Market appetite for Dispute Boards (DBs) is “subdued”, at least in this region. With a few notable exceptions, project owners and contractors tend not to want to appoint a standing panel to give interim-binding decisions on disputes. Hopefully without oversimplifying or misrepresenting market sentiment, users don’t want the expense of them or the delay in getting to the start line on arbitration, which is built into the FIDIC main contracts.
Undaunted, FIDIC continues with initiatives to support Dispute Boards. The latest of these is Practice Note III, “Decisions: Preparation and Composition”. This is the last of three practice notes on Dispute Boards; the first two addressed, respectively, dispute avoidance and appointment of dispute boards. Practice Note III covers the decision-writing function itself.
The stated purpose is to establish a standard of good practice for Dispute Boards producing decisions under FIDIC forms. FIDIC says: “The decision in a dispute is an extremely important product of a DB’s role. It is intended to be a legally enforceable document. It is what the Parties are paying for, and it will possibly affect either or both Parties substantially.”
Of course, FIDIC contracts already require Dispute Board decisions to be reasoned. The Practice Note intends to build on this by adding granularity in the form of 11 best-practice tasks spanning the full process of decision preparation: managing the referral, timetabling, review of the parties’ submissions, jurisdictional challenges, management of additional exchanges, assessment of evidence, conduct of hearings, deliberation among board members, structuring and drafting the decision, ensuring compliance with contractual formalities, and post-decision considerations.
These 11 tasks are set out in detail, spanning 13 pages in the Practice Note. None of it, in my reading, is poor practice, in conflict with itself or otherwise objectionable. But it is detailed and although it avoids, where possible, stating hard and fast rules, any written guidance of this type carries the risk of being perceived as prescriptive. And that can (inevitably will) raise an issue on enforceability of decisions.
To take just one common area of conflict in short-timetable proceedings such as Dispute Boards and statutory adjudication: responding parties often push the boundaries of the referred dispute by adding counterclaims; and both parties might keep sending additional unsolicited submissions, sometimes adding new points, whilst objecting to the other party doing the same. The Practice Note guides the Dispute Board in ways that they can manage this, for instance in what new submissions to allow and in asking its own questions of a party or asking a party to address issues relevant to the dispute, but (expressly) not so as to assist the other party.
This management task has always involved judgment calls and trade-offs that one or both parties might disagree with but a party seeking to resist enforcement on the basis of procedural irregularity has not previously been able to wave a written guidance note in the air. These 11 tasks now provide a structured checklist against which that party can measure the Board’s conduct: apart from management of additional exchanges, was the assessment of evidence procedurally adequate? Were jurisdictional challenges correctly administered? Etc.
Each of these questions is capable of being raised in enforcement proceedings, whether framed as a breach of natural justice, a procedural irregularity, or a jurisdictional excess.
Setting up these tasks as “best practice” rather than mandatory requirements may offer some insulation, but experience suggests that these things will be deployed forensically in adversarial proceedings regardless of the writers’ intentions. Other examples: the SCL Delay & Disruption Protocol is also just a best practice guide but it is quoted in just about every time and cost claim (and by both parties) in aid of allegations that the other party has breached the contract or is wrong on the law. Litigation pre-action protocols were intended to ensure that parties had matured their dispute and understood each other’s position before litigating but they became another battleground for allegations of failure to tick all the boxes before launching.
FIDIC have not addressed this risk in the Practice Note. In particular, there is no statement that departure from the tasks does not, by itself, constitute grounds to resist enforcement.
FIDIC and its users will want to avoid satellite disputes about enforcement, such as the long-running Persero actions [PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation] in which enforcement of a FIDIC DAB award of over US$17 million was resisted through several arbitrations and Singapore court proceedings over six years because the contract (FIDIC First Edition 1999) had not clearly set the conditions for summary (“pay now, argue later”) enforcement of a DAB decision in arbitration.
I should reiterate my own support for quick, high-quality interim-binding adjudication, as being a benefit to our industry and I would like it to be more widespread, whether under contract or statute. Anything that improves the quality and clarity of Dispute Board decisions is good in itself and improves enforceability because correct and reasoned decisions are less likely to be challenged. But we should acknowledge the risk that the guidance, intended to make decisions more enforceable, may also provide the grounds on which enforcement is resisted.
* Dubai-based Stuart Jordan is the Global Head of Construction for Baker Botts, a leading international law firm. He has extensive experience in the Middle East, Russia and the UK.