Clifford Chance

UNCITRAL Specialised Express Dispute Resolution (SPEDR) Model Clause for Adjudication: Implications for Construction Industry

UNCITRAL is presently developing its model clauses on specialised express dispute resolution, otherwise known as "SPEDR" (Model Clauses).

The Model Clauses provide for:

• Highly Expedited Arbitration
• Adjudication
• Technical Advisors
• Confidentiality

This blog concentrates on the SPEDR clause for adjudication. 

Adjudication

Adjudication is a concept which is familiar to practitioners in numerous common law jurisdictions such as the United Kingdom, Australia, New Zealand and Singapore. In these jurisdictions, adjudication was established through legislation principally in order to address acute cashflow issues being faced by participants in the construction industry:

• In the United Kingdom, the Housing Grants, Construction and Regeneration Act 1996;
• In Australia, each State has enacted its own legislation, including: Building and Construction Indu stry Security of Payment Act 1999 (NSW); and Building and Construction Industry (Security of Payment) Act 2021 (WA);
• In New Zealand, the Construction Contracts Act 2002; and
• In Singapore, the Building and Construction Industry Security of Payment Act 2004.

Whilst adjudication has received some criticism (for example, in relation to "smash and grab" adjudications), proponents of adjudication argue that it has granted contractors the ability to obtain payment (where justified) in the event of non-payment by a principal without incurring the time and expense of potentially lengthy and costly court/arbitration proceedings.

UNCITRAL's SPEDR adjudication clauses will permit parties to refer their disputes to adjudication and, if necessary, subsequently to enforce the adjudicator's decision through arbitration. The Model Clauses can be accessed here.

One of the first relevant considerations in the event that a party wishes to include a SPEDR Adjudication clause is the scope of dispute that may be referred to adjudication. The SPEDR Adjudication clauses permit users to decide whether they wish to refer all, or only specific, disputes, to adjudication.

Adjudication Process

The SPEDR Adjudication process contemplated by UNCITRAL is similar to that set out in its model arbitration clauses. Where a party seeks to commence an adjudication, they must communicate a "request for adjudication containing a description of the dispute, including its basis and an indication of the determination being requested" to all other parties, and once their identity is agreed, or determined by the "appointing authority", to the adjudicator.

Upon the adjudicator's acceptance of appointment, and subject to the adjudicator's power to conduct the proceedings as they think appropriate – including abridging or extending any periods of time, the following deadlines are triggered:

• the adjudicator must consult with the parties regarding matters related to the dispute and procedure within 3 days;
• the responding party must communicate their response to the request for adjudication within 14 days; and
• the adjudicator is required to render their determination within an identified number of days (30 days as currently drafted), albeit this may be extended.

Enforcement

Where a party does not comply with the terms of an adjudicator's determination, the adjudication clause provides for 'Compliance Arbitration' whereby a party may commence arbitration to enforce the adjudication decision through 'Highly Expedited Arbitration'. Highly Expedited Arbitration is proposed to be undertaken in accordance with the UNCITRAL Expedited Arbitration Rules, with certain amendments which abridge the deadlines for rendering the arbitration award and which would be binding upon the parties.

Substantive Arbitration

The parties' ability to commence arbitration regarding the subject matter of an adjudication pursuant to Clause 1 of the SPEDR Adjudication Model Clause is protected by Clause 5. However, UNCITRAL has also drafted an optional clause for inclusion which would result in arbitration proceedings being suspended to the extent that they deal with the same subject matter as an adjudication.

Whilst the optional clause alleviates some concerns regarding concurrent adjudications and arbitrations, there appear to be two additional issues that parties should consider:

• where arbitral proceedings have been commenced in respect of multiple issues, the clause only provides that "arbitral proceedings on issues before the adjudicator" shall be suspended. As drafted, the scope of this clause gives rise to the risk that only the specific overlapping claim in the arbitration, rather than the arbitration as a whole, will be suspended which may result in the parties having to progress parallel dispute resolution proceedings, including expending the cost and resources of doing so; and
• the ability to commence adjudication whilst arbitration proceedings are ongoing may provide parties with significant scope to weaponise adjudications in the course of arbitration proceedings in order to obtain tactical advantages such as extensions to deadlines in the course of the arbitration by way of suspension or disrupting the work of the opposing side by instigating adjudications when memorials and submissions are being prepared to divert resources.

Conclusion

Contractors and subcontractors are likely to welcome SPEDR adjudication clauses as a means to ensure cash flow throughout the course of projects. Whilst the SPEDR adjudication clause is currently drafted with the intention to include the clause alongside an UNCITRAL arbitration clause, there is scope for contractors to seek to include the provision in contracts which adopt the rules of arbitral institutions. However, principals will need to carefully consider:

• how they will ensure that they comply with the tight deadlines provided in the SPEDR adjudication clause in light of the consequences of failure to comply;
• the scope of disputes that they consider should be referable to SPEDR adjudication;
• if incorporating the clause alongside institutional rules, whether those institutional rules provide for expedited arbitration; and
• the potential cost and time impacts in the event that concurrent arbitration and adjudications are commenced.