DRB's evolved in the USA, where they have been used for some time as a means of resolving disputes in heavy civil engineering projects. Rather like the use of an expert to resolve disputes, their constitution and rules depend entirely on what is in the contract, and it is therefore necessary for the constitution and powers of the DRB to be part of the contractual mechanism.
DRB procedure is intended to be quicker and cheaper than litigation or arbitration and may have advantages over mediation or conciliation which, in the context of international construction contracts, may not produce the strength of decision required.
A DRB typically has three suitably qualified people. It is possible for larger projects, of course, to involve a larger board (for example, the Channel Tunnel project had a board of five persons and while all five heard the dispute, decisions were made by a three-man panel comprising the chairman and the two most appropriate members). The DRB meets regularly during the course of the project, even if no particular dispute has been referred to it, to ensure that it is fully familiar with the project and the parties. In such circumstances, the DRB may become an informal forum for resolving disputes before positions become entrenched. The cost of the DRB is shared equally between the parties, whatever the outcome of any dispute referred to it.
The result of all of this is that DRB recommendations tend to be quicker, cheaper and more conclusive than traditional methods of dispute resolution available. A DRB recommendation may or may not be binding , depending on how it is structured. There is an argument that non-binding decisions are preferable to binding decisions: the latter creates a "win-lose" result, whereas a non-binding decision may prove less damaging to the parties' relationship. In any event, a subsequent arbitrator or court would give a lot of weight to a decision reached by a DRB, and in any case, non-binding decisions are almost always adopted by the parties.
- DRBs are less formal than arbitration and litigation, but stronger than mediation
- They can be used on large and complex contracts
So how do DRBs work? It is often the case that each party will select a member of the board, who then appoint the chair. Any procedures established by the DRB or set out in the contract should be simple, and hearings should take place a relatively short period of time after a dispute is referred – certainly not more than two months. In order to avoid an adversarial approach, the parties should prepare position papers rather than pleadings, and the DRB should take the lead in ascertaining the facts for itself so that, for example, cross-examination should be conducted by the DRB.
What about using DRB's for domestic contracts? Obviously, the cost of a DRB, even if spread between the parties, limits its use to larger contracts (although it would be perfectly feasible to have a "one man" DRB). On larger and more complex contracts or on, for example, private finance initiative contracts, there is no reason why a DRB could not be used – it certainly chimes with the current non-adversarial ethos of the industry.
Tony Bingham rightly pointed out in a recent article (23 April) that although every party to a contract has the right to adjudicate, it is not necessarily the case that you have to adjudicate every dispute – it may be more practicable for the parties to reach an agreement that a particularly complex matter might best be dealt with by another route – a DRB, for instance.
Simon Lewis is a partner in solicitor Dickinson-Dees.