report by Roderick O’Driscoll
Peter Chapman, who is a Civil
Engineer and a Barrister and a member of the South East Branch, talked to us
about Dispute Resolution Boards (DRBs).
Dispute Resolution Boards (DRBs), Peter told us, were used commonly in
construction and other areas such as concession contracts.
DRBs use a process for dispute
resolution based on adjudication methods, but combined with an “on-site”
knowledge, members of the Board periodically attending the site to become
acquainted with the manner in which the contract was being executed.
Adjudication has changed the face of
dispute resolution. It is neither
litigation nor arbitration. It is not
final and need not necessarily be enforceable.
It is a form of judicial process using the rules of natural
justice. It is inherent in their task
that the Board use their own expert knowledge, and adjudicators can, of course,
act inquisitorially. There is a
relationship with Engineers’ decisions, provided for by ICE or a FIDIC-style of
contract, and much concern was expressed by Engineers when DRBs started as they
felt it might be the beginning of their demise. To a certain extend, Boards have replaced the Engineer, but Engineers
do, of course, continue to be employed, and they fulfil a quite separate task
under the contract from the DRBs.
DRBs are used for the larger value
contracts. Members are usually
appointed one from each party, and a third is appointed by the other two. The
difference between normal adjudication and Board adjudication is that they have
a “job site” character and their task is not restricted only to when disputes
arise. Parties see them as a tool to be
used and often do use them for advice on an informal basis. Their presence reduces acrimony and
disputes. Parties temper their approach
to each other because of the knowledge and the presence of the Board, and
disputes are often resolved earlier than would otherwise be. Cash flow is maintained, allowing parties to
get on with the job of completing the project.
DRBs are now used in many
countries. The concept of DRBs is given
support by the banks, by FIDIC and, to a certain extent, by the adjudication
processes under the Regeneration Act of 1996.
Contractors have a habit of failing to learn from their
experiences. Partnering is all very
well until you get involved in a dispute.
Conciliation and mediation is an excellent process, but there is often a
need for a third party to actually make a determination. Arbitration can cause high costs and
delay. Litigation is winning or losing;
enquiry becomes inquisition, procedural issues loom high, and the process is
lengthy and expensive. By contrast,
adjudication and DRB resolution are quick (although such speed does not permit
time to check and re-check decisions made) and effective in maintaining the
relationship between the parties.
A Board can consist of one
adjudicator in smaller contracts, and the new FIDIC contract so provides. Normally, however, there are three, and
generally speaking they have different expertise. Members of a Board must sign
statements of independence, and they must have the time and knowledge to deal
with the matters as they arise. Decisions
always need to be supported by reasons to satisfy the losing party. The Board’s
work is of an on-going nature, and they become part of the project process. So
important is the constitution of the Board that financial support arrangements,
for example from the World Bank, will usually be suspended until a Board is in
place.
The number of site visits by a Board
is typically three to four a year, sometimes more, sometimes less. During their
visits their time is spent, not only in resolving any disputes, but also in
giving advice and obtaining knowledge of what is actually happening. It is not
unusual for a Board member to meet the parties separately to hear some
background and for members of the Board to act quite informally as between the
parties. It is only when a specific dispute is referred that procedures become ―formal
and the jurisdiction to make determinations comes into effect. The informal
part of their work, however, cannot be over-emphasised. DRBs assist the parties to find a decision
amongst themselves quickly and they can nip problems in the bud.
The average cost is 0.05% / 0.03% of
the project cost, so that on a project costing £100,000,000 DRB expenses would
typically be well under £100,000. The
cost is shared between the parties. It
is estimated that an arbitration dealing with similar disputes would cost three
times as much as it costs to maintain the Board.
Formal proceedings before the Board
commence by a reference. The Board will then convene on site for a hearing when
necessary. The parties set out their case
on one or two sheets of paper, stating their position. When there is a hearing
it will almost invariably be without lawyers, and be presented by engineers.
There is no wrangling on procedure. The Board dictates the manner of
proceedings, frequenting acting inquisitorially, and often requiring
adjournments for further information. DRB hearings take on average one or two
days, rarely more. After the hearing, the Board like to get their decision out
as quickly as possible with their reasons and try to do this within two weeks
at the most. Most decisions are resolved by a majority unless the contract
provides otherwise.
In addition to their determinations,
the parties use the Board for advising and giving opinions on a wide range of
matters. It is a fast-track system and
meets and deals with problems head on.
It works because all parties co-operate. The objects of both parties are the same, ie to see a completion
within a specified time and to pay a proper and fair remuneration. Disputes
arise after the contract has started because of variations and unforeseen
matters. Boards can resolve these
things at an early stage. Without a
Board, a dispute remains unresolved and becomes a cancer. It then spreads
infection and dissatisfaction between the parties, leading to further disputes.
The Board can be as flexible as the
parties require. They can give binding determinations or recommendations. By
requiring the provision of a DRB in their contracts, employers immediately show
they intend to act fairly. The system is now wholly supported
internationally.
Though there has been some resistance
to the system, experience shows that the parties increasingly appreciate its
advantages. For example, both the employers and the contractors involved in the
Hong Kong Airport project had been against a Board-type system when the
contract started, but now that it is completed, they regret that the services
of the Board were not used more frequently.
After the talk Peter dealt with a
number of questions from the floor.
This talk must surely have been one
of the most useful the Branch have had in recent months, covering as it did,
aspects of alternative dispute resolution which are not frequently referred to.
Our thanks to Peter for his excellent talk and for standing in at such short
notice.