Archive for the ‘Andy’s Blog’ Category

Sharia’a and Dispute Boards

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…)

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The Contractual Arrangements Between the Parties and the Dispute Board

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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6 Advantages of DABs Over Arbitration

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.

 

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8 Ways to Ensure Impartiality of Dispute Board Members

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…)

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The ABCs of DRBs | Watch this useful video

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.

abc-of-drb

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