The ICC's New Dispute Board Rules

Author:Mr Carroll Dorgan
Profession:Jones Day
 
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In recent years, the inventory of alternative dispute resolution ("ADR") techniques has been enriched by the use of dispute review (or adjudication) boards. The International Chamber of Commerce ("ICC") in Paris has now issued its new Dispute Board Rules ("DB Rules"), in force as from September 1, 2004. This article first reviews the background and comments upon certain general principles and issues that arise in connection with dispute boards. It then summarizes the salient features of the ICC's DB Rules and concludes with a few comments about these rules.

Background

Introducing its DB Rules, the ICC describes dispute boards as follows:

"Dispute Boards (DBs) are independent bodies normally set up at the outset of a contract and which remain in place for its duration. Comprising one or three members thoroughly acquainted with the contract, DBs can help parties resolve their disagreements and disputes by providing informal assistance and by issuing recommendations or decisions."

The modern development of dispute boards began in the United States in the 1960s, where they were used successfully on major civil engineering projects (dams, underground construction, etc.). Disputes boards were subsequently used with success in international projects. In 1989, the American Society of Civil Engineers ("ASCE") published a standard dispute review board ("DRB") specification that had been prepared by the Technical Committee on Contracting Practices of the Underground Technology Research Council. The ASCE published a revised DRB specification in 1991. A Construction Dispute Review Board Manual was published in 1996.

In the United Kingdom, beginning in the 1970s, parties in construction projects developed a procedure known as adjudication, in which disputes were submitted to a standing project neutral who would render decisions that were binding upon the parties, but subject to review or appeal in a later proceeding (litigation or arbitration). The success of adjudication led to the enactment of the Housing Grants, Construction and Regeneration Act of 1996, which mandates the use of statutory adjudication in all commercial construction projects in England, Scotland, and Wales (except for exempted projects in certain industries). Practitioners in the U.K. consider that adjudications under the Act have significantly reduced the number of disputes that are referred to litigation or arbitration.

A change of policy by the World Bank 10 years ago increased the use of dispute boards in international projects. The World Bank had long recommended (and eventually required) that contracts for construction projects that it helped to finance be based upon the FIDIC "Red Book" i.e., the Conditions of Contract (International) for Works of Civil Engineering Construction, 4th edition (or an earlier edition of the Red Book). The Red Book provided that disputes be referred in the first instance to the engineer, who would render a decision that would become final and binding upon the parties unless one of them gave notice of its intention to commence arbitration. However, many parties involved in international construction contracts doubted that the engineer selected and paid by the employer could act impartially when deciding disputes, some of which could involve action or inaction by the engineer himself.

In 1995, the World Bank issued new Standard Bidding Documents for the Procurement of Works ("SBD-W"), which provided for disputes to be submitted to a dispute review board, rather than to the engineer. (The World Bank's SBD-W permitted the reference of disputes to the engineer only for contracts that cost less than US$ 50 million and only if the engineer was independent of the employer.) The dispute review board under the SBD-W would issue recommendations that were not binding upon the parties. If a party did not accept the dispute review board's recommendation, the parties would have to resort to arbitration for a final and binding resolution of their dispute. In the version of the SBD-W issued in 2000, the dispute review board's recommendation is binding on the parties, unless subsequently revised in an arbitral award.

FIDIC itself then introduced a dispute adjudication board ("DAB") in its various conditions of contract:

In 1995, FIDIC published its new Conditions of Contract for Design/Build and Turnkey (the "Orange Book"), which did not provide for an engineer to review...

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