Briefing

Appointing Dispute Boards: Practical considerations

Dispute Boards provide an effective and practical means of avoiding and resolving disputes that can arise during the lifecycle of construction projects. To ensure a Dispute Board is effective, it is crucial that the parties appoint the right Board for the relevant project or dispute. This article outlines some of the practical considerations when making that decision.

Dispute Boards are creatures of contract. As such, their precise composition and remit will depend on the contract terms. Universally, however, they comprise independent and impartial professionals or experts that are appointed to manage or resolve conflicts arising between the parties. How do parties select the right candidates from within that broad range?

This article discusses certain factors to consider when deciding on a Dispute Board’s composition, including:

Whether to establish a standing or ad hoc Board
Whether the Board should consist of one or three members
The identity of the Board members

There are, however, a range of other important factors that are relevant to the successful formation of a suitable Dispute Board. FIDIC has published detailed guidance on this matter, with respect to its suite of contracts,¹ which has been instructive in producing this article.

Is a standing or ad hoc Dispute Board right for your project?

Dispute Boards can be appointed for different durations. A standing Board is appointed for the entirety of the project to assist with dispute management and avoidance throughout, as well as dispute resolution if a dispute crystallises. Whereas an ad hoc Board is appointed to adjudicate and resolve a specific dispute(s) pursuant to the agreed dispute resolution process under the contract.

Standing Boards will come at a cost but may be more economical in the long run. By being involved throughout the project, standing Dispute Boards can obtain an in-depth understanding of the issues affecting the project, and the dynamics of the parties’ relationship. This can be key to effective dispute avoidance or dispute resolution, particularly where complex and technical issues are at the core of the parties’ dispute, or where it is important to preserve a long-term working relationship.

However, it is important to recognise that these advantages are not always realised. We have seen examples of standing Dispute Boards reaching unexpected decisions because they did not properly understand the contract terms. Parties should be mindful of this and ensure that their case on any dispute is always advanced as clearly and persuasively as possible. There is a careful balance to be struck between acknowledging a standing Board’s existing knowledge and ensuring that basic but fundamental issues are clearly and persuasively addressed.

Ad hoc Boards do not provide the same dispute avoidance function but can be tailored to suit the specific dispute confronting the parties. This can be particularly advantageous where a dispute relates to a specific area of expertise, such as delay disputes, or problems with specialised engineering matters, and it is advantageous for the Board to include members with requisite experience. There are also cost advantages as the Board is usually appointed for a considerably shorter term.

Should your Board consist of one or three members?

The size of a Dispute Board can also vary. A sole member is often more efficient, while a three-member Board provides a greater range of expertise and experience. In a three-member Board, usually each party to the contract will select one member and a process is agreed to appoint the third, who acts as chair.

A three-member Board provides the benefit of a diversity of perspectives and skill sets. This can be particularly useful in complex disputes. For instance, we have recently acted on a final account dispute where the ad hoc Board consisted of a leading barrister and eminent delay and quantum experts. It appeared clear that they were dividing the issues between them so each member focused on the area in which they had the greatest depth of expertise, whilst also having the benefit of their fellow Board members to act as ‘critical friends’. Having multiple members provides the opportunity for collegiate decision making, increasing the likelihood of a thoroughly considered, balanced and robust decision.

A sole member can be more efficient, removing the need to coordinate schedules and availability of multiple members. This may be preferrable where the parties are concerned about costs, or where a decision is time-critical. A sole member Dispute Board may also be most suitable where a dispute relates to a discrete technical issue, that is best addressed by a single expert in that field.

Parties may also consider non-conventional ways of constituting a Dispute Board to suit their project needs. For example, a standing sole member who is then joined by two further members should a dispute crystallise requiring adjudication. That approach balances a reduced retainer throughout the project, while still offering a range of experience should a dispute require formal determination.

Identifying the Board members

Finally, and perhaps most crucially, there is the question of who the Board members should be. Key criteria for a suitable Dispute Board member will differ between projects and disputes.

As a general principle, it is vital that parties evaluate their project or dispute to identify the key issues that may need to be decided and, where a dispute has crystallised, the strengths and weaknesses of their position. That will often highlight the kind of individual that it may be advantageous to appoint. For example, if a party wants to strictly enforce the terms of the contract, they may take the view that a ‘black letter’ lawyer would be an appropriate appointment.

Once the relevant characteristics are determined, parties must then identify candidates who possess those characteristics. Direct experience, whether that is from the parties, their legal advisors, experts or claims consultants, is key to provide a reliable insight into how candidates might approach the project or the dispute. Alternatively, various institutions also maintain lists of possible members, such as FIDIC’s President’s List of Approved Dispute Adjudicators.

There are a range of other factors that parties may want to consider beyond the expertise and profession of possible candidates. As non-exhaustive examples these may include:

Whether it is valuable to have a member with knowledge of local customs and practices in the location of the project.
The soft skills of the candidate. For example, it is often useful to have a chair who is well organised to ensure the efficient running of the process.
Whether it is useful to have a member that has considerable experience of acting for employers or contractors and is therefore better placed to recognise the commercial and practical pressures a party is operating against.

With multi-member Boards, it is also important to consider the likely dynamics of the panel when making the appointment. The parties should consider a candidate’s relevant expertise, reasoning style, ability to communicate clearly, their standing amongst the other appointees, along with prior experience in dealing with particular issues of significance to the dispute.

Final thoughts

Probably the most important decision in the lifespan of any dispute is selecting the people who will decide it. Ultimately, parties are making a prediction as to how a Board will approach any given dispute. Like all predictions, that is inherently difficult but can be assisted by deep knowledge of the potential candidates, a realistic and thoughtful appraisal of the case and some insight into how the Dispute Board may approach the dispute and the dynamics between them.

Footnotes