UK: The New FIDIC Yellow Book Dispute Resolution Procedure: Part 2 – Are Dispute Adjudication Boards Worthwhile? Benefits, Problems And Comments On FIDIC's Security Of Payment Regime

Last Updated: 31 July 2017
Article by Robbie McCrea


In Part 1 of this paper we reviewed the dispute resolution procedure included in FIDIC's pre-release version of its second edition of Conditions of Contract for Plant and Design Build ("the Proposed 2017 Yellow Book"),[1] which affirms and expands the infamous Dispute Adjudication/Avoidance Board ("DAB") mechanism.

DABs are used widely in international construction contracts and they can be very effective. However, if either party refuses to comply with its obligations under the DAB provisions it can be difficult and at times impossible to enforce them. Defective drafting of the FIDIC Rainbow Suite, or 1999 Conditions of Contract, has led to a proliferation of disputes as to whether, as a matter of contract, it is possible to summarily enforce binding but not-final DAB decisions, notwithstanding that FIDIC has explicitly stated this was its intention. The problematic wording has been resolved in the Proposed 2017 Yellow Book; however, even where the contractual position is clear a further issue is whether not-final DAB decisions are able to be enforced as a matter of law in a number of jurisdictions. Many contractors have signed up to the FIDIC Conditions on the understanding that the DAB provides a security of payment regime, only to find it act as a barrier to payment instead.  The reality is that DABs often do not provide the straightforward relief that FIDIC intended. 

This paper considers the practical effect of FIDIC's DAB mechanism as a security of payment regime, and in doing so addresses the benefits, pitfalls, how not-final DAB decisions are treated in different jurisdictions, and potential solutions for a workable DAB mechanism, and by implication the proposed new binding Engineer's determinations, as a contractual precondition to arbitration.

The intended DAB security of payment regime

DABs, under the FIDIC form and as they are commonly understood, consist of a board of one or three people, appointed by parties to a contract to assist in the resolution of issues or disputes arising in relation to that contract, as a first step before any dispute can be referred to arbitration or court proceedings.

While DABs under the 2008 Gold Book and Proposed 2017 Yellow Book also provide a dispute avoidance role during the contract,1 this paper focuses on the security of payment regime of binding decisions. The key features of FIDIC's security of payment regime are as follows:2

  • when any dispute arises in relation to a contract, either party may refer the dispute to the DAB;3
  • the DAB must issue a decision within 84 days of the dispute being referred to it;
  • the decision "shall be binding on both Parties, who shall promptly give effect to it;" and
  • obtaining a DAB decision is a condition precedent to referring that dispute to arbitration.

Either party may issue a "notice of dissatisfaction" ("NOD") with a DAB decision within 28 days of it being issued, which will preserve the parties' ability to refer the underlying dispute to be finally determined in arbitration. If neither party issues a valid NOD then the decision will become final, and the decision itself will be enforceable in arbitration without the merits of the underlying dispute being looked at any further.

FIDIC has repeatedly affirmed that its intention is that any DAB decision, whether subject to an NOD or not, be able to be enforced summarily in arbitration in the first instance;4 i.e. "pay now, argue later".  This was explained by the Singapore courts in the Persero II proceedings5 as creating:6 

"a contractual security of payment regime, intended to be available to the parties even if no statutory regime exists under the applicable law ... [and under which w]hen a dispute over a payment obligation arises, the regime facilitates the contractor's cash flow by requiring the employer to pay now, but without disturbing the employer's entitlement (and indeed also the contractor's entitlement) to argue later about the underlying merits of that payment obligation."

In addition, and as explained in Part 1 of this paper, the Proposed 2017 Yellow Book adds a further layer to this security of payment regime whereby, as a precondition to referring any dispute to the DAB, parties must first refer the dispute to the Engineer who will have 84 days to resolve the dispute or, failing that, must issue a binding Engineer's determination.  

Benefits of the DAB mechanism

The benefits of this functioning DAB mechanism include:

  1. If a DAB is set up early in the contract, it will be able to provide immediate assistance once a dispute arises, and should already have a good knowledge of the project.
  2. Disputes must be referred to a DAB timeously, meaning the issues will still be fresh in the parties' minds and should be able to be resolved without unduly disturbing the carrying out of the project.
  3. Decisions must be issued within 84 days, which is much faster than can be achieved in arbitration.7

Similar security of payment regimes have been implemented by legislation in a number of jurisdictions, such as the United Kingdom, Australia, New Zealand and Singapore.8 In these jurisdictions the ability to receive fast and enforceable adjudication decisions, while not appropriate for every dispute, has dramatically decreased the number of construction disputes that proceed to substantive court or arbitration proceedings.

