DABs gain ground locally but industry awareness is needed
Dispute Adjudication Boards are becoming more common in the region, says Hamish MacDonald, regional director, Systech International. But they still face some barriers in the UAE.
With construction activity in the Middle East booming it is inevitable that the incidence of disputes between the various contracting parties will also increase. Employers and contractors embarking on construction projects need to develop, at the outset, a mechanism for resolving the range of disputes they might encounter during the execution of those projects. One of the most effective tools available is the Dispute Adjudication Board (DAB).
DABs are relatively new to the UAE, and have only recently been adopted by the Government of Abu Dhabi as the first tier in the dispute resolution process provided in their new Conditions of Contract issued in January 2007. The DAB process has also recently been introduced on a number of major developments in Abu Dhabi that have adopted either the FIDIC or NEC standard forms of contract as the basis for their contract conditions.
The use of DABs was first adopted by FIDIC in 1995 in the new version of the Design-Build Contract and also in an optional amendment to the standard form construction contract (the Red Book) where DABs were introduced replacing the engineer as the first-tier dispute decider. In 1999, FIDIC completely revised its various forms of contract and introduced DABs as the principal means of dispute resolution across the new suite of contracts.
The FIDIC suite of contracts provides for two distinct types of DAB. The first type is the "full-term", which comprises one or three members who are appointed before the contractor starts executing the works, and who typically visit the site on a regular basis thereafter. Disputes are referred to the DAB as and when they arise during the course of the project. The appointment of the full-term DAB expires upon the contractor's submission of a written discharge, pursuant to sub-clause 14.12 of the FIDIC conditions, which confirms the resolution of all disputes under the contract. The second type of DAB is the ad-hoc board, which comprises one or three members who are only appointed if and when a particular dispute arises, and whose appointment typically expires when the DAB has issued its decision on that dispute. In both cases, each party is responsible for paying half the cost of the DAB.
It is interesting to note that the Government of Abu Dhabi has elected to use the ad-hoc type of DAB in its new contract conditions. Whilst this type of DAB can be argued to be the more cost-effective one, as it avoids having to pay the DAB's retainer fees and the cost of regular site visits, it loses the distinct advantage of having an on-call, well informed DAB with first-hand experience of what actually happened on site to assist it in making its decisions. It also loses the opportunity for the parties to jointly consult with the DAB during the site visits in order to obtain the DAB's informal opinions on any differences of opinion that may have arisen between the parties before they become disputes, thereby reducing the number of disputes.
The use of dispute boards has proven to be a most effective form of dispute resolution offering early and cost effective resolution of disputes in real time. Statistics obtained from the Dispute Resolution Board Foundation (DRBF) show that on projects utilising dispute boards, over 98% of the disputes referred have been concluded by the board's recommendation or decision without further referral to either arbitration or the courts. An effective dispute resolution process indeed.
However, there are two issues that may adversely affect the successful implementation of the DAB process in the UAE in the short term.
The first is the lack of sufficient knowledge of the process among the participants in the local construction sector: the employers, contractors, consultants and potential board members. But this can easily be resolved through participants attending relevant seminars and training workshops.
The second is the lack of a local list of suitably qualified individuals to act as the member(s) of the DABs.
FIDIC currently publishes a list of international adjudicators known as the FIDIC President's List of Approved Dispute Adjudicators (www.fidic.org). Other international lists are available through the Institution of Civil Engineers (www.ice.org.uk), the Royal Institute of Chartered Surveyors (www.rics.org) and the Dispute Resolution Board Foundation (www.drb.org).
However, in order to make the dispute adjudication process work effectively in the UAE, it will be essential that the appropriate bodies (Society of Engineers UAE, DIAC, ADCCAC, RICS UAE) develop lists of suitably qualified and experienced adjudicators who are locally based.