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 development of the 2017 FIDIC dispute resolution provisions and whether they will address the issues experienced with dispute boards, which we discussed in Part One (available at reedsmith.com) of this alert, as well as considering what parties to FIDIC contracts might do in order to make the dispute board provisions work better for both of them and their project.

Will the FIDIC 2017 provisions help overcome resistance to the use of dispute boards?

A greater emphasis on dispute avoidance

The Red Book 1999 provided that the standing DAB may give advice and opinions “when requested by both the Employer and the Contractor” (sub-clause 20.2). This was an early foreshadowing of the dispute avoidance role later introduced in the Gold Book in 2008, and now a focus of the provisions in the 2017 Suite, marked with a name change from Dispute Adjudication Board (DAB) to Dispute Adjudication/Avoidance Board (DAAB).1 The 2017 Suite provides for a standing dispute board across the forms2 and, if the parties agree, they may request the DAAB to provide (non-binding) assistance and/or to informally discuss and attempt to resolve any disagreement that may have arisen. The DAAB may also invite the parties to request assistance in dispute avoidance, that is, the DAAB is expressly permitted (and perhaps thereby encouraged) to take on a more pro-active role in dispute avoidance.3 The idea is that the DAAB may give an opinion or advice that assists the parties to prevent the matter becoming a dispute.

Changes to address past problems

The 2017 Suite retains the core procedure set out in the 1999 editions, requiring the DAB to issue its decision within 84 days of a dispute being referred, and providing that the decision shall be immediately binding upon the parties who shall promptly give effect to it. However, the new provisions make it clear that:

  1. Payment following a DAAB decision should be made swiftly – immediately after the payer receives an invoice without any requirement for certification or notice.4
  2. The parties are required to act or make payment on the DAAB decision, regardless of whether a Notice of Dissatisfaction (NOD) is issued.  The DAAB decision is binding on both parties and the Employer is responsible for the Engineer’s compliance with the DAAB decision.5
  3. If the unsuccessful party does not comply with the DAAB decision, the failure to comply itself may be referred to arbitration.6
  4. If no DAAB is in place when the dispute arises, the parties do not have to follow the DAAB procedure.7 However, if the dispute reaches arbitration, the arbitral tribunal may take into account any non-cooperation in constituting the DAAB in awarding its costs.8