However, despite FIDIC's best intentions, there are a number of practical issues which have plagued its contractual security of payment regime and will continue to do so.

Problems with the DAB mechanism

The practical difficulties we have experienced with the FIDIC DAB mechanism can be broadly broken down into the following: (1) defective contract wording, (2) jurisdictional issues, and (3) a lack of will from employers and project-funders to adhere to the contractual DAB mechanism.  These are addressed below. 

1. Defective contract wording

Defective contract wording has been a major problem with the DAB mechanism under the 1999 Conditions of Contract. The issue is that although those Conditions provide for final DAB decisions to be directly enforced in arbitration, there is no express provision for not-final DAB decisions to be enforced. This has led to extensive debate and a multitude of competing options as to the correct way, if at all, to enforce a not-final DAB decision.

FIDIC sought to clarify the position through a Guidance Memorandum issued on 1 April 2013 which provided wording for an amended Sub-clause 20.7 that expressly provides for not-final decisions to be enforced in arbitration, and which can be incorporated into the 1999 Conditions of Contract. This same wording has been included in the 2008 Gold Book, whereas the Proposed 2017 Yellow Book uses similar, albeit further refined, wording to address the contractual issues with the DAB mechanism.  

Parties using the FIDIC form therefore now have the tools to avoid the contractual issues set out above, provided they have the will to include them.

3. Not-final DAB decisions are not enforceable in some jurisdictions

A more critical issue with the FIDIC security of payment regime is that irrespective of how clear the contract is, not-final DAB decisions are simply not enforceable in a number of jurisdictions. In those cases parties will still be required to go through the mandatory DAB procedure but will then have no ability to enforce the resulting DAB decision in the event the losing party refuses to comply.

DABs are purely creations of contract and therefore, unlike adjudication decisions under statutory regimes,9 DAB decisions are not recognised as an enforceable title in and of themselves.  The two key issues we have experienced with this are whether an arbitral award enforcing a not-final DAB decision: 

  • will comply with the definition of an enforceable arbitral award in a jurisdiction's arbitration legislation, given that such an award (a) will not review the underlying merit of the dispute and (b) will be followed by a final substantive arbitral award on the underlying merits; and
  • will be prevented by the principle of res judicata (that a matter which has already been decided cannot be decided again), because the final substantive arbitral award will need to decide the same matters that are subject to the enforced DAB decision.

Other practical issues include how the enforcement of a not-final award should be taken into account in the final substantive arbitral award.

A snapshot of how some jurisdictions have dealt with these issues is set out below.


As of January 2017 the position in Romania appears to be that not-final DAB decisions cannot be enforced. The position has been unsettled for a number of years, and we are aware of not-final DAB decisions that have been enforced and commentators who support this.10 However, the majority of reported arbitral awards have declined to enforce not-final DAB decisions. In the most definitive statement to date, a High Court decision issued in January 2017 found that not-final DAB decisions cannot be enforced under Romanian law.

The reasons for the Romanian position are as summarised above, namely that any arbitral award enforcing a not-final DAB decision will not comply with Romanian legislation,11 and res judicata.


Following the Persero series of cases,12 the Singaporean position is perhaps the best known in the world. In those cases the claimant contractor was able to enforce a not-final DAB decision, albeit after going through two sets of arbitration, High Court and Court of Appeal proceedings, and over a period of six years. The difficulty with that case related to the defective contract wording of the 1999 Conditions of Contract, and if we assume that this defective wording has now been resolved it might be expected that a not-final DAB decision would be enforced promptly.

However this is not a certainty. The Singapore International Arbitration Act defines an "award" as a decision "on the substance of the dispute and includes any interim, interlocutory or partial award". While this is a wider definition than the Romanian legislation, the Minority of the Court of Appeal in Persero II considered that not-final DAB decisions amount to provisional relief only and therefore cannot be enforced under this definition.  It is conceivable that a court might also reject such an award as not being on the "substance" of the dispute.

The position in Singapore today therefore is that not-final DAB decisions should be expected to be enforced, but there is no guarantee that they will.

South Africa

By contrast, the courts in South Africa have had no problem giving effect to the intention of the contract.  The position is set out in the case of Tubular Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd (06757/2013) [2013] ZAGPJHC 155; 2014 (1) SA 244 (GSJ) (3 May 2013). In that case the court focused only on the question of the intention of the contract, from which basis it had no difficulty in giving effect to what it described as the "perfectly clear" intention that the parties are "obliged to promptly give effect to a decision by the DAB ... [and] that the issue of a notice of dissatisfaction does not in any way detract from this obligation". 

