Instead, there has been a widespread adoption of dispute advisory boards, which share similar features with the adjudication procedure, on large international construction projects.
Since their inclusion within the FIDIC standard form of contract and World Bank sample bidding documentation (1995), dispute boards have been used on an increasing scale. Under World Bank and FIDIC rules, the dispute resolution process takes 66 days, and under the draft ICC Rules (the rules of the International Court of Arbitration), which are being developed, it takes 90 days. These periods, while greater than the 28 days for an adjudicator to make a decision, can give rise to the same debates.
Dispute boards perform several roles: they make immediately binding decisions, which become final if not objected to by either party; they make recommendations that are initially non-binding but become so if neither party objects; and they can perform a consultative role, which can be useful where parties initially want a second opinion rather than the determination of a dispute.
The dispute boards tend to be made up of one or three individuals who are appointed at the start of a project, as adjudicators can be, rather than simply when a dispute arises. The advantage is that the board/adjudicator becomes familiar with the project.
Also, given that parties must often interact with the board members on a long-term basis, aggressive correspondence and spurious claims are discouraged.
Single adjudicators are more likely than three-member dispute boards to suffer from availability problems when disputes arise and may not have a broad enough technical knowledge of the issues that may emerge in future disputes. These concerns can be addressed at least to an extent by agreeing a panel from which the adjudicator is to be selected.
Although adjudicators can be flexible in the procedures that are adopted, subject to their governing rules, the lack of statutory framework covering dispute boards usually results in much more flexible dispute resolution procedures. This is especially so in relation to the timescales for taking steps in the proceedings, jurisdiction and procedure.
An advantage of adjudications and dispute boards is the ultimately non-binding nature of the decisions. Adjudication produces a binding decision on an interim basis only and the losing party has the (sometimes admittedly small) comfort that the dispute can be subsequently litigated or arbitrated. Dispute boards' decisions generally involve a cooling-off period after which their decisions/recommendations become final and binding if neither party decides to reject them.
In the international arena, the use of dispute boards continues to grow rapidly and the evidence indicates that this flexible approach works (statistics from the Dispute Resolution Board Foundation indicate that 97.6% of all reported dispute board recommendations were accepted). The driving force behind this growth relates to a combination of factors, not least the cost–time advantages and non-confrontational approach of the dispute boards.
Arguably, however, their real success lies in their ability to provide parties with a constructive means to resolve disputes while minimising the damage to working relationships, which is vital for the continued progress of the works on long-term projects.
It is generally agreed that adjudication is working at least to the extent that it has significantly reduced the number of arbitrations and cases being dealt with in the courts. However, statutory adjudication, with its often coercive approach, has not been able to replicate the beneficial effects that dispute boards have had on major international construction projects.
Mark Roe is a partner and Marcia Jennings is a solicitor at Masons.