UNCITRAL Publishes a New Model Clause on Adjudication

UNCITRAL’s recently published Model Clause on Adjudication is a welcome development for parties involved in complex projects, facilitating a quick and cost-effective dispute resolution process by requiring adjudicators to reach their decision within 30 days from the acceptance of appointment. The Model Clause also solves the issue of international enforcement of the adjudicator’s decision by introducing a highly expedited compliance arbitration process. However, the Model Clause allows the adjudicator to determine whether a particular dispute is suitable for adjudication – which could create uncertainty. But regardless of its merits and any potential drawbacks, the Model Clause could lead to a wider application of contractual adjudication, especially in jurisdictions where there is no statutory adjudication process.

Background

On 28 November 2024, the United Nations Commission on International Trade Law (UNCITRAL) published its Model Clause on Adjudication (Model Clause). This was published as part of a wider package of four model clauses¹ relating to Specialised Express Dispute Resolution. The model clauses were drafted by UNCITRAL’s Working Group II with the goal of achieving expeditious dispute resolution, comprehension of technical matters and maintaining confidentiality.

The intention of the Model Clause is for the 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. The Model Clause, under paragraph 1, allows for all disputes to be settled by arbitration under the UNCITRAL Arbitration Rules (UAR) when a party deems it necessary.

Key Features of the Adjudication Procedure

Paragraph 2 of the Model Clause goes on to list the key features of the adjudication procedure. These are:

Scope of the Adjudication

Two options are available in relation to the scope of the adjudication. Option 1 provides a broad and inclusive approach where any dispute under the contract could be subject to adjudication. The adjudicator has the power to determine that parts of the dispute or the whole dispute referred to him or her is not suitable for adjudication. Option 2 provides the parties with the option to decide that the adjudication would apply to specific type of disputes. These disputes could just relate to payment issues or claims after a claim of payment has been made.

Request

The party commencing the adjudication needs to initiate a request for adjudication, which will contain a description of the dispute, the basis of the dispute, and an indication of the determination being requested. This request should be sent to the opposing parties and once the adjudicator is appointed, to the adjudicator.

Appointment of the Adjudicator

Paragraph 2 of the Model Clause also lays down the procedure in relation to the appointment of the adjudicator. The parties are to agree on the adjudicator who is appointed. If the parties do not agree on the adjudicator after 7 days from a proposal for an adjudicator made by a party has been received by all other parties, the Appointing Authority can appoint the adjudicator promptly.

The Explanatory Notes to the Model Clause recognise the practice of appointing an adjudicator before any dispute arises so as to streamline the proceedings, saving the parties’ time and costs.

Appointing Authority

The parties are required to designate the Appointing Authority, which could be, a professional body or institution with knowledge of and familiarity with experts in the relevant field. Unlike an arbitration proceeding under the UAR, there is no default appointing authority for adjudication. The parties consequently need to ensure that they specify the appointing authority when using the Model Clause.

Consultation

The adjudicator is to consult with the parties within 3 days of his or her acceptance of appointment. This encourages the first consultation to occur before the respondent submits its response to the request. This allows the respondent to focus its response on the issues raised during the consultation.

The Model Clause gives the adjudicator the capability to hold additional consultations with the parties, if he or she chooses to. This ensures ongoing engagement and the opportunity for further input from all parties involved.

Response to the Request

The response to the request is to be submitted within 14 days from the acceptance of appointment for the dispute by the adjudicator. The respondent will be reminded of the 14-day deadline, in relation to submitting the response, by the adjudicator during the initial consultation.

Conduct of the Proceedings

The adjudicator may conduct the proceedings as he or she considers appropriate for the dispute, providing the adjudicator with the leeway to allow or request additional submissions from the parties, such as rejoinders and surrejoinders, during the investigations stage of proceedings, if necessary.

The Model Clause consequently facilitates adjudications to be run in a manner that would best suit the dispute, as long as the parties are treated with equality and given a reasonable opportunity to present their case.

