Arbitration under the New Roads and Street Works Act 1991 – mandatory or not?

The Court of Appeal has clarified in Cadent Gas Ltd v Cityfibre Ltd [2026] EWCA Civ 24 that not all disputes about costs and expenses for damaged apparatus under the New Roads and Street Works Act 1991 (the “Act”) must go to arbitration. Instead, claims “expressed as conferring a right to compensation” – like those under s82(1)(b) – should be litigated in court, not arbitrated.

This decision is of potential significance to many utilities providers. Generally speaking, large numbers of claims pursued under s.82(1)(b) are low in value.  As a result, they fall to be dealt with in the County Courts (e.g. on the fast or small claims track), which can be slow moving and with limits applied to costs recovery – by contrast, arbitrations can be swifter and with enhanced costs recovery prospects. 

Utilities providers therefore need to consider carefully whether claims they intend to bring under the Act fall under the scope of the arbitration provisions or not, as this may well be critical to informing case strategy. While this case concerned the Act specifically, similar arbitration regimes apply to related legislation (such as the Water Industries Act 1991) and similar care should be taken there too.

Background

The appellant internet provider (“CityFibre”) claimed that the respondent (“Cadent”), a gas distribution company, damaged its apparatus when carrying out street works as a statutory undertaker. It sought to recover its costs and expenses in relation to that damage under s.82(1)(b) of the Act and, when Cadent refused to pay, referred the claim to arbitration pursuant to s.96(3). 

Cadent contested the arbitrator’s jurisdiction to determine the issue, contending that the language of s.96(3) meant that a dispute under s.82(1)(b) could not be referred to arbitration but should instead be litigated. The arbitrator disagreed and made a partial award to CityFibre. Cadent issued proceedings challenging the partial award. 

HHJ Hodge KC (sitting as a High Court judge) set aside the partial award, holding that the dispute was not required to be arbitrated under the Act, so the arbitrator lacked jurisdiction. He gave permission to appeal.

The Act

Section 82(1) states that a statutory undertaker “shall compensate – (a) the street authority or any other relevant authority in respect of any damage or loss suffered by the authority in their capacity as such, and (b) any other person having apparatus in the street in respect of expense reasonably incurred in making good damage to that apparatus …”.

Section 96(3) provides that:

“Where under any provision of this Part a person is entitled in certain circumstances to recover costs or expenses incurred by him in executing works or taking other steps, any dispute as to the existence of those circumstances or as to the amount recoverable shall be determined by arbitration. This applies whether the provision is expressed as conferring a right to recover, or as imposing a liability to reimburse or indemnify or to bear the cost, but does not apply in relation to a provision expressed as providing for the charging of a fee or conferring a right to compensation…” 

The appeal

On appeal, CityFibre argued that:

• Parliament articulated a clear intention and purpose in relation to dispute resolution under Part III of the Act, namely that claims brought to recover costs and expenses in executing works are to be determined by arbitration.
• The purpose of the drafting in s96(3) is to distinguish between those claims that are claims for the recovery of costs or expenses and those that are not. The carve-out in s96(3) (from the words “but does not apply …”) identifies types of claim which are not claims for the recovery of costs or expenses and therefore fall outside the statutory arbitration regime.
• The question is to be tested by asking whether, as a matter of substance, the provision giving rise to the right of recovery confers a ‘right to compensation’ or an entitlement to costs and expenses.
• The present claim under s82(1)(b) was one for the recovery of costs and expenses, which is a more limited right than the ‘right to compensation’ with which the carve-out is concerned. The use of the verb “compensate” in the opening of s82(1) does not change s82(1)(b) from a provision allowing recovery of expenses to one which confers a right to compensation.
• This approach is consistent with the underlying purpose of s96(3) and preferable to a construction which requires claims for the recovery of expenses to be litigated in court.

Cadent supported the Judge’s reasoning, submitting that:

• The purpose of the carve-out is to qualify the default arbitration regime to make clear that it does not apply to claims “expressed as providing for the charging of a fee or conferring a right to compensation…”
• It is evident from the wording of s96(3) and s82(1) that Parliament did not intend each and every claim for costs and expenses to be arbitrated.
• The word “compensate” conditions s82(1)(a) and (b), making it clear that Parliament intended those sections to be expressed as a conferring a right to compensation.
• The present claim under s82(1)(b) falls squarely within the carve-out and, as such, falls to be determined by court litigation. 

The Court of Appeal agreed with Cadent’s approach and upheld the decision of the Judge. In dismissing the appeal, the Court emphasised that:

• Section 96(3) is drafted by reference to the way that the provision of Part III under which the relevant right or liability arises is expressed. The issue is not the abstract one of whether a given claim arises from ‘a right to compensation’, but rather the narrower one of whether the provision containing the right or liability is expressed as conferring a right to compensation.
• The question here is whether s82(1)(b) is so expressed. The Court found that it was, by virtue of the phrase “shall compensate” in the opening words of s82(1).
• General contentions about the meaning of the concept “compensation” were not relevant, but in any case, s82(1)(b) does create a liability to pay compensation in respect of expenses incurred in making good damage to apparatus. The fact that the statutory liability is limited to the payment of expenses (rather than for other losses) does not affect its compensatory nature.
• The policy considerations advanced by the parties were inconclusive – this was not a case in which the potential advantages or disadvantages of arbitration over court proceedings helped in construing the statutory language.

Comment

This decision is relevant to statutory undertakers and anyone engaged in or contemplating a dispute under Part III of the Act. Careful thought should be given to the forum in which any dispute is brought, as it is not the case that all claims are subject to mandatory arbitration – certain claims (such as those expressed as conferring a right to compensation) will fall to be litigated in court instead.  

Written by Matthew Kaltsas-Walker (Partner) and Jasmine Sharp (Solicitor) in our Dispute Resolution team