CONSTRUCTION ADJUDICATION IN NIGERIA: NAVIGATING THE ENFORCEMENT LANDSCAPE
by Adeola Agunbiade-Adeyemi[1]
INTRODUCTION
Disputes arising out of construction contracts are sometimes inevitable given the complexity of infrastructure projects, the multi-party nature of construction contracts, pressure of delivery of well-built projects within reasonable timelines and at competitive costs etc. Construction disputes were previously referred to litigation, but because of delays and the requirement for arbiters who have expertise in construction matters, parties began referring their disputes to arbitration. However, arbitration has also begun to lose its attraction due to large costs, increase in the length of proceedings, often prolonged in the event of a challenge, potential conflict of interest issues etc. While other forms of ADR mechanisms such as mediation are being increasingly used, a new ADR model known as ‘Adjudication’ is being employed by parties to resolve construction disputes. This article attempts a brief expose on what construction adjudication is, how far it has developed in Nigerian and the enforcement landscape drawing from the author’s practical experiences.
ADJUDICATION IN CONSTRUCTION DISPUTES
Adjudication is contemplated as a quick formal, private process where an adjudicator resolves construction related disputes by issuing an interim binding decision until the dispute is finally determined by litigation, arbitration and in some cases, a mutually negotiated settlement. In recent times, the process has become complex , requiring parties to serve detailed submissions, witness statements and expert reports. It is still a preferable option for parties to resolve construction disputes targeted at providing an interim cash-flow remedy during the cycle of the project. The essence of this is to ensure the continuity of the project and to avoid the problem of lengthy and cost intensive proceedings associated with litigation or arbitration. Adjudication could either be statutory or contractual in nature. As a result, the party to a construction contract can either exercise their contractual or statutory right to refer a dispute to an adjudicator.
Some of the benefits of adjudication include flexibility for the parties; shorter timelines and speedy resolution of the dispute; lower costs; inquisitorial powers of the adjudicator; specialist arbiters etc.
Adjudication is not as popular in Nigeria unlike litigation and arbitration and is only just beginning to receive some form of recognition especially in the context of construction disputes. Its unpopularity has largely been attributed to lack of information on the model amongst stakeholders in the construction industry.
THE LEGAL FRAMEWORK OF ADJUDICATION IN NIGERIA
There is no statutory legislation governing adjudication in Nigeria as at date. Hence, its utilization as a dispute resolution model is primarily contractual. It is often found in international construction contracts (albeit for projects in Nigeria) modeled on FIDIC standard form of contracts. Most FIDIC contracts, provide for Dispute Adjudication Board/Dispute Avoidance Adjudication Board (“DAB/DAAB”) which may comprise of one or three adjudicators depending on the agreed terms of the contract. In addition, the 2017 Red and Yellow Book requires a standing DAAB and therefore provides that the Parties shall jointly appoint the member(s) of the DAAB within the time stated in the Contract Data (if not stated, 28 days) after the date the Contractor receives the Letter of Acceptance.
The General Conditions of Contract for the procurement of works, 2011 (the “GCC”) prepared by the Nigerian Bureau of Public Procurement also provides for adjudication as a means of resolving construction disputes arising from state funded projects. Essentially, the GCC provides that a party who is dissatisfied with a decision made by the Engineer shall refer such decision to the Adjudicator within 14 days of the notification of the Engineer’s decision. The Adjudicator who is to be jointly appointed by the parties or the designated appointing authority shall give an interim written decision within 28 days of notification of a dispute. Furthermore, the decision shall become final and binding except the adjudicator’s decision is referred to arbitration within 28 days of the decision.
Similarly, the Lagos Chamber of Commerce International Arbitration Centre on 9 December, 2020 introduced its Adjudication Rules , which provides a framework for resolving disputes arising from construction contracts. As with most adjudication rules, except where the parties agree to accept the adjudicator’s decision as final for all purposes, the decision is only binding in the interim until the dispute is finally determined by arbitration or litigation.
NAVIGATING THE ENFORCEMENT LANDSCAPE
One of the practical issues which may arise from the non-statutory regime for adjudication in Nigeria is enforceability of adjudicator’s decision where a party fails to voluntarily comply with the decision. In England, the position is that adjudicator’s decisions could and should be enforced through the courts by way of summary judgment. This position is based on the courts’ purposive interpretation of the relevant provisions of Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”), (the statute which regulates the framework for mandatory adjudication of construction disputes in England). This is reinforced by the overarching purpose of the HGCRA which is to provide the parties to a construction contract with a speedy mechanism for resolving disputes, although not finally determinative. In other words, provided that the adjudicator had answered the question put to him or her, then the decisions will be enforced regardless of any errors made along the way. The mantra is “pay now-argue later”.
