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Lord Bowness: My Lords, there is little that I can add to the expert words that have already been spoken this morning. However, there is one part of the regulations on which I should like to ask the Minister to address the House when she responds. I refer to Regulation 25 which deals with the adjudicator's fees. It says:
- "The adjudicator shall be entitled to payment of such reasonable amount as he may determine by way of fees and expenses reasonably incurred by him. The parties shall be jointly and severally liable for any sum which remains outstanding following the making of any determination on how the payment shall be apportioned".
As a solicitor in private practice, I am bound to point out to the House that I view with envy the idea that one can be the sole determinator of what is reasonable as regards one's fees.
However, on a rather more serious note, we are very often talking in construction contracts about small businessmen in contract with very large firms. While I appreciate that this is a fast track, and while I accept that when the matter was discussed in the other place it was said that it was unlikely that large fees would be incurred, nevertheless, the size of the fee very often depends on the ability of the person to pay. Indeed, that decides whether or not the amount is viewed as large or small.
I am somewhat unhappy that there appears to be nothing in the regulations to resolve a dispute about fees. Mr. Raynsford, the Minister's honourable friend,
said that the adjudicator would have recourse to the courts for enforcement of payment if the parties fail to meet the fees that were provided for and that provision has to be made through the courts for enforcement in that respect. Likewise, it appeared to be suggested in another place that the parties could have recourse to the nominating body if they felt that the adjudicator had demanded unreasonable fees and expenses.Nevertheless, that all seems to me to be rather complicated and potentially expensive for what is supposed to be an inexpensive and fast-track procedure. I hope that the Minister will be able to address that point when she replies. I apologise for the fact that I was not able to give her prior notice of that question.
Baroness Farrington of Ribbleton: My Lords, to be asked to approach this matter with clear eyes and a clear mind is quite difficult. As all noble Lords who have spoken today have acknowledged, we are dealing with quite a complex matter. The noble Lord, Lord Hacking, was certainly right when he referred to the diverse views expressed within the industry. I listened to the comments made during the debate with great interest. There is clearly strong support in principle for the scheme and the principles behind it.
However, before I turn in detail to the points raised in the debate, I should like to make one or two brief general comments about the orders before the House. I believe that that will help to put the points raised into context and will show that the Government intend to make absolutely sure that the industry benefits from Part II of the Housing Grants, Construction and Regeneration Act 1996 and benefits from it as soon as possible.
The construction industry is a complex operation. It often involves a number of different processes carried out by different contractors, sub-contractors, suppliers, professionals and specialists. These players may have different interests. A complex network of construction contracts normally sets the ground rules by which they act and interact. However, things do sometimes go wrong and disputes arise. There are often disputes about what has or has not been paid and those disputes often drag on, costing time and money.
Part II of the Act is introduced with cross-party support and with the support of the construction industry. Its principal aims are, first, to ensure that disputes over payments become rarer because construction contracts are clearer over what is to be paid and when; and, secondly, to provide a straightforward and speedy means of resolving disputes through adjudication.
I turn now to some of the detailed points that were raised during the debate. The noble Baroness, Lady Hamwee, raised the issue of paragraph 20(a) of the scheme. This paragraph gives the adjudicator the power to open up any decision or certificate unless the contract states that it is final and conclusive.
I am aware that this issue has caused concern to some parts of the industry. The Government took advice on that point and views were not unanimous. However, we accepted the argument that the "final and conclusive" proviso was important in order that the contracting
parties should be able to agree whether certain certificates and decisions should be opened up. It is only common sense that there are some decisions--and we are thinking of technical and professional matters--which parties will be prepared to have "signed off" and not reopened. However, I know that there are anxieties about the misuse of the paragraph 20(a) provision. I believe that they are misplaced, but, nevertheless, we will keep an eye on the workings of the scheme. If abuses of that provision become apparent once the legislation has been in operation for a while, we are prepared to act.A further point was raised concerning enforcement of the adjudicator's decision under paragraph 24 of the scheme, in particular the importing of Section 42 of the Arbitration Act. For adjudication to work, it is vital that the adjudicator's decision is complied with by both parties. That will only happen in practice if there is a quick, unambiguous and practical route to the courts in cases of non-compliance.
