04 May 2021
The Joint Contracts Tribunal (JCT) and the Chartered Institute of Arbitrators (CIArb) have worked together in order to produce the first Dispute Adjudication Board (DAB) Rules for use with the JCT Design & Build Contract and Major Project Construction Contract forms. These JCT forms of contract are used on projects that would typically benefit from a DAB and the costs of a DAB would be proportionate to the size and value of the projects. These Rules comply with the UK adjudication legislative regime under the Housing Grant, Construction and Regeneration Act 1996 (HGCRA), as amended by the Local Democracy, Economic Development and Construction Act 2009.
The JCT/CIArb DAB Rules comprise a set of rules and a DAB tripartite agreement (TPA). The DAB Rules can be incorporated within the JCT forms of contract, and the TPA provides the formal method for contractually binding both of the contracting parties with a DAB member. By incorporating the DAB rules within a JCT Contract, and completing and executing the TPA between the employer, contractor and a DAB member, a contractually binding DAB can then be put in place for a particular project. Typically, a DAB will comprise one or three members.
DABs have been recognised for international contracts for many years. In the modern context, North America led the way with the development of Dispute Review Boards (DRBs) comprising industry experienced construction professionals who would follow the project and make non-binding recommendations that arose. In essence, DRBs provide a dispute avoidance mechanism. FIDIC introduced an optional DAB in its Design & Build Orange Book in 1995. This was a 56 day process. FIDIC’s revision of its Red Book in 1999 introduced a standing (meaning the DAB is appointed at the outset of the project to follow its progress) DAB with an 84 day process, and an optional process in both the Yellow and Silver Books. All lead to a binding DAB decision. By this stage, the World Bank was supporting and, indeed, insisting on the use of DABs in projects funded by the World Bank with the value of more than $50 million. This period of international dispute avoidance and dispute resolution based on neutrals following the project coincided with the UK’s development of statutory backed adjudication.
Adjudication under the Housing Grants Construction Regeneration Act 1996 was introduced in May 1998 with a 28 day binding dispute resolution process. Standard forms that were used in the UK were quick to adopt procedural rules providing for adjudication in order to comply with the legislative implied right to adjudication. A particular feature is the difference in time periods for reaching a decision. In effect, the international approach is 3 months, whilst a decision in relation to a dispute in the UK requires a decision to be issued within 28 days.
It also should be noted that the best practice approach to international DABs is that they are appointed to follow the project and assisted avoiding disputes, whilst in the UK, an adjudicator is appointed once a dispute has arisen. This latter approach is also true of the Yellow and Silver Books, although from 2017, FIDIC has adopted standing DABs in recognition that a key function of an adjudicator’s focus should be on the avoidance of disputes, and only make binding decisions if necessary. This reflects the domestic and international move towards facilitative contracting and the benefits that can be achieved both by all contracting parties if they seek to support each other in their project goals; namely, the completion of a quality facility on time whilst resolving differences quickly, making prompt payment and the needs of a supply chain to fulfil its commercial objectives.
The CIArb in 2014 published a set of Dispute Board (DB) Rules for use in international projects. The JCT recognised that it would be helpful to publish rules that provided an ongoing avoidance function during the course of more substantial longer term projects whilst at the same time complying with legislation for the 28 day adjudication process. JCT’s approach was to work with the CIArb and base its rules on the CIArb DB Rules with the aim of producing a compatible 28 day avoidance and decision making procedure.
The JCT/CIArb DB Rules are compatible with several of the JCT forms of contract. The purpose of the DAB is to assist the parties in the avoidance of dispute and also the timing and resolution of disputes. The new Rules comply with Section 108 of the HGCRA, set out a series of definitions and then provide the option of comprising a DAB with either one or three DAB members. The parties can decide whether to have a sole or three member DAB. The three member approach is often based on the employer selecting a member, the contractor selecting a member and then both parties, or the two DAB members, identifying and agreeing a chairperson. The project size and skillset is also a factor in the selection of the DAB. On a substantial complex project, it is often more helpful to have three members with diverse skills, who may complement each other’s skills.
Once the JCT DAB is in place, it can only be terminated by the mutual agreement of both parties. This avoids the situation where one party decides that it does not wish to comply with the DAB’s decisions and then seeks to dispense with their services entirely. The Rules provide a mechanism for default appointment and replacement of a particular member. The CIArb is the default appointing body, and applications can be made to the president or the president’s designated person. The purpose, of course, is to maintain the function of the DAB for the duration of the project and, if necessary, beyond completion in order to resolve any disputes that might arise.
A principle function of the DAB Rules is for the DAB and the parties to hold periodic meetings and site visits as soon as it is practical ideally from the commencement of the works. The purpose is for the parties and the DAB members to get to know each other, for the DAB to begin to understand the project and, importantly, to build on their relationship with the parties to discuss issues or problems as they arise with the primary purpose of avoiding disputes. There is, of course, the ability for either party to refer a matter to the DAB in order that the DAB can reach a binding decision. This means that the parties can request a binding decision, but there is a substantial emphasis on working with each other and the DAB to deal with issues in the hope of avoiding the need for a referral and binding decision.
The DAB fulfils its avoidance function by providing informal advice under Article 9 of the JCT DAB Rules. The parties can request an informal advisory opinion at any time. This could be done during a site visit or in a written note to the parties. The parties are not bound by it, and the DAB may, on its own initiative, raise an issue with the parties in order to promote dialogue. It is, of course, important that both parties are involved in the discussion as the primary purpose here is the avoidance of dispute, not mediation involving private sessions with each party. That approach would not comply with the transparent function of a DAB that may be called upon later to make a binding decision.
If a dispute arises, then either party may give notice of its intention to refer the dispute. The referral is then served on the other party and the DAB within 7 days, and a decision is to be issued within 28 days in order to comply with the HGCRA.
A hearing might be held in order to facilitate discussion about the issues in dispute and for the DAB to ask questions. Article 13 provides the DAB with the power to establish a procedure in relation to the making of a decision, to decide its own jurisdiction, call for site visits and hearings, and conduct itself as necessary in order to provide a decision. The DAB can take the initiative in ascertaining the facts and the law and may open up and review certificates as well as make use of its own specialist knowledge and order the payment of money or other redress.
The construction industry in the UK has been progressive in the development of, and the use of, adjudication and mediation as well as partnering and facilitative contracting in order to reduce conflict and promote successive projects. JCT/CIArb DAB Rules provides another method for the industry, particularly in relation to larger projects, for an independent expert panel to assist in the avoidance of disputes, with the provision of binding decisions if required from a panel that has followed the project and dealt with the parties.
Partner, Fenwick Elliott LLP
Visiting Professor King’s College London
Nicholas led the drafting of the CIArb 2014 DB rules.
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