Arbitration: the new Court of Appeal for dispute boards

Statutory adjudication, introduced in 1998, caused the decline of domestic construction arbitration in the UK. In the construction industry worldwide the decline continues due to the use of dispute boards which are the newest established form of adjudication.

Dispute boards (DBs) commence with the start of a construction project and continue through completions and even beyond.

Some 98 per cent of the world's major infrastructure projects use one form or another of DBs. All of the world's development banks mandate the use of a dispute board in their projects - the Channel Tunnel and the Hong Kong Airport are but two examples of projects where DBs were used.

The use of such boards is expanding to other commercial areas such as ship building, concession agreements and generally any situation where you have a long-term contract that needs an experienced deciding body to give decisions so that the project or contract can proceed without delay.

Avoiding misunderstandings

DBs are constituted usually at the time the construction contract is signed between the employer and the contractor. They are founded in the belief that it is better to have a group of experienced construction professionals visit the job site during the entirety of the construction on a quarterly basis, receive copies of all correspondence, have regular site visits and go over potential problems and disputes with the parties before any misunderstanding turns into an actionable dispute. Also, in most international situations the employer and the contractor are reluctant to take their disputes to the local courts as the delay and cost can be prohibitive. DBs are inexpensive and quick.

Normally in a DB situation if the DB (which looks much like an arbitral tribunal) is unable to first help the parties prevent a dispute from crystalizing then either the contractor or the employer may refer the dispute to the DB. Once it is received, the DB is mandated to return its decision, usually within 84 days. It is a very swift process and the DB usually gives a binding decision which the parties must adhere to unless and until that decision is overturned by an arbitration tribunal.

The DB is usually made up of three or more experienced practitioners who act as inquisitors and are mandated to seek out the necessary evidence, can hold hearings, take submissions and hire their own experts to guide them in areas they may not have familiarity with, for example. delay damage claims.

Normally after a decision is given (and remember these are adjudication decisions) the parties have a certain amount of time before they can appeal the decision to arbitration. The time and the particular arbitration appointing body (Chartered Institute of Arbitrators, International Chamber of Commerce, etc.) to be used are governed by the initial agreement of the parties which set up the DB.

The time before arbitration can be between 45 and 60 days and is referred to as a cooling-off period, the hope being that some amicable settlement will take place and that the dispute will end.

If it does not end during this period of time, then arbitration acts as the appeal court for the decision. The arbitrators, once appointed by the appointing body, can open up and review all of the evidence, the decision itself and anything else that the DB members heard or read.

The arbitrators can modify, change, uphold or completely throw out the DB's decision. The one unique issue is that the decision itself can be and is admissible in the arbitration proceedings as evidence. Another major point is that the DB decision, in and of itself is considered an expert opinion, which in the absence of any other evidence to the contrary in the arbitration, will, in effect be binding on the arbitration tribunal.

Real-time knowledge

Thus when a dissatisfied party comes to arbitration claiming that the decision is wrong, unless that party provides other further and better evidence as to the issues in the decision, the arbitration tribunal will have to uphold that decision. The other factor governing the arbitration tribunal is that the dispute board, unlike arbitration, is with the project from the beginning and has visited the site, knows all of the parties, has reviewed evidence as it was being created and comes to the decision with full, real-time knowledge of the events.

Frequently the DB has participated in the events themselves and is therefore extremely knowledgeable as a witness of what transpired at the time of the dispute's coming into being - a percipient witness coupled with the expertise of the members of the DB creates a very strong evidentiary situation for the arbitration tribunal to rule against.

That aside, arbitration has become the only way to effectively appeal from a DB decision and as DBs grow in use worldwide, so will the use of arbitration as the only way to seek decision review.

Dr Cyril Chern is a chartered arbitrator and the secretary of the dispute board federation, Geneva. He is also a barrister practising from Crown Office Chambers

www.ciarb.org/das

www.crownofficechambers.com