The construction industry often faces problems such as projects that do not go as planned, frequent changes in execution, tensions between commissioners and contractors over extra payments, and tight deadlines that result in penalties. To resolve these disputes, dispute boards or “technical panels of experts” are used, which are mechanisms included in construction contracts. These panels help resolve issues prior to arbitration and have proven to be effective on large projects around the world.
Dispute Boards are specialized mechanisms designed to resolve contractual disputes in an efficient and timely manner. These bodies are established for the purpose of addressing disputes as soon as they arise in the context of a contract. In general, they are constituted shortly after the contract is signed and are composed of one or three members who have in-depth knowledge of the parties involved, the contract in question and its execution.
Types of Dispute Boards: Permanent and Ad Hoc
There are two main types of Dispute Boards: permanent and Ad Hoc. Permanents are established prior to the start of the project and are present throughout the contract. Ad Hocs, on the other hand, are constituted specifically to resolve a particular dispute and are dissolved once a decision has been reached. Each type has its own advantages and disadvantages.
Advantages and Disadvantages of Permanent and Ad Hoc Dispute Boards
Permanent Dispute Boards provide continuity and in-depth knowledge of the project and the parties, which can speed up the dispute resolution process. However, they can also be costly to maintain and may raise concerns about impartiality due to their close relationship to the project.
Ad Hoc Dispute Boards, on the other hand, are more agile and are constituted specifically to resolve a particular dispute. This can be more cost effective and can address concerns about fairness. However, they may require more time to become familiar with the project and the parts.
There are three main types of Dispute Boards (DBs) in the construction industry:
- Dispute Review Boards (DRBs): Issue “recommendations” in disputes, not immediately binding. The parties have 30 days to object to the recommendation; otherwise, it becomes binding. If objected to, further legal action may be taken.
- Dispute Adjudication Boards (DABs): They issue initially binding “decisions”. Parties may object to a decision within 30 days of its issuance, allowing for a review.
- Combined Dispute Boards (CDBs): Issue recommendations, but may issue binding decisions in specific circumstances. If one party requests a decision and the other party does not object within the allotted time, the decision becomes binding.
CDBs balance the flexibility of DRBs with the mandatory nature of DABs, basing their choice on factors such as urgency and the need to preserve evidence. Estos mecanismos agilizan la resolución de disputas en proyectos de construcción.
DBs are intended to facilitate the efficient resolution of contractual disputes in construction projects. Its operation is based on two key aspects:
- Informal Assistance to the Parties: In addition to issuing recommendations or decisions, the DBs have an initial role of “informal assistance”. This involves holding meetings with the parties and visiting the construction site to address disputes in a non-binding manner. They may provide informal opinions and issue written notes, but these are not binding on the parties. If a formal decision is subsequently required, the DB is not obliged to follow its previous opinions.
- Supplementary Procedure: DBs may follow a procedure agreed upon by the parties or a standard one provided by the DB Regulations. Cuando se inicia una disputa, una parte presenta un reclamo por escrito al DB y a la otra parte. This complaint should include clear details about the dispute, issues to be resolved, evidence and specific requests. The other party responds within 30 days and, unless otherwise agreed, a hearing is scheduled in 15 days. During the hearing, the parties can clarify the dispute.
The operation of DBs focuses on collaboration and dispute resolution in an effective and efficient manner, which often avoids costly legal proceedings such as arbitration.
Conclusions
In summary, Dispute Boards are an effective pre-arbitration dispute resolution mechanism suitable for long-term contracts, especially in construction projects. These expert panels are noted for their ability to address a large number of disputes that may arise during the execution of construction projects, where legal and technical issues are combined. DBs can resolve these disputes more efficiently and without unnecessary delay.
The DBs fulfill their role through two main methods: by providing informal support to the parties involved or by issuing recommendations or binding interim decisions that can be submitted to arbitration at a later date. Compared to arbitrage, DBs tend to be cheaper. Furthermore, decisions issued by the Disciplinary Boards (DBs) generally become final, signifying that they are binding and not subject to an extended review process.
Another beneficial aspect of DBs is that they act as a filter, helping to clarify disputed issues and refining disputes so that they are usually clear, which often would not otherwise occur.
In terms of regulation, DB regulations provided by institutions such as the ICC or AAA can be easily incorporated into contracts through standard clauses. This makes the application of DB regulations accessible and effective for the involved parties.
In summary, “Dispute Boards” are a valuable and flexible tool for resolving a wide range of disputes in complex construction contracts, especially those of an international nature. their effectiveness becomes recognized, it is highly recommended to incorporate standard DB clauses provided by International Arbitration Centers into such contracts. This can contribute to quicker and more efficient dispute resolution and help avoid costly arbitration proceedings or protracted litigation.
