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 the answer is somewhat more complicated.
The reality is that very few adjudicated cases go on to arbitration or litigation after the decision is handed down. This is probably due to parties concluding that the Adjudicator’s decision is more or less where the parties would have ended up had the dispute been finally determined in court or an arbitration tribunal. Alternatively, parties may decide that the costs of re-running the dispute in court or arbitration are simply prohibitive.
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. The result is more and more submissions, often a one or two day hearing, an extended timetable and much bigger legal bills all round.
So what can be done to protect yourself from the costs of adjudication? One obvious answer is to insure the risk. But, 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 you – 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 exclusively through 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 or Gary Brooks.
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 email@example.com.
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