A blog subscriber recently asked how to set up and organise a Dispute Adjudication Board (DAB) and particularly what may be done when one of the parties refuses to agree to the appointment of the DAB in order to frustrate the dispute procedure. The following advice is related to the FIDIC contracts but may be equally applied to other forms of contract that have dispute board or adjudication provisions.

A proactive action would be to include a list of several potential DAB members in the Contract. If the list has been prequalified in terms of qualifications and experience, particularly for the type of project being undertaken, then agreement of the board members should be straightforward.

The Contract should state the time frame for the appointment of the DAB. FIDIC provides that the date should be stated in the Appendix to Tender. Contractors would be well advised to check that a reasonable date is included therein.

If no list of potential DAB members is included in the Contract, FIDIC offers the following directions: ‘each Party shall nominate one member for the approval of the other Party. The Parties shall consult both these members and shall agree upon the third member, who shall be appointed to act as chairman.’

My suggestion: each party nominate more than one member in case the other party has an objection or in case the nominated member has a conflict of interest or is unavailable. When selecting potential members for nomination, it is not enough to select someone experienced in adjudication. It is very important to ensure that the person is properly experienced and qualified in terms of discipline and type of project.

Also consider the type of expertise required from the DAB as a whole. A good mix is to have the three members from engineering, quantum, contractual and legal backgrounds. In this way, they can all add value; there would probably be a gap if three people of the same discipline were appointed. When reviewing nominated members, selection should be undertaken in a spirit of agreement and cooperation between the parties with the intention of appointing the best board possible.

Impartiality is vital. FIDIC’s General Conditions of Dispute Adjudication Agreement contains the following obligation: ‘The Member warrants and agrees that he/she is and shall be impartial and independent … The Member shall promptly disclose … any fact or circumstance which may appear inconsistent with his/her warranty and agreement of impartiality and independence.’

The Parties would be well advised to determine any potential conflicts of interest in the early stages of the process.

To return to the question posed by the blog reader, what happens when one of the parties is trying to wriggle out of the formation of the DAB? FIDIC deals with this under Sub-Clause 20.3 (Failure to Agree Dispute Adjudication Board), which provides that either party may request the ‘appointing entity or official named in the Appendix to Tender’ to make the appointment and that ‘This appointment shall be final and conclusive’.

For this to work, however, there must actually be an appointing entity or official named in the Appendix to Tender. If not, it is going to be a challenge to reach resolution.

It seems that our reader is a Contractor with a dispute and is facing an Employer who is reluctant to appoint the DAB because the Employer realises that a decision given by the DAB would go against him. Additionally, there was no list of DAB members, or an appointing entity included in the Contract. This is a common situation and my advice to contractors is: before signing any contract, always carefully check the whole contract for errors, omissions and conflicts. If any such thing exists, approach the Employer and request that it be corrected. Once the contract is signed, you will be stuck with it for better or worse, and it’s usually worse.

This blog was written by ICCP Executive Officer and Fellow, Andy Hewitt

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