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EFFECTIVE USE OF DISPUTE BOARDS IN CONSTRUCTION PROJECTS

EFFECTIVE USE OF DISPUTE BOARDS IN CONSTRUCTION PROJECTS. A Presentation by Ewuwuni Onnoghen-Theophilus (Mrs) LL.M, MCIArb (UK), Certified Negotiator (PON, Harvard), Trained Mediator (ICMC, Nigeria), Notary Public. Lead Counsel, ONNOGHEN-THEOPHILUS at the

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EFFECTIVE USE OF DISPUTE BOARDS IN CONSTRUCTION PROJECTS

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  1. EFFECTIVE USE OF DISPUTE BOARDS IN CONSTRUCTION PROJECTS A Presentation by Ewuwuni Onnoghen-Theophilus (Mrs) LL.M, MCIArb(UK), Certified Negotiator (PON, Harvard), Trained Mediator (ICMC, Nigeria), Notary Public. Lead Counsel, ONNOGHEN-THEOPHILUS at the Government Contract Dispute Resolution Workshop held on 07 – 08 May 2019 at the Convention Centre, Abuja Chamber of Commerce & Industry, Km 8, Umaru Musa Yar’Adua Expressway, Airport Road, Abuja

  2. INTRODUCTION • Dispute – Any situation where one Party makes a claim against the other Party and the other Party rejects the claim in whole or in part and the first Party does not acquiesce (Clause 1.1.29, 2017 FIDIC Red Book) What Parties to a construction contract want from a dispute resolution process • Reduction in frequency of disputes; • Speedy resolution; • Less contentious process; and • A just and fair solution at minimum cost. Dispute avoidance by well crafted conditions of contract and arresting issues or claims before they become disputes.

  3. DISPUTE BOARDS (DBs) • A Dispute Board is a project-specific ADR method which fuses dispute management with dispute resolution. • Dispute Management means two things. • it means dispute avoidance; and • Where the parties cannot avoid falling into dispute, they will activate a structured process involving a third party for a formal decision.

  4. ADVANTAGES & DISADVANTAGES OF DBs Advantages • Promotes early identification and resolution of issues before they crystallize into disputes; • Informal process which encourages open communication during site visits and meetings; • Encourages co-operation & partnering among project participants; • Experts who are familiar with the Project. Disadvantages • Additional layer of cost to the project; • Undermines the position/authority of the Engineer or Architect

  5. EXPLORING DBs TYPES • Standing – from commencement of the Project • Ad hoc – As the need arises FORMS – Classified based on the nature of the determination they make. DETERMINATION Recommendation; or Decision

  6. FORMS OF DBs • Dispute Adjudication Board (DAB) • Makes decisions. Parties must comply. • Binding in the interim. • No Notice of Dissatisfaction (NoD) within 28/30 days = Final & Binding • NoD = Refer to arbitration or other resolution method 2. Dispute Review Board (DRB) • Makes recommendation • Non-binding • Binding only if no NoD is issued within stipulated time frame

  7. FORMS OF DBs CONT’D 3. Dispute avoidance/adjudication board (DAAB) • Standing board • Makes decision • NoD to be given in respect of part of decision only. That part will be severed from the rest. 4. Combined Dispute Boards • Enables either a decision or a recommendation depending on what the parties want 5. Dispute Mediation Board • Mediators, make recommendation

  8. FORMS OF DBs CONT’D 6. Dispute Review Expert • Single member • Small projects • Makes recommendation RULES GOVERNING DB OPERATION & PROCEDURE • Generally found in the terms of the contract (Standard Form or Bespoke). This helps make the Parties familiar with the procedure. • In the Fédération Internationale des Ingénieurs Conseils (Federation of International Consulting Engineers) (FIDIC) Red book, 2017 – Clause 21 • Institutions have their DB Rules

  9. INSTITUTIONS AND DBs • American Arbitration Association (AAA) - adopts a Dispute Adjudication Board (DAB). • Charted Institute of Arbitrators (CIArb) - DAB or a Dispute Review Board (DRB). • Dispute Resolution Board Foundation (DRBF) - adopts a DRB • International Chamber of Commerce (ICC) - offers DRB, DAB

  10. DISPUTE AVOIDANCE • Clause 21.3 of the 2017 FIDIC Red Book provides for the DAAB’s Dispute Avoidance role. It states that: “If the Parties so agree, they may jointly request (in writing, with a copy to the Engineer) the DAAB to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement that may have arisen between them during the performance of the contract. If the DAAB becomes aware of an issue or disagreement, it may invite the parties to make such a joint request. Such joint request may be made at any time, except during the period that the Engineer is carrying out his/her duties under Sub-Clause 3.7 [Agreement or Determination] on the matter at issue or in disagreement unless the Parties agree otherwise.