The England and Wales scheme adopts a mechanism based on Section 42 of the Arbitration Act 1996. The function of Section 42 in the context of arbitration proceedings is to ensure that any procedural order made by the arbitration tribunal may be enforced in the courts. Adjudication decisions are of course not mere procedural orders. They are quick, practical decisions which are intended to be enforced without challenge until a final decision or agreement is achieved. The use of Section 42, suitably amended, is quite fitted to the type of enforcement required under adjudication. It seems unlikely that the words,
- "unless the parties agree otherwise",
in Section 42 of the Arbitration Act will cause problems. A person who goes to the trouble of specifically excluding a reference to Section 42 of the Arbitration Act from his contract is unlikely to be relying on the scheme in the first place. Such a person is more likely to use adjudication provisions which are more suited to his circumstances. However, I know that there are those in the industry who are concerned about the application of Section 42. I can assure noble Lords that we shall consider whether this causes significant problems in practice. If it does, we are prepared to consider changes to the scheme.
The noble Baroness, Lady Hamwee, referred to Section 42. I hope I can offer some clarification. Section 42 was brought into force on 31st January 1997. The procedure is covered by the rules of the Supreme Court amendment order 1996, which also came into force on 31st January 1997. Section 42 is not given a particular mention and is therefore covered by the general provision of the rules. The "white book" which contains the rules of the Supreme Court is published biennially. The latest edition does not include the 1996 orders.
My noble friend Lord Howie mentioned adjudicator nominating bodies. I should perhaps run through the background to the current provision at paragraph 2(3) of the scheme. The original intention, as set out in the consultation paper issued in November 1996, was that the scheme itself would list adjudicator appointing or
nominating bodies. This was intended to provide a straightforward fallback for obtaining an adjudicator if the contract did not make provision for this, or if the contractual provision had failed. The problem is that it would have required an amended affirmative order every time a nominating body wanted to be added to or removed from the list. That would not have been a good use of Parliament's time. Therefore Ministers decided that there should be no statutory list. That this was the correct decision is borne out by the fact that one of the potential adjudicator nominating bodies has already withdrawn.The scheme now provides more flexibility for referring parties who wish to find an adjudicator quickly. It does not set strict criteria for adjudicator nominating bodies as to do so would immediately create scope to challenge the whole adjudication process. It does, however, place a clear and unambiguous duty on the adjudicator to act impartially, and includes various other checks aimed at ensuring that the adjudication is carried out in accordance with the Act. The Department of the Environment, Transport and the Regions and the Scottish Office will initially make available lists of organisations which offer their services as ANBs. The kinds of bodies which will be included on these lists will be professional bodies, legal bodies and industry umbrella bodies which have indicated their willingness and ability to offer an adjudicator nominating service.
The noble Lord, Lord Hacking, raised a point concerning the payment provisions in the scheme. They are based on lengthy and detailed consultation with the industry. The department took on board many comments made by the industry following informal consultation with the industry in the summer. I do not for one moment pretend that the provisions will be the ideal solution for every contract, but they provide a workable menu of clauses which can be imported as and when they are needed.
The noble Lord, Lord Hacking, commented on Section 108 of the Act. I hear what he says but I am afraid that I am unable to comment today on the wording of the Act. Adjudication was requested by the construction industry. It is still awaited with some enthusiasm by the industry. The Minister for London and Construction has said that the Government will monitor progress. The Government want this legislation to work for the construction industry and will do their best to ensure that it does so. The industry has waited a long time for Part II to be brought into effect. I fully expect the orders which we have debated to allow that to happen. With such a diverse industry it has been impossible to obtain a consensus. However, we have tried to listen to all the arguments which have been put to us and have come up with a scheme which reflects the interests of the industry as a whole.
The noble Lord, Lord Bowness, asked what controls there are as regards the levels of fees which an adjudicator may charge. Paragraph 12(b) of the scheme places a clear duty on the adjudicator to avoid unnecessary expense. The Government have not introduced any further requirements in the scheme on the level of fees or expenses. I do not think, for example, that it would be appropriate to list fee scales in the
scheme. Every increase would require the affirmative resolution of the House. I hope that the industry will use this as it is intended; namely, as a way of minimising the cost and disruption which have hampered many construction operations. But, as I said, if any aspects of it cause problems, we are prepared to make changes.
The type of matter covered in the legislation is untested and it clearly makes sense to keep a careful watch that it is benefiting the industry in the way intended. There are a number of ways in which monitoring can be carried out. What is vital is that the experiences of the adjudicator nominating bodies, professional institutions, industry bodies and, above all, those in the industry who use the legislation form part of the overview of how the legislation is working in practice. We shall be prepared to revisit the scheme if there are significant problems. I commend the orders and regulations to the House.
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