The Ministry of Justice (Ministry) has released a consultation document inviting submissions on a proposed new statutory adjudication framework for commercial disputes. The proposal is largely based on the model established by the Construction Contracts Act 2002 (CCA) for the construction industry. It aims to offer a process by which parties can seek a fast determination of a commercial dispute from a qualified adjudicator.
In our view, a form of statutory adjudication has merit. Statutory adjudication processes can be effective in resolving straightforward disputes more quickly and cheaply than litigation or arbitration. However, it is important that such processes have clear objectives, limits and safeguards to ensure that they are used appropriately. As we discuss below, the Ministry should be careful not simply to replicate the CCA model for wider commercial disputes.
Adjudication is best suited to low-value or straightforward disputes
The proposed Adjudication Act aims to introduce a statutory adjudication process for business-to-business disputes. The framework is designed to provide a fast, flexible and cost-effective alternative to court or arbitration with the draw card being that determinations are immediately binding but not final – allowing parties to litigate or arbitrate subsequently if dissatisfied with the outcome. This is described as a "pay now, argue later" regime, which construction industry participants will be familiar with from the CCA.
The process would be voluntary, requiring agreement from both parties. It would rely on a pool of authorised adjudicators to be available to make determinations "on the papers" within strict timeframes, similar to those contained in the CCA. The usual timeframe for a determination under the proposal would be within 45 days, a faster process than under the Disputes Tribunal or court systems. Parties may or may not chose to be legally represented. Similarly to the CCA, parties will be expected to pay the adjudicator's costs. However, the Ministry's proposal also seeks submissions on whether adjudicators should be able to make costs awards.
Notably, the Ministry's proposal does not set any limit on the value or complexity of claims that can be referred to adjudication. In our view, a claim value limit would be appropriate. High value, complex disputes are typically ill-suited to fast track, summary procedures, which we have seen in the CCA context. For example, respondents in particular can be disadvantaged by having to respond to large or complex claim urgently. Similarly, there can be heightened natural justice concerns in dealing with very complex or high value claims under significant time pressure. A claim value cap is one way of avoiding this issue.
Pay now, argue later will not always be the best approach
The CCA's core rationale is to maintain cashflow and business continuity in the construction industry, when delayed payments can have flow on effects to other projects or associated sub-contractors. The purpose of the "pay now, argue later" approach is to ensure that work can continue while disputes are resolved, with the knowledge that parties can litigate later. The efficient resolution of disputes as they arise within a larger project is prioritised over other dispute resolution objectives such as finality.
The Ministry's proposal for commercial adjudication proposes that it be available for contractual claims between entities that provide goods or services in some form. Broadly, this would involve companies, incorporated societies, building societies, limited partnerships and charitable trusts, with disputes in scope including payment claims, contractual interpretation and cross-border commercial disputes. Given the diverse nature of possible disputes, the core rationale of the CCA may not apply so easily to all business sectors. Many commercial disputes outside of construction do not involve the same cashflow imperatives or project dependencies. While the same commercial imperative may not exist for the statutory adjudication proposal, we nevertheless see merit in lower value, less complex disputes being able to be resolved privately, and in a timely way.
Adjudicator selection is important
The Ministry's proposal adopts the CCA's approach to adjudicator selection, relying on party agreement to an adjudicator, or an authorised nominating authority making that decision. The Ministry is seeking submissions on what qualifications or experience an adjudicator should be required to have. The Ministry's proposal also seeks submissions on whether there should be a government role in authorising adjudicators who can offer statutory adjudication. This could include either individual certification by a public or private authorised agency, or the Minister could authorise private entities to provide adjudicators and select one where parties cannot agree.
It is likely that the success of a statutory adjudication process will hinge on the quality of adjudicators available to resolve disputes. We favour a publicly accessible register of adjudicators, categorised by their areas of expertise and relevant experience. This may better allow both parties and nominating authorities to select the adjudicator best suited to the dispute at hand. If nominating authorities are involved, in our view, those authorities ought not to be able to appoint adjudicators who are not at complete arm's length from the nominating authority, to preserve the integrity of the selection process.
Conclusion
The proposed statutory adjudication process has the potential to improve access to justice and reduce costs for businesses to resolve their disputes. However, we note that parties are more likely to submit to the proposed process once it has become more established. It may take some time before the business community is able comprehensively to evaluate the effectiveness of the scheme.
What we do know is that adjudication is best suited to the resolution of straightforward, summary issues, not multifaceted or high value claims. Rather than replicating the CCA process, there is merit in tailoring the framework to limit the adjudication's availability to low value (sub $1m), business-to-business disputes.
Submissions are open until 19 September 2025 and can be made here. If you are interested in discussing our initial thoughts further or would like assistance drafting a submission, please contact a member of our commercial litigation team.
This article was co-authored by Bridie McKinnon (partner) and Isobel Jaspers (solicitor).
