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One of the objections to the use of dispute boards in the Middle East and North Africa that I have heard goes something along the lines of:

“they may work in the West, but we have different laws here and our culture is different”.

Most of the MENA Region law is based upon the Civil Code and also respects the laws of Sharia’a. Whilst I am not a lawyer and certainly not an expert on Sharia’a, I have discussed this at length with people who are experts on both subjects and here is a summary of my findings.

Sharia’a believes in the binding character of any agreements and the Holy Qur’an says:

Oh, you who believe abide by your contractual commitments’ and ‘Oh, you who believe fulfill your contracts’ (al-Ma’ida 5:1).

Dispute boards assist the parties in determining the correct interpretation of contracts and consequently, help the parties to fulfil their obligations as required by Sharia’a.

The principles of Islamic contract law are: (more…)

Some Parties are fairly, or very, familiar with the DB process and have worked with a few DB Members. They are in a position to choose the same people again, or to elect to choose an alternative, for whatever reason. However, some Parties have less, or even no, knowledge of the process and nominating and appointing a DB Member and Chairman may be a risky business. So what should you consider when appointing DB members? Here are my tips:

Generally, DB Members have to confirm that they are independent of the Parties, so do not be tempted to nominate someone whom you think might favour your Party. It puts the Member in a difficult position and may cause resignation of the Member late on, with all the attendant cost and inconvenience.

The Member has to act in an unbiased way. This can be a subjective matter, but one can gain a sense of the Member’s approach to matters by the way emails are written, and by voice and perhaps face to face contact by meeting in person, on skype or video-conference. And don’t be afraid to ask around to see if you can find someone who has worked with potential nominees. This can be very useful. (more…)

In practice, it is the Employer who will decide whether or not to have a dispute board (DB) on his project. So what are the criteria which he needs to look at when making this decision?

I suggest there are a combination of practical, financial and legal matters. This puts the Engineer, the Quantity Surveyor and the Employer’s legal advisors in the spotlight (so I hope some of them are reading this, or that readers will put these points to them).

So let’s ask ourselves some questions..

On the practical side, what do you think might influence the decision? Remember that a DB is there to firstly try to avoid and prevent disputes.

When do potential disputes start to arise? (more…)

Previous blogs have dealt with the selection process for DAB members, what to look for when selecting members and how the impartiality of members is assured. So what happens when either the one-person DAB or the three-person DAB have been selected and they have agreed to serve? Well, as with most things in business, it is necessary to enter into a contract between the parties.

Sub-Clause 20.2 (Appointment of the Dispute Adjudication Board) of the FIDIC contracts has this to say on the subject:

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Some people initially fail to see the many advantages of Dispute Boards over arbitration, so we thought it would be useful to offer a brief comparison.

Arbitration

• The arbitrators first have to be selected and appointed.
• The panel has to be available and become familiar with both the project and the matters in dispute.
• Arbitrators are appointed to deal with existing disputes when they cannot be resolved at project level.
• The arbitration process tends to be a drawn out and lengthy procedure.

Dispute Adjudication Boards

• Standing DABs are appointed at the beginning of the project.
• The DAB is familiar with the project and the parties.
• Part of the DAB’s obligation is to advise the parties and facilitate agreement and consequently to avoid disputes occurring in the first place.
• If a dispute does occur, the DAB is obliged to provide a decision within 84 days.
• The whole concept of DAB’s is that disputes are settled quickly by industry experts.

Dr. Nael Bunni has calculated that arbitration costs the parties between $150,000 and $200,000 per day of arbitration, or between 12.5% and 38% of the claim value. The DRBF has calculated that arbitration costs may be 10-15% of project value.

The DAB will cost the parties for the time spent dealing with the dispute and possibly some travel expenses. According to the DRBF, this works out at between 0.05% of the construction cost on dispute free projects and 0.25% for more difficult projects. The costs are also shared by the parties.

Given further DRBF statistics that on projects with DABs, 98% of disputes are resolved at project level and of the remaining 2% that were referred to arbitration, almost all of the arbitration decisions agreed with the DAB, it is hard argue that DAB’s are not a much better way of dealing with disputes than arbitration in all respects.

One question that I am often asked when presenting talks on DABs is how the parties can be assured of the impartiality of DAB members. This is an excellent question because if the members are not truly impartial and just as importantly, seen to be impartial, the whole process will fall down.

If we take the FIDIC Red Book Sub-Clause 20.1 (Appointment of the Dispute Adjudication Board), together with the Conditions of Dispute Adjudication Agreement, which is the agreement between the Employer, the Contractor and the DAB Member, we can see that the following safeguards are in place: (more…)

I thought that something a little light-hearted would make a pleasant change from our usual comments on dispute boards. This video illustrates a very effective animation, which explains all about dispute boards and how they work.

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Dispute Boards MENA held its second seminar in Dubai on 13th April. The focus of this seminar was to illustrate how a Dispute Adjudication Hearing works. We created a case study which provided the basis for the claim and asked our listed practitioners and industry peers to take on the roles of the Contractor, the Engineer and the Dispute Adjudication Board (DAB). Both the Contractor and the Engineer presented their cases to the DAB and upon reviewing the case, the DAB gave his decision. So here’s what happened…

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Does the whole dispute adjudication board grind to a halt if a DAB member either does not, or cannot carry out his or her duties? Well, no it doesn’t.

The Sub-Clause 20.2 (Appointment of the Dispute Adjudication Board) of the FIDIC Red Book covers this eventuality as follows:

‘If at any time the Parties so agree, they may appoint a suitably qualified person or persons to replace (or to be available to replace) any one or more members of the DAB. Unless the Parties agree otherwise, the appointment will come into effect if a member declines to act or is unable to act as a result of death, disability, resignation or termination of appointment’ (more…)

A couple of years ago I was asked to provide training on procurement for a large developer in the GCC region. Part of my recommendation was that the developer should seriously consider including provisions for the appointment of dispute boards within his contracts.

After the course, the senior contracts manager gave me a lift to the airport and during the journey, told me that he did not like DABs. When I asked him why, he told me that the only experience he had of DABs was on a project where a single person DAB was appointed and that when the DAB member first came to site he immediately informed the project team that he was a lawyer and had no experience in construction projects. Obviously, in this situation the appointees of the DAB here had not considered the requirements of a DAB member very well when making their selection, because, if the DAB member or members are not suitable for the role, the DAB process will surely fail. So what qualities should we look for when selecting and proposing members? (more…)