For many years the Irish Construction Industry has been blighted by the tactic of the paying party delaying payment for completed works for advantage. This practice was brought into sharp focus with the collapse of the Irish banking sector and, consequently, the Irish economy in 2008. As a result of the downturn many main contractors became insolvent and this highlighted the large debts accumulated over long periods of time owed by main contractors to numerous subcontractors. In order to address this situation the Government introduced the Construction Contracts Act 2013 (the CCA 2013). The CCA 2013 includes provisions imposing payment entitlements (Section 3(4)), outlawing pay when paid clauses (Section 3(5)) and introducing statutory adjudication in payment disputes in construction into Ireland for the first time (Section6).
Adjudication has been described as a fast track dispute resolution process. It is designed to provide a means whereby disputes in relation to payment can be resolved on a binding, if interim, basis so that money due on foot of such awards becomes immediately payable. Payments are made on foot of enforceable decisions pending the full resolution of the underlying dispute through negotiation, through court proceedings or through arbitration as the case may be.
Statutory adjudication in construction disputes has been available in the UK since the late 1990’s and the statistics available from the UK demonstrate that the vast bulk of disputes between parties come to an end at the adjudication stage once payments have been made. A similar outcome is expected here once the CCA 2013 comes into force. Payment of monies, albeit on an interim basis, alters the dynamic and the respective incentives of the parties to engage in expensive and time consuming litigation.
As a form of alternative dispute resolution process adjudication has similarities with arbitration. The process is structured, the adjudicator must act impartially and must apply and adhere to principles of natural justice. Each party is given an opportunity to present its argument and the adjudicator must avoid ex parte or confidential communications from either of the participants. The process results in a decision or award which is binding on the parties and is capable of immediate enforcement.
One essential and important difference between adjudication and arbitration is the very short timeframe in which the appointed adjudicator must reach his or her decision on the matter. The adjudicator must reach a decision within 28 days beginning with the day on which the payment dispute is referred to the adjudicator (the parties may agree a longer period). The CCA 2013 is compulsory and parties cannot exclude its application (Section 2(5)(b)).
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