final decision, even if the dispute were to be reopened later.

Amendment No. 194 would remove the right of a party to refer a dispute back to the adjudicator in the event that a non-monetary decision was ignored. Paragraph 52 of the draft scheme proposals was intended to allow a party to seek financial redress through adjudication in such cases, and we think there is much to commend this. However, we will consult the industry on remedies for non-compliance.

Amendment No. 195 rather labours the point that an adjudicator should not be liable to anyone for an action taken in good faith. However, we have already said that

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an adjudicator should not be liable except where he acts in bad faith, so he could not then be liable to anyone in particular. Amendment No. 195 is simply unnecessary.

Lastly, Amendment No. 196 would give an arbitrator the same powers as the court in the event of a case being reopened. The noble Lord has made an interesting point, and we must look closely at the powers of anyone who is asked to rule on a reopened dispute. I thank him for drawing it to our attention.

I hope that that gives some indication of our openness on matters of detail and, indeed, on matters of principle that are there in the scheme.

I would like to turn my attention to the "rival" scheme of the noble Lord, Lord Howie of Troon, since he has offered it to the House, and since it offers my hard-pressed officials a chance to throw back at the noble Lord, Lord Howie, something of what he has been throwing at them over the past few days.

First, the noble Lord criticised the government version of the scheme at Second Reading for its length. A close reading of Hansard suggests that he then believed the whole matter could be dealt with in as few as 14 lines. Now that the noble Lord has tried his own hand, I hope he will agree that the matter is rather more complex than he first suggested. Indeed, I believe that the only reason his scheme is shorter than our own version is that, in many important respects, it is much less satisfactory.

As the noble Lord said, he has based his scheme on the Conciliation Procedure published by the Institution of Civil Engineers in 1994. Indeed, it almost looks as though the noble Lord has been through that publication and crossed out the word "conciliator" each time it appears, replacing it instead with "adjudicator". Perhaps that is why we see the adjudicator making parties meet each other in paragraph 9 and struggling to help them reach agreement in paragraph 11.

We must be quite clear--the noble Lord's scheme has been tailored for use in civil engineering, with little regard to the construction industry as a whole. No doubt this is why it allows upwards of three months to reach a decision, when many smaller disputes require movement within days or weeks. More importantly, it offers conciliation and not adjudication. In his report, Sir Michael Latham distinguished the two quite clearly. His conclusion was:

    "Most disputes on site are, I believe, better resolved by speedy decision--i.e. adjudication".

I wish to turn now to another point and one on which the government description of the scheme has been roundly criticised. We have been told over and over again by the noble Lord and others that what the industry wants is for disputes to be resolved until practical completion but that it should be possible to re-open them thereafter. That is what we will provide if--as I suspect it will--that view holds throughout consultation. But the Howie scheme, if I may call it that, makes no mention of the effect of adjudication. According to his scheme, the adjudicator produces a recommendation and then starts collecting his fees. Whether parties are bound by what he says, or for how

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long, or whether they have rights of appeal, is left entirely vague. That is one of the reasons why the scheme is shorter than ours.

Finally, I should like to consider briefly the nature of the decision-making process, if indeed this rechristened conciliator can be said to reach a decision at all. This is a strange process. In paragraph 10 we are told that the adjudicator may conduct proceedings,

    "in any way that he wishes".
In paragraph 11 we hear that the adjudicator may consider confidential information which he is not allowed to divulge. In paragraph 16 we are told that the recommendation,

    "need not necessarily be based on any principles of contract, law or equity".
And yet, from this quixotic, covert, inequitable creature--be he conciliator or adjudicator--there is no right of appeal. If parties wish to sign away their rights like this in contract, that is their own look out. But the noble Lord is surely not seriously telling us that we should enshrine it in statute as the back-up for people who do not have a proper contract.

It was with some relief that we saw the amendments put forward at the end of last week by the noble Lord, Lord Berkeley. They certainly make a bad scheme better, although they still do not make it right. It is helpful that the noble Lord, Lord Berkeley, should recognise that the adjudication procedure must have some force and be able to produce a result which requires the parties to act. Since the adjudicator must be called upon to resolve the dispute, the term "decision" is much to be preferred to "recommendation". The noble Lord is also to be congratulated on attempting in Amendment No. 197B to offer the industry a means of resolving its disputes which does not focus solely on the interests of civil engineers.

However, the noble Lord, Lord Berkeley, is still asking us to impose a dispute resolution procedure where the parties' legal entitlements are considered only,

    "within the practical constraints of a rapid and economical adjudication process",
whatever that may mean. Is this cheap and cheerful, or just quick and dirty? I am also more than doubtful about the adjudicator being asked to take a,

    "fair and commercially reasonable view".
Again, these may be matters for a contract, but not for legislation.

In addition, while I welcome the noble Lord's attempts to remedy the deficiencies in proposals that fail to indicate the effect of an adjudicator's decision, I have one or two reservations. In particular I am worried about the effect on certain common law rights of the last sentence of paragraph 16A, and I am also doubtful about decisions which may be immediately overturned by an arbitrator or in the courts. That would not help much in many construction disputes and runs counter to what most in the industry have told us they want.

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I apologise for replying at such length. However, I thought it appropriate when noble Lords have taken a great deal of trouble to put down these individual amendments.

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