Presentation on theme: "Dispute Review/Adjudication Boards Contract Management in International Construction Beijing, April 28, 2009 Beijing, April 28, 2009 Cameron Hassall Matt."— Presentation transcript:
Dispute Review/Adjudication Boards Contract Management in International Construction Beijing, April 28, 2009 Beijing, April 28, 2009 Cameron Hassall Matt Buchanan
Dispute Review/Adjudication Boards · April 2009 1 General Overview Dispute Boards in the Construction Process Mediation
Dispute Review/Adjudication Boards · April 2009 2 Dispute Boards - Overview The Basics Quick history of DB Dispute Boards in a Little More Detail Conclusions
Dispute Review/Adjudication Boards · April 2009 3 Dispute Boards - The Basics Description A “project specific” dispute avoidance and fast track adjudication process Typically 3 independent and impartial persons Creature of contract Ideally suited to: Larger international projects Multi-contact projects Concessions
Dispute Review/Adjudication Boards · April 2009 4 Categorisation Standing vs. ad/hoc Type of output Various terms used Dispute Boards - The Basics
Dispute Review/Adjudication Boards · April 2009 5 General Forms of DB Dispute Resolution Board (DRB) – non-binding recommendation Dispute Adjudication Board (DAB) –decision that has an interim binding force Combined Dispute Board (CDB) – a hybrid of DRB and DAB
Dispute Review/Adjudication Boards · April 2009 6 Main Differences to Other Forms of ADR Part of the project administration Often set up at the outset of a project Can influence the conduct of the parties Offer expedited and potentially cost effective dispute resolution Opportunity will remain for a referral to arbitration or the courts
Dispute Review/Adjudication Boards · April 2009 7 Quick History of Dispute Boards US Foundation DB concept had its origins in the US - used for over 30 years Boundary Dam in Washington 1960s - “Joint Consulting Board” Influential studies undertaken in the 70’s: US National Committee on Tunnelling Technology (1972) Better Contracting for Underground Construction (1974) Adoption by influential employers - AT&T, Hawaiian Department of Transportation
Dispute Review/Adjudication Boards · April 2009 8 World Bank and National Governments El Cajon Dam and Hydropower Project in Honduras (1980) Procurement of Works (1990) – possibility of DB to publish non-binding recommendations Procurement of Works (2000) – move toward an interim binding DAB process Master Bidding Document for Procurements of Works and User's Guide (July 2005)
Dispute Review/Adjudication Boards · April 2009 9 World Bank and National Governments Standard Bidding Document for Construction Projects in the People's Republic of China (November 2007): Jointly issued by 9 ministries in People's Republic of China Introduced the concept of a dispute board in the "General Contract Terms".
Dispute Review/Adjudication Boards · April 2009 10 Organisations and Associations International Federation of Consulting Engineers (FIDIC) Followed the World Bank example in 1995/96 - introduced “dispute arbitration board” in its Orange Book (Contract for Design-Build and Turnkey) and optional amendment to standard form contracts
Dispute Review/Adjudication Boards · April 2009 11 Organisations and Associations Further revision in 1999 - DB principal means of dispute resolution: –Red Book (Construction) – standing DB –Yellow Book (Plant Design and Build) and Silver (EPC/Turnkey) – establishment of the DAB deferred until disputes arise Gold Book (Design, Build and Operate) in 2008 – standing DB
Dispute Review/Adjudication Boards · April 2009 12 Organisations and Associations Associations Dispute Resolution Board Foundation - written and non-biding recommendations American Arbitration Association - Construction Industry Disputes Review Board Procedures International Chamber of Commerce - Dispute Board Rules Institution of Civil Engineers - ICE Dispute Resolution Board Procedure Beijing Arbitration Commission - The Construction Dispute Board Rules of the Beijing Arbitration Commission (1 March 2009)
Dispute Review/Adjudication Boards · April 2009 13 Dispute Boards in a Little More Detail Selection and Appointment of Dispute Board Members Number of members Prudent to use an odd number Smaller projects may elect for 1 while Large projects can have upward of 3 Largely driven by project size
Dispute Review/Adjudication Boards · April 2009 14 Dispute Boards in a Little More Detail Examples Channel Tunnel Rail Link project - DB of 5 (although quorum was 3) Hong Kong Airport project - Group of 7 plus a convenor to cover all the main contracts. A panel of 1 or 3 (referring party’s choice) selected to hear the dispute Docklands Light Railway (Lewisham extension), London – technical and financial panels UK PFI projects – DB comprising a chairman and other ad hoc members
Dispute Review/Adjudication Boards · April 2009 15 Dispute Boards in a Little More Detail Qualifications Independence of members is paramount –Impartiality and objectivity –Nationality? Appropriate background and experience Qualifications –Technical knowledge across the full range of potential disputes that may arise –Contract administration and interpretation experience –Practical experience in the industry –Familiarity with ADR Ability to work with other DB members Initiative Availability!
Dispute Review/Adjudication Boards · April 2009 16 Dispute Boards in a Little More Detail Appointment of members Typical approach – each party selects one member of the DB with the third (chairman) either jointly appointed by the parties or by the other two selected members Right to lodge reasonable objection to the other party’s selection Assistance in identifying potential members BAC, AAA, ICC, DRBF.
