Definition: Simply stated, 'jurisdiction' is the authority to make a formal decision on a dispute.
Adjudicator's jurisdiction: If the Adjudicator has jurisdiction, they can decide the outcome of the adjudication, and their decision will be binding until enforced in arbitration or litigation.
Challenging the Adjudicator's jurisdiction: A party can make a submission that the Adjudicator cannot decide the outcome of the dispute on which they were asked to adjudicate.
Investigating Jurisdiction:
It is worth noting that the Adjudicator can investigate any challenge to their jurisdiction. If they decide the challenge fails, the adjudication will proceed. Alternatively, if they decide the challenge has merit, they must decline to adjudicate on the dispute.
If the parties agree to be bound by the Adjudicator's investigation, they cannot contest the conclusion of the challenge on jurisdiction.
This article will explore how to raise a jurisdictional challenge, and what you can challenge.
What happens if there is a jurisdictional challenge? / How to raise a jurisdictional challenge.
Options:
- In the Response section of the Adjudication process, the Responding Party may challenge the Adjudicator's jurisdiction. Here, they will ask the Adjudicator to investigate their own jurisdiction, agreeing to be bound by the result. Subject to this, the Responding Party will not be able to challenge the outcome of this investigation.
- The Referring Party can refer the jurisdictional challenge to a second Adjudicator, but as this will not stop the first adjudication, and will therefore lead to two separate simultaneous adjudications, it is rarely used.
- The Referring Party can alternatively request a declaration from the Technology and Construction Court (TCC), that the Adjudicator lacks jurisdiction. However, this option requires a great deal of cooperation between all parties, including the Adjudicator.
- The Responding Party must set out clear grounds for challenging the Adjudicator's jurisdiction, as part of their submissions, whilst continuing to participate in the adjudication. If the Responding Party were not successful in the adjudication, they could challenge whether or not the Adjudicator's decision was valid, providing they maintained their challenge throughout.
Summary of principles relating to jurisdiction
Note:
To validly object to an Adjudicator's jurisdiction, the courts may consider at what stage this issue was raised. If the parties had not raised the jurisdictional issue at the time the Adjudicator was appointed, the courts may find that the parties allowed the Adjudicator to have ad-hoc jurisdiction. This essentially means that the parties had waived the right to raise a jurisdictional challenge.
Raising a jurisdictional challenge may not guarantee a fresh adjudication, nor a new Adjudicator. The following principles may be taken into consideration, amongst other factors:
1. Is there a contract?
There must be a binding contract, and a valid contract within the definition of a Construction Contract within the Housing Grants, Construction and Regeneration Act 1996 (HGCRA). This may be in writing or evidenced in writing.
2. When was the contract entered into?
If the contract was entered into before 01 October 2011, and the contract was not in writing, parties may not have a right to adjudicate.
If the contract was entered into before 01 May 1998, and an adjudication clause was not expressly incorporated into the Contract, then the parties may have no right to adjudicate.
3. Is the contract a construction contract within the definition of s.104(1) and 105 of the HGCRA?
To qualify as a construction contract, there must be (inter alia) an agreement to carry out construction operations. Supply contracts do not qualify. For a full breakdown, see s.104 and s.105.
The dispute must relate to a clause within the construction contract, and specifically arise as a direct result of the contract.
4. Is the contract with a residential occupier and therefore excluded by section 106 of the HGCRA?
Adjudication does not usually apply to domestic contracts, unless the agreement is included within a standard form contract that includes a standard adjudication clause, or if the form of contract incorporates, on some other basis, adjudication provisions.
5. Has the adjudicator's appointment been made in accordance with the contract? Has the referral been validly made?
A contract clause may detail the steps that should be taken to appoint an Adjudicator, including by whom, how, and when the Adjudicator shall be appointed.
You may be able to raise a jurisdictional challenge if the Adjudicator was appointed incorrectly.
6. To adjudicate, has the dispute crystalised?
If a party is not aware of the dispute, then the dispute may not have crystalised. Therefore, it is important to ensure that the dispute has crystallised and this is usually by a form of written notice detailing the dispute, being sent from one party to the other, prior to the Notice to Adjudicate. The purpose of this is to allow the Responding Party to acknowledge they are in a dispute, and respond accordingly. Alternatively, simply ensure that the Referring Party can show the Respondent is/was aware of the dispute, even if they have not responded.
7. Has more than one dispute been referred to the Adjudicator?
Only one dispute at a time can be referred to an Adjudicator. It is therefore possible to raise a jurisdictional challenge if you can show that more than one dispute has been referred. However, there is much case law as to what constitutes a separate dispute. It is possible to raise, in effect, multiple questions, under a single dispute.
8. Has there been a previous adjudication on the same dispute?
Parties cannot refer the same dispute to a different adjudication. The same parties can have multiple disputes on different matters.
9. Are the parties to the contract the same parties who are bringing the adjudication?
The parties to a contract are the parties in the adjudication and any divergence from this may give rise to a jurisdictional challenge.
10. Is there a conflict of interest preventing the adjudicator from acting?
A conflict of interest can lead to a biased decision by the Adjudicator. Should a conflict of interest arise, the court may refuse to enforce the decision. There are specific rules around conflicts of interest, and it is worth understanding the intricacies of this jurisdictional challenge.
11. Did the Adjudicator base their decision on factors that were not referred to them?
The Adjudicator can only decide and issue a decision on the questions contained and set out within the Notice of Adjudication. It is the Notice that defines the scope of any adjudication. However, the parties can expressly agree to allow the Adjudicator to go beyond that.
12. Is there an insufficient connection between the Dispute and the Adjudicator's decision?
There are many reported cases where the Adjudicator has made a decision on a matter which was not disputed. An Adjudicator may exceed their jurisdiction if they mistakenly seek to resolve a wider dispute. Unless the parties agree otherwise, the Adjudicator only has jurisdiction to resolve the questions referred to them.
13. Has the Adjudication been compromised?
If the parties settle the dispute privately during the adjudication by way of a compromise agreement, it is usual for the adjudication to be stayed, for the parties to agree upon who will pay the adjudicator's fees, and for no decision to be issued.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.