What is a Dispute Board?
There are three principal types of Dispute Board:
- Dispute Review Board - A dispute review board issues recommendations and guidance. This acts as more of a facilitating process, to get the parties to engage with one another without creating a conflict, in order to work towards a resolution.
- Dispute Advisory Board – Issues formally reasoned decisions which have mandatory outcomes that are binding on both parties
- Combined Dispute Board (also known as a Dispute Avoidance Board or Dispute Adjudication Board) – A combination of the Dispute Review Board and Dispute Advisory Board, dealing with disputes in the Dispute Resolution Board centre of conciliation and making recommendations, but also has the power to give firm and binding decisions.
A Dispute Board will usually have one or three members. The number of members is always odd in order to avoid a deadlock when providing guidance and decisions. Where there is one member this will be a joint appointment by both parties. In cases of three members, each side will appoint one member and there will be a chair appointed.
Standing Dispute Boards vs Ad Hoc Dispute Boards
A standing Dispute Board is one that exists for the length of the contract, and is usually established at the very start, ideally as at contract execution. Whereas, an ad hoc Dispute Board is one that is only appointed as and when disputes arise.
An issue that commonly occurs with setting up an ad hoc Dispute Board is that this will require agreement of both parties at a point when they are already in dispute and therefore not disposed to agreeing to anything requested by the other party. This leads to delay in their formation and agreement of terms of reference.
Setting up a Dispute Board from day one of the contract can be beneficial as it demonstrates to both the contractor and the employer that there is a neutral board to help in providing guidance and solutions to the many issues that arise during the execution of the project. Further, the implementation of a Dispute Board from the outset can lead to better relations and trust on site in reminding parties of their duty to cooperate and act in good faith with one another. The active presence of a Dispute Board reminds the parties of their obligations under the contract throughout the project and provides a means for disputes to be settled quickly and efficiently without causing further delays to completion. The main benefit of a Dispute Board constituted at the start of a project, is to create awareness between the parties of the issues that may arise, and to facilitate communication, in order to diffuse these issues before they create a larger and more complex problem.
In the life cycle of a construction project it is highly likely that some form of dispute or unforeseen issue will arise. This may be an issue with sourcing materials, the cost of materials increasing dramatically, lack of materials, adverse weather conditions, issues with sourcing labour, weather conditions, variations, or a performance issue.
By forming a standing Dispute Board these issues can be addressed at the point of discovery, opening up a channel of communication between the parties and inviting the contractor to notify the employer at an earlier stage. This also promotes increased compliance by both parties with the contractual terms, thereby further reducing the likelihood of delays, increased costs and disputes.
What are the common myths in using Dispute Boards?
- It is expensive to set up a Dispute Board and to create a system where any dispute can be referred. Not so, as the procedure will be discussed and agreed at the outset and ideally be in place from the moment the Contract is signed.
- The decisions are not enforceable and are not binding. If you are using FIDIC then the decision shall be binding on both parties unless and until it is revised by amicable settlement or by an arbitration award.
- Dispute boards introduce conflict at early stages of the contract. At the outset of a contract, parties are much more likely to agree to the appointment of DAB members and to the process and procedure, than if left until much later in the contract process when a dispute has arisen and it becomes in the interests of one party to delay and obfuscate.
- Dispute Boards are liable to corruption and often favour a single party in the contract. Each party will appoint a member of the 3-person DAB and the chair will then be appointed by them. DABs are no more likely to be corrupt than an arbitral panel.
What are the benefits of using Dispute boards?
- It is cheaper and quicker to resolve a dispute when they are small than when they evolve into larger more complex disputes.
- They facilitate a higher level of engagement between the parties to the contract.
- It will create an open platform for issues that arise during performance of the contract.
- They promote communication between the parties.
- Their decisions can be binding on both parties.
- DABs resolve disputes quickly and efficiently.
Application of Dispute Boards in England
Traditionally it will only be those who are dealing with FIDIC contracts who are familiar with the process and benefits of using a Dispute Board. Those based in the UK are more used to the adjudication processes included in JCT contracts, which is the most common form of contract used in construction projects in the UK. However, JCT has, as of 2021, included provision for a Dispute Board as part of the dispute resolution procedure in performance of the contract. This step by JCT recognises the value of Dispute Boards and brings the dispute resolution procedure under JCT contracts more into alignment with the process used by FIDIC in attempting to prevent disputes and allow the execution of the contract to flow more freely.
Our Top Tips in Implementing a Dispute Board
- Carefully considering the contract and the Dispute Board provisions, ensuring that everyone is on the same page.
Make sure both parties are aware that they are committing to a process, which is to facilitate the project, and to encourage cooperation and finding solutions quickly and efficiently. Open discussion of the relevant clauses in the contract is always key to ensuring both parties are aware of the contents of the contract, and how to implement the correct procedure relating to the Dispute Board.
- Recognise the specific needs of your project.
Both parties should be aware of the project dynamics and its needs, and what level of dispute resolution this entails. Every project will be unique in its problems and the solutions required, which may mean that the approach of the Dispute Board is tailored to your specific project. For example, on specific issues it may be relevant to consult legal advice where technical queries are raised as to clause interpretation, or to refer quantum aspects to a quantity surveyor or an engineer to provide guidance on specification and work execution issues. Think about the practicalities of how the Dispute Board will operate on your project/site, the relevant jurisdiction, and how the skill sets of the members appointed will need to be addressed.
- Do not hesitate to follow the procedure of your contract
There is often a hesitancy or delay by both parties to a contract to issue contractual notices, particularly where they believe or are led to believe that the issue is or will be agreed. The notice provisions are there to be used, and if they are not this can cause more significant problems down the line. The use of and application of the contract terms by both parties in fact increases transparency and efficiency in the execution of the contract, which will in turn assist in decreasing the number and size of disputes.
- Be clear and concise in the procedures you want to implement
When negotiating contractual terms relating to disputes and dispute resolution, it is important to be very clear and concise about what you want in the contract. At this stage it is vital to think about what will work and the practicality of what you are suggesting. For example; do you want flexibility, what will be the length of submissions, what will be the timing of submissions, is representation by lawyers required, do you want the Dispute Board attending site periodically, etc.? There should be no ambiguity in how the contract and its procedures will function as this can serve to disrupt the Dispute Board. Both parties must be clear about how they want the contractual procedure to operate and why they want it to operate in that particular fashion.
- Carefully consider the member(s) appointed for the Dispute Board
When appointing the member, or members, of the Dispute Board it is important to have in mind the issues that may arise in full consideration of the conditions, locality and common issues of the project. In applying all of these factors to the choice of appointment it may serve as a guide to the type of person both in qualification and character, who will best serve as a member of the Dispute Board.
'Different aspects of Dispute Boards in Latin America, UK & Middle East' was discussed at our September 2022 webinar, with guest speakers, Jaime Gray of NPG (Peru) and Anna Laney of Crown Office Chambers (UK). https://www.bartonlegal.com/site/webinars/different-aspects-of-dispute-boardsTo find out how Barton Legal can help you, please click here.
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.