UK: adjudicator allowed to rule on his own jurisdiction

If parties agree that an adjudicator can determine his own jurisdiction and that his decision will be binding on them, then, on an application for enforcement of the decision, the court will not re-open the adjudicator's finding: WSP v Dalkia [2012] EWHC 2428 TCC.  Michael Mendelblat in our construction department reviews this case.

Background

This case was decided in August 2012 but has only just been reported.  The claimant sought summary judgment against the defendant in relation to an adjudicator's decision.  The defendant contended that the adjudicator did not have jurisdiction to deal with various claims made by the claimant.

The parties' contract was based on the NEC3 professional services form but the Housing Grants Construction and Regeneration Act 1996 did not apply and accordingly the relevant adjudication provisions were those provided in NEC option clause W1.  These are quite different from option W2 (to be used where the Act applies) and provide time limits within which matters are to be referred to adjudication.  If they are not complied with, then by clause W1.3(2) neither party may subsequently refer their claim to the adjudicator or the tribunal, thus creating in effect a limitation clause.  However, the parties had entered into an agreement by which they revised the terms of this clause.  The agreement also provided that its effect and interpretation should be subject to the exclusive jurisdiction of the adjudicator in the first instance and whose decision was final and binding on the parties, unless and until revised by the English court. 

Decision

Jurisdiction

The first question for the court was whether the adjudicator had the right to rule on his own jurisdiction.  The court referred to the case of Thomas-Fredric's (Construction) Ltd v Wilson [2003] EWCA Civ 1494. This decided that if parties agree that the adjudicator may determine his jurisdiction and that they would be bound by that ruling then enforcement will be ordered in the short-term, even if the adjudicator was plainly wrong on the issue (first limb).  Even if the parties have not submitted to the adjudicator's jurisdiction, summary judgment may still be given if the adjudicator's ruling on the jurisdiction issue was plainly right (second limb).  In the present case, the court concluded that the parties had given the adjudicator exclusive jurisdiction as to the effect and interpretation of the agreement which was equivalent to determining his own jurisdiction.  His decision would be final and binding on the parties and the case was therefore within the first limb of the Thomas-Frederic's decision. The court rejected the employer's argument that the wording "unless and until revised by the English Courts" meant that the court could re-open the question of jurisdiction on a summary judgment application.

Time limits

Although not formally part of his judgment, the court considered the interpretation of the agreement in relation to the time limits set out in clause W1.  It noted that the language used in the NEC Contract was that "a party does not refer any dispute" other than in accordance with the time limit and that this meant "cannot refer" or "may not refer".  However in this case the parties had agreed to extend time and they were bound by that term of their agreement which was in conflict with the provisions of clause W1 and was intended to take precedence over them.  The court did not regard such a conclusion as un-business-like on the basis that the agreement resulted from discussions between the parties as to the manner in which the final account should be dealt with.

Comment

Regarding jurisdiction, the starting point is that if an adjudicator has no jurisdiction to determine a dispute, his decision will be invalid and will not be enforced by the court. As such, challenges to jurisdiction are a common means of avoiding enforcement. An adjudicator does not have jurisdiction to decide his own jurisdiction unless the parties refer the dispute over jurisdiction to him and agree to be bound by his decision on jurisdiction. As such, parties should think very carefully before bestowing blanket jurisdictional powers on adjudicators as this is likely to prevent future appeal. It is unusual for parties to give an adjudicator power to decide his own jurisdiction for this reason. On the facts of this case, the outcome was an unlikely consequence of the parties' drafting.

On time limits, where option W1 does apply, parties should be careful to ensure that they abide by the applicable time limits.  However, if the 1996 Act applies, then the different provisions of option W2 will be applicable where the time-limits are not included.