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© Christopher Koch, th GENEVA GLOBAL ARBITRATION FORUM THE USE OF DISPUTE BOARDS IN NON-CONSTRUCTION SETTINGS by Christopher Koch LANDOLT & KOCH 17, rue du Mont-Blanc CH-1201 Geneva Tel Fax
© Christopher Koch, 2010 Time & the Contractual Management of Risk Contracting is and exercise in Risk management A contract is a promise based on the parties understanding of the economic risk at the time of contracting. When performance takes place over time, this introduces a factor of uncertainty that makes contractual management of risk more difficult. The more complex a project, the harder it is to provide for a contractual solution to all possible contingencies. When time and complexity make it difficult for the parties to contractually allocate risks it is time to think about a mechanism for doing this.
© Christopher Koch, 2010 Dispute Boards as risk allocation device DBs were used in construction because Building a project it takes time Conditions are often unforeseeable Parties are obliged to work together Need for a contractual unblocking device to keep the project going DB has an unblocking function DBs are designed to unblock a situation when the contract does not give the parties sufficient guidance on how to allocate the risk of a given situation The emphasis is on speed and the assistance to the parties to continue their contractual performance rather than on a final determination of rights. Use of DBs is not restricted to construction ICC Rules are industry neutral
© Christopher Koch, 2010 SHIP BUILDING & REFURBISHMENT Shipbuilding much like construction Project time 2 to 3 years Imponderables: price of steel, economic evolution Design issues, refurbishment issues because vessel in worse shape than anticipated. Many of the same issues as in All statistics provided by the Dispute Board Federation
© Christopher Koch, 2010 Traffic Charge Disputes between Telecoms Roaming charges concern multiple operators Depending on where the user is he may be using three to five different networks. Telecoms are necessary contractual partners Home operator has no choice of who will carry the signal when the client travels abroad. Telecoms must work together and preserve relationship. Operational disputes have to be addressed quickly and be resolved with amicably. What kind of Board and procedure? Ad hoc, 1 member DB Boards, Document only proceeding Decision within 30 days of receipt of documents.
© Christopher Koch, 2010 Hospital related DBs in England with NHS NHS enters into long terms building and equipment leases Use of DBs for disputes regarding equipment and building performance standards Disputes with independent practitioners using NHS facilities
© Christopher Koch, 2010 Concession related DBs in Public-Private Partnerships DB perfect for Concession disputes Infrastructure– Utilities - Hospitals – Prisons Concessions last 20 – 50 years Public interest in obtaining public service at affordable price v./ private interest in recovering investment + a profit Private – Public risk allocation is dependent on many factors, including political + economic The crisis in government finances will accelerate use of PPP in financially less stable countries.
© Christopher Koch, 2010 Other Areas where DBs could be used effectively Distribution Agreements determination of performance targets price determination issues product supply and quality issues Mid and Long-term Supply Agreements quality issues price determination issues delivery issues Oil & Gas exploration contracts Exploration and production issues Royalty issues Product and service contract issues
© Christopher Koch, 2010 What type of DBs are used Use of ICC DB rules No ICC statistics available From the anecdotal evidence it seems that the DB rules are popular in non FIDIC settings. When they are used, parties seem to adopt CDBs. Since ICC Rules only deal with standing DBs they may not be too well suited to the setting up of ad hoc DBs Standing or Ad hoc DBs? It depends on the type of sector and the kind of dispute which parties anticipate. In telecoms roaming charge disputer ad hoc DBs with as Sole DB Member. Parties to a dispute may differ each time. In the concession setting DBs may be set up at the beginning of the operations phase, but are not active until a dispute is referred to them. They are in fact, hybrid standing as to their appointment but ad hoc in terms of how they function, since there is no regular flow of information between them and the parties performing the contract.
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