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Lord Williams of Elvel: I am sure that my noble friend is right but the problem is, what happens when

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there is an adjudication which is sort of binding subject to practically everything one can think of and when payments, perhaps large sums, must be made and the contract must continue according to adjudication? I would like the Minister to go through the practical circumstances. Where are the parties at that point? Are they bound by the adjudicator's decision until such time as the problem is revisited, to repeat that expression, in one form or another or are they not bound? What is the situation?

Lord Lucas: Adjudication is a right under the Bill. In order for the adjudication to be effective, the adjudicator must be able to issue a decision. That decision must be implemented. Therefore, if the adjudicator comes to a decision, that decision will be implemented and the payments will be made. The only point at issue is whether the adjudication can be reopened at a later date, as though it had never been made, and the whole issue rejudged, or some version of it--I believe that that is what the noble Lord, Lord Berkeley, was describing and it is a common way in which such things are done--or whether that should be an end of it; it should be an adjudication verging on arbitration and something which comes to a clean end.

The Bill does not express itself on that matter one way or another. It allows either form, or any other imaginable form, so long as it fits in with the provisions of the Bill and there is an effective arbitration. We would expect different contracts to use different forms of arbitration. The only time in which we descend into certainty is in the scheme, which provides that arbitration is binding almost as though it were arbitration, although it is not.

Viscount Ullswater: I believe that my noble friend is right. He is describing what I mentioned in an earlier intervention; that the scheme for adjudication should be this quick way of resolving disputes. I believe that the noble Lord, Lord Williams, equally understands that to be the purpose of adjudication. It is the resolution of that at a later date which a contract can agree to by arbitration or by going to the court after the contract has been completed.

It is in order for the work to flow and for the contract to continue that such arbitration is placed on the face of the Bill. If that form of adjudication is not in the contract, as my noble friend said, one must rely on the scheme for construction contracts, which is much more draconian, as I indicated. I know that it is wrong to try to muddle the words "adjudication" and "arbitration" but when I read the scheme--I found great difficulty in doing so--to my untrained mind it was almost a form of arbitration. It would be much more difficult to reopen it at a later date. The scheme is the quick resolution. If what is in the contract is what is required in the Bill, I understand that it can be reopened by arbitration after the contract has ended. However, it is not like the scheme, which would be the fall-back position.

Lord Berkeley: I do not know whether I have understood the Minister. Whether or not the adjudication is binding depends in the first instance on what is written in the contract. However, whatever is written in the contract, if it is not binding, adjudication

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or some other resolution of disputes cannot be opened until substantial completion, as the noble Viscount, Lord Ullswater, said. Am I correct in that interpretation?

Lord Lucas: I shall certainly write to the noble Lord if he is wrong. I believe that he is right and I believe that an award which could be reopened immediately would not be a conclusive adjudication and would not fall within the terms of the Bill as I understand it. I shall certainly write to the noble Lord if there is any doubt about that.

Lord Williams of Elvel: Would the Minister be good enough to copy the letter to me and to the noble Baroness, Lady Hamwee, and my noble friend Lord Howie of Troon, setting out what on earth the Government mean by the provision? I really do not understand it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwee moved Amendment No. 161:

Page 60, line 41, leave out subsection (4).

The noble Baroness said: I had not realised that the amendment would be so topical. In moving Amendment No. 161 I shall speak also to Amendments Nos. 191, 192, 193, 194 and 197.

Amendment No. 161 seeks to delete the reference to the Arbitration Act 1996 in Clause 105. Seeing it at that point I stumbled and wondered whether it might more appropriately appear in Clause 111. However, having listened to the previous debate, I am not sure whether it should be there at all or whether it should be there and strengthened. It may not be wise to take up much of the Committee's time pursuing that matter because underlying issues need to be resolved first.

Amendment No. 191 in Clause 111 seeks to change the subject matter of the clause. Clause 111(1) allows the Minister to:

    "make a scheme ... containing provisions about the matters referred to in the preceding provisions of this Part".
The term "matters" appears to me to include everything that has already been referred to in this part of the Bill; for instance, Clause 101, which defines a construction contract, Clause 102, which defines construction operations, and Clause 103, which deals with the exclusion of residential construction contracts. I do not believe that it is intended to allow the Minister to rewrite those provisions, among others. I have therefore sought to define the scope of the Minister's powers more strictly to what is to be the subject of the scheme for construction contracts.

Amendment No. 192 seeks to suggest that if the Minister is to have powers to make regulations regarding the scheme, we should at any rate address whether he should have similar powers to amend that scheme. I may be told that the clause contains a power to allow amendments, but I tabled the amendment in order to ask that question.

Finally--and I do not believe that this contradicts what I have just said--Amendment No. 197 seeks to provide that regulations made under the section which

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creates a scheme should be subject to approval by resolution of both Houses of Parliament. I was grateful, as I am sure were other Members of the Committee, to see a copy of the draft scheme, which according to the accompanying letter from the Minister one might call a draft draft. He refers to it very much as a first shot, which has an appealing honesty about it and recognises the difficulties that there are in creating a satisfactory scheme.

He says also that the Government intend to have both consultation and discussion before a statutory instrument is laid. The very complexity of the matter and its controversial nature seem to me to indicate that the affirmative resolution procedure will be appropriate.

I take this opportunity to ask the Minister to confirm that that consultation and discussion will be the widest reasonable consultation and discussion with all sections of the industry. Perhaps he will take this opportunity to confirm that. I beg to move.

8.45 p.m.

Lord Howie of Troon: I was rather surprised to find my Amendment No. 194 suddenly popping up. It has the effect of leaving out "Lord Advocate" and inserting "Secretary of State" for Scotland.

I raised this matter on Second Reading and my reason for doing so was quite simple. I did not believe that the Lord Advocate, estimable though he may be, was quite the man to be dabbling in construction contracts. At that time, as I recall it, the noble Lord, Lord Lucas, pointed out that the Lord Advocate was chosen because he knows about arbitration.

That did not help me very much. I know that the confusion is not as great as we thought it was, but we know that there is a confusion between arbitration and adjudication. The scheme will deal with other matters in relation to arbitration and adjudication; for example, payment and so on. I believe that the Secretary of State for Scotland, who has a department not unlike the Department of the Environment, which deals with such matters, is to be preferred to the Lord Advocate. But I leave it at that. The Government may be right. I doubt it but they may be.

I should like to say a few words about Amendment No. 161 in the name of the noble Baroness, Lady Hamwee. That seems to me a very sound, sensible and succinct amendment. I was going to speak about this issue on the debate that the clause stand part until I noticed this amendment.

This is where we get into difficulties. We must not forget that the intention of the Bill, which we applaud, is to help rather than hinder. That is the idea. Everything in it should tend towards helping rather than hindering. Sir Michael Latham wanted an arrangement whereby adjudication was followed by arbitration, for which we have argued constantly and which has been the practice followed in the construction industry since Brunel's time.

Most contracts of any size are carried out under standard conditions of contract. There are quite a variety of those established by the Institution of Civil Engineers and other groups. There are standard conditions of

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contract under which large contracts are carried out and which would almost meet the requirements of Clause 105. They could very readily be tweaked and altered in such a way that they do meet the requirements of Clause 105. Therefore, all contracts of any size in future will be carried out under standard conditions of contract which suit the requirements of Clause 105.

The noble Lord, Lord Lucas, is quite right that through the contracts, adjudication and arbitration arrangements will have been sorted out in the way that we have asked for. The problem is--and this point has been touched upon by the noble Viscount, Lord Ullswater--that smaller contracts may not be carried out under those standard conditions of contract. Under the provisions of subsection (4), the scheme will then apply to those contracts; but, as the noble Viscount, Lord Ullswater, said and as the noble Lord, Lord Lucas, admitted, the provisions of the scheme which hang over the whole of this part of our discussion like a very dark black cloud are more onerous than the conditions in standard conditions of contract.

The Government are saying that, whereas large contracts will be carried out under the standard conditions of contract, small contracts will be carried out perforce under the conditions of this scheme, which are more onerous. Why hit the small contracts when a small contractor is less able to safeguard his interests than a larger contractor? I suggest that subsection (4) should most certainly go. Later I shall suggest that the scheme should go too, but perhaps this is not the time to forecast such dire pronouncements.

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