Adjudication after Brexit: an English affair10 March 2021

The Hague Convention provides that, in an “international case” (i.e. where the parties are not “resident in the same contracting state”⁴), where a contract contains an exclusive jurisdiction clause, the courts designated in the clause have jurisdiction, subject to limited exceptions, and the courts of any other contracting state have an obligation to suspend or dismiss proceedings brought in breach of the agreement. The central question before the court was, therefore, whether the case fell within the limited exceptions.

JUDGMENT

Notwithstanding the exclusive jurisdiction clause in the Contract, the Contractor argued that two exceptions under the Hague Convention applied, and founded the TCC’s jurisdiction:

• Article 6(c), which provides an exception where “giving effect to the [exclusive jurisdiction clause] would lead to a manifest injustice or would be contrary to public policy”; and
• Article 7: which provides an exception in the case of “interim measures of protection”.

Article 6(c)

Hodge J dismissed the Contractor’s argument in relation to Article 6(c). He considered each of the tests for “manifest injustice” and “public policy” and commented that the burden rested on the Employer as claimant to show that one, or both, limbs of the exception applied, noting the “high threshold required for this exception to be engaged”.

The Contractor attempted to argue that enforcement of the award by the courts of Paris would run contrary to the purpose of adjudication as a “speedy mechanism for settling disputes in construction contracts”. However, it did not adduce any evidence as to the position under French or Italian law. Accordingly, in the “absence of any evidence as to why enforcement cannot proceed effectively in the courts of Paris, France”, there was no reason to disregard the “bargain that [the parties] freely made”.

LESSONS LEARNED

This decision provides a stark illustration to international contracting parties as to the powers and proclivities of the English courts to resolve disputes concerning domestic construction operations. Even in circumstances where the contract is neither governed by English law nor subject (as a matter of contract) to the jurisdiction of the English courts, the parties may nevertheless find themselves subject to adjudication and to enforcement proceedings before the English courts. The UK adjudication regime provides a means for quick and preliminary resolution of disputes and is intended to alleviate the cashflow difficulties which might otherwise arise from non-payment pending the resolution of lengthy and complex proceedings. This decision makes clear that parties to construction contracts will be held to the “pay now, argue later” rationale of the adjudication regime notwithstanding an exclusive jurisdiction clause in favour of foreign courts.

The decision also provides additional certainty to parties that adjudication awards in relation to construction projects in England, Wales and Scotland will be enforceable.

International contracting parties to construction contracts should therefore ensure that they are familiar with the idiosyncrasies of the adjudication regime and be aware of the circumstances in which the Hague Convention will apply. Owing to the recent developments in the law applicable to jurisdiction clauses following Brexit, it is particularly important for contracting parties to obtain advice on the operation of jurisdiction provisions, whether at the drafting stage or when disputes arise.

HOW CAN WFW HELP?

WFW’s leading construction disputes practice has extensive experience in assisting parties to adjudication proceedings, including on the enforcement of adjudication decisions. As an international law firm with a wealth of experience in advising clients globally in complex multi-jurisdictional disputes, WFW is also ideally placed to provide advice in relation to jurisdictional issues arising from complex projects.

This article was authored by London Disputes Resolution Partner Ryland Ash, Associate Jack Moulder and Alexander Kyriacou, a trainee solicitor in our London office.