When Sir Michael Latham issued his “Constructing the Team” report in 1994 and adjudication was first floated as an idea to resolve disputes quickly, efficiently and at low cost, he could never have foreseen that the process of resolving construction disputes by adjudication would evolve into the complex process that it is today.
I could write a large essay speculating on the reasons for this but my own personal view (it may well be wrong) is that the courts have realised that very few cases that have been adjudicated end up in litigation or arbitration. For this reason the courts are keen to make sure that the adjudication process is seen to run fairly and that published decisions are as close as possible to what the court’s judgement or an arbitrator’s award would be, based on the same facts and legal arguments delivered in the same very tight time scales.
If you have been involved in an adjudication over the last few years you will know that it has become a high pressure, legalistic, complex and expensive process that should only be embarked upon by those that are thoroughly prepared, brave and well represented.
If you don’t believe what I am saying, ask any party that has been involved in adjudication over the last few years and they are likely to tell you that the process of referring disputes to adjudication is becoming increasingly expensive. It would be easy to blame this on the legal profession hijacking a process that was supposed to be quick and cost-effective, but I suspect that the answer is somewhat more complicated and in reality it is probably the case that most parties will conclude that the costs of re-running the same dispute in court or arbitration would simply be prohibitive. An adjudicator’s decision is therefore likely to be the final word on the dispute.
So, with parties realising that adjudication is likely to be the one and only referral of a dispute to a third party for a determination, parties are increasingly prepared to invest more and more resources in order to try to get that all important win. This results in more and more submissions, often a one or two day hearing, an extended timetable and much bigger legal bills all round.
Readers will know that in all but exceptional circumstances each party has to bear its own costs of representation. These costs can be very substantial and if you are the losing party you will also be expected to pay the adjudicator’s fees and expenses. So, what can you do to protect your company from this experience? You might be thinking that you are never going to start an adjudication so what is the problem, but this will not help you if you are forced to respond to an action that is taken by a disgruntled Employer, Contractor or Sub-Contractor. You may not want to fight but you may have no choice.
So what can be done to protect yourself from the costs of adjudication? One obvious answer is to insure the risk. However, as Adjudicators invariably lack the power to deal with inter-party costs, insurers have been very reluctant to insure a party’s exposure to its own legal costs and those of the Adjudicator if the decision goes against it, that is, until now.
The answer to the conundrum of the spiralling cost of adjudication may finally have been addressed with the introduction of ALADINS.
Adjudication Legal And Dispute INSurance is a full scope legal expenses insurance policy available to Contractors, Sub-Contractors and Consultants in the UK exclusivelythrough The Vinden Partnership and Watson Laurie Insurance Brokers. In exchange for a modest annual premium the policy insures a Client’s liability to pay legal expenses arising from a whole range of disputes arising under Commercial Contracts through to Employment disputes. Most importantly, however, is that legal costs arising from adjudication proceedings under construction contracts are covered by ALADINS with legal expenses cover of £1,000,000 available in any one year of insurance limited to £100,000 per claim. Premiums are calculated on a declared turnover basis so by way of an example, a company with an annual turnover of £10 million would be charged an annual premium of £6,000 plus IPT.
At the risk of stating the obvious and in the event of a dispute proceeding to adjudication, an insured party’s own costs and exposure to the adjudicator’s fees are insured. ALADINS will not respond where claims are adjudged to have little or no chance of success but in reality such claims have never been pursued in any event. ALADINS will respond, however, where a claim or the defence of a claim is adjudged to have reasonable prospects for success.
ALADINS has been two years in planning and is available to purchase from 1 October 2015. For further information on ALADINS and/or a no obligation quotation please contact either Steve Padley (firstname.lastname@example.org) or Gary Brooks (email@example.com)
Peter Vinden is a practising Arbitrator, Adjudicator, Mediator and Expert. He is Managing Director of The Vinden Partnership and can be contacted by email at firstname.lastname@example.org.
For similar articles please visit www.vinden.co.uk
Limit of £100,000 any one claim, £1m in the aggregate
Excess: £2,500 each & every claim
Cover only for disputes £20,000 +
Sections of cover:
Construction Contract Disputes, Contract Disputes, Criminal Prosecution, Employment Disputes, Tax Protection, Property Disputes, Data Protection, Statutory Licence, Personal Injury, Wrongful Arrest, Jury Service Allowance
Only covers contracts entered into after inception date
All Adjudication Expenses shall be first met out of any damages, compensation or monies received in that adjudication or subsequent litigation or settlement thereof
The client if pursuing and they won would pay for the adjudication expenses out of any damages or compensation or monies received in that adjudication or subsequent litigation or settlement thereof. If the client lost the adjudication expenses would be picked up by the legal expenses policy.
The client if defending and they won or lost would have the adjudication expenses paid for by the legal expenses policy.
Subject to set criteria otherwise individually underwritten.
You must notify Watson Laurie Limited immediately in any of the following circumstances, providing full details in order that your premium and terms can be reassessed:
• If there is any cause, event or circumstance which may give rise to a claim being made under this insurance which has not already been notified
• If an Insurer has ever refused commercial legal expenses insurance, imposed special terms or declined to renew a commercial legal expenses insurance policy.
• If there has been more than one claim or dispute to which this insurance would have applied or any disputes in which fees or expenses exceed £3,000 in the last 3 years.
• The Insured is not domiciled within The United Kingdom of Great Britain and Northern Ireland.
• If the Insured’s Turnover exceeds £20,000,000
• Excludes property developers