Advantages and disadvantages of Dispute Review Boards

Advantages and disadvantages of Dispute Review Boards           -By Eng K.Ekanayake

Introduction

It is worthwhile to mention that the contracts in the construction industry are more complex than all other type of contracts by its nature. This complex itself has paved the path for the disagreements between parties concerned to such contracts. As such it is high time to explore the available options or to create new alternatives to address this issue. In order to address the aforesaid requirements, a method called Dispute Review Board has been introduced by certain types of conditions of contracts. The DAPs Australia suggests that the DRB was first used in 1975 as a response to the high incidence of disputes being encountered on Tunneling and Dam projects in United States. As far as the FIDIC conditions of contracts are concerned this has been named as Dispute Adjudication Board. All these fall into the category of Alternate Dispute Resolution Methods. At present various guidelines and procedures have been introduced to strengthen these systems. Dispute resolution can be categorized into two main categories and they are Judicial dispute resolution and Extra Judicial dispute resolution or Alternative Dispute Resolution.

A DRB is a low cost ADR technique and has to be established as part of the contract at the outset of the contract. The DRB usually consists of either three members or one depending on the parties’ agreement. It is worthwhile always to utilize knowledgeable expert as the DRB members in order to achieve its desirable objectives. So appointed DRB would work together with the project staff and obtain a substantial understanding on the project activities especially on the potential disputes. With the commencement of the project the DRB meet together and are provided with all necessary documents so that they could become familiar with the project deliverables, schedules, progress, cost and issues ect. When a dispute is referred to the DRB, it considers the dispute and makes a recommendation. Unless a party objects it, the recommendation becomes final and bindings. If a party objects the recommendation, the dispute could be referred to other type of dispute resolution mechanism such as arbitration.

DRB as an ADR mechanism in the construction industry in Sri Lanka

As far as Sri Lanka is concerned the most applicable dispute resolution mechanism is Dispute Adjudication Boards (DAB) which is almost similar to the DRB. Sri Lanka is familiar with FIDIC type Conditions of Contracts and the contract documents published by ICTAD. When the Dispute Adjudication Boards is concerned, it is a mechanism introduced in the FIDIC conditions of contracts whereby the parties have the provisions to refer any disputes to the DAB failing which the next step could be followed. In FIDIC 1987 there is no provision for a DAB but there is a provision in FIDIC 1999 and it is the kind FIDIC document which introduced this mechanism firstly to our construction industry. It could be argued that main purpose of having a DAB or DRB in a contract is to resolve the dispute then and there in order to save money and time of the parties to the contract. The successfulness of this type of mechanism depends on various factors such as the knowledge and approach of the parties to the contracts towards the DAB and the knowledge and commitment of the members of the DAB.

 Sri Lankan contractors are still new to the DAB system. The main reason could be most of our contractors are not professional contractors and in order to resolve  disputes they believe on unprofessional approaches such as offering bribes, make influenses through various means and  back door approaches, rather than a mechanism like an ADR. The other noticeable and unfortunate situation is most of the contracts are dominated by the Employer due to some reasons. All those factors negatively affect the existence of the Alternate Dispute Resolution techniques in Sri Lanka. The good points that could be noted now is various institutions such as Institute of Engineers (IESL),  Institution for Commercial Law and Practice (ICLP) have understood the necessity of ADR techniques and actions are being taken to develop and make it user friendly among the parties concerned.

Advantages of having a DAB in contracts

The main advantage is DAB members are on the subject from the commencing of the contract and thereby they are familiar with the ongoing activities of the contract. Moreover, the DAB members are meant to be the subject expert and thus a dispute could be addressed in an efficient manner. Either Client or the Contractor could seek clarification, opinion or advice from the DAB with the knowledge of the other party whereby the disputes could be minimized or eradicated totally.

