A Dispute Board is used here to describe the role of an
independent neutral expert panel (usually 3 people but increasingly just 1 person) brought
into a project to assist the parties to either avoid disputes or if there are to be disputes
to seek to reduce the consequences of the dispute.
Dispute Boards are a truly innovative method of seeking to avoid disputes as they arise, to use
the jargon “in real time”. The skill of a Dispute Board is to ensure that the parties to the
contract are communicating with each other, addressing the allocation of risks and performance
issues such that potential disputes evaporate.
Ideally the Dispute Board will go to site regularly and meet with both parties to discuss the
project whether there are disputes or not. Communication is as much about listening and
responding as it is about speaking. It is through this regular communication and progress
reviews that the Dispute Board is able to use its influence and experience to seek to avoid
disputes. By asking the right questions and eliciting detailed answers the Dispute Board can
show the parties the way.
If a dispute becomes necessary the dispute board is on hand, already versed in the project and
able to decide any dispute. It is the speed with which the Dispute board reaches its decision
that is the true benefit to the parties in this situation. Most parties prefer a quick decision
so that they can move on with the project rather than a final determination that will take years
to provide.
The Dispute Board’s decision or recommendation can become final and binding upon the parties and
even if disputed by a party it is usually a contractual obligation that the parties have
undertaken to comply with the decision at least until the end of the project.
The advantages of Dispute Boards are that they aim to preserve the parties’ relationship.
Business relationships take many years to develop and require significant input at a senior
level. The first casualty of any dispute is trust and the relationship between the parties.
Once lost it is usually lost forever and the business consequences of this are enormous.
Good organisations recognise the need to preserve the relationship whilst also ensuring that the
parties receive their proper entitlement. The Dispute Board offers the opportunity to achieve
this aim.
A Dispute Board can work with the parties to avoid disputes and arbitration, whilst the project
achieves an outcome that is acceptable to both parties. Arbitration and litigation are slow,
expensive methods of achieving commercial goals and come with the risk that relationships will
be shattered. Usually one party is severely weakened as a result of the outcome.
A question often posed is to prove the financial benefit of Dispute Boards. There is some data
that having a Dispute Board reduces the incidence of disputes that go to litigation and
arbitration and from this it is easy to calculate the saving by using a Dispute Board versus the
party cost of arbitration or litigation. However, the real benefit to the parties is the
relationship. What is that worth in your organisation?
Each particular project will have particular procedures depending upon the form of contract used
and the particular terms of that contract. What follows is an outline of a typical procedure.
In order to function as an effective Dispute Board, it is necessary for the Dispute Board to
carry out certain standard procedural functions. These include:
- To become familiar with the project, documents and site.
- To keep up to date with progress, developments and problems.
- To encourage the parties to resolve issues early before they turn into full blown
disputes.
- Deal with any disputes referred to it in a professional and timely manner.
The Dispute Board’s powers come from the contract and the Dispute Board Procedure. It is
important that the Dispute Board does not exceed its powers. For instance whilst the Dispute
Board is to be proactive it does not have the power to investigate matters that have not been
brought before the Board and as stated above cannot give advice to the Parties unless expressly
asked by both Parties jointly.
The role of the Dispute Board is to help avoid or resolve disputes within the constraints of the
contract and the Dispute Board procedure. It is not there to replace the day to day decision
making and management exercised by the Contractor, the Project Manager/Engineer or the Employer.
For instance the parties may ask the board to decide a dispute over two drawings that contradict
each other. The Dispute Board will decide which of the two drawings reflect the contractual
obligations of the parties. The Dispute Board will not tell the parties which drawing should be
built because once the dispute board has declared the contractual obligation, if the Engineer
wants something else building he can instruct a variation.
A standing Dispute Board that is appointed from the commencement of the contract will have as its
primary role the avoidance of disputes whereas an ad hoc Dispute Board (also known as a Dispute
Adjudication board) will usually be appointed specifically for the purpose of resolving a
dispute that has arisen.
The Dispute Board needs to establish procedures and advice the parties how it will go about:
- Site Visits and Meetings
- Establish procedures for deciding disputes
- Conduct of the hearing
- Take the initiative in ascertaining the facts and the law.