United Arab Emirates

The position in the UAE, and which is representative of the Middle East generally, is untested (so far as we are aware) but is very unlikely to permit not-final DAB decisions to be enforced. While UAE law does recognise arbitral awards, the UAE Civil Procedures Law only recognises final awards and therefore any bifurcation would likely jeopardise the entire arbitration agreement,13 whereas we would expect not-final awards would also be disputed on grounds of res judicata.

Lack of will from employers and project-funders to adhere to the contractual DAB mechanism

The biggest issue we have experienced with FIDIC's security of payment regime is recalcitrance from employers to adhere to DAB decisions, and a lack of will or ability from project-funders, such as development banks, to encourage compliance.


There are a number of solutions and steps parties can take in response to the issues described above. Remedies to the defective contract wording have already been well canvassed. In addition, there are a number of contract amendments that could effectively ensure compliance or at least a release from the DAB mechanism in jurisdictions where enforcement will be difficult. These include making it a condition precedent to issuing a valid NOD that the issuing party has fully complied with the corresponding DAB decision, or allowing the DAB mechanism to be deleted upon non-compliance by the other party.

However, many of these amendments will not be acceptable to employers, and the extent to which concerns are able to be addressed will be a matter of negotiation.  Consequently the most important thing parties can do is ensure that, prior to entering into any contract, they have discussed, understood and agreed their obligations under the dispute resolution mechanism. This should include discussions with any project-funder as to their position and role in enforcing the security of payment regime.  


Our answer to the question "are DABs worthwhile?" is, perhaps unsurprisingly, "it depends".

FIDIC's promotion of dispute avoidance is a good thing and should be viewed positively, albeit carefully. The security of payment regime will not suit every contract. Where parties are confident that decisions by the DAB and/or Engineer will be complied with or will be enforceable in the applicable jurisdiction, then the DAB mechanism is likely to be worthwhile. Conversely, where DAB decisions are unlikely to be enforceable, serious questions will need to be asked about what other steps might be available to ensure the security of payment regime is workable. In some cases no satisfactory assurances will be available and the DAB mechanism may well be a waste of time, effort and money.  

In summary, FIDIC's DAB mechanism is very good when it works, but is often a waste of time when it does not. Parties looking to enter into any FIDIC contract should consider very carefully whether this mechanism is suitable for their particular circumstances, what can be done to minimise the risk of the security of payment regime being ineffective, and whether this mechanism or parts of it should be deleted altogether.  If appropriate steps cannot be taken, parties should at least understand the risks they are signing up to.


1. Parties should use caution in asking the DAB to act as a quasi-mediator, but the development should generally be viewed positively.

2. These are provided in Sub-clause 20.4 of the 1999 Conditions of Contract, Sub-clause 20.6 of the 2008 Gold Book, and Sub-clause 21.4 of the Proposed 2017 Yellow Book

3. "Dispute Board" in the FIDIC Pink Book.

4. For instance in the FIDIC Guidance Memorandum of April 2013.

5. Which culminated in the Singapore Court of Appeal in PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] SGCA 30.

6. PT Perusahaan Gas Negara (Persero) TBK ("PGN") v CRW Joint Operation (Indonesia) ("CRW") [2014] SGHC 146, at paragraphs 22 and 24.

7. With the exception of emergency arbitration procedures, which provide only urgent and temporary relief.

8. For instance, the Housing Grants, Construction and Regeneration Act 1998 in the UK, or in Singapore where the Building and Construction Industry Security of Payment Act 2006 goes as far as to state that an application for review of an adjudicator's decision can only be heard if that decision has actually been paid.

9. Housing Grants, Construction and Regeneration Act 1996.

10. C. Leaua, Arbitration in Romania: A Practitioner's Guide, Kluwer Law International, 2016.

11. Article 1.121(3) of the Romanian New Civil Procedure Code requires arbitral awards to be "final" in order to be enforceable.

12. Although the Persero series was decided under Indonesian law, the applicable arbitration law was based on the seat of arbitration: Singapore.

13. We are aware of one case that has endorsed the right of arbitral tribunals to issue partial awards where this is provided in the parties' arbitration agreement, Dubai Court of Cassation, Petition No. 274 of 2013, dated 19 January 2014, but as the UAE does not have a system of binding precedent, it is questionable whether this can be relied upon in light of the body of law against it.

International Quarterly is produced quartely by Fenwick Elliott LLP, the leading specialist construction law firm in the UK, working with clients in the building, engineering and energy sectors throughout the world.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Robbie McCrea
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions