What is a Dispute Board
A Dispute Board comprises a panel of one or three suitably qualified and experienced independent persons appointed under the contract to provide a speedy and cost-effective resolution of a dispute referred to it. A Dispute Board decision on a dispute is generally accepted by the parties, and avoids the need for arbitration or litigation.
The members of a Dispute Board need to be relevantly experienced in the type of project under construction, and have a thorough understanding of legal and contractual issues. They should be respected for their experience and expertise, and they must be independent and impartial. Both contracting parties must agree on membership of the Dispute Board.
The usual selection process for a three-person Dispute Board is for the Owner/Employer to nominate one member, and the Contractor to nominate a second member. Notwithstanding their nomination by a party, they do not represent the contracting parties, and must be impartial. Each party has the right of reasonable objection over the other party’s selection. The Chairman is usually nominated by the party nominees, and then agreed to by the parties.
The most effective Dispute Boards are standing or full-term boards organised at the start of the Contract, and before construction begins. The primary role of such a standing Dispute Board is dispute avoidance. The Board is provided with the contract documents, plans and specifications, and with regular progress reports during the course of the project. Thus, the Board members become and remain familiar with the Contract, the project and the participants from the beginning of the project, and have an up-to-date knowledge of all the relevant issues which might impact on potential disputes.
The Dispute Board meets on regular site visits with representatives of the Employer and Contractor together, and is briefed on progress and potential problems. The Board also carries out an inspection of the works on each of its site visits, and thus obtains firsthand knowledge of the site and the project.
The aim of the Board’s site meetings is to facilitate communication with the contracting parties, and encourage resolution of contentious issues by the parties themselves, before they become actual disputes. With the acquiescence of both parties, it can provide an informal advisory opinion on a potential dispute.
Either party has the right to refer a formal dispute to the Dispute Board. Following such a referral, the Board may hold a hearing, question witnesses, consider submissions and then provide a reasoned decision on the dispute, all within a defined limited time. The process is very similar to expert determination, and is considerably quicker and more economical than arbitration. The contractual effect of the Board’s decision depends on whether the Dispute Board is a so-called Dispute Resolution (or Review) Board (DRB) or a Dispute Adjudication Board (DAB).
The decision of a DRB (the US model) is a recommendation to the parties of the DRB’s considered opinion as to the appropriate resolution of the dispute. The DRB’s recommendation has no contractual effect, unless the parties agree to implement it. However, notwithstanding the lack of a binding contractual effect of the DRB’s recommendation, it is generally very persuasive because of the stature of the Board members, and the structured, fair and independent process by which they came to their reasoned decision.
By contrast, the decision of a DAB (the FIDIC model) is a decision that is contractually binding on the parties unless and until it is overturned by agreement or in accordance with the contractual requirements for final determination of disputes (arbitration or litigation). There is a defined limited period of time after the DAB’s decision within which either party may give notice of dissatisfaction with the DAB’s decision. In the absence of such notice, the DAB’s decision is contractually binding on the parties. Even if one of the parties gives formal notice of dissatisfaction, the final resolution of the dispute by arbitration or litigation is usually deferred until the end of the project; in the meantime, the DAB’s decision is binding on the parties.