Sorry, ladies; in Ireland ‘adjudication’ is a male-only affair!

The attraction of a cheap and rapid dispute resolution procedure for construction claims without lawyers is comparable to the mythical Siren song to sailors, who dive headlong into the sea to their deaths at its irresistible call. 

The fear of Sirens may explain why only men were appointed to the national Irish panel of adjudicators.  This gentlemen’s club comprises thirty male adjudicators and one chairman, all of whom are familiar names and experienced arbitrators/mediators.  Availability and conflict of interest are immediate issues that spring to mind with this Old Guard. 

It is most regrettable that the ministerial panel lacks any young, gender balanced, (and less expensive) professionals, who could learn, hands on, through a risk-free adjudication process, and become Ireland’s next generation of mature and experienced arbitrators.

There is a need in the construction industry to train up the New Guard of arbitrators.  The appointment of the current ministerial panel seems a missed opportunity to open up doors in the industry.  This under-representation (or more precisely non representation) of female adjudicators is certainly not encouraging for junior practitioners and may act as a deterrent for certain aspiring adjudicators. 

In 2013 Ireland (inspired by the UK model, albeit with an Irish twist), introduced adjudication through the Construction Contract Act (the “Act”).  The commencement date, three years later, is 25 July 2016.  Payment disputes arising under a construction contract thereafter can be subjected to the statutory adjudication process. 

The Act has a similar objective as its’ UK cousin, namely to improve cash flow in the building industry.  Essential to achieving this goal is a binding and immediately enforceable decision (irrespective of whether such decision is subsequently challenged in arbitration/court).  Pay now, argue later is the modus operandi.  In that frame of mind and given the objective of the Act, it could be said that parties should not be able to contractually opt out of their right to refer matters to adjudication.  This is where the Act is vulnerable.

While the position in the UK is clear and transparent, the drafting of the Act has exposed the Irish adjudication process to vagueness and constitutional challenge.  

No Opt Out - Should the Act be construed to prohibit parties from contractually waiving their right to refer payment disputes to adjudication, the Act could, possibly, be unconstitutional. 

Opt Out -        Should the Act be construed to allow the parties to waive the right to refer payment disputes to adjudication, then the constitutionality challenge outlined below disappears and the presumption of constitutionality is preserved. 

In a previous draft of Section 6(12) of the Act, the adjudicator’s decision was not binding. The wording was clear-

“The decision of the adjudicator shall not be binding if the payment dispute is referred to arbitration or proceedings are otherwise initiated in relation to the decision unless the parties agree to accept the decision as finally determining the payment dispute” [emphasis added]

The reason for this provision was the protection of public monies.  It was deemed not acceptable that tax payers’ money be paid out under a decision of an adjudicator which could subsequently be overturned and the monies prove unrecoverable, having being paid out and dispersed. 

However, as enacted, section 6(12) states that:

“The decision of the adjudicator, if binding, shall, unless otherwise agreed by the parties, be treated as binding on them for all purposes and may accordingly be relied on by any of them, by way of defence, set-off or otherwise, in any legal proceedings.” [emphasis added]

The phrase “if binding” is not defined in the Act.  This not only lacks clarity, but adds confusion to what should be a straightforward process.  So much so that one could be forgiven for thinking it was deliberately drafted in such a way as to invite interpretation by a Court, with all the subsequent comfort, guidance and acceptance of the new process that judicial clarity would bring. 

Had the legislator intended to have a binding, and immediately enforceable adjudication decision, it is also questionable why, in drafting the Act, it was deemed necessary to explicitly entitle the executing party to suspend the works where amounts due under the decision of the adjudicator are not paid.  This right then subsequently disappears “after the decision of the adjudicator is referred to arbitration or proceedings are otherwise initiated in relation to the decision”.  This seems more leaning towards the earlier draft of Act that the decision of the adjudicator is not binding if the payment dispute is referred to arbitration or proceedings are otherwise initiated in relation to the decision.

The opt out right is complicated by Section 2(5) of the Act.  This states that the Act will apply “whether or not:

a) the law of the State is otherwise the law in relation to the construction contract, or

b) the parties to the construction contract purport to limit or exclude its application”.

It is uncertain at this stage how the Irish Courts will interpret the above clauses.  Furthermore, the Court will have to consider the constitutionality of the Act.  Indeed, according to Article 34.1 of the Constitution:

“Justice shall be administered in courts established by law by judges appointed in the manner provided by this Constitution”. 

Article 37.1 recognises a limited restriction to the administration of justice by judges:

“… in matters other than criminal matters, by any person or body of persons duly authorised by law to exercise such functions and powers, notwithstanding that such person or such body of persons is not a judge or a court appointed or established as such under this Constitution”.

The Irish Court have accepted the administration of justice by arbitrators governed by Ireland’s modern Arbitration Act 2010.  While the Irish Courts have traditionally respected party autonomy and the independence of the arbitral process, there is a substantial difference between the arbitration and statutory adjudication processes.  Unlike arbitration, the statutory adjudication is not a voluntary process.  It is an imposed implied term, and it is unclear whether parties can expressly agree otherwise.  It is therefore not certain at all how the Irish Courts will deal with this potential constitutional issue. 

Saoirse is an Irish female name, meaning ‘freedom’; ‘free will’, and quite aside from the manner in which the Act has been drafted, the absence of both women and freedom of choice in the process currently proposed, may doom the validity of statutory adjudication in Ireland.  This legal debate can, perhaps, be summarised as follows:

• If parties, notwithstanding Clause 2(5) of the Act, could contractually opt out of the adjudication process, then the adjudication process could be construed as a voluntary process akin to the arbitration process. Consequently, the function and the power of the adjudicator could be enforced.
• If the Act, however, be interpreted as preventing parties from opting out of adjudication (and to avail directly of existing Court and/or Arbitral processes), then the party’s autonomy has been removed and the imposed administration of justice by non-judges might just go too far and would not fall under the ambit of the exception of Article 37.1 of the Irish constitution. As such the Act would be unconstitutional.

Until the Act is challenged, the jury is out on this.

By allowing the opting out option the Act will, arguably, have lost its function, but the fundamental right of parties’ autonomy will be preserved.   Through that idol, individuals possess a general freedom to choose with whom to contract, whether to contract or not, and on which terms to contract.  And if need’s be, move to the dispute resolution mechanism as they see fit.

Last but not least, the Rules of the Superior Courts have not yet been amended to deal with the rapid enforcement of an adjudicator’s decision.  Without such aligned Court rules, the situation exists where a party could refer the dispute to arbitration pending enforcement of a adjudicator’s decision and an arbitral award could be well issued before the decision of the adjudicator has been enforced by leave of the Court.  Sin scéal eile, as Saoirse might say; but! that’s another story…

June 2016

Bruno Herbots

Partner at Herbots Solicitors

www.herbots.ie