Reed Smith Client Alerts

FIDIC has made clear that it considers the use of a dispute board fundamental to a fair and balanced contract, which is the underlying philosophy of its forms. Despite this, employers and contractors are often resistant to using dispute boards, and the dispute board provisions are often deleted when using the FIDIC forms. In this two-part alert, we look at the reasons behind the resistance to dispute boards and what parties to FIDIC contracts might do to make the dispute board provisions work better for both them and their project.

Authors: Vincent Rowan Shareena Edmonds Bree Miechel Elinor Crowther

Here we look at the benefits that might be expected from using a dispute board and some practical experiences of using dispute boards, before considering why the expected benefits may not be being realised.

The intention behind the dispute board in the FIDIC forms

Arbitration (and litigation), in the international projects and construction sector, have traditionally been regarded as costly and time consuming. There is a perception (and sometimes a reality) that contractual disputes often take almost as long to be resolved as the project itself. Recognising this, FIDIC has sought to develop its standard forms in a way that provides for and encourages early and efficient dispute resolution without recourse to arbitration or litigation.1

In the FIDIC 1999 Rainbow Suite, provisions for dispute adjudication boards (DABs) were introduced and developed as part of a three tier dispute resolution process.2 The DAB provisions were developed with the aim of providing the parties with a quick (84 days from referral to decision), inexpensive and effective method of dispute resolution, available contemporaneously during the project works. The intention was that the procedure, if used correctly, would remove, or at least limit, the need for recourse to arbitration or litigation and help the parties to maintain a good working relationship. In the 1999 Suite, the Red Book required that the DAB be appointed on a ‘standing basis’ (from an early stage in the project), in contrast to the Yellow and Silver Books, where the DAB is to be appointed on an ‘ad-hoc’ basis, when a claim has already become a dispute.