The term adjudication (dispute adjudication) describes a type of proceeding for the extra-judicial settlement of disputes between two or more contractual partners which is particularly common in the Anglo-Saxon jurisdictions. It presupposes that there is a relevant contractual agreement between the parties concerned, which may already be concluded in the construction or plant engineering contract. An adjudication proceeding is carried out by one or more adjudicators, i.e. the dispute adjudication board (DAB).
The parties decide the details of the adjudication proceeding and who will occupy the DAB, if necessary as soon as the construction contract has been concluded. This makes it possible to agree on procedural rules which are tailored to the specific needs of the parties but should nevertheless always meet the basic requirements of the rule of law.

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The objective of dispute adjudication is to have a possible dispute related to the handling of the construction or plant engineering contract decided as quickly as possible by experts. Herein lies the difference to classic conciliation, which aims to help the parties achieve an amicable consensus, and generally does not give the conciliator the authority to make a binding decision. Dispute adjudication differs from arbitration primarily in its legal nature and the binding effect of the decision to be made by the DAB. Depending on the contractual agreements of the parties, it is only temporarily binding and usually subject to review by the ordinary courts, although it cannot be referred to them for at least the duration of the adjudication proceeding. A (temporarily) binding decision of the DAB does not need to be enforced with state assistance. It may suffice to include in the contractual agreement of the parties that failure to comply with a decision of the DAB constitutes a severe violation of the contractual obligations, which may be subject to penalties (damages, termination for good cause, contractual penalty, etc.).

Adjudication can be particularly effective as a dispute avoidance and dispute resolution tool during construction. In the case of larger-scale building projects, it is worth implementing a DAB as a stand-by board which provides support for the building project from the onset and, if required, may even be involved at very short notice for mediative dispute resolution. If no agreement can be reached, the DAB will rule on the dispute at a second level in accordance with the above-mentioned criteria. This usually requires both legal expertise and expertise in the technical or operational aspects of construction. As a result, the DAB should consist of at least one specialist lawyer and an equally well-qualified engineer.

The advantages of such a dispute resolution proceeding during construction are considerable. Its presence alone encourages the parties to avoid unnecessary disputes. As it guarantees a timely end to any conflicts of opinion over the handling of the construction contract, it will prevent the project from coming to a standstill because the parties cannot agree on the parameters for continuing it. In the event of disputes over the amount of claims for supplementary services, a temporarily binding decision on the sum to be paid will immediately be made, thus ensuring urgently needed liquidity, which will ultimately benefit the quality of the construction work. And finally: the a posteriori judicial clarification of construction contract disputes and the enormous transaction costs associated with this can be largely avoided.

You will find more information on the subject of adjudication (in German) at