DRBF Jakarta January 2020

Dispute Boards in FIDIC 2017

Reaching New Heights with Dispute Boards in Southeast Asia
DRBF Conference, Jakarta, Indonesia

15 January 2020

Kelvin Aw
Partner
CMS

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Reach Real expertise Recognition

We have 72 offices around We operate in industry CMS ‘has real global reach
the world including in a sectors. This means that we in the markets which really
number of key construction have real international matter’.
and infrastructure hubs in construction and
Legal 500
South America, Asia, the engineering expertise with
Middle East, North Africa more legal specialists in this
and Europe. field than most other legal
organizations.

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General

Why parties follow a non-binding recommendation?

Consensual Extends spirit of collaboration

Trust Trust and respect for DB members

Quick & Cheap Sense and Sensibilities

Knowledge Contemporaneous knowledge of Project of Standing DB

Control Parties maintain some control over outcome

Independence DBs maintain independence

Maintain Focus Parties maintain focus on Project delivery

Vent Unhappiness are aired early on

Minimise Disputes Major disputes are reduced

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General

Can a non-binding recommendation

improve a Project?
• 35% say that dispute board provisions reduce the tender price [1]
• 99% considered that dispute boards improved communication of
projects [1]
• U.S. state Department of Transportation assert a 17 percent
reduction in the cost of every mile of highway built under contracts
mandating the use of a dispute review board [2]

[1] Dispute Resolution Board Foundation, 2009, Dispute Review Boards ("DRBs"):
Real Time Avoidance and Resolution of Construction Disputes
[2] Faulkner, R, Haselgrove-Spurin, C & Slaughter, G, 2002:
The International Arbitration News

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General

Proof that non-binding informal recommendations

are helpful
China South Africa DRBF

• Ertan • Katse Dam • 2006 study across

Hydroelectric • Contract value of 1,434 projects
Dam US$2.5 billion (US$97.6 billion)
• Contract value of • 12 Dispute Board • 1,860 Dispute
US$2billion Board
recommendations recommendations
• 40 Dispute Board provided provided
recommendations • 1 went to • 52 went to
provided Arbitration Arbitration or
• All followed Litigation *

* 97% success rate by number of projects. 83% success rate by contract value.
Larger projects more likely to Arbitrate

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Old Features under FIDIC 1999

FIDIC 1999
(Sub-Clauses 20.2 to 20.4)

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New Features under FIDIC 2017

FIDIC 2017
(Sub-Clauses 21.1 to 21.8)

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New Features under FIDIC 2017

Renamed DAAB (Dispute Avoidance Adjudication Board)

Standing / Permanent DB, appointed at Contract formation

Robust Appointment Process

New Avoidance of Disputes role

Enforceability of DAAB Decisions Strengthened

Interrupts Limitation Period

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Standing Dispute Board

• Rename of DAB to DAAB

• Dispute Avoidance and Adjudication Board
• Standing / Permanent Dispute Board
• Strong support from most MDBs
• Appointment at Contract formation
• Regular site visits
• Supports successful Project delivery

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Appointment Process

• Robust Appointment Process (Sub-Clauses 21.1, 21.2)

• Standing DAAB constituted at Contract formation
• If not constituted:
− Constitution by Appointing Authority, and appointment “shall be final
and conclusive”, and Parties and DAAB shall be deemed to have
signed and be bound by a DAAB Agreement; OR
− Dispute can still be referred to Arbitration directly, where no DAAB is
in place (Sub-Clause 21.8).

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Appointment Process

• DAAB term survives Termination of Contract

• DAAB term expires after earlier of:
− DAAB Decision on all disputes referred to it within 224 days after
termination date; OR
− Parties reach final agreement on all matters connected to termination

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Avoidance of Disputes

• Introduction of Avoidance of Disputes Role:

• Provide assistance
• Informal Discussions
• Non-Binding
• Not a new concept
• FIDIC Pink Book 2006 Procedural Rule 2 “to endeavour to
prevent potential problems or claims from becoming disputes.”
• DRB’s popularity in North America
• ICC Dispute Board Rules (2011) at Article 16 provides for the
dispute board to “informally assist the Parties in resolving any
disagreements that may arise during the performance of the
Contract”

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Avoidance of Disputes

• Objectives (DAAB Procedural Rule 1):

• Facilitate avoidance of Disputes
• Achieve expeditious, efficient and cost effective resolution of
Disputes
• Informal Assistance (Sub-Clause 21.3)
• Parties’ joint request or invitation of DAAB
• During meetings, site visits or otherwise
• Non-binding on Parties or DAAB

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Enforceability of DAAB Decisions

• DAAB a mandatory pre-condition to Arbitration (Sub-

Clause 21.6):

“Unless settled amicably, and subject to Sub-Clause 3.7.5

[Dissatisfaction with Engineer’s determination], Sub-Clause 21.4.4
[Dissatisfaction with DAAB’s decision], Sub-Clause 21.7 [Failure to
Comply with DAAC’s Decision] and Sub-Clause 21.8 [No DAAB in
Place], any Dispute in respect of which the DAAB’s decision (if
any) has not become final and binding shall be finally settled by
international arbitration. …”

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Enforceability of DAAB Decisions

• Enforceability of DAAB Decisions Strengthened (Sub-

Clause 21.7)
• Allows for failure to comply with DAAB Decision to be referred to
Arbitration directly
• Arbitral Tribunal empowered to enforce a DAAB Decision through
“summary or other expedited procedure” or “to order, whether by
an interim or provisional measure or an award”, the enforcement
of the DAAB Decision.
• Arbitral Tribunal may also “include an order or award of damages
or other relief” in its interim or provisional measure or award.

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Enforceability of DAAB Decisions

• Challenges under FIDIC 1999

• Enforcing Binding but not Final DAB Decision
• CRW v PGN [2011] Singapore High Court and Court of Appeal
considered whether an arbitral tribunal could make a final award
in respect of the party’s failure to comply with a DAB Decision
• Sub-Clause 20.6 “does not allow an arbitral tribunal to make a
binding DAB Decision without hearing the merits of that DAB
Decision”
• Arbitral Tribunal had to open up, review and revise DAB Decision

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Enforceability of DAAB Decisions

• Addressed by FIDIC 2017 in Sub-Clause 21.7

“In the event that a Party fails to comply with any

decision of the DAAB, whether binding or final and
binding, then the other Party may, without prejudice to
any other rights to may have, refer the failure itself
directly to arbitration under Sub-Clause 21.6 [Arbitration]
in which case Sub-Clause 21.4 [Obtaining DAAB’s
Decision] and Sub-Clause 21.5 [Amicable Settlement]
shall not apply to this reference”

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Interrupting Limitation Period

• Interruption of Limitation Period (Sub-Clause 21.4.1):

“The reference of a Dispute to the DAAB under this Sub-

Clause shall, unless prohibited by law, be deemed to
interrupt the running of any applicable statute of limitation or
prescription period”.

• However, even if allowed by local law, when would

limitation period recommence? Parties cannot
commence Arbitration after DAAB Decision, until
outcome of 28 day Amicable Decision.

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Timelines

Contract Award

Constitute DAAB

Dispute Arises

Dispute Avoidance Role:

Reference for Engineer’s
• Assistance
Determination
• Informal Discussions
• Site Visits

Reference of Dispute to DAAB

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Timelines

Reference of Dispute to DAAB

DAAB Decision in 84 days No DAAB Decision in 84 days

No NoD in 28 days of NoD in 28 days of

NoD in 28 days after 84 days
Decision Decision

DAAB Decision Final & Amicable Settlement Period (Optional)

Binding

Arbitration 28 days after NoD

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