The disputes are resolved outside the courts in a manner determined by the parties. It is an effective mechanism to settle disputes, with (or without) the help of a third party. When any business is concerned it is imperative to maintain confidentiality since today’s business world is very competitive. Taking in to consideration aforesaid requirements DAB is one of the best options to resolve dispute between the parties because the parties could maintain the Confidentiality up to the level they wish.

All most all the contractors do the constructions to earn a good profit. If there are disputes between parties then both the parties are unable to achieve their desired objectives smoothly. Consequently, they have to spend more time and money to resolve such disputes if they proceed with litigation. In comparison to the cost and time taken for litigation the DAB is an ideal mechanism one should follow to resolve their disputes to save money and time. A dispute often can be settled or decided much sooner with ADR; often in a matter of months, even weeks, while bringing a lawsuit to trial can take a year or more. When cases are resolved through ADR, the parties may save some of the money they would have spent on attorney fees, court costs, experts' fees, and other litigation expenses.

ADR can be a less adversarial and hostile way to resolve a dispute. For example, an experienced mediator can help the parties effectively communicate their needs and point of view to the other side. This can be an important advantage where the parties have a relationship to preserve.

In a trial, there is typically a winner and a loser. The loser is not likely to be happy, and even the winner may not be completely satisfied with the outcome. ADR can help the parties find win-win solutions and achieve their real goals. This may increase the parties' overall satisfaction with both the dispute resolution process and the outcome.

In ADR, parties typically play a greater role in shaping both the process and its outcome. In most ADR processes, parties have more opportunity to tell their side of the story than they do at a trial. Some ADR processes, such as mediation, allow the parties to fashion creative resolutions that are not available in a trial. Other ADR processes, such as arbitration, allow the parties to choose an expert in a particular field to decide the dispute. Hence, it Increase Control over the Process and the Outcome.

DAB Improves Attorney-Client Relationships Attorneys may also benefit from ADR by being seen as problem-solvers rather than combatants. Quick, cost-effective, and satisfying resolutions are likely to produce happier clients and thus generate repeat business from clients and referrals of their friends and associates.

The DAB mechanism is suitable even for multi-party disputes because the Employer, Contractor, Engineer and Sub Contractor could be the parties to the dispute and could appear before the DAB at a same time.

Disadvantages of having an ADR mechanism

Sri Lankan contractors expect the nominated DAB member to represent them in the DAB as same as the way a Lawyer does in a court case. It demonstrates that most of the contractors have not understood the concept of the impartiality that must be maintained in the ADR system. When they feel that the nominated member is independent, they reluctant to make the agreed payments to the members and thereby another dispute could arise very easily between the members and the contractors.

Both our Contractors and Employers are in a mindset to believe that the DAB members must be lawyers who could argue on legal principle whereas the objectives of the DAB are entirely different. The article published by Danniel D. McMillan and Robert A. Rubin suggests that the attorney involvement in DAB must be discouraged.

In ADR, the parties normally give up most court protections, including a decision by a judge or jury under formal rules of evidence and procedure, and review for legal error by an appellate court.

Unlike the arbitration the DAB is not directly linked to the courts whereby the enforcement of DAB decisions is in question. There is less opportunity to find out about the other side's case with ADR than with litigation. ADR may not be effective if it takes place before the parties have sufficient information to resolve the dispute. If a dispute is not resolved through ADR, the parties may have to put time and money into both ADR and a lawsuit.

There is a dearth of professionals, having experience and knowledge on DAB who could be selected as the DAB members. The article published by Danniel D. McMillan and Robert A. Rubin suggests that the technical competence of DRB members enhance the credibility of their recommendations. In litigation there is no assurance that the respective judge would have the expected familiarity with the type of project under construction.

Conclusion

All those who are involved in the construction industry must understand the better part of the DRB so that it could be used effectively in order to resolve disputes without going for litigation which is costly and time taking exercise. The professionals those who are engaged in the field already as DAB members or those who wish to enter as DAB members must be mindful to acquire the knowledge and techniques that are necessary to perform their duties independently and credibly.