Construction Articles

Jurisdiction is important.  If the adjudicator lacks it, his decision should not be enforceable.  Many jurisdictional challenges are raised in an attempt to avoid enforcement.  Many such challenges fail. 

 The message from the Courts is loud and clear: if you have a jurisdictional argument, you must reserve your right to raise it.  If you don't reserve your right, you lose it.  As recent case law proves, this has proven something of a trap for the unwary.

An adjudicator's jurisdiction

To put it simply, when the adjudicator gives his decision, he must be acting within his powers.  If he is not acting within his powers, then he will lack jurisdiction.  If he lacks jurisdiction, the decision will not be binding; it will be null and void.

There are numerous types of jurisdictional challenges that can be raised.  Common examples include:

• The dispute hasn't crystallised. In other words, a dispute must exist between the parties. The adjudicator does not have the power to preside over a dispute that does not exist yet
• The adjudicator has not been properly appointed. The adjudicator must be appointed in accordance with the procedure set out in your contract or the Scheme for Construction Contracts (depending on which is applicable)

Jurisdictional challenges

If the adjudicator does lack jurisdiction, then in theory, the Courts will not enforce his decision.  His decision becomes meaningless.  However, it's not that simple.

The responding party will often raise jurisdiction challenges in an attempt to avoid enforcement of the adjudicator's decision.  However, the Court is likely to find that if the responding party did not raise its jurisdictional objection at the earliest opportunity, it cannot later raise that objection.  By staying silent or not expressing its objection clearly enough, the responding party may inadvertently waive its right to raise a jurisdictional challenge.

Reserving your rights

Broadly speaking, there are two ways in which you should reserve your right to raise a later jurisdictional argument; by general reservation and by specific reservation.

In all cases and as a bare minimum, it is good practice for the responding party to generally reserve its rights as to the adjudicator's jurisdiction.  Indeed, as a matter of course standard wording should be included in the responding party's submissions.  The general reservation needs to be made at the right time and must use the right words in the context of the particular adjudication.

In Bothma & Anor (t/a DAB Builders) v Mayhaven Healthcare Ltd [2007] EWCA Civ 527, the Court held that the responding party's general reservation was sufficient to entitle it to challenge the adjudicator's jurisdiction during enforcement proceedings.  This approach has been upheld again in the recent case of GPS Marine Contractors Ltd v Ringway Infastructure Services Ltd [2010] EWHC 283 (TCC).

However, a general reservation of your rights to later raise a jurisdictional challenge is not guaranteed to succeed.  The comments of Akenhead J in GPS Marine are ominous.  He indicates that if the general reservation is not made clearly and at the appropriate time, then your reservation might fail:

"One can reserve generally or specifically.  I will leave open the issue as to whether a general reservation as to jurisdiction without any hint or suggestion as to what the grounds are can be effective; it may be so indefinite as to be a meaningless and ineffective reservation but it may be that in a particular context a general reservation may suffice."

Along with your general reservation, if you know of a specific jurisdictional argument, you should specifically reserve your right to use that argument.  Do not rely solely on one type of reservation.  If your specific reservation fails and you didn't make a general reservation, you will be left empty handed.

A responding party found this out the hard way in Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890 (TCC).  In this case, the responding party (Paradigm) raised a couple of arguments that it classed as jurisdictional.  In fact, its stronger jurisdictional argument that no dispute had crystallised, was held by the Court to be quite correct.  For parts of the claim, no dispute had crystallised and the adjudicator lacked jurisdiction.

However, the problem for Paradigm was that its representatives had failed to properly reserve its position during the adjudication.  No general reservation was made.  Instead, Paradigm argued that two specific reservations were made.  In fact, the reservations made by Paradigm's representatives were not reservations, they were more criticisms of the method adopted by the referring party.

Akenhead J identified this and went onto enforce the adjudicator's decision in full, even though it was clear that the adjudicator lacked jurisdiction.  The basis for the enforcement of the decision being the ineffective reservation of Paradigm's rights in relation to the jurisdiction of the adjudicator.

This judgment might seem harsh, but the message is loud and clear: you must unambiguously reserve your position in relation to jurisdiction.  You will not succeed if you attempt to dress up criticisms/complaints about the referring party's conduct as genuine reservation of rights.

Sage advice is given in Building Law Reports (also edited by Akenhead J) regarding the outcome of Allied v Paradigm:

"This underscores the importance of explicating that in making submissions as to an adjudicator's lack of jurisdiction, one is not consenting to be bound by his or her decision in that regard.  This is something of a trap for the unwary.  Many parties either represent themselves in adjudications, or have claims consultants do so rather than experienced solicitors.  It is important that, unless a party wishes to be bound by an adjudicator's decision on jurisdiction, a referring party reserves its position most carefully."

Even where you may have adequately reserved your rights, you may not have negotiated your way around the jurisdictional minefield just yet.  There are other ways in which you can inadvertently submit to the adjudicator's jurisdiction.  Watch out for:

• Inadvertently electing to accept the adjudicator's decision, also known as "blowing hot or cold". Even if a responding party maintains an objection to jurisdiction during and after an adjudication, it may still inadvertently then elect to treat an adjudicator's decision as valid. For example, it may rely on the decision and pay part of the sum awarded or ask the adjudicator to modify his (apparently disputed) decision under the slip rule
• Do not give the adjudicator jurisdiction to determine his own jurisdiction. Again, standard wording should be used to let the adjudicator know that he does not have such jurisdiction
• After you've made your reservation of your rights, all correspondence and submissions should be clearly identified as being without prejudice to your assertion that the adjudicator does not have jurisdiction

Tom Holroyd, Solicitor - Construction, Engineering & Projects department

If you would like any more information about this, or related construction matters, please do not hesitate to contact Sean McCay, Head of the Construction, Engineering & Projects department, on 0800 840 4929 or by e-mail: law@pannone.co.uk