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Dispute Boards in Construction

Projects

13 May 2020

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LexisNexis® Confidential 2

The law as stated during this webinar is

up to date as of 7 May 2020

Dispute Boards in Construction

Projects

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Introduction

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Senior Associate

CMS

Partner and Co-head of Infrastructure,

Construction and Energy Disputes

CMS

Adrian Bell

Jay Randhawa

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Agenda – Dispute Boards

• General

• Who can refer disputes and Procedure to be followed?

• Dispute Resolution Board (DRB) v. Dispute Adjudication Board (DAB)

• Standing Dispute Boards v. Ad-Hoc Dispute Boards

• Dispute Prevention Benefits

• Dispute Resolution Benefits

• Binding Nature & Enforcement of Dispute Board Decisions

• FIDIC 2017 Suite & FIDIC

• NEC4 Suite

• Dispute Boards – Perspective

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General

DISPUTE BOARDS

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Dispute Boards - General

• Aim

o Communication

o Contentious situation

o Independent and involved

• Role

o Dispute avoidance

o Dispute resolution

o Both?

• Constitution

o 1 member

o 3 members

o More?

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Dispute Boards - General

• Experience

o Industry

o Project

o Discipline

• Effectiveness

o Start of Project v. during Project

o Site Visits

• Project Familiarity

o Bridge between Employer and Contractor

o First-hand insight

• Cost – Who is to bear?

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Who can refer disputes and procedure

to be followed?

DISPUTE BOARDS

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Reference to Dispute Boards

• Who can refer disputes?

o Employer

o Contractor

o Third-parties – (suppliers, subcontractors etc.)?

• Procedure

o Document only basis

o Hearing format

o Considering submissions

o Reasoned determination

• Is there a time duration for rendering the determination?

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DRB v. DAB

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DRB v. DAB

• Dispute Resolution Board (DRB)

o US Model

o Recommendation

o Persuasive? Binding?

o DRB – Dispute Review Board?

• Dispute Adjudication Board (DAB)

o European Model

o Determination

o Binding?

o Objection to DAB Decision

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Standing v. Ad-Hoc Dispute

Boards

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Standing v. Ad-Hoc Dispute Boards

• Appointment and Expiration

• Role

o Dispute avoidance

o Dispute adjudication/resolution

• Suitability

o Large v. comparatively smaller projects

o Responsiveness

• Approach

o Proactive v. Reactive

• Cost Perspective?

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Dispute Prevention Benefits

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Dispute Prevention Benefits

• Bilateral Agreement

• Positive Relations

• Open Communications

• Trust and Cooperation

• Prevent aggregation of claims

• Minimise contractual posturing

• Claims management

• Dispute prevention

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Dispute Resolution Benefits

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Dispute Resolution Benefits

• High resolution rate

• Impartial forum

• Informal and rational

• Trust and Cooperation

• Parties predisposed to Dispute Boards

• Transactional costs reduction (i.e. legal & consulting fees)

• Real-time dispute management

• Informed decisions efficiently

• Lower bids

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Binding Nature & Enforcement

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Binding Nature and Enforcement of Dispute Board Decision

• Binding Nature

o Contractual clause

o Period to notify dissatisfaction

o Final and binding

o Arbitration?

• Enforcement

o Distinct from Arbitration award

o Approach court or arbitral tribunal

o Non-compliance = Breach of contract?

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FIDIC 2017 Suite

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FIDIC 2017 SUITE

• DAB to DAAB

o Dispute Adjudication Board (FIDIC 1999 Suite)

o Dispute Avoidance and Adjudication Board

o 42-day period for commencing proceedings retained

• New Role

o Dispute Avoidance

o DAAB Procedural Rules Expanded

• Security for Repayment

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FIDIC 2017 SUITE

• Limitation & Prescription Periods

• Can Dispute Board decisions which are not final be enforced?

• Deemed acceptance to Dispute Avoidance and Adjudication Agreement

• Jurisdictional Issues

• Cost Impact of DAAB

• Practice Adoption

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FIDIC, DISPUTE BOARDS & COVID-19

• FIDIC Covid-19 Guidance Memorandum to Users of FIDIC Standard Forms of Works Contract (April 2020)

• FIDIC Webinar: Covid-19: ADR and the role of dispute avoidance (23 April 2020)

o International judge and arbitrator, Sir Vivian Ramsey stated industry moving into an era of dispute avoidance

o President of the Dispute Resolution Board Foundation Region 2, James Perry mentioned that prime importance of dispute boards is facilitating discussions

o Moving forward – Could dispute discussions take place digitally? Providing of PPE on projects?

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FIDIC 2017 and DAAB in the future

• Multilateral Development Banks (MDB) supporting increased use of DAAB

• Breaking convention in Middle East and Africa

• Mandating 2017 FIDIC Suite/DAAB

• FIDIC Golden Principle 5 (GP5):

Unless there is a conflict with the governing law of the Contract, all formal

disputes must be referred to a Dispute Avoidance/Adjudication Board (or a Dispute Adjudication Board, if applicable) for a provisionally binding decision as a condition precedent to arbitration.

• Rationale behind GP5?

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NEC4 Suite

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NEC 4 Suite

• Option W3

o Obligatory referral of all “Potential Disputes”

o Constitution (1 or 3 members)

o Site visits at specified intervals

o Referral & Review

• Dispute v. potential disputes?

• Recommendation to become binding?

• NEC & FIDIC Compared

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Perspective

Dispute Boards

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Dispute Boards – Perspective Matters

• Cost Justification

• Dispute Boards Success Rate

• Dispute Boards as an Insurance?

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Upcoming Construction webinars

• (Brief) COVID-19 and the energy sector (2020) – 29 May 2020

• Termination of construction contracts (2020) – 7 July 2020

• Insolvency in construction (2020) – 13 October 2020

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Thank you and reminders

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