Arbitration and enforcement of an adjudicator's decision

Whilst the default position under many construction contracts is that, in the event of non-payment of an adjudicator's decision recourse would be had to a court to enforce the decision complex issues can arise where parties have agreed that disputes arising between them should be finally decided in arbitration.

The recent case of Northumbrian Water Ltd v Doosan Enpure & Anor [2022] EWHC 2881 (TCC) provides some useful guidance on the interplay between a court and an arbitral tribunal in adjudication enforcement proceedings, where Mrs Justice O'Farrell considered whether a stay of the enforcement proceedings pursuant to section 9 of the Arbitration Act 1996 should be granted.

Northumbrian Water Ltd ("NWL") had engaged Doosan Enpure Limited and Tilbury Douglas Construction Limited acting in an unincorporated joint venture ("JV") for works to upgrade Horsley Water Treatment Works. The contract was based on the NEC3 Engineering and Construction Contract Option C. The parties had agreed that Option W2 should apply, which made provision for adjudication, and "the tribunal" was specified as "arbitration".

Disputes arose between the parties arising out of cost-overruns, delays to the works and quality issues. NWL terminated the contract and claimed that the amount due to it following the termination for Contractor default was £50,999,343.30. The JV disputed that any sums were due to NWL and it claimed it was entitled to an adjustment to the Prices under the Contract in the sum of £32,854,840.23.

In the event, NWL served a Notice of Adjudication seeking, amongst other things, a decision that the JV should pay NWL £26,168,652.47. The adjudicator decided, amongst other things, that the JV should pay NWL the sum of £22,458,540.04. The JV did not pay the sums directed by the adjudicator and issued a Notice of Dissatisfaction which stated "[t]he Responding Party intends to refer the matters addressed by the Decision… for the final determination of the Dispute."

NWL raised court proceedings seeking enforcement of the adjudicator's decision, which were resisted by the JV. Dealing firstly with the validity of the adjudicator's decision, Mrs Justice O'Farrell held that "…the adjudication decision is binding on the parties unless and until revised in arbitration and is enforceable as a matter of contractual obligation" and that subject to the section 9 stay "… the JV has no defence to the application for enforcement of the adjudication decision and NWL is entitled to summary judgment".

In turning to the application for a section 9 stay, it was noted that the JV's Notice of Dissatisfaction did not include any challenge to jurisdiction or any breach of the rules of natural justice. On that basis, the JV had therefore lost its right to challenge the validity of the adjudicator's decision in court or arbitration. It followed that whilst the JV still retained the right to refer the underlying dispute to arbitration, the validity of the adjudicator's decision was not then something under the contract which was to be referred to arbitration and section 9 of the Arbitration Act 1996 was not engaged.

The court also had regard to Clause W2.3(11), which it construed as the parties having agreed that the court has the power to enforce an adjudicator's decision pending any revision in arbitration.

In this case the JV's attempts to resist enforcement were unsuccessful. The court did, however, recognise and acknowledge the parties' agreement to arbitrate, where it distinguished between a claim to enforce an adjudicator's decision that is agreed to be binding and enforceable (which here could be decided by the court) with claims relating to the underlying dispute (which here were to be finally decided by the arbitral tribunal).

Managing the interface between adjudication, arbitration and litigation presents many challenges and requires careful consideration of the particular facts and circumstances. This is well summarised in Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] 1 BLR 93 where the court's reasoning was that a losing party may be faced with a choice to either challenge the validity of the adjudicator's decision in court arguing that it should not be enforced or to treat the decision as valid and binding on an interim basis, with the dispute then being referred to arbitration for final determination.