They’re endorsed by the World Bank and pioneered in the US, so why are dispute boards not more widely accepted in the UK?
If your game is major international projects, such as motorways, dams and tunnels, particularly in far distant places with World Bank finance, you probably know all about dispute boards. They are an American idea. The first one that we know about was set up for a tunnel project in Colorado in 1975. They spread to Central America, where the World Bank encountered them and decided that they were a “good thing”. They really took off in 1999 when FIDIC revised its colourful suite of contracts. Now they pop up all over the Third World and Eastern Europe.
They are found a little closer to home as well. The Channel Tunnel project used a dispute board. So did the Channel Tunnel Rail Link, Docklands Light Railway Lewisham Extension, Dublin Port Tunnel, and several PFI hospital projects.
There are many variations on the dispute board theme, but this is the basic model. At the very start of the job, the employer and the contractor each appoint an independent neutral person to be a member of the board. The two appointed members then agree to appoint a third to act as the chair. They might be engineers, architects or anything else. Even lawyers. They are not there to represent the parties and must stay entirely independent.
Disputes will happen sooner or later and the dispute board can usually sort them out much more quickly and economically than a more conventional adjudication or arbitration process
This little team keeps in touch with the project throughout. They receive regular progress reports and they visit the site three or four times a year. They learn about problems and can hold informal sessions at which they can give their view on differences. If this doesn’t prevent a dispute from developing, the board can deal with it quickly with the benefit of its background. The role can be expanded to include principal subcontracts.
All this costs a few bob, of course. Employers are often reluctant to increase cost by retaining dispute board members. There seems little point in paying for three professional people to read lots of paper and then make regular trips to outlandish places to see how the dam is getting on when there are no disputes to resolve. They are tempted to wait until the dispute arises and then set up the machinery. But those with experience of the process (not just the board members) generally agree that the money is well spent. Disputes will happen sooner or later and the dispute board can usually sort them out much more quickly and economically than a more conventional adjudication or arbitration process.
Despite their growing popularity in the international major project world, the idea has not really caught on in more modest UK jobs. In 1999, when FIDIC was turning the idea of dispute boards into a conventional feature of international construction, the UK was looking in a quite different direction to find the answer to disputes. We had just invented (or more correctly re-invented) adjudication. As a statutory process, it had started working in 1998. It promised to be a quick and economical way to resolve disputes. The UK industry really had no appetite for another bright idea.
Adjudication has certainly made a difference. Main contractors are much less keen to refuse payment to subcontractors without due cause. Decisions are made within weeks and are enforced enthusiastically by the courts. Legal costs have been cut dramatically. But there is more work to do. Increased lawyering of the process makes it uneconomic for many (possibly most) disputes. The process was designed to enable disputes to be resolved very early with minimal effect on progress, but most cases are taken to adjudication after practical completion.
Maybe the dispute board concept has something to offer. The appointment of a three-person board for the duration of a £10m or less project would be difficult to justify, but a single independent person is more affordable, and of course does not need to spend nearly so long on keeping in touch than is appropriate for a $1bn project in the Congo. A truly independent person who understands what the job is about has a real chance of avoiding, not just resolving, disputes.
If, like the FIDIC board, the informal role can mutate if necessary into formal adjudication, the cost of the adjudication will certainly be much lower. The parties may save serious legal costs, but also managerial time, enabling them to concentrate on the project. The role might be taken by a multidisciplinary practice with competence in the relevant fields. As an example, take a look at www.builtenvironmentsolutions.com
John Redmond is an arbitrator and consultant at solicitor Osborne Clarke in Bristol