Dispute Boards > DBs vs. Arbitration

The traditional way of settling disputes was to refer the matter to arbitration.

A typical arbitration procedure requires each of the parties to propose one suitably qualified arbitrator and for the two appointees to appoint a third member, who is often delegated the responsibilities of the chairman of the arbitration panel.

 

Arbitration is a Lengthy Process

Given that the three arbitrators should be experts to some extent, at least on the subject of the dispute and the construction industry in general, one would expect that most issues should be able to be reviewed and an arbitrator’s determination issued fairly quickly, as is the case with dispute boards. This is not usually the case however, because it is necessary to agree on the arbitration panel, which then needs to be appointed formally by the parties. Rules and procedures have to be established, the arbitrators have to have time available to devote to the dispute and they have to take the time to become familiar with the parties, the project and the issues surrounding the dispute.

Given all this, it is easy to see why it may be several months before the arbitrators are able to even start to consider the matter of the actual dispute. More often than not, lawyers for both parties become involved somewhere during this process and consequently, we now have a new set of people with a different level of understanding of the construction process adding their opinions to the mix.

One must also consider that it may be to the advantage of one of the parties to attempt to delay the outcome of the arbitration and in such a case, deliberate tactics may be adopted to delay and confuse the whole process. Of course if, following the arbitration, the matter progresses to court proceedings, then lawyers will definitely need to become involved and the various proceedings, possibly including the additional involvement of expert witnesses, will serve to extend the time for the resolution of the dispute, quite possibly to years rather than months.

It has been said that arbitration was a perfectly good process until it was hi-jacked by lawyers and whilst this may be a somewhat cynical point of view, it is certain that if matters do progress to this level, the resolution of the dispute will become both very protracted and extremely costly.

 

Dispute Boards Settle Disputes in a Timely and Cost Effective Manner

The industry recognised that such a situation was not desirable and provided little benefit to the project or the parties. Consequently, a relatively easy procedure to settle disputes in a timely and cost effective manner was required to enable the parties to devote their energies to completing the project. Hence the rise in popularity of dispute boards which provide the following advantages:

  • Decisions must be given in a timely manner (FIDIC stipulates 84 days from the referral of a dispute). Arbitration could take years
  • Dispute boards are more economical. One or three member dispute boards that have to give a decision within 84 days will be significantly more cost-effective than arbitration teams which may take years to come to the same decision
  • Disputes are decided by industry experts, rather than lawyers
  • A standing dispute board would already be familiar with the contract, the project, the circumstances and the personnel, whereas arbitration teams must ascertain all these factors during the arbitration process