  11. DISPUTE AVOIDANCE CLAUSE CONT’D Such informal assistance may take place during any meeting, Site visit or otherwise. However, unless the Parties agree otherwise, both Parties shall be present at such discussions. The Parties are not bound to act on any advice given during such informal meetings, and the DAAB shall not be bound in any future Dispute resolution process or decision by any views or advice given during the informal assistance process, whether provided orally or in writing”. Emphasis supplied. • NOTE – The Fédération Internationale des Ingénieurs Conseils (Federation of International Consulting Engineers) (FIDIC) & World Bank’s 2019 Agreement that World Bank will use six FIDIC standard contracts for the next five years.

  12. CONSTITUTING DBs • Composition – Number of members, selected from list included in the contract data. • Qualification • Appointment process. Time frame for appointing members (FIDIC Red Book = 28 days after the date the Contractor receives the Letter of Acceptance/Award. • Default appointing provisions • Executing the Agreement • Fees • for time spent/expenses plus monthly retainer • Both parties pay • failure to pay = Suspend services

  13. MODUS OPERANDI • Site visits – Regular, no comment on the progress of the Works • Site Meetings – should hold immediately after Site visit. The Board gives informal advise on issues as they arise during meetings. - The first site meeting should take place at an early stage, shortly after work commences. It will provide the Board members with an opportunity to familiarise themselves with the project and give the parties an opportunity to get to know one another in the absence of a dispute and before relationships begin to strain. • Review contract documents, progress reports, certificates, variation orders, instructions

  14. FORMAL REFERRAL OF DISPUTE If an issue or disagreement cannot be settled via the dispute avoidance procedure at site meetings, the dispute will be formally referred to the DB. • Statement of Claim • Statement of Defence • Hearing – Lawyers? • Witnesses, experts • Determination Time Frame - Within 84 days of the referral (Clause 21.4.3, FIDIC 2017 Red Book) or within 14 days of the hearing (AAA)

  15. MODUS OPERANDI CONT’D • Expiration Of DBs • FIDIC - upon termination of the Contract, the DAAB will expire 28 days after the DAAB has given its decisions on all disputes referred to it; • ICC - When the parties give joint notice to the dispute board to disband the dispute board. • AAA - On the date of final payment to the contractor • Compliance with Decision Decision is binding and Parties must comply with it whether or not a NoD is given. – Clause 21.4.3, 2017 FIDIC Red Book. • Enforcing the decision • Refer non-compliance to arbitration or litigation

  16. MODUS OPERANDI CONT’D • Determination vis-à-vis subsequent proceedings • Admissible under Clause 21.6, 2017 FIDIC Red Book and CIArb Rules. • Engineer can be called as witness (FIDIC); • Board member called only with the agreement of both parties. • CONCLUSION DBs are a proactive and cost effective method of handling disputes. DBs also meet the earlier highlighted requirements of parties in a construction project as regards dispute resolution methods. Government is advised to adopt it for its projects going forward. The seeming cost it entails should not hinder the government because there are huge savings in time and cost when compared with arbitration and litigation.

  17. REFERENCES • Dispute boards: practice and procedure by Practical Law UK Practice Note (Construction) • Mark Entwistle, Dispute Boards, The Resolver – Quarterly Magazine of the Chartered Institute of Arbitrators, August 2013 • Kailash Dabeesingh, FCIArb, FRICS, Chartered Arbitrator, Changing Trends in Dispute Resolution Dispute Boards: The Mauritian Experience, 2016 Paper in Society of Construction Law (SCL) Africa’s Archive. • 2017 FIDIC Red Book

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