A Leading Edge Example of Med Arb/Arb

ARBITRATION.1We all talk about the concept of med/arb. Yet how often do day-to-day practitioners find themselves placed in a contractual situation where they are required/motivated to mediate and in the event of failure adjudicate or arbitrate the dispute? 

There are under various forms of contract single persons or groups of three persons who are appointed either at the onset of the contract or during the execution of the contract. The Dispute Board Federation (DBF) www.dbfederation.org promotes the skills required for men and women to mediate and then adjudicate. It must be made very clear that the term adjudication in international construction and other contracts does not have the same meaning as it does in England and Wales. 

In England and Wales “adjudication” is a process governed by the Housing Grants Construction and Regeneration Act 1996 that was put in place to ensure that payments due to contractors or subcontractors were not delayed for months and years by employers. It is an excellent procedure whereby the parties can receive an answer to their dispute within 45 days.

This is not what is envisaged in international contracts. The International Federation of Consulting Engineers* (FIDIC) Suite of contracts contains clauses referring to the Dispute Adjudication Board (DAB). This description does not describe the informal work of the Board. For that reason various international working groups have been looking for alternative wording to describe the Board’s work which encourages the parties to anticipate the proactive interference by the board in order to prevent disputes arising.

The new Yellow FIDIC Conditions of Contract for Plant and Design Build published in 2017 upon which I have co-written a critical analysis with Matthias Neuenschwander which is scheduled for publication in Spring 2018**, cannot decide whether to refer to the Board as a dispute avoidance board or a dispute adjudication board.

The Sub-Clause 21.3 of these new conditions addresses avoidance of disputes. It states:

“If the parties so agree, they may jointly refer a matter to the DAB in writing (with a copy to the engineer) with a request to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement that may have arisen between them during the performance of the contract. If the DAB becomes aware of an issue or disagreement, it may invite the parties to make such a joint referral.”

If these negotiations fail then either of the parties is free to then trigger a dispute resolution process which results in a formal review of the dispute and the issuing of a decision by the members of the same board who have attempted to mediate the dispute between the parties. There have been attempts to remove the word “dispute” from the title of the Board. The use of the word “dispute” implies that there has to be a disagreement. Whereas a more neutral word would encourage parties to realise that the boards purpose is not only to decide which also to advise and mediate.

While the decision process is called adjudication it is, in fact, a process governed by rules which is arbitration in all but name. This flexibility which is inherent in the formulation and work of the Board is easily transferable away from construction to any other situation where there is a contract of supply of goods and services. With the benefit of my expertise, ASM can very cost effectively provide model conflict avoidance and subsequent decision-making rules.

Expressions of interest can be sent in the first place to admin@compass-resolution.com                                      

* The International Federation of Consulting Engineers is an international standards organization for the consulting engineering & construction best known for the FIDIC family of contract templates.

** I have also co-written a critical analysis on another FIDIC work, the Red Conditions of Contract, with Annette Anthony. It is scheduled for publication in Autumn 2017.

By Ben Beaumont ASM Team Member and Civil and Commercial Mediator, Arbitrator And Adjudicator

A Leading Edge Example of Med Arb/Arb
Tagged on: