A standing Dispute Board is appointed from the commencement of the project and will have as its primary role the avoidance of disputes. The Dispute Board will visit site regularly and hold meetings with the parties to discuss the project and the areas of risk. They will receive regular progress updates and all key correspondence so that they are up to date and well informed about the project and its progress.
Ideally the Dispute Board will go to site regularly and meet with both parties to discuss the project whether there are disputes or not. 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.
Ad hoc Dispute Boards are formed for the purpose of resolving a single dispute between the parties very much like the appointment of an adjudicator in the UK. Their sole purpose is to resolve a dispute that has arisen.
The parties can either choose a Dispute Board or use the contractual rules to have a Dispute board appointed. Once appointed the dispute will be referred to the Dispute Board for their resolution in accordance with the contract rules and procedures.
Once the Dispute Board has reached its decision it no longer has any power to be involved further in the project.
The Dispute Board will either be:
The FIDIC model of Dispute Board is that the Dispute Board issues a decision that the parties are required to comply with and give effect to. In other words, the parties must do as the Dispute Board decides (it is temporarily binding). If a party does not like the decision of the Dispute Board then they can refer it to arbitration, but until the arbitration has finally decided the dispute the unhappy party is required to comply with the decision.
The difficulty is that the mechanism for forcing a party to comply with a Dispute Board’s decision that one party is unhappy with can in some jurisdictions cause problems. In the UK it might be possible to enforce the decision as one might enforce an adjudication decision by a quick process in court.
However, the contract requires the parties to arbitrate any dispute (including the non-compliance with the Dispute Board’s decision) and in some jurisdictions the courts are reluctant to enforce a Dispute Board’s decision that has not been the subject of a full arbitration hearing. This difficulty has spawned a great deal of academic and legal consideration.
In the USA the standard Dispute Board model is for the Dispute Board to simply issue their advisory recommendation or opinion. Their experience seems to be that this opinion forms the basis of negotiation and matters are generally settled without the need for arbitration.
The downside is that a reluctant party cannot be compelled to comply with the Dispute Board’s decision neither in the short term nor longer unless they agree.
There is no doubt that the real benefit to be derived from a Dispute Board is their knowledge, skill and experience that can be used to avoid disputes. A good standing dispute board can use subtle persuasion to nudge the parties into proper communication and risk analysis. From there it is a short step for the parties to see the sense in a negotiated settlement rather than long drawn out and bitter arbitration.
More and more it is the dispute avoidance skills that the parties are looking for and expect from the Dispute Board.
The skills required in order to provide this service are a subtle blend of Construction professional, lawyer, dispute resolver, mediator, diplomat and communicator. It is a difficult set of skills to master let alone master them on site starring into a large excavation (hole).
There is a growing trend for the Dispute Board to be given the power to issue an opinion and make a binding decision. The new ICC Rules allow for just this option. Such an option should be adopted after very careful consideration as it could very easily create legal difficulties about the manner in which a Dispute Board advised and then made a temporarily binding decision.