Dispute boards should decide, not recommend

Have you ever heard of the “long shadow” on a construction project? It’s what those of us that comprise Dispute Adjudication Boards and Dispute Resolution Boards on large projects are told is the effect of appointing a three person board at the outset of a major project. A dispute board is the standard approach in the FIDIC international conditions of contract for building civil engineering works. It is written into the contract that the board will decide disputes. But it’s existence has the side effect of dispute avoidance. Useful, if true. That’s the long shadow. I joined in with a two-day Dispute Resolution Board Foundation (DRBF) Conference last week in Brussels. It is fascinating to listen to the differing ideas, limitations and enthusiasms of folk from across the world as to how to manage the business of disputes. At one end of the spectrum some people want chaos and thrive on long, expensive, even corrupt, machinery for deciding disputes. At the other end there are those who cry out for the cut and dried almost immediate binding decision to chop out the dispute and get on with the job. There are those who want a guardian angel to sprinkle dispute avoidance dust on the project to avoid disputes arising. Then there are those who want to a mixture of imposing their own bright ideas on the project more like the old engineer used to do - somewhere between a god and the devil.

The idea of a dispute board sprung from “project advisory panels” about 25 years ago in the USA. Then the World Bank liked the idea of a dispute board regularly visiting the project when funding major projects.The board became the eyes and ears of the bank but nobody admitted that. The reason for the board was said to be to manage the dispute. Then when a dispute arose the board gave a “recommendation” as to what ought to prevail. The Americans were nervous about deciding a dispute as a binding process. The reason is that this requires judicial behaviour by the board. The American board preferred to be able to talk to one side without the other; to make suggestions about performance, even suggest ways of operating the contractual rules. These boards were required on projects of $10m plus.

At one end of the spectrum some want chaos and thrive on long, expensive, even corrupt, machinery for deciding disputes. At the other end there are those who cry out for the cut and dried almost immediate binding decision

Then other parts of the world caught on to borrowing money from the World Bank and from the European Banking Institute. Here the FIDIC contract document rules the roost. The contract from 1999 contained a Dispute Adjudication Board (DAB). It was not the American model. It was not a board that made “recommendations”. The reason is that there was lots of evidence outside of the US that a mere recommendation would be a waste of time. The preferred system is to have a DAB that adjudicates the problem and, wallop, makes a decision that is binding immediately and enforceable. Let the dispute then meander its way into arbitration or litigation at whatever pace. Every time I go to a DRBF meeting, the Americans are still bewildered as to why we folk from elsewhere don’t do it the US way. It’s because we tried recommendations only to find that one of the parties at least would look at it and pay not the slightest attention, save to wave a variety of interesting “get knotted” signs.

The world bank when funding major projects liked the idea of a dispute board visiting the project regularly

The DAB is invariably appointed at the outset. Employer and contractor chooses “his” DAB member; then the two members choose a chairman. Then we three fly off hither and thither to visit the job every few months. I actually see the project being built instead of merely being a sweeper-upper at the end. We are briefed on the ups and downs of the project. Sniff the makings of a dispute. Wriggle uncomfortably when one party or the other fails to comply with contractual rules. But the mouth of the DAB stays shut until the dispute comes trotting along to be decided. The system, in my experience, works perfectly. We have 86 days to decide any dispute. The hard-nosed approach is to adjudicate, that’s all. Tempting as it is for the DAB to become more interactive with the site management and contractual management and act as a guardian angel, don’t. Or rather set up clear and precise wider boundaries to go further than “just” adjudicate. I like that idea so long as we have permission.

The French folk at the conference were worried that high-speed dispute deciding lacks the judicial machinery required for binding and enforceable decisions. Let me say in fluent French … my dear chaps, you are quite wrong.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple

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