16 March 2021
Under Construction - Q2 2021 – 3 of 5 Insights
The courts have shown continued support for adjudication ever since the Construction Act came into force, and that support was also evident in a recent decision concerning enforcement of an adjudication decision in the context of a foreign jurisdiction clause. The novel issue to be considered was that although the construction works were carried out in England, the parties had provided for the courts in Paris to have exclusive jurisdiction. Did that impact on whether the TCC were able to grant summary judgment to enforce an adjudicator's decision?
There was no doubt that the works were caught by the Construction Act. The fitting out works were carried out by the claimant sub-contractor at One Bishopsgate Plaza Hotel in London under a supply and installation agreement dated May 2019. Even though the construction works were to be carried out in England the parties chose that the contract should be governed by Italian law and that disputes were subject to the exclusive jurisdiction of the Paris courts.
A dispute arose as to payment and the claimant commenced adjudication proceedings. The claimant was awarded approximately £450,000 which it then sought summary judgment to enforce the adjudicator's decision.
The adjudication took place under the Scheme for Construction Contracts, and the Scheme provides at paragraph 23 that the decision of the adjudicator is binding until the final determination of the dispute by litigation, arbitration or agreement between the parties.
It is well known that the intention behind the Construction Act was to produce a speedy binding and interim decision. As Mr Justice Dyson said in the decision of Macob Civil Engineering v Morrison Construction (1996), the Construction Act was intended:
"… to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement … Parliament has not abolished arbitration and litigation of construction disputes. It has merely introduced an intervening provisional stage in the dispute resolution process. Crucially, it has made it clear that decisions of adjudicators are binding and are to be complied with until the dispute is finally resolved."
Although the parties' arrangements were governed by Italian law, it is the location of the works, not the governing law, that determines whether the Construction Act and the provisions regarding adjudication and payment apply. Foreign law contracts can therefore be caught by the Construction Act.
Following the expiry of the transitional period and Britain's exit from The European Union jurisdictional questions are determined by the Hague Convention where the parties have included an exclusive jurisdiction clause. The interpretation of two Articles of the Hague Convention were considered by the Court:
In respect of Article 6(c), the Claimant argued that "it would be manifestly contrary to the public policy enshrined in the 1996 Act, or alternatively it would be manifestly unjust, to refuse to enforce an otherwise enforceable adjudicator's decision" (paragraph 22) on account of the exclusive jurisdiction clause. However, the judge was not persuaded by the Claimant's arguments concluding that the Claimant had not discharged the burden of proof and that:
"If Parliament considers that the cashflow problems affecting the construction industry, and the consequent need to address this problem by way of a speedy mechanism for settling disputes in construction contracts on a provisional, and interim, basis, warrant a derogation from the binding character accorded to an exclusive jurisdiction clause in favour of a foreign court so as to enable an adjudicator’s decision to be enforced in the English and Welsh (or Scottish) courts, then it will need to make a declaration in respect of construction contracts under and in accordance with art. 21 of the 2005 Hague Convention (paragraph 54)."
However, in respect of Article 7, the court was persuaded that the reality of the summary judgment application was that the court was granting an interim rather than a final or conclusive remedy meaning that the Hague Convention did not require the court to suspend or dismiss the Summary Judgment proceedings. The parties would then be left to litigate the underlying dispute in the courts of Paris.
The decision was consistent with the approach set out in MBE Electrical Contractors v Honeywell Control Systems (2010) in relation to arbitration provisions in construction contracts and the enforcement of adjudicators' decisions. Where a construction contract contained an arbitration provision the "pay now, argue later" policy of the Construction Act required the courts to enforce the interim adjudicator's award before final determination by the parties' chosen forum, in that case arbitration. In the ordinary course a party could not avoid paying an adjudicator's award by seeking to stay enforcement proceedings in favour of arbitration.
A similar approach was required in relation to foreign exclusive jurisdiction clauses.
by Rebecca May