Are dispute adjudication decisions binding and enforceable, even if incorrect?
Adjudication is a dispute resolution process; aimed to be quicker and a more cost-effective approach to settling a dispute. If parties choose to challenge the final decisions made at adjudication, the dispute can then be taken to arbitration, giving the arbitrator power to overrule any previous decisions made.
The Supreme Court of Appeal (SCA) has reinstated that an adjudicators award is a binding form of law and should be legally complied with. This is to keep in line with SCA previous decisions on cases such as Ekurhuleni West College v Segal and Another and Radon Projects (Pty) Ltd v NV Properties and Another. Both cases demonstrated that when parties are dissatisfied with the given conditions of the award from adjudication, the dispute can then be continued to arbitration, to be revisited and altered accordingly.
The Relevant case – Framatome v Eskom Holdings SOC Ltd
Eskom (the Employer) and Framatome (the Contractor) completed an NEC3 Engineering and Construction Contract, replacing the Steam Generators at Koeberg Nuclear Power Station for Unit 1 and 2 (the Contract).
A disagreement evolved between Eskom and Framatome regarding a compensation event, by Eskom’s Project Manager. Framatome decided to take this dispute to adjudication, where the adjudicator was in agreement with Framatome due to the compensation event needing to be assessed by Eskom (Decision 7). Ideally Eskom would notify relevant parties of their dissatisfaction of Decision 7, however they chose to ignore the adjudicators award.
Another dispute was brought to adjudication, as Eskom chose not to provide an assessment of said compensation event. This resulted in the adjudicator concluding that Eskom has failed to make a full assessment within the timeframe of Decision 7, leaving Framatome’s intended quotation accepted in terms of the reasoning provisions of the Contract (Decision 11).
Consequently, this led Eskom notifying both the adjudicator and Framatome of its dissatisfaction of Decision 11, leading Framatome to take Eskom to Gauteng High Court.
The enforcement application
Being successful, the High Court decided that the adjudicator in Decision 11 had made judgments that were outside his terms of references, issues that which, were not part of his adjudication. This subsequently led Framatome to appeal to the SCA.
The SCA decision
The SCA looked at whether the adjudicator’s final award was binding on the parties and to whether the adjudicator had made a decision based on the issues that he was faced with from both parties. IF he had done, the SCA concluded that both parties were then bound by the determined outcome, despite that he may have ‘fallen into error’.
The SCA final decision is as follows:
- The adjudicator followed all procedures for the dispute before him, never straying from the original dispute.
- The decision was never reviewed by an arbitral tribunal, therefore the decision made by the adjudicator remains binding and a mandatory compliance.
- Due to Eskom not adhering to the conclusion of the adjudicators, they were ordered to make additional payments to Framatome.
The SCA has stated that when adjudicators awards are disputed, they are still considered binding, except for when or if, the disagreement is re-examined at arbitration. No party should agree to referring a dispute to adjudication, knowing that if the adjudicator decision does not go in their favour, that they simply ignore all decisions made in hope of a final decision at arbitration.
Please note. The information provided on this website is NOT LEGAL ADVICE and is for information purposes only. No action or inaction should be taken due to this information or any reliance placed upon this information. Please note where legal advice is required this should be obtained by an appropriate qualified legal practice and no information provided within this website should form the basis of any legal, contract or commercial decision. K J Taylor Consulting Ltd. are commercial quantity surveyors and not construction legal advisors.