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TCC Case Update: Paris or London? A post-Brexit question of enforcing adjudication awards on cross-border projects

Construction / 26 May 2021

In the recent case of Motacus Constructions Ltd v Paolo Castelli SpA [2021], the Technology and Construction Court (“TCC”) had to consider an intriguing and unusual question: could an adjudication award be enforced in the TCC when the parties had expressly agreed that a different country’s courts would have jurisdiction? The decision is an interesting first benchmark for the post-Brexit landscape, where the 2005 Hague Convention now applies to these issues.

Background
Motacus and Castelli entered into a contract relating to fit-out work at a hotel in London (“the Contract”). In the Contract, the parties expressly agreed that the Contract would be subject to Italian law and decided in the courts of Paris.  France would therefore have exclusive jurisdiction to deal with disputes arising out of the Contract.

Despite that express clause, the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Construction Act”) applies to all contracts relating to construction works carried out in the UK, irrespective of whether the parties agree to a foreign jurisdiction. Further, because of the Scheme for Construction Contracts 1996 (as amended), it was implied into the Contract by this statute that the parties had the right to adjudicate any dispute arising under the Contract. Motacus and Castelli exercised that right when a dispute arose, resulting in an adjudicator’s decision that Castelli should pay Motacus around £450k plus VAT and interest.

Enforcement
No payment was made by Castelli, so Motacus began enforcement proceedings in the TCC. The complication here – which has been muddied more by Brexit – was whether the TCC even has jurisdiction to enforce an adjudication award. While the Contract had adjudication provisions implied, this did not extend to enforcing an adjudicator’s award. Surely, at that point, it follows that the express choice to resolve disputes in the Paris courts would be the logical venue for the enforcement? In fact, the answer is found in the 2005 Hague Convention (“the Convention”), which has applied from 1 January 2021 on the UK’s exit from the EU. The Convention says that where parties have agreed jurisdiction, then that must be honoured, subject to specific exceptions.

Motacus argued that exceptions did apply, specifically under:

—  Article 6(c) – that there would be ‘manifest injustice’ if the adjudicator’s award could not be enforced; and

—  Article 7 – that adjudication was an “interim measure of protection” that are not governed by the Convention. Enforcement of that interim measure is covered by extension of that principle.

Castelli argued, respectively, that:

—   The bar to prove manifest injustice is high and was not met in this case; and

—  Enforcement of an adjudication is not an interim measure, in the same way as (for example) a measure like a freezing injunction. It does not simply protect by preserving the status quo.

The Decision
The TCC Judge was convinced by Motacus’ argument on Article 7. The enforcement of the adjudication decision was an ‘interim measure of protection’, going back to a key purpose of the Construction Act of allowing quick resolution of construction disputes on an interim basis to keep cash flowing. This guiding principle of “pay now, argue later” is at the core of the judgment.

“In my judgment, the concept of an interim protective measure extends to a decision of an adjudicator which, by the operation of the 1996 Act and the Scheme, is not final and binding on the parties. The function of the adjudicator’s decision is to protect the position of the successful party on an interim basis pending the final resolution of the parties’ dispute through the normal court processes (or by arbitration).”

Key Takeaways
This decision is a welcome clarification of how the adjudication regime works alongside the Convention post-Brexit. Construction professionals will almost universally agree that adjudication is a positive and powerful tool to have to keep cash flow moving in construction projects, so professionals working on UK projects with foreign jurisdiction clauses will be reassured by the decision.

Aside from this, it is worth remembering that “interim measures” exceptions are also used widely in other contexts, so any decision that firmly places adjudication within that category of measures may be important for other decisions.

If you have questions about adjudication or enforcing an award, our specialist construction team can help.

 

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This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email: mailinglists@greenwoodsgrm.co.uk

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