Dispute Resolution Boards are ‘a thing’: who knew!
OK, I need to be up-front here. I have been a lawyer for 30 years. I’ve worked in dispute resolution and complex transactions in Europe, Asia and USA. I never knew a thing called a dispute resolution board even existed until last week.
Dispute resolution processes (ADR, Litigation, Arbitration etc.) all suffer 2 main drawbacks. (1) During any dispute resolution process, trust between the parties may be tested, or even destroyed. (2) The time and cost of resolving a dispute is often greater than avoiding them in the first place.
Dispute Resolution Boards (DRBs) seek to avoid or minimize the chances of disputes arising by a timely and informal process taking place while the parties continue working together. DRBs can even lead to an enhancement of trust, and smarter working.
The first known example of a DRB is in the building of the Boundary Dam in Washington in the 1960s. DRBs became popular in large complex infrastructure projects in the 1980s. The Dispute Resolution Board Federation believes that DRBs have been used in as many as 800 projects since then.
The DRB process is a contractual mechanism that takes the often inserted “dispute escalation” provisions to a new level. In a classic DRB clause the parties agree to appoint a standing board of independent experts, who will get familiar with the project from its inception. This group is then used as mini arbitration boards, to deal with discrete issues of contention. Each party chooses their own expert and these experts will then jointly choose another member of the DRB to be the chairman. Once appointed, members are not advocates or representatives of the parties who nominated them. They participate as independent, impartial members. Often the contract will specify how the DRB should conduct itself – how often it must make site visits, whether it must follow a fixed timetable, and in what circumstances the DRB's decision(s) become binding.
DRBs follow the rules of natural justice: DRB members will not meet separately with either party. Communications with DRB members are in writing, with a copy provided to both parties. And periodic site visits and briefing of the DRB members occurs regardless of whether or not differences or disputes have arisen. By keeping the DRB members up to date they can spot ahead of time when differences could arise and help get those resolved.
Data shows that DRBs are cost-effective. For a US$50M+ project lasting 2+ years: with quarterly meetings, the cost without hearings will be less than 0.5% of the contract value. And big users of DRBs have reported a marked decrease in the number of disputes (60% of projects utilizing a DRB have no disputes at all) and a marked decrease in matters going to Arbitration - 98% of the disputes that reach the Dispute Resolution Board don’t go on to further litigation or arbitration.
Something to think about for your next big IT / Development projects.
