Adriana Spassova presentation. Networking that was made jointly by DRBF and Artyushenko & Partners law firm (Kazakhstan) in Almaty (Kazakhstan) - DAB in Construction, April 25, 2018. Details are here https://a-p.legal/en/2018/05/01/report-on-our-networking-on-april-25-2018/

1. Dispute Boards
25.04.2018
Almaty, Kazakhstan

2. DAB: history, process and FIDIC use
Adriana Spassova
Partner EQE Control OOD, ABS Group
DRBF Region 2 (incl. Kazakhstan) Board Director & Bulgaria CR
BSCL founder and chair
FIDIC accredited trainer & dispute adjudicator
ESCL Board member

3.  A creature of
contract
 An alternative
dispute resolution
method
 Acts during the
project execution
What is the Dispute Adjudication Board?

4. What is a Dispute Board?
 “The term ‘dispute board’ is a generic term that includes (a) the dispute
review board, which is a device that originated in the USA (and continues
to be used most often there) and which provides non-binding
recommendations; (b) the dispute adjudication board, which emerged
from the earlier USA model, and which provides a decision that has
interim-binding force and which is used most everywhere else in the world
except the USA; and (c) the combined dispute board (CDB), which is a
hybrid of dispute review boards and dispute adjudication boards and was
created by the ICC in 2004. Various other terms have been used, such as
dispute settlement panel, dispute mediation board, dispute avoidance
panel, dispute resolution board, and dispute conciliation panel.
Fundamentally these different varieties of dispute review devices are the
same, each providing early adjudication based on the contractual bargain
between the parties.”
Cyril Chern, ”Chern on Dispute Boards: Practice and Procedure” (Informa Law Third

5. What is the story of the Dispute Boards?
The Dispute Resolution Board Foundation (DRBF) has gathered
information about the use of Dispute Boards since 1982.
DRBF has more than 1000 members in 70 countries.
The data shows the depth and breadth of the process being used
worldwide for numerous types of projects of varying size.
The database available online includes about 3000 projects in all
continents:
https://drb.org/publications-data/drb-database/

6. • The first DB was used on the second bore of I-70 Eisenhower Tunnel1975
• FIDIC issued the DAB Supplement to the 4th Ed Red Book1992
• The World Bank made DBs mandatory for its projects above 50 m$1995
• FIDIC introduced the DAB: standing for Red, ad hoc for Yellow & Silver Books1999
• ICC introduced DB rules2004
• 9 MDBs adopted DBs, incorporated in the FIDIC Pink Book2006

7. The DRBF statistics shows the DB success:
• Over 98% of matters going to the DB do not go on to later
arbitration or litigation.
• In case the disputes are refereed to arbitration/ litigation, the DB
determination is considered as reliable expert evidence,
confirmed in most cases.

8. How are the Dispute Boards in the FIDIC Conditions of Contract
working?