A new model clause on adjudication from the UN’s Commission on International Trade Law aims to facilitate a quick and cost-effective dispute resolution process, writes Arpan Gupta, construction knowledge counsel at the global law firm HFW.
UNCITRAL’s (the United Nations Commission on International Trade Law) recently published Model Clause on Adjudication is a welcome development for parties involved in complex construction projects.
Amongst other things, the clause facilitates a quick and cost-effective dispute resolution process and solves the issue of international enforcement of the adjudicator’s decision, which could lead to a wider application of contractual adjudication, especially in jurisdictions where there is no statutory adjudication process.
UNCITRAL published its Model Clause on Adjudication in November 2024 with the intention for parties to obtain a fast and cost-efficient determination by an adjudicator with the requisite experience, so that disagreements are resolved quickly, allowing any projects to be kept on track.
Paragraph 2 of the clause goes on to provide detail on the following key features of the adjudication procedure – scope of the adjudication, request for adjudication, appointment of the adjudicator, appointing authority, consultation, response to the request, conduct of the proceedings, determination and its binding but not final nature.
A key feature of the model clause is the quick dispute resolution process – the adjudicators are to reach their decision within 30 days from the acceptance of appointment. This 30-day window can be extended up to a maximum of 60 days by the adjudicator, but only in exceptional circumstances and after consultation.
The model clause also tries to solve one of the issues with the contractual adjudication process – the lack of binding nature of the adjudicator’s decision internationally. For example, FIDIC does have a provision under which the adjudicator’s (or dispute boards’) decision is final and binding unless a Notice of Dissatisfaction is issued. However, this decision cannot be enforced in many jurisdictions. The model clause solves this issue by providing for a highly expedited compliance arbitration process.
Paragraph 4 of the model clause provides that parties can submit disputes to arbitration that have been determined in any earlier adjudication proceedings under paragraph 2. Therefore, no party is limited by any aspect of the adjudication and the arbitral tribunal is not bound by any previous determination.
Finally, paragraph 5 of the model clause indicates that parties could institute adjudication and arbitration concurrently. If the parties want to avoid this possibility, optional wording is provided which states that (i) any arbitration proceeding can only be commenced once the adjudicator has made his or her determination, or (ii) if the adjudication is commenced while the arbitration proceedings are continuing, the arbitral proceedings can be suspended at the request of a party.
One potential drawback to the model clause is that it gives discretion to the adjudicator to determine whether a particular dispute is suitable for adjudication. This could lead to uncertainty as parties may use this provision for tactical arguments.
It will be interesting to see how parties to a complex construction project adopt and adjust the model clause to their contracts.
Click here to read the full HFW briefing on the UNCITRAL model clause.