Dispute Review/Adjudication Boards · April 2009 17 The DB Agreement Standard form or bespoke approach Incorporate rules and procedure by reference Confidentiality - in respect of non-parties or subsequent litigation or arbitration Resignation and replacement of members
Dispute Review/Adjudication Boards · April 2009 18 Dispute Board Rules and Procedure Free to determine the rules of procedure Simple, fair, easy to understand Many standard forms and institutional rules (e.g. BAC, AAA, World Bank, FIDIC, ICC) Parties may elect for bespoke rules Parties can allow the DB to determine its own procedure
Dispute Review/Adjudication Boards · April 2009 19 Dispute Board Rules and Procedure Can be made to work with various statutory requirements UK - Housing Grants, Construction and Regeneration Act Singapore - Building and Construction Industry Security of Payment Act Australia - Security of payment legislation
Dispute Review/Adjudication Boards · April 2009 20 Costs Usually shared between the contracting parties Multi-contract project using one DB Costs of routine operations paid by the owner/employer Costs of DB activities in relation to referrals split between parties to the dispute
Dispute Review/Adjudication Boards · April 2009 21 Operations and Hearings Standing DB Provision of Information –Informed as to construction progress on a regular basis (e.g. routine progress reports) –Members must take the time to process the material Presence on Site –Allow a DB to become familiar with the specifics of the project and to the parties –Observe problems as (and before) they develop –Number of visits depend upon the complexity of the project, stage of the construction, attitude of the participants
Dispute Review/Adjudication Boards · April 2009 22 Operations and Hearings Routine operations –Site presence may act as a catalyst for the airing of issues –Informal “review” sessions –Assisting with communication between the parties –If a matter cannot be resolved in the informal manner quick reference to the DB for recommendation or decision –Report after review sessions to ensure that progress is captured
Dispute Review/Adjudication Boards · April 2009 23 Operations and Hearings Hearing Either party may refer and ad/hoc DB will crystallise at this point Should be far less formal than an arbitration or an action in court! Legal representation?
Dispute Review/Adjudication Boards · April 2009 24 Operations and Hearings Typical process: –Position papers in advance of the hearing –Supporting document bundle can be supplied with the position paper –If further evidence is produced the DB will allow the other party to consider and respond –Issues as to principle and quantum can be heard separately –Each party will usually outline its position paper –Witnesses of fact may be involved - any cross-examination usually be through the DB –Expert witnesses are unusual but may be of benefit in particular circumstances
Dispute Review/Adjudication Boards · April 2009 25 Operations and Hearings Output of the Hearing Once hearing meetings are closed the DB will prepare its written decision Important to specify a time limit within which the DB is to make its decision Example time limits in standard forms range from 14 days (AAA), 84 days (World Bank and FIDIC) to 90 days (ICC).
Dispute Review/Adjudication Boards · April 2009 26 Operations and Hearings Important for the parties to be able to extend the time period for the decision Clearly unanimous decisions are preferable Some DB procedures allow for majority decisions (with minority opinions) Decisions can be either in the form of –Non binding recommendations –Interim binding decisions
Dispute Review/Adjudication Boards · April 2009 27 Operations and Hearings Non-binding recommendations Recommendation which the parties are free to comply with or reject and proceed directly to arbitration or litigation Pros of non-binding recommendations –Can resolve the dispute! –Non-threatening process –Shorter and less complicated than interim binding –Can be less costly –May have a cultural resonance Cons of non-binding recommendations –Can simply be ignored! –A costly diversion from binding resolution? –May not sufficiently focus the minds of the parties
Dispute Review/Adjudication Boards · April 2009 28 Operations and Hearings Interim binding decisions Decision may be binding pending final determination of the dispute by a court or an arbitral tribunal Pros of interim binding decisions –Means of resolving a dispute in the first instance –Can enforce the first instance decision (breach of contract) –Will focus the minds of the parties on resolving the dispute –Unlikely to be ignored by the parties –Suits some organisational structures Cons of interim binding decisions –Parties will fight harder as there is more at risk –Greater costs – preparation for and attendance at the hearing –Involvement of lawyers? –Decision making ability is taken away from the parties
Dispute Review/Adjudication Boards · April 2009 29 Operations and Hearings Enforcing the Decision of a DB Not capable of enforcement under the New York Convention nor does it have the status of a court judgement Binding only as a matter of contract between the parties In enforcement proceedings arbitral tribunal/courts will not revisit merits of the claim May be able to resist enforcement where DB has exceeded its jurisdiction
Dispute Review/Adjudication Boards · April 2009 30 Conclusion Cost Early resolution Confidential process Applying project specific expertise and knowledge to dispute resolution
Dispute Review/Adjudication Boards · April 2009 31 Mediation What is mediation Features Advantages Disadvantages Strategic decisions
Dispute Review/Adjudication Boards · April 2009 32 What is mediation A god-send and the end of litigation and arbitration? Glorified negotiation? Voluntary, non-binding method of negotiation of a settlement of a dispute, whereby the parties meet with an impartial 3 rd party and attempt to arrive at a mutually satisfactory resolution of their dispute which the parties meet with
Dispute Review/Adjudication Boards · April 2009 33 Features of mediation “Typical” mediation Short statements Mediator introduction Face to face opening positions Kissenger style “shuttle diplomacy” Bridge the gap Identify real areas of dispute Identify and encourage areas of compromise Use in tandem with other ADR Tries to foresee and remove “roadblocks” to settlement
Dispute Review/Adjudication Boards · April 2009 34 Advantages of Mediation Time and costs Management time Maintains business relationships Creative solutions Flexibility of procedure Private/Confidential It works (or so they say)
Dispute Review/Adjudication Boards · April 2009 35 Disadvantages of mediation Settlement at all costs Client perception Settlement regardless of merits Settlement without full appreciation of the facts/law Shows weakness Gives away case Delay tactic/Non-binding No precedent value
Dispute Review/Adjudication Boards · April 2009 36 Strategic decisions - When? Pre-condition to arbitration/litigation? Before commencing litigation/arbitration? After first round of submissions? Just before hearing? After award (if enforcement problems)?