The UK’s Construction Industry Council (CIC) has announced the upcoming publication of a new low-value disputes adjudication procedure (CIC LVD MAP).
The MAP is to be published on 18th March 2020 in response to growing construction industry concerns about the increasing complexity and prohibitive costs of adjudication.
Adjudication is currently unaffordable to many SME’s, and the CIC LVD MAP encourages the use of adjudication as a disputes resolution process where the amount in dispute is small.
The CIC said that the overarching objectives of the CIC LVD MAP are to provide a:
- Clear streamlined adjudication procedure where costs are lower and more predictable.
- Method of allowing newly qualified Adjudicators to gain experience deciding Low Value Disputes.
Therefore, the purpose of the MAP is to provide a simple and cost-effective procedure to make adjudication more accessible for SME’s and others involved in low-value claims.
The new low-value disputes adjudication procedure will be aimed at disputes where claims are for £50,000 or less, and the issues in dispute are relatively uncomplicated.
According to CIC “The new adjudication procedure is the result of two consultations with the construction industry and other stakeholders, from which comprehensive and informed feedback was considered. The document sets out a streamlined adjudication procedure for Low Value Disputes and, by linking the Adjudicator’s fee to the amount claimed, provides certainty as to how much the Adjudicator will be paid for making an Adjudicator’s Decision.”
The new MAP will also include an outline timetable for the procedural stages, giving users a simple but flexible approach to the main stages of the process.
In the UK, Part II of The Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009 (“the Construction Act”) introduces a statutory adjudication right for parties to a construction contract.
The statutory adjudication applies to contracts for the carrying out of construction operations in England, Wales, Northern Ireland or Scotland.
For a discussion on which contracts are covered by the construction act please see my earlier post here.
The Act also applies to agreements to provide architectural, design or surveying work or to provide advice on building, engineering, interior or exterior decoration or on the laying out of landscape, in relation to construction operations.
The decision of an adjudication is final and binding, provided it is not challenged by subsequent arbitration or litigation.
However, the general rule is that no costs are recoverable by the party that succeeds in the adjudication – subject to an award of the adjudicator’s fees.
This can make low-value disputes adjudication unattractive and inaccessible to many SMEs.
Secondly, the level of the adjudicator’s fees can vary significantly between appointees and can become significant.
TeCSA’s low-value disputes adjudication services
Last June the Technology and Construction Solicitors Association (TeCSA) launched a pilot adjudication service for low-value disputes (“LVD”), where the amount claimed was under £100,000.
The pilot’s purpose was to improve access to the statutory right to refer disputes arising under construction contracts to the quicker dispute resolution system of adjudication.
Following the success of the pilot scheme, the TeCSA’s low-value disputes adjudication service became part of the TeCSA’s adjudication offering as of January 1 2020.
To fall within the TeCSA’s LVD Adjudication Service, the claim must not exceed £100,000 (exclusive of VAT and interest).
The key benefit of the TeCSA’s LVD Adjudication Service is that adjudicator’s fees will be capped in accordance with the following table:
|Up to £10k||£2,000|
|Up to £10,000 to £25,000||£2,500|
|£25,000 to £50,000||£3,500|
|£50,000 to £75,000||£4,500|
|£75,000 to £100,000||£5,000|
Note that the claim value excludes VAT and interest. Therefore, for example, a claim for £100,000 plus VAT and interest would qualify.
The TeCSA’s LVD Adjudication Service applies to adjudications under the Construction Act or under contractual procedures equivalent to an adjudication under the Construction Act.
The downside is that the TeCSA’s LVD Adjudication Service it is limited to adjudications run under the TeCSA scheme and procedure.
Many standard forms of contract allow a variety of nominating procedures, which does not always include TeCSA.
By way of example, NEC requires the adjudicator and the nominating body to be named in the Contract Data Part 1 and the procedure used is the NEC procedure in the adjudicator’s contract, so it is difficult to see how the TeCSA fees could apply.
The JCT contract also allows parties to name the adjudicator and to select a nominating body in the Contract Particulars.
Where no adjudicator nominating body is specified then parties will have to choose one of the bodies listed in the JCT – the list does not include TeCSA.
To ensure that the mechanism is included in your contract you need to ensure that the adjudicator is to be nominated by TeCSA.
For further information or to discuss a matter, please contact me.
This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by Adriana Badescu.