John Redmond looks at the growing use of Dispute Review Boards to resolve construction disputes.
Construction lawyers in the United Kingdom are very proud of the fact that most innovative developments in the dispute resolution world seem to originate in the world of construction. Civil court procedures in England now incorporate many practices that were once exclusively found in the Official Referees' (now the Technology and Construction) Court in London. Adjudication, the remarkable process that produces binding decisions in the most complex disputes in just 28 days, is a creation of the UK Housing Grants, Construction and Regeneration Act 1998 (popularly known as "the Construction Act"). The construction industry has embraced mediation faster than most.
Another initiative by the construction industry is rapidly developing - the Dispute Review Board. It was first seen in the USA, possibly in the contract for the Boundary Dam in Washington. Its popularity grew in US domestic projects, and in 1981 the World Bank suggested that a Board should be appointed for the El Cajon Dam and Hydro project in Honduras. It worked, and in 1990 the World Bank produced a modified FIDIC contract that incorporated a Dispute Review Board procedure. In 1995 its use was declared mandatory for all projects financed by the International Bank for Reconstruction and Development in excess of $50 million. The ICC has a standard form of agreement for the appointment of a Board, and projects from Hong Kong to Copenhagen, Bangladesh to Dublin, Taiwan to St. Lucia have adopted the process.
The best known use of a Dispute Review Board in the UK has been the English Channel Tunnel Project. Boards were also set up for the London Docklands Light Railway Project, Saltend Private Power Plant, motorway contracts and several hospital projects.
There are several types of Boards in operation, but the essence of the process is that the members of the Board are appointed at the start of the project. Typically two of the members will be professionally qualified in the relevant industry, and the chairman will be a lawyer. They remain in post until the conclusion of the project, and stay in touch by receipt of regular reports as to progress and periodic site visits.
They can be made aware of potential disputes at an early stage during their visits to the site. This will often be before the parties have become entrenched in their positions. Since members are already up to speed on a project, they can give informal views on the issues during the course of the visits, or if an issue has been referred formally they can quickly and efficiently give their recommendation for its resolution. The machinery for the Board's operation varies from contract to contract, but will invariably involve a much less formal procedure than arbitration. The recommendation will not be binding unless the parties agree to adopt the decision, or may be binding unless taken on to further resolution process (in which case the Board will probably be described as a Dispute Adjudication Board).
Promoters of the Dispute Review Board procedure claim a remarkable level of success in avoiding lengthy and expensive formal arbitration and litigation. Reasons given for this success are varied and some appear contradictory. For example, it is said that the regular attendance of the Board members on site leads the parties to treat them as trusted members of the project team before whom they can be completely open. On the other hand it is suggested that the fact that the members are only present at fairly infrequent intervals means that they are seen as an aliens whose interference should be discouraged by a show of solidarity, which of course requires the resolution of the "dispute" before the Board even hears about it.
There is sometimes a reluctance to incur the cost of appointment of a Dispute Review Board at the outset, when the optimistic parties confidently assert that there will be no disputes. The three Board members will require a monthly retainer and payment for time spent and expenses. In fact, however, the total cost will usually be a tiny percentage of the overall project cost, and will be dramatically less than the cost of even a modest international arbitration. The usefulness of the Board is seriously impaired if it is not appointed until the parties have been forced to accept that a dispute has in fact arisen.
The Dispute Review Board is not an alternative to arbitration or litigation. It is never the ultimate tribunal for the resolution of disputes, and is unlikely to be appropriate where the contractual relationship is a short lived transaction. When a prolonged period of activity is anticipated, with the potential for dispute to arise at any point, a variant of the Dispute Review Board should be considered. Examples are not limited to construction. Facilities maintenance contracts, healthcare services contracts and software development projects are all potential candidates for the procedure.
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