Dispute boards have become increasingly popular on international projects to assist parties to prospectively resolve potential disputes in a collaborative manner. Many organisations have now published dispute board rules, either as stand-alone rules or as part of the standard form contracts’ dispute resolution clause. These boards often provide a quicker a cheaper alternative to arbitration or litigation. However, to date, there has been little uptake in the UK, principally due to the already established and well utilised statutory adjudication regime under the Housing Grants, Construction and Regeneration Act 1996 (known as the Construction Act).
As the Dispute Adjudication Board (DAB) will usually be appointed at the start of the project and will provide guidance to the parties throughout the lifecycle of the project, it will have intrinsic knowledge of the project. This will help the DAB to make informed decisions.
Several of the FIDIC contracts provide for a Dispute Adjudication Board (DAB) or Dispute Adjudication/Avoidance Board (DAAB).
Under the 1999 ed. clause 20:
Under the 2017 ed, clause 21:
NEC4 provides for a Dispute Avoidance Board under Option W3:
More recently, we have seen the introduction of the Joint Contracts Tribunal’s (JCT) Dispute Adjudication Board (DAB). It is a hybrid offering which combines a dispute board procedure with an adjudication function. It is intended to provide a proactive and collaborative forum to help parties avoid disputes on both domestical and international projects.
The process envisages that the DAB will either visit or meet with members of the project team every two months. The parties can ask for the DAB to provide three tiers of advice:
Arbitration is a consensual dispute resolution process, which means that parties need to agree for their disputes to be resolved through arbitration: a party cannot unilaterally commence an arbitration. Typically arbitration agreements are included in the contract between the parties, but they can form the basis of separate stand-alone agreements.
The arbitration process is often confidential (subject to any related interim or post-award court proceedings) and arbitration disputes are typically heard by either a sole arbitrator or a panel of three arbitrators, known as the tribunal. In a tribunal of three arbitrations, each party usually nominates an arbitrator with a chair/president appointed jointly by the party-appointed arbitrators or by the arbitral institution.
When and how is it used in an international context?
Arbitration is favoured in the context of international disputes as its affords parties from different jurisdictions flexibility and neutrality over their dispute resolution procedure as opposed to one party needing to submit to the national courts of the other, which may be unattractive.
Arbitrations can be administered by specific arbitral institutions, such as the International Chamber of Commerce or ICC (based in Paris), London Court of International Arbitration or LCIA (based in London) or the Singapore International Arbitration Centre or SIAC (based in Singapore) or they can be ad-hoc (that is, not administered by an institution).
What are the key considerations when looking to use of arbitration?
Arbitrations are subject to a number of different laws and rules, which include:
The enforcement of arbitral awards is governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
For more information on international arbitration, click here.
What are the pros and cons of resolving a dispute via litigation?
Although litigation has its drawbacks (namely the length of time it can take for a decision to be reached, and the high costs associated with these extended timings), dispute resolution through the traditional route of the courts has many important advantages.
Should I consider litigation in the English courts for a dispute concerning an international project?
Clearly litigation has its place in construction disputes, but what about on international projects? Again, while the costs of bringing an international claim in the English can be high, and the lack of procedural flexibility brings with it some practical challenges, litigation in the English courts may remain an attractive option.
London has been a traditional centre for international commercial litigation largely on account of the prevalence of English law and the status of English as the dominant language of international business. The high calibre of the English judiciary and the existence of a specialist construction court in the Technology and Construction Court can, however, give the English courts an advantage over many other jurisdictions.
What is mediation?
Mediation is a voluntary, confidential, informal, flexible, relatively speedy and inexpensive process in which a trained independent facilitator, the mediator, will help the parties settle their disputes by focusing on the parties’ interests.
In most disputes it is in the parties’ interests to settle, rather than to spend time, cost and effort in fighting each other in formal, sometimes public, court or other proceedings.
How does a mediation work?
