“they may work in the West, but we have different laws here and our culture is different”.
Most of the MENA Region law is based upon the Civil Code and also respects the laws of Sharia’a. Whilst I am not a lawyer and certainly not an expert on Sharia’a, I have discussed this at length with people who are experts on both subjects and here is a summary of my findings.
Oh, you who believe abide by your contractual commitments’ and ‘Oh, you who believe fulfill your contracts’ (al-Ma’ida 5:1).
Dispute boards assist the parties in determining the correct interpretation of contracts and consequently, help the parties to fulfil their obligations as required by Sharia’a.
Generally, DB Members have to confirm that they are independent of the Parties, so do not be tempted to nominate someone whom you think might favour your Party. It puts the Member in a difficult position and may cause resignation of the Member late on, with all the attendant cost and inconvenience.
In practice, it is the Employer who will decide whether or not to have a dispute board (DB) on his project. So what are the criteria which he needs to look at when making this decision?
I suggest there are a combination of practical, financial and legal matters. This puts the Engineer, the Quantity Surveyor and the Employer’s legal advisors in the spotlight (so I hope some of them are reading this, or that readers will put these points to them).
So let’s ask ourselves some questions..
On the practical side, what do you think might influence the decision? Remember that a DB is there to firstly try to avoid and prevent disputes.
Previous blogs have dealt with the selection process for DAB members, what to look for when selecting members and how the impartiality of members is assured. So what happens when either the one-person DAB or the three-person DAB have been selected and they have agreed to serve? Well, as with most things in business, it is necessary to enter into a contract between the parties.
Some people initially fail to see the many advantages of Dispute Boards over arbitration, so we thought it would be useful to offer a brief comparison.
The arbitrators first have to be selected and appointed.
The panel has to be available and become familiar with both the project and the matters in dispute.
Arbitrators are appointed to deal with existing disputes when they cannot be resolved at project level.
The arbitration process tends to be a drawn out and lengthy procedure.
Standing DABs are appointed at the beginning of the project.
The DAB is familiar with the project and the parties.
Part of the DAB’s obligation is to advise the parties and facilitate agreement and consequently to avoid disputes occurring in the first place.
If a dispute does occur, the DAB is obliged to provide a decision within 84 days.
The whole concept of DAB’s is that disputes are settled quickly by industry experts.
Dr. Nael Bunni has calculated that arbitration costs the parties between $150,000 and $200,000 per day of arbitration, or between 12.5% and 38% of the claim value. The DRBF has calculated that arbitration costs may be 10-15% of project value.
The DAB will cost the parties for the time spent dealing with the dispute and possibly some travel expenses. According to the DRBF, this works out at between 0.05% of the construction cost on dispute free projects and 0.25% for more difficult projects. The costs are also shared by the parties.
Given further DRBF statistics that on projects with DABs, 98% of disputes are resolved at project level and of the remaining 2% that were referred to arbitration, almost all of the arbitration decisions agreed with the DAB, it is hard argue that DAB’s are not a much better way of dealing with disputes than arbitration in all respects.
One question that I am often asked when presenting talks on DABs is how the parties can be assured of the impartiality of DAB members. This is an excellent question because if the members are not truly impartial and just as importantly, seen to be impartial, the whole process will fall down.
I thought that something a little light-hearted would make a pleasant change from our usual comments on dispute boards. This video illustrates a very effective animation, which explains all about dispute boards and how they work.
What happens if a DAB Member is unable to or does not carry out their duties?
Does the whole dispute adjudication board grind to a halt if a DAB member either does not, or cannot carry out his or her duties? Well, no it doesn’t.
What Makes a Suitable Dispute Board Member?
A couple of years ago I was asked to provide training on procurement for a large developer in the GCC region. Part of my recommendation was that the developer should seriously consider including provisions for the appointment of dispute boards within his contracts.