In Nigeria, the courts have not been presented with similar interpretative opportunities considering that there is no statutory regime for adjudication to begin with. However, considering that its utilization as a dispute resolution model is generally contractual, it suffices for present purpose to analyze the relevant adjudication provisions in some of the standard contracts and propose practical steps in terms of enforcement of an adjudicator’s decision in the event of non-compliance.
As a first step, the adjudication provisions in FIDIC standard contracts (for instance, the 1999 and 2017 Red and Yellow Book) provide that the adjudicator’s decision shall be binding on the parties who shall promptly comply with it. In fact, the 2017 version of both books go a step further by requiring that “the duty to promptly comply” shall apply whether or not one of the parties is dissatisfied with the decision. Building on this, the adjudication clauses also provide that where either party is dissatisfied with the DAB’s decision, it shall within 28 days give a notice of its dissatisfaction (“NOD”) and intention to commence arbitration to the other party. Finally, where no NOD has been given by either Party within 28 days after it received the DAB’s decision, then the decision shall become final and binding upon both parties. The effect of these provisions is that primarily, DAB/DAAB’s decisions are temporarily binding. However, they may become ‘final and binding” where a dissatisfied party fails to file a NOD within 28 days. The GCC contains a similar provision by providing that where neither party refers a dispute submitted to an adjudicator to arbitration within 28days of the adjudicator’s written decision, such decision shall become final and binding.
The question which remains is that, in a situation where the decision has become final and binding and a party required to comply with a directive under the decision (whether it is to make some payments or to take some other steps), fails to do so, what remedies are open to the other party?
While the GCC is silent on possible next steps, the FIDIC provisions (at least the 2017 model) suggest that the non-compliance may be submitted to arbitration. The use of “may” is significant as this suggests that a party may very well refer the non-compliance to litigation. As such, where the party seeking enforcement opts for litigation, it cannot be prevented from doing so, by for instance, issuance by the defaulting party of an application staying proceedings pending arbitration.
Indeed, the litigation option may prove to be more potent especially where the decision sought to be enforced is a monetary decision. Unlike most arbitration rules, the different civil procedure rules by Nigerian courts have summary or undefended list procedures. Thus, the party seeking enforcement of a monetary decision can make a case that the non-compliance is a clear breach of contract, which the Defendant has no defence. This ought to pave the way for summary proceedings- the ultimate goal being an enforcement order by the court and post judgment enforcement processes. In a case where the decision is a directive to a party to carry out some other action, perhaps directing the employer to grant the contractor’s request for extension of time, take some matters into consideration in a variation dispute, the contractor could also where the employer fails to voluntarily comply with this directive bring an action (in court) to remedy the non-compliance.
In all, depending on the directive sought to be enforced, the stage of the project and whether a party envisages that arbitration proceedings may be subsequently commenced in relation to another part of the decision against which a NOD has been issued, it is important that flexibility be retained so as to give the parties the option of either referring the failure to comply to litigation or arbitration. In the GCC context, the party may very well submit the failure to comply to litigation since the option of submitting same to arbitration is absent in the standard form contract. Alternatively, the relevant provisions may be modified to give the party an election to also submit the failure to comply (with a final and binding decision) to arbitration so that depending on the situation at the time, a party may elect to either enforce the decision via litigation or arbitration.
If the approach by the English court in summarily enforcing DAB decisions arising from statutory adjudication is anything to go by, it is also important to add on the subject, that a referring party should ensure that the appointment of the adjudicator is properly done in line with the contractual terms while the adjudicators should also on their part ensure that they decide exactly what was submitted to them and conduct the process in a fair manner. Otherwise, a recalcitrant party may still find a way to challenge decisions that have become final and binding on the basis of faulty appointments, the adjudicator deciding a different dispute etc.
CONCLUSION
While adjudication as a dispute resolution model in construction disputes has its benefits, the enforcement landscape of adjudication decisions in Nigeria remains at a nascent stage. As such, it is extremely important to be mindful of the contractual provisions early on and the interconnectedness and legal implications of the different adjudication provisions. Until we have a statutory policy in Nigeria for enforcement of adjudication as it is the case with arbitration, the enforcement approach will principally turn on the specific provisions contained in each contract.
[1] Adeola Agunbiade-Adeyemi, Senior Associate Dispute Resolution Practice Group, Banwo&Ighodalo Nigeria. Director, Africa Construction Law. This post is based on a presentation made by the Author at the African Construction Law Conference 2021, “Challenges with enforcement of Contractual Adjudication by Nigerian Courts”.
