The Differences between Dispute Resolution and Dispute Adjudication Boards

Internationally, and broadly speaking, Dispute boards fall into two categories – those who advise or make recommendations to the parties and those who decide or adjudicate on a dispute. Dispute Resolution (or Recommendation) Boards do the former and Dispute Adjudication Boards do the latter.

The philosophy of resolution boards is that after three experienced, respected and impartial board members have studied an issue and made a recommendation on the basis that ‘if you proceed to arbitration on this matter, in our opinion the outcome will be this or that’, the parties will probably accept this as being good advice. The Dispute Resolution Board Foundation records show that if one of the parties chose not to accept this advice then subsequent arbitrations have, in almost all cases, agreed with the DRB. The major difference is that a recommendation is just that, i.e. a recommendation and is not actually binding on the parties.

In the MENA region, the FIDIC forms of contract are most widely used and these use Dispute Adjudication Boards whose role is different in this respect.

Under Sub-Clause 20.4 (Obtaining a Dispute Board’s Decision), the board is obliged to give a decision on any matter that is referred to it and the decision ‘shall be binding on both Parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award’. If neither party issues a notice of dissatisfaction within 28 days after the decision is received, ‘the decision shall become final and binding upon both Parties’.

To sum up then, the parties are not obliged to comply with a DRB’s recommendation, but failure to comply with a DAB’s decision would constitute a breach of contract, which would undoubtedly be supported by the law if a case for damages were brought.