Dispute Board (DB)

A tested and successful process for Dispute

Avoidance and Dispute Resolution

Volker Jurowich
 Dispute Board (DB)
Dispute Review Board (DRB)
Dispute Resolution Board (DRB)
Dispute Adjudication Board DAB) FIDIC
Combined Dispute Board (CDB) ICC
Ad hoc Dispute Board
Standing Dispute Board
Single Member Dispute Board
Multiple Members Dispute Board
Dispute Avoidance Panel
Dispute Settlement Panel
Dispute Adjudication Panel

Volker Jurowich
 Dispute Board (DB)
What is a Dispute Board?

A panel, usually of three persons:

Impartial and independent of the Contract Parties
Experienced in the subject matter of the Contract
Appointed jointly by the Parties
Focus on Dispute Avoidance
Recommendations or decisions in case of formal dispute
DB cost shared equally by the Parties

Volker Jurowich
 Dispute Board (DB)
Objectives:

1. Dispute Avoidance through early consultation with the

Parties in all matters with a dispute potential

2. Dispute Resolution through non-binding

recommendations to the Parties or binding decisions on a
referral

Volker Jurowich
 Dispute Board (DB)
History and development

1960 Boundary Dam, Washington

1975 Eisenhower Tunnel, Colorado
1980 El Cajon Dam, Honduras
1995 The World Bank makes the DRB process a mandatory feature in
all projects financed by it US$ 50 Mio
1995 FIDIC, the International Federation of Consulting Engineers,
introduces the DAB process into one of its Standard Forms of
Contract

Volker Jurowich
 Dispute Board (DB)

1996 In the UK Statutory Adjudication is introduced. Other nations

follow, like New Zealand and Singapore.
1997 More Multilateral Development Banks follow World Bank
1999 FIDIC introduces the DAB process into its Standard Forms
of Contract (Rainbow Edition)
2000 The World Bank and other MDBs make the DAB process
mandatory.

Volker Jurowich
 Dispute Board (DB)
Statistics (DRBF survey 2010)

Total Contracts approx. 2200

Total Contracts value US$ 155 Billion
Average no. of Disputes 1,3
60% of all Contracts were without formal Dispute
More than 95% of all Contracts did not require further procedures
like arbitration or litigation

Volker Jurowich
 Dispute Board (DB)
Basis for Jurisdiction:

The basis for a DB process is a contractual agreement between

the Parties to a Contract.

Normally there is no legislative basis, as for Arbitration.

(Statutory Adjudication is not subject of this presentation)

Volker Jurowich
 Dispute Board (DB)

The Parties to a Contract empower the Dispute Board to assist in Dispute

Avoidance and, in case of formal disputes, to render recommendations
or decisions on the dispute.

To that effect they conclude, besides the Contract in which they

agree on this process, separate agreements with the DB Members.

They usually also agree on some procedural rules, which are

binding upon the DB.

Volker Jurowich
 Dispute Board (DB)

Normally, the DB process is the first tier of a two-tier dispute

resolution process.

The second tier on international construction contracts is

usually international arbitration. But it can also be
litigation.

Volker Jurowich
 Dispute Board (DB)

DB Procedure:

Ad hoc Dispute Board

Standing Dispute Board

Volker Jurowich
 Dispute Board (DB)
Ad hoc Dispute Board

While the agreement to refer disputes first to a Dispute Board is already

included the Contract, the ad hoc DB is only established in case of a
formal dispute. This should be done within a specified period (FIDIC
28 days) after one Party has notified its intention to evoke the
procedure.

The DB must then, within the period stipulated in the Contract (FIDIC 84
days), give a recommendation or a decision.
(No Dispute Avoidance function)

Volker Jurowich
 Dispute Board (DB)
Ad hoc Dispute Board

FIDIC has introduced the ad hoc Dispute Board in

the Yellow Book, Standard Form for Plant and Design-

Build,
the Silver Book, Standard Form for EPC/Turnkey
Projects,

Volker Jurowich
 Dispute Board (DB)

Standing Dispute Board

The Standing Dispute Board (Permanent DB) is best established before

construction starts. The Contract must set that out clearly.
This DB accompanies the construction process through regular Site visits. It
will receive regular information, such as Monthly Reports, important
contractual correspondence and revised construction schedules. It
advises the Parties with the aim of Dispute Avoidance. In the event of
unavoidable disputes and a formal referral, it must act similar to an ad
hoc Board and deliver, within the contractual period, a
recommendation or a decision.

Volker Jurowich
 Dispute Board (DB)
Standing Dispute Board

FIDIC has introduced the standing DB in

the Red Book, Standard Form for Construction (for

Works designed by the Employer)
the Gold Book, Standard Form for Design, Build and
Operate,

Volker Jurowich
 Dispute Board (DB)
Ad hoc DB or Standing DB?

Pro Ad hoc DB: 1. Perceived less costly, as only established

in case of dispute
2. DB Member appointments will consider the
subject of the dispute

Pro Standing DB: 1. Dispute Avoidance

2. In case of disputes better knowledge of the
issue in dispute

Volker Jurowich
 Dispute Board (DB)
Ad hoc DB or Standing DB?

The trend is now clearly for Standing DBs.

The alleged additional costs over the ad hoc DB due to

regular Site visits, will be more than balanced by the Dispute
Avoidance.

Volker Jurowich
 Dispute Board (DB)

Other advantages:

The persons acting on the Site, the Employer, the Contractor and the
DB get to know each other. Thus a basis of trust is established.
Procedural posturing is avoided.
Claims and the responses will be set up more realistic.
The correspondence between the Parties is more likely to consider
the likely attitude of the DB. It is therefore less controversial.
The formation of stuck opinions and resulting entrenched positions
tends to be avoided.
False expectations will less easily develop or can be corrected early.

Volker Jurowich
 Dispute Board (DB)
Appointment (establishment) of a DB (By the Parties)

For a 3-person DB first each Party nominates a person for consent by the
other Party. Then the Parties consult with the two persons selected on the
designation of the third person, who will usually act as Chairman.

While with Standing DBs few problems are normally expected because
the appointment of the DB takes place in the honeymoon phase, the
appointment of an ad hoc DB has more problems, as this happens only
when there is already dispute:
- The person designated by the other Party is not accepted
- The Parties cannot agree on the third person

Volker Jurowich
 Dispute Board (DB)

Appointment (Establishment) of a DB by an Authority

As a remedy against the above described impasse, it is absolutely
necessary that the Contract names an authority (Appointing Authority),
that appoints, in the event of default against deadlines set, on call of one
or both Parties, one, two or all DB members with final and binding
effect.

FIDIC President
Chairman, ICC International Court of Arbitration

Volker Jurowich
 Dispute Board (DB)
Requirements upon DB Members

Independence
Impartiality
Competence in the subject matter of the Contract
Competence in interpretation of Contracts
Fluency in the language of the Contract
Competence in communication
Availibility

Volker Jurowich
 Dispute Board (DB)
Disclosure, before appointment, of any relationship with any of the
Parties or their representatives or employees, which might be
regarded as not in line with the above requirements. The measure is
not ones own good conscience, but the assessment of the Parties.
This requirement is to be strictly observed. A fact that is initially
judged with common sense, and does not lead to rejection, may
later, when there is dispute, be judged differently if not earlier
disclosed.
Confidentiality

Volker Jurowich
 Dispute Board (DB)
Selection of DB Members:
Personal knowledge
Recommendation
Recommendation of an institution such as FIDIC, DRBF
Agreed list in the Contract
Interview

The selection should be tailored in each case to the Contract. While

selection is usually done from professional engineers experienced in
contracts, the engagement of an experienced construction lawyer is
helpful to cover legal aspects and avoid procedural errors.
In international projects it is also recommended to pay attention to the
nationality of the DB members. At least the Chairman of the DB
should have a different nationality than that of the Parties.