Determination

One of the most noteworthy features of the Model Clause is that the adjudicator is to make its reasoned determination within 30 days from the acceptance of appointment for the dispute. This 30-day window can be extended up to a maximum of 60 days by the adjudicator, but only in exceptional circumstances and after the adjudicator has consulted the parties. The parties can of course agree to a different time frame, in addition to allowing the proceedings to be extended.

Binding but not Final

The adjudicator’s decision is contractually binding, and the parties are to comply with the determination without delay. Any party dissatisfied with the adjudicator’s decision retains the right to refer the dispute to arbitration (either under the UAR or the UNCITRAL Expedited Arbitration Rules (Expedited Rules)) to obtain a final award on the same issues that were the subject of adjudication.

Compliance with the Adjudicator’s Determination

Paragraph 3 of the Model Clause states that any dispute in relation to the compliance with the adjudicator’s determination can be referred to arbitration under the Expedited Rules.

The Model Clause suggests some modifications to the Expedited Rules such as:

• Reducing the period of time for the parties to agree on the appointment of a sole arbitrator from 15 days to 7 days.
• Reducing the period of time within which the arbitral tribunal needs to finalise the conduct of the Arbitration from 15 days to 7 days.

In addition to the above, article 16 of the Expedited Rules states that the decision of the sole arbitrator needs to be issued within 6 months from the date of the constitution of the tribunal. Article 16(2) allows for an extension of an additional 3 months in exceptional circumstances. The Model Clause reduces this time to 2 months, with no further extension.  

While deciding whether the party has complied with the adjudicator’s determination, the arbitral tribunal is not allowed to review the merits of the determination. The tribunal, however, retains authority to assess whether the parties were treated equally or given a reasonable opportunity to present the case.

Arbitration in Relation to Adjudication

Paragraph 4 provides that parties can submit disputes to arbitration that have been determined in any earlier adjudication proceedings under Paragraph 2. No party is constrained or limited by any of its claims, arguments, evidence or other submissions in connection to the adjudication. Further, the arbitral tribunal is not bound by any previous determination of the adjudicator. The tribunal can conduct a full and de novo review of the disputed issues of fact and law, without regard to any decision that may have been made by the adjudicator.

Concurrent Proceedings

Paragraph 5 indicates that parties could institute adjudication and arbitration under the Model Clause concurrently. The Explanatory Notes indicate that there is an expectation that parties would submit to adjudication first and wait for the adjudicator’s decision before starting an arbitration due to the short duration of the adjudication process. There is also an assumption that any period of overlapping proceedings will be short.

If the parties want to avoid any possibility of concurrent proceedings, paragraph 5 includes optional wording which states that any arbitration proceeding can only be commenced once the adjudicator has made his or her determination. If the adjudication is commenced while the arbitration proceedings are continuing, the arbitral proceedings can be suspended at the request of a party.  

Conclusion

Adjudication is a quick method of dispute resolution which is preferred by the construction industry as it allows for a temporarily binding resolution of disputes in complex projects by an adjudicator who has the necessary expertise to understand the project. This enables the projects to continue without major disruption. However, one of the issues with the contractual adjudication process is that there is lack of binding nature of the adjudicator’s decision internationally. The standard form contracts such as FIDIC do 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 is a welcome development as it provides for a rapid adjudication process where the adjudicator’s determination could be rendered within 30 days. In jurisdictions where parties do not have access to statutory adjudications, the Model Clause provides a framework for wider application of contractual adjudication. It also solves the issue of international enforcement by providing a mechanism by which the decision of the adjudicator can be enforced through a highly expedited arbitration process. However, one of the issues with 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 in the process – each party may use tactical arguments in favour of or against adjudication. It will be interesting to see how parties to a complex construction project adopt and adjust the Model Clause to their contracts.

Footnotes

1. The other three model clauses cover Highly Expedited Arbitration; Technical Advisers; and Confidentiality.