Location, location, location

A contract is entered into in England and the works are to be completed in Scotland. Now you might not think this would cause any problems, but this may have implications and you may have to deal with a jurisdictional challenge in an adjudication where you have referred the adjudication under the ambit of the Scheme for Construction Contracts (England and Wales). 

Now, if the applicable law is not set out expressly within the contract, if the contract is formed in England, then the laws of England and Wales will apply, (and it’s been that way since 1955).   

However, the issue arises with which Scheme is to be utilised, because if you refer the matter under the wrong scheme then the adjudicator will lack jurisdiction and you will have an unenforceable decision at the end of the process. 

The Scheme now has three versions: one for each of England, Wales, and Scotland. Now there is not really an issue with the versions for England and Wales because even if the relevant Scheme was to be selected by reference to the location of the ‘construction operations’ the law governing of the contract is the same, since we have shared a legal system with Wales for a few hundred years. However, when it comes to Scotland, as most will be aware, they have an entirely different legal system which is often described as a ‘hybrid system’.

We have had these three versions of the Scheme since 1998 and you would have thought that the matter of determining which Scheme applied had long since been settled. Well you would be wrong.

The matter was referred to the courts in April this year (Laker Vent Engineering v Jacobs E&C Limited).  The matter which fell to the court was whether an adjudicator had jurisdiction when appointed under the Scheme for England and Wales, when the ‘construction operations’ were undertaken in Scotland. The jurisdiction of the contract was expressed as ‘English Law’ and the court decided that because of this the Scheme for England and Wales applied and as such the adjudicator had been correctly appointed.

Now most of you reading this are probably saying: “I could have told you that!!”  Well the point the court made was that if the applicable laws of the contract are the laws of England and Wales, then it seems simple to say that the applicable Scheme is the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended).

I was recently involved in an adjudication with similar facts to those in ‘Laker Vent’ and argued exactly that: if the contract was governed by English law, then the Scheme for England and Wales was applicable. However, in my situation the adjudicator decided that I was wrong and that although English Law was the applicable law, the Scottish Scheme applied to the contract. I have to say that I thought at the time that this was complete nonsense and still maintain that position. Given the recent decision of the TCC, it looks like my position has indeed been vindicated.

I do wonder what the courts will do if asked to consider which Scheme applies when we have construction operations which span the borders such as roads, rail, bridges and even large sites?

Whilst it appears that my position in the recent adjudication is also the position of the TCC, on this occasion I feel that this matter may not be entirely resolved (or given the drafting of the Schemes whether it ever can be)….watch this space as they say!!!

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These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.