22/01/2021 Briefing

In this article, we:

  1. outline SCL Adjudication;
  2. determine whether or not the jurisdictional scope of SCL Adjudication should be extended to Ireland; and
  3. consider whether or not SCL Adjudication is the optimal method for resolving business-to-business (“B2B”) technology disputes of the future.

Outline of SCL Adjudication

Modest application and registration fees

According to the SCL Adjudication Schedule of Charges (“Schedule”), the registration fee for SCL Adjudication is £500 plus VAT. There are no other administration fees.

Paragraph 2.2 of the Schedule provides that subject to certain exceptions, the Adjudicator’s fees “shall not exceed £450 per hour”. This is an attractive headline figure. The exceptions set out certain specific Adjudicator charges not subject to the £450 hourly cap:

  1. charge for time spent travelling;
  2. charge for time reserved but not used as a result of late postponement/cancellation of hearings, provided that the basis for such charge is advised in writing and approved by SCL; and
  3. charges for recovery of such expenses as are reasonably incurred in connection with proceedings and as are reasonable in amount, provided such claims are supported by invoices/receipts.

The guidance notes on the SCLA Rules (“Guidance Notes”) provide that hourly fees shall not exceed £450 plus VAT in respect of the appointment of a technical expert or lawyer as a third-party advisor. With capped fees enshrined in the SCLA Rules and the Guidance Notes, SCL Adjudication offers an economically feasible and predictable dispute resolution procedure.

Experienced lawyers and IT specialists

SCL will maintain a panel of individuals eligible to determine adjudications (“SCL Adjudication Panel”). The availability of suitably skilled and experienced personnel is perhaps the number one selling point of SCL Adjudication, with technology-related disputes long-suffering from a shortfall in sufficiently knowledgeable adjudicators and dispute resolution facilitators. This issue will only increase in importance as smart legal contracts, hosted on distributed ledger technology, increase in prevalence, with an inevitable need for dispute resolution solutions and skilled personnel. The sector is actively looking for answers to questions of smart legal contract enforceability, including dispute resolution solutions. We believe SCL Adjudication may provide the answers.

To be eligible to become an Adjudicator, lawyers must have not less than 15 years’ experience as a practicing barrister or solicitor and have advised or acted in relation to: (i) technology disputes on a regular basis for a total period of not less than 10 years; and (ii) litigation, arbitration or adjudication, whether or not related to IT, on a regular basis for a total period of not less than 15 years.[1] To be eligible to become an Adjudicator, IT specialists must have: (i) worked in the technology industry on an employed, self-employed or consultancy basis for at least 15 years; (ii) within the past three years, successfully undertaken arbitrator or adjudicator training with a recognised training organisation; and (iii) acted as an arbitrator, adjudicator or pupil for a minimum of 8 hours in relation to a dispute which has resulted in an award on the merits.[2] By maintaining the SCL Adjudication Panel of experienced lawyers and IT specialists, SCL adjudication is likely to result in the timely, and successful, resolution of disputes.

Matters amenable to SCL Adjudication

The types of matters that may be amenable to SCL adjudication are unlimited.[3] SCLA Rules explicitly mention the following matters as falling within the definition of “Decision” and therefore constituting matters amenable to SCL Adjudication:

  1. damages and/or debt payable and the amount;
  2. allowing or restraining another party from doing something; and
  3. the rights and obligations of the parties.[4]

SCL Adjudication by Incorporation

The SCLA Rules state that they may be incorporated into any contract for the provision of technology-related goods and services, which includes, but is not limited to:

  1. software development contracts;
  2. outsourcing arrangements;
  3. system integration contracts;
  4. IT consulting contracts;
  5. software licensing arrangements;
  6. blockchain or ‘smart contracts’; and
  7. cloud computing contracts.

