Whilst the usual rule is that a defendant cannot endeavour to raise a counterclaim as a means of defeating a claim to enforce an adverse arbitral award, the court has recently decided that an adjudicator’s decision is not to be treated as a counterclaim but more as a binding decision that a debt is due from the losing party to the winning party. On that analysis, the defendant was entitled to set off the adjudicator’s decision against the arbitral award.

In Workspace Management Ltd v YJL London Ltd [2009] EWHC 2017 (TCC), the court had to decide whether a contractor was entitled to set off an adjudicator’s decision in its favour against sums it was obliged to pay the employer under an arbitrator’s award relating to the same contract. Generally, a defendant cannot endeavour to raise a counterclaim as a means of defeating a claim to enforce an adverse arbitral award, but the court in this instance held that an adjudicator’s decision is not to be treated as a counterclaim but more as a binding decision that a debt is due from the losing party to the winning party. On that analysis, setting off the adjudicator’s decision against the arbitrator’s award was simply a mutual set-off of debts.

In reaching this decision, the court noted that both decisions were binding on the losing party, neither decision had greater status than the other (the arbitration award was, in this case, actually stated to be “provisional” and “interim”) and both were capable of being the subject of the judgment of the court. The court concluded that it would be “artifi cial to allow the claimant to ring-fence the award simply because it is not subject to potential challenge (which an adjudicator’s decision might be), in circumstances where, for reasons best known to themselves, the parties are conducting simultaneous arbitration and adjudication proceedings.”

To read the judgment, go to: http://www.bailii.org/ew/cases/EWHC/TCC/2009/2017.html