Volker Jurowich
 Dispute Board (DB)
DRB/DAB/CDB
The DRB (Dispute Review Board) is the usual procedure in North
America. In the event of a dispute, a Party can refer it formally to the
DRB, which then will issue a recommendation that is non-binding.
Some contracts require that a Party must declare dissatisfaction with the
recommendation within specified time in order that it will not become
binding.
The DAB (Dispute Adjudication Board) shall make a decision on the
dispute, which is immediately binding but not final. If contradicted by
the stipulated deadline, it remains binding until and unless revised in a
subsequent decision, arbitration or litigation. The decision must
therefore be implemented without delay.

Volker Jurowich
 Dispute Board (DB)
DRB/DAB/CDB

The CDB (Combined Dispute Board) is a child of the ICC, Paris, and was
presented in its Dispute Board Rules of Sept. 2004. The CDB usually
makes recommendations, but may also make, upon joint request of the
Parties, a decision as the DAB does. Should the Parties fail to agree
whether the CDB is to make a recommendation or a decision, then the
CDB is authorised to decide itself whether to make a recommendation
or a decision.

Volker Jurowich
 Dispute Board (DB)
DRB/DAB/CDB

The DRB process is surely the most consensual option. The

resolution of the dispute remains largely in the hands of the Parties.
The recommendation is a welcome aid or guide. In fact, the vast
majority of recommendations lead to a final settlement by direct
agreement of the Parties.
Experience shows that the DAB process is more controversial.
However, it is preferred by contractors due to its faster effect on cash-
flow.

Volker Jurowich
 Dispute Board (DB)

This is similarly seen by the MDBs. Therefore, in the MDB Harmonized

Edition of the FIDIC Red Book the DAB process is mandatory.
This process is a result of FIDICs standpoint that in order to ensure
uninterrupted progress of Works, binding, albeit not final, decisions are
required.
It replaces the former Engineers Decision, which was also binding in
the interim.

Volker Jurowich
 Dispute Board (DB)
Liability of DB Members
DB members should enjoy, in principle, a judges
privilege. Liability only in cases of gross
negligence or willful misconduct.
This needs to be included in the DB agreements
if not already included in the construction
contract.

Volker Jurowich
 Dispute Board (DB)
Enforcement

Because the DB process is based only on a contractual agreement

between the Parties, there is no legal basis for direct
enforcement.
Non-compliance with a binding decision constitutes breach of
contract. This breach would then need to be subject of the next
instance, arbitration or litigation.

Volker Jurowich
 Dispute Board (DB)
Summary
Construction projects are prototypes
The price is made for a structure yet to be constructed, often with
planning/design still incomplete
The construction time may extend over several years, often with
unforeseen/unforeseeable developments
Learning effect is limited due to changing personnel. Therefore,
there is often dispute over identical issues.
Even the best contracts can not exclude disputes. But there is room
for improvement
High legal costs, extremely long times until decision, uncertainty
about the outcome
Volker Jurowich
 Dispute Board (DB)
Increased stress on management resources
Negative impacts (permanent) on business relations
Parties want a quick, cost effective and transparent process, capable of
maintaining good relations.
These expectations can best be met by the DB process.

DBs accompany the construction progress from the beginning.

Intensive personal knowledge of the persons involved, of the contract,
of the construction progress, of the problems and of the actual
conditions
There is no need to prepare after years on the basis of Party
submissions, the facts or the history
Volker Jurowich
 Dispute Board (DB)

Dispute Avoidance
DB in making recommendations /decisions is bound by the
contract and the facts. It must not seek compromise, as
does mediation.
DB recommendations /decisions are normally admissible in
subsequent proceedings. This fact will be considered by the
Parties not satisfied with a recommendation /decision when
deciding on further action.

Volker Jurowich
 Dispute Board (DB)

Thank you for your attention!

Questions?

Volker Jurowich