Mediation, and settlement or otherwise at or after the mediation, is in the total control of the parties. Unlike a judge or an arbitrator, a mediator does not judge or decide anything in favour of a party. It is entirely up to the parties whether they settle and, if so, on what terms.
A mediation can take place at any time. What is the best time for any dispute will depend on a number of factors, including the extent to which each party has exchanged information about the nature of and evidence for its case. The timing should always be kept under review as circumstances change.
Some contracts require the parties to mediate as part of a tiered dispute resolution procedure. The courts in some jurisdictions require the parties to a dispute to consider mediation prior to, or during, formal court proceedings
How does adjudication work in the UK?
In the UK, parties to a construction contract have the legal right to refer a dispute to adjudication “at any time”. This is known as statutory adjudication as the right, which cannot be contracted out of, arises from the Housing Grants, Construction and Regeneration Act 1996 (as amended), otherwise known as the Construction Act.
Adjudication was introduced in the UK to improve cash flow in the construction industry and to ensure that there was quick and cheap way to resolve construction disputes.
Adjudications are decided by adjudicators, who are either agreed by the parties or nominated by an adjudicator nominating body. Decisions are issued within 28 days of referral of the dispute to the adjudicator (although this period can be extended) and disputes are usually decided on paper without a hearing.
There are limited grounds on which to challenge an adjudication decision and the UK courts have developed a specific process for the prompt enforcement of adjudication decisions.
Is adjudication used in other jurisdictions?
Other countries across the globe have followed suit. Statutory adjudication can now be found in Malaysia, Australia, Singapore, New Zealand, Canada and Ireland, although the range of disputes that can be referred to be resolved by adjudication differs across jurisdictions. For example, in some of these countries only payment disputes can be referred to adjudication but in others, including the UK, a broader range of disputes can be referred, including technical disputes and disputes on contractual interpretation.
In jurisdictions where no statutory adjudication regime applies, parties can nevertheless agree to resolve their disputes, or certain of them, by adjudication by providing for adjudication as a dispute resolution process in their contracts. This is known as contractual adjudication. The parties are free to agree how the adjudication process will run, for example, the appointment of the adjudicator, number of submissions and the deadline for the issue of the decision.
What is an expert determination?
Expert determination is a form of alternative dispute resolution whereby the parties agree to submit a dispute to an “expert” who will make a decision on the matter referred to her/him. Parties can agree to use this process if and when a dispute arises or stipulate for its use in their contracts.
The parties should agree and record whether the expert determination is to be binding or non-binding on them. If the decision is to be binding on the parties, they should also consider if and how that can be overturned, for example, by referring the matter to litigation or arbitration.
What does it involve and what are the key considerations?
As expert determination is essentially a form of alternative dispute resolution agreed between the parties: the process itself is agreed between them. This flexibility and tailored approach to the process may be helpful.
The parties will want to consider, among other things, the following issues:
The parties will want to ensure that the agreement on these matters are binding on the parties. This can be done in the original contract or by a separate supplementary agreement.
When to use it?
Expert determination can be a very effective form of dispute resolution for certain matters. Its advantages include:
What are the risks?
It is generally not suitable for complex disputes involving disputed factual evidence. There may also be disputed areas of law or other technical issues that an expert would not be in a position to opine on. Therefore, expert determination often works better when the matter referred is discrete or can be dealt with independently of disputed matters of fact or law.
The parties should also consider the skillset of their expert and whether they have sufficient experience of acting in that capacity. A decision which is not clearly explained or poorly reasoned may lead to further disputes. Equally, the parties will be keen to ensure that the expert does not overstep her/his jurisdiction and properly utilises her/his powers and duties. Not only will this be likely to lead to a more satisfactory decision but it will also avoid disputes as to whether the decision is enforceable or not (if it is binding).
The expert determination process is primarily based on the agreement of the parties and so the contractual provisions dictating this (or a later supplementary agreement) will be critical if the parties want to build in this method of ADR into their contracts. It is therefore important for the parties to take legal advice as to its content.
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