Dispute Boards are used as a project specific alternative to conventional dispute resolution procedures such as arbitration or litigation. The term ‘Dispute Board’ can cover a range of bodies including dispute, advisory, review, adjudication and conciliation boards. Some standard form contracts, such as the FIDIC suite of contracts, include a Dispute Board as part of the dispute resolution provisions.The contract between the parties will establish the Dispute Board’s composition (which will consist typically of three members selected by the parties) and give the board jurisdiction to hear all, or a category of, disputes as they arise between the parties. Dispute Boards can be appointed either on a standing or ad hoc basis. As with arbitration and adjudication, the Dispute Board’s specific rules set out the process and timetable to be followed in deciding a dispute and whether the board reaches a non-binding ‘recommendation’ or an interim or even final binding ‘determination’. Proceedings before a Dispute Board are usually confidential (although decisions may be admitted as evidence in subsequent proceedings).
Why use a Dispute Board?
The traditional advantage of a Dispute Board is that it is perceived to establish and promote a culture of claim avoidance thus facilitating positive relationships, open communication, and a spirit of mutual trust and cooperation between the parties. Dispute Boards can help to settle issues promptly and cost effectively, before they develop into full disputes, and in a relatively informal forum before knowledgeable individuals familiar with the project. Dealing with issues in this way helps to focus minds on what is important, delivering the job, and to avoid the substantial, time consuming and expensive diversion of resources synonymous with formal proceedings.
Issues with Dispute Boards
Dispute Boards can, however, be costly in their own right, particularly if the board is to stand for the duration of a long project. The parties will be jointly and severally liable for the direct costs of the board members, plus any additional time spent resolving disputes. The ability of the Dispute Board to make a full, fair and representative decision has also come under scrutiny. This is due to the restricted timescale without the opportunity for a full examination of evidence. In addition, there are questions as to what extent such decisions, if agreed to be binding, can be effectively enforced. Furthermore, a Dispute Board’s decisions are not usually summarily enforceable by local courts. That means that the beneficiary of the award will have to prove its case all over again in the event that the ‘losing party’ refuses to pay. To address such issues, however, FIDIC has published suggested amended drafting to its suite of contracts.
Conclusion
Dispute Boards should not be forgotten as a form of dispute resolution. They are a particularly useful tool in the resolution of small scale, repetitive and relatively inexpensive disputes. Parties however need to consider the board’s ability to resolve larger, more complex, disputes where more traditional forms of dispute resolution, such as arbitration and litigation, are likely to be favoured.
Thomas King
Pinsent Masons LLP