CIArb Features

Dispute Avoidance: FIDIC 2017

10 Jul 2018

Have contracting parties embraced the concept of using the skills, experience and expertise of dispute board members to stop issues becoming disputes? 

Talk to any dispute board member, and they will tell you that their primary function should be in assisting parties to avoid issues turning into disputes. Although settlement of issues by agreement is always more palatable than having decisions imposed on you, contracting parties have not, in my experience, generally embraced the concept of using the skills, experience and expertise of dispute board members to stop issues becoming disputes requiring formal decisions to be made.

But is all that soon to change?

The 2017 editions of the FIDIC Red, Yellow and Silver Book forms of contract incorporate for the first time provisions that expressly address the avoidance of disputes. Sub-clause 21.3 of the new forms provides a process under which the Parties, provided they so agree, may jointly request the Dispute Avoidance and Adjudication Board (‘DAAB’) to provide assistance and/or informally discuss and attempt to resolve any issue, prior to that issue turning into a formal dispute. The provision also permits the DAAB to invite the Parties to make such a joint request, should it become aware of any issue or disagreement that exists between the parties during its site visits, or otherwise. The only constraints to the process are that the Parties must agree to a joint request being made, and that a request cannot be made during the period when the Engineer is acting under Sub-Clause 3.7 of the conditions to agree or determine the relevant issue.

What the written request to the DAAB should contain or set out is not indicated. Nor is it clear what the DAAB should do with the request, other than provide ‘informal assistance’. This appears to be the giving of advice to the parties, which would likely relate to the potential merits of the issue and/or what the DAAB thought might be the answer. What it presumably would not extend to is the DAAB adopting a mediation type role between the Parties, for to do so would appear to go beyond offering ‘informal assistance’, and could easily compromise the DAAB’s ability to decide any subsequent referral of the issue for decision independently and impartially.

In practical terms, issues of principle would appear to be most suitable for parties to engage Sub-clause 21.3 of the new conditions. Early views/advice on issues such as time-bars, contractual interpretation, technical requirements and so on, should provide parties with guidance on the way forward, providing certainty at an early stage and mitigating costs and time being incurred in commencing a formal dispute referral process. Less suitable for informal assistance would be issues relating to the evaluation of extension of time and cost entitlements, unless this was limited to evaluation methodologies and principles.

Whether the new provision will encourage parties to engage the dispute avoidance procedure to potentially head off referrals to the DAAB remains to be seen. Including an express provision for dispute avoidance in the 2017 editions of the FIDIC Forms cannot be faulted, since it should at least encourage parties to actively consider engaging the DAAB to assist with issues before they crystallise into formal disputes. On the other hand, there will undoubtedly be concerns regarding how the DAAB can remain objectively independent and impartial should a dispute be referred to them for decision which the DAAB has previously given informal advice. Even Sub-Clause 21.3 makes clear that the DAAB is not bound by any views or advice it may give under this Sub-Clause, in reality it may be difficult for the DAAB to go against its earlier advice, unless new evidence or arguments are presented under the referral. In addition, the absence of any clear guidance or procedure with respect to dispute avoidance, together with the fact that parties are not bound to follow or comply with any views or advice given by the DAAB, may result in parties being reluctant to pursue dispute avoidance for fear of potentially compromising their position or delaying a referral to the DAAB for decision at the earliest opportunity. It also cannot be ignored that a recalcitrant or unwilling party intent on delaying the resolution of an issue will simply not agree to a joint request being made at all, thereby nullifying at source any opportunity for dispute avoidance.

One hopes that contracting parties will embrace the new Sub-Clause 21.3 avoidance of disputes provision of the 2017 editions of the FIDIC Red, Yellow and Silver Books and use it positively to facilitate amicable resolution of issues. Including an express provision for dispute avoidance in the latest editions of the contracts has to be applauded as a step in the right direction.

For further information, please contact or