Model Adjudication Clauses

The Guidance Notes provide three Model Clauses, demonstrating how SCLA Rules may be incorporated into a contract. For example, Model A provides:

Any dispute arising under this agreement shall be referred to adjudication in accordance with the Society for Computers & Law Adjudication Rules (SCLA Rules) and no litigation or arbitration proceedings relating to that dispute may be commenced prior to the publication of the Adjudicator’s Decision. If either party wishes to commence litigation or arbitration proceedings after the Decision has been published, it must do so within six calendar months of the Effective Date of the Adjudicator’s Decision, otherwise the claim will be time-barred.”

Commencement

Under SCLA Rules, the referring party (“Claimant”) must serve written notice (“Dispute Notice”) on the responding party (“Respondent”) to refer any dispute between them to SCL Adjudication under SCLA Rules.

Contents of Dispute Notice

Under SCLA Rules, the Dispute Notice must contain:

  1. evidence of the agreement between the parties and their intention to adjudicate under SCLA Rules;
  2. names, addresses and contact details of the parties;
  3. neutral explanation of the nature and scope (including estimated value) of dispute;
  4. explanation of nature of technology/technical solution involved in dispute;
  5. provision of any information relevant for the purposes of assisting the SCL Chairman to identify an appropriate Adjudicator from the SCL Adjudication Panel; and
  6. copy of Dispute Notice for the attention of the SCL Chairman.

The Dispute Notice must not exceed two A4 pages in double-spaced 12-point font.[5]

Response within three working days

Under SCLA Rules, the Respondent must serve a Response Notice on all parties, copying the SCL Chairman, within three working days of receiving the Dispute Notice.

Contents of Response Notice

The Response Notice shall state:

  1. whether or not Respondent agrees with Claimant’s position as set out in the Dispute Notice;
  2. where Respondent does not agree with Claimant’s position as set out in the Dispute Notice, Respondent’s position on any such matters; and
  3. whether or not Respondent intends to bring a counterclaim and if yes, a brief description of such counterclaim.[6]

Like the Dispute Notice, the Response Notice must not exceed two A4 pages in double-spaced 12-point font.[7]

Adjudicator obliged to resolve dispute in timely and cost-effective manner

Under SCLA Rules, the Adjudicator “shall” conduct the procedure in a “timely and cost-effective manner and avoid incurring unnecessary expense.” The inclusion of this express obligation in the SCLA Rules demonstrates SCL’s commitment to timely and cost-effective dispute resolution.

Powers of Adjudicator

Under SCLA Rules, the Adjudicator has the following powers, which may be exercised by the Adjudicator upon application by either party or upon his or her own initiative:

  1. production of documents and/or making software or other technology available for inspection;
  2. conducting tests/experiments;
  3. asking specific written questions of any party;
  4. inviting written submissions and limiting length/scope thereof;
  5. meeting and questioning the parties in the presence of the parties;
  6. conducting on-site visits/inspections in the presence of the parties;
  7. holding oral hearings;
  8. seeking specialist advice from consultants/experts on technical or accounting issues. However, and in line with the rules of arbitration bodies, such consultant/expert must comply with the IBA Guidelines on Conflicts of Interest in International Arbitration;
  9. if the Adjudicator is not a lawyer, seeking input from a lawyer on the SCL Adjudication Panel;
  10. conducting the adjudication on a proactive and inquisitorial or adversarial basis. Interestingly, therefore, depending on the powers exercised by the Adjudicator on his or her own behalf or upon the application of one or more parties to the dispute, the adjudication may be conducted in a (i) common law style; (ii) civil law style; or (iii) hybrid style. The SCLA Rules therefore offers considerable flexibility to technology companies who may be incorporated in, or represented by lawyers who practice in, common law and civil law jurisdictions to decide upon the basis of the adjudication;
  11. deciding on the admissibility of evidence and as to what (if any) rules of evidence will apply. Again, considerable flexibility is provided to technology companies incorporated in civil and common law jurisdictions, because it affords parties the ability to reconcile and control the variance of rules regarding the admissibility of evidence in common law and civil law systems; and
  12. extending or abridging time for the resolution of the dispute. Without prejudice to the foregoing, the SCLA Rules provide that the overall time limit for the resolution of the dispute “shall not exceedthree calendar months …”.

Decision within three calendar months

Arguably, the most appealing of all SCLA Rules for parties involved in B2B technology disputes is the rule that the Adjudicator shall act fairly and impartially and deliver a decision “no later than three calendar months from the date of his or her appointment.” There is, in effect, a ‘backstop’ of three calendar months for all decisions subject to SCL Adjudication.  This is a short timeframe and certainly short when compared to the majority of court actions.

As stated in the Guidance Notes, “There is no restriction on the size or scope of technology disputes that may be referred provided that the matter is capable of resolution within…the maximum period of three calendar months.” Indeed, some disputes may be resolved in less than three calendar months and it is clarified in the Guidance Notes that:

The three-calendar month period provided for is intended to operate as a back-stop. Adjudicators are encouraged to expedite the procedure where possible and deliver their Decision at the earliest opportunity.”

Therefore the complexity of a dispute should not deter parties from considering SCL Adjudication. The only factor parties should consider is whether or not the dispute is capable of being resolved within three calendar months.

The decision shall also be in writing and the Adjudicator must provide reasons for the decision.[8]

Discretion to award interest and set rate, period and basis of interest

Under SCLA Rules, the Adjudicator “may award” the payment of simple or compound interest on any amounts found due from one party to another. Moreover, the “rates, period and basis” of an award of interest on any amounts found due from one party to another is at the discretion of the Adjudicator.

Decision may be subsequently litigated or arbitrated

Under SCLA Rules, the parties are not prevented from subsequently litigating or arbitrating the dispute. This is confirmed in the Guidance Notes, which provides that the Adjudicator’s decision will be “provisionally binding”, meaning that the parties may re-open the dispute in subsequent litigation or arbitration.

Binding decision unless and until subsequently litigated or arbitrated

The SCLA Rules provide that “unless and until the underlying dispute is finally determined by a Court or (where that dispute is subject to an arbitration agreement) an arbitrator, the Decision will be binding on the parties.” This operates to prevent one party from arguing that it is does not have to presently perform its obligations under the Adjudicator’s decision or that the Adjudicator’s decision is not presently binding upon them simply because there lies a possibility of subsequently litigating/arbitrating the matter.

Six calendar months to commence litigation/arbitration proceedings

Parties intending on litigating/arbitrating matters referred to the Adjudicator must do so “within six calendar months” of the fifth working day after the decision is sent by email and secure post to the parties. Under SCLA Rules, if no court/arbitration proceedings have been commenced within six months of the fifth working day after the decision is sent to the parties, the decision “shall become final and binding for all purposes.”

Enforcement

Under SCLA Rules, unless the Adjudicator otherwise directs, the successful party shall be entitled to enforce the award in the Technology & Construction Court in London “or in any other suitable court”, for example, the Irish courts.

Costs

Respecting the principle of party autonomy, SCLA Rules provide that parties will be given the autonomy to decide how costs are to be awarded upon the resolution of their dispute. In the absence of agreement between the parties, it is provided that the Adjudicator shall have the power to order either party to pay “some or all” of the “reasonable costs” incurred by the other party “in relation to the adjudication”, whether incurred “before or after the issue of the Dispute Notice”. What is “reasonable costs” is undefined in the SCLA Rules and Guidance Notes and is likely to be determined on a case-by-case basis.

Confidentiality

Respecting the principle of party autonomy, the parties are given the autonomy under SCLA Rules to decide upon the issue of confidentiality. The parties are entitled to determine what will remain confidential. In the absence of agreement between the parties, it is provided that “the adjudication procedure and all documents produced in relation thereto, including the Decision, are and shall remain confidential.”

Governing Law and Jurisdiction

SCLA Rules provide that SCLA Rules and the adjudication procedure are governed by “English law” and any disputes in relation thereto or arising therefrom are subject to the “exclusive jurisdiction of the English courts.”

Should the jurisdictional scope of SCL Adjudication be extended to Ireland?

In principle, there is nothing stopping SCL Adjudication from being extended to Ireland. The only modification of the SCLA Rules which may be requested, or perhaps required, by Irish parties to a B2B technology dispute is the amendment of Rule 45 to provide that in certain circumstances (for example, where one or more of the parties to a dispute are Irish incorporated) SCLA Rules and the adjudication procedure are to be governed by Irish law and any disputes thereto or arising therefrom are subject to the exclusive jurisdiction of the Irish courts. For this reason, SCL should consider whether or not Rule 45 could be amended to provide for Irish law and the exclusive jurisdiction of the Irish courts in certain circumstances.

Should SCL Adjudication be interpreted as being the optimal method for resolving B2B technology disputes of the future?

Due to SCL Adjudication’s:

  1. modest application and registration fees;
  2. cap on hourly Adjudicators’ fees;
  3. guarantee of a decision within three calendar months;
  4. maintenance of the SCL Adjudication Panel of experienced lawyers and IT specialists acting as Adjudicators;
  5. flexibility between common law and civil law approaches towards the conduct of proceedings and the admissibility of evidence;
  6. enforceability of awards;
  7. confidentiality obligations;
  8. preservation of the right to litigate/arbitrate within six calendar months of the fifth working day after a decision is sent to the parties; and
  9. respect for party autonomy,

SCL Adjudication is, we submit, capable of becoming the optimal method of resolving B2B technology disputes. There is a strong case to be made for its promotion as the default dispute resolution platform for Irish and UK technology companies who find themselves embroiled in B2B technology disputes.

By virtue of the fact that a decision will be rendered within three calendar months, SCL Adjudication offers technology companies a quick and efficient way to resolve disputes. Moreover, there is nothing to be lost by using SCL Adjudication as the default, or first instance, dispute resolution platform, because even if a party is dissatisfied with a decision rendered by an Adjudicator within three calendar months from the date of appointment of such Adjudicator, such party may still litigate/arbitrate the matter “within six calendar months” of the fifth working day after receiving the Adjudicator’s decision. This is only 9 months, at the latest, from the date the Adjudicator was appointed. Compared to arbitration and litigation proceedings which may drag on for months or even years, this is a very short time period and evidences SCL Adjudication’s viability as the optimal method for resolving B2B technology disputes in the future.

We suggest that consideration be given to extending SCL Adjudication to Irish law matters by allowing Rule 45 to be amended in certain circumstances (perhaps when one or more parties to a dispute are Irish incorporated) so as to provide for Irish law and the exclusive jurisdiction of the Irish courts. If this were achieved, lawyers drafting Irish law contracts could amend model dispute resolution clauses and Irish parties approaching a dispute could consider a voluntary reference to SCL Adjudication. The scheme is, we believe, what technology lawyers have long been waiting for and provides a forum to potentially resolve a specialist class of dispute. The volume of technology-based disputes has long been low in the UK and very low in Ireland. Part of this trend can, we believe, be attributed to perceived difficulties in litigating and arbitrating technology-based disputes. SCL Adjudication is a viable solution to a range of long-existing and new problems and it is, we believe, capable of application in Ireland.

The authors wish to thank Colin Grant for his contribution to this article.

This article was first published by SCL.

 

References

[1] Paragraph 6 of SCL Adjudication (Adjudicator Eligibility Criteria).

[2] Paragraph 7 of SCL Adjudication (Adjudicator Eligibility Criteria).

[3] The definition of “Decision” at page 1 of SCLA Rules includes the words “matters referred to him or her [i.e. the Adjudicator] … and may include (without limitation) …”.

[4] Page 1 of SCLA Rules.

[5] Rule 4 of SCLA Rules.

[6] Rules 6.1 – 6.3 of SCLA Rules.

[7] Rule 4 of SCLA Rules.

[8] Rule 31 of SCLA Rules.