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Clause 107, page 60, line 23, leave out 'resolution by an adjudication' and insert 'adjudication under a'.


Clause 107, page 60, line 26, leave out 'procedure must' and insert 'contract shall'.

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Page 60, line 26, at end insert--

'( ) enable a party to give notice at any time of his intention to refer a dispute to adjudication;'.

Lord Lucas: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 79 to 81. At the same time it may be convenient to consider Amendments Nos. 82 to 85. Again, I believe that the noble Lord, Lord Howie, has an amendment in this group.

I am sure that I do not need to remind your Lordships that when the Bill was last in this House there was a great deal of debate about the effect which an adjudicator's decision should have. The noble Lords, Lord Williams of Elvel, Lord Howie of Troon, and Lord Berkeley, all spoke to amendments in their name which were designed to ensure that adjudication should produce only a temporary decision, and the noble Baroness, Lady Hamwee, was one who queried our use of the word "resolution" in connnection with adjudication proceedings. As a result of those representations I gave an undertaking at Report that the adjudication under the scheme for construction contracts would enable adjudication decisions to have temporary effect.

By the time the Bill reached another place the Government decided that the meaning of the word "resolution" was insufficiently understood by the industry and we sought to remove it. That is the purpose of Amendment No. 79.

We also brought forward a new subsection to spell out the effect of an adjudicator's decision in much more detail. Our proposal was that an adjudicator's decision should be binding, which we consider essential, but that parties might reopen a dispute if they chose before an arbitrator or the courts. However, mindful not only of the views expressed in another place, but also of the debate that had already taken place in this House, we finally concluded that the industry did not wish to be given the option of permanently binding adjudication. The Government also considered the representations of professionals who feared that rapid but permanent decisions on matters concerning professional competence might have a damaging effect on professional indemnity premiums.

Accordingly I am now asking the House to agree, in Amendment No. 84, a provision which would make an adjudicator's decision binding but temporary. Although we hope that the vast majority of adjudicated decisions will effectively become permanent, we are proposing that this should be possible only with the agreement of parties after the event--or if arbitration or the courts reach the same conclusion.

Amendment No. 80 would substitute the word "contract" for procedure at the head of subsection (2) of Clause 107, and Amendment No. 85 would place all the emphasis on the contract in subsection (4) by omitting the word "procedure".

The noble Lord, Lord Howie of Troon, may recall that, in Committee, he proposed an amendment which would have required the start of the process in which a dispute was referred to an adjudicator to begin with an

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act of formal notification. Similar suggestions were also made in another place and, although the Government remain doubtful that such a step is really necessary, we have accepted that there are many in the industry who would like to see the process begin formally in that way. We have brought forward therefore Amendments Nos. 81 and 82 which have this effect.

Amendment No. 81 makes it clear that notice may be given at any time. We believe that this is essential if notification is not to provide recalcitrant parties with an opportunity to block the adjudication procedure with artificial and unreasonable constraints. We feel that that is what could happen if Amendment No. 81A, in the name of the noble Lord, Lord Howie of Troon, were to be accepted.

Amendment No. 83 would allow the adjudicator to extend the period for his consideration by up to 14 days with the agreement of the referring party. There were those in another place who advocated that the adjudicator should have sole discretion to extend his consideration indefinitely, but we remain firmly of the opinion that this would be most inadvisable and would inevitably result in adjudication becoming much slower and more expensive than it need be. However, we have accepted that it might be desirable to allow some possibility of an extension in circumstances other than those for which the Bill already allows where parties are agreed that the adjudicator should be given more time. Amendment No. 83 would mean that, where there was a real possibility of a few more days making a difference to a case, the adjudicator would only need to persuade the referring party to allow him more time. Amendment No. 83 would give an extra degree of flexibility to the adjudicator without compromising, to any great extent, our priorities of speed and fairness. We have had to strike a balance, and I believe we have got it about right.

Moved, That the House do agree with the Commons in their Amendments Nos. 79 to 81.--(Lord Lucas.)



Line 2, after ("time") insert ("within the period prescribed in the contract").

Lord Howie of Troon: My Lords, this is again a small amendment. I should first like to express my thanks to my noble friends and to Baroness Hamwee for the care with which the Government responded to our arguments on the complicated business of adjudication and the distinction between adjudication and arbitration which we tried over and over again to make and which I think the Government eventually got hold of. However, I am not sure that they have quite got hold of the point. I was rather entranced by the remark of the noble Lord the Minister when he said that the adjudication was to be binding but temporary. I know that I am only a Scot and we look at things somewhat differently, but it is hard to see how it can be both binding and temporary. I see the noble Lord, Lord McColl, sitting there. He is a very eminent medical man and he could talk about a binding bandage being temporary. However, this is a different thing altogether. I cannot see that arbitration can be binding if it is temporary. However, I think that the Government means

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well here. They are trying to do what we want them to do but they cannot bring themselves to say it. They have gone a good way towards the arguments which we put forward and we are grateful to them for that.

Government Amendment No. 81 contains three words which have caused a good deal of concern in the civil engineering profession. It is a provision to enable a party to give notice "at any time" of his intention to refer a dispute to adjudication. In the nature of things, a construction contract is completed over a period of time, sometimes over quite a long period of time, depending on the complications of the project. However, there comes a time when the project is deemed to have been completed. Some sections of the industry are worried that the words "at any time" might mean that the question of arbitration could be raised long after the project had been completed.

My amendment relates to the scheme, which we have not mentioned today, rather than to other contracts, and proposes that the contract should suggest a time limit within which adjudication has to be undertaken. It is a simple issue. Neither contractors nor clients like to think of the spectre of arbitration hanging over their heads for an unspecified period. They believe, rightly or wrongly, that the wording "at any time" raises that spectre.

Moved, That Amendment No. 81A, as an amendment to Commons Amendment No. 81, be agreed to.--(Lord Howie of Troon.)

Viscount Ullswater: My Lords, without Commons Amendment No. 81, I believe that the problem of notification of a reference of a dispute for resolution by adjudication would exercise the writers of contracts to an unreasonable degree. Parties might be tempted to write into the contract something that would seek to undermine the usefulness of this part of the Bill--for example, to the effect that disputes could only be notified within 24 hours of their arising, or only before 9.30 in the morning. This amendment gives the parties a formal starting time for the referral period. I believe that nobody would wish the right to refer to become a source of dispute in itself. I am certain that the scheme for construction contracts should not be used as the first fall-back position for all minor problems with a contract and that this is therefore a sensible amendment.

When your Lordships considered this clause when the Bill was before the House on the previous occasion, the concept that adjudication should be available at any time was, I believe, always implicit. However, it seems that during the passage of the Bill through another place the requirement for adjudication to be available at any time has become explicit.

The concept that there should be a strict time limit upon the referral period is the subject of Amendment No. 81A to Amendment No. 81 proposed by the noble Lord, Lord Howie. I understand that some sections of the industry are concerned about what they see as the widening of the timescale for the opportunity for referral of disputes for adjudication. Sir Michael Latham put forward the concept of adjudication for the quick settling of disputes. He recommended in his report,

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Constructing the Team, the three basic principles which this section of the Bill follows: first, that there should be no restriction on the issues capable of being referred to the adjudicator, conciliator or mediator, either in the main contract or in sub-contract documentation; secondly, that the award of the adjudicators should be implemented immediately; and, thirdly, that any appeals to arbitration or the courts should be after practical completion and should not be permitted to delay the implementation of awards. I believe that the Government have interpreted those principles in the words of Clause 107 and that the government amendments which my noble friend has put forward complement that position.

I believe that going to arbitration could be much more costly and therefore should not be the first recourse for the parties. The government amendment will not allow a strong party to the contract writing in difficult and onerous conditions which would have the effect of limiting substantially the effectiveness of this section. Therefore, I am content to support the government amendment. I am not content to support the amendment moved by the noble Lord, Lord Howie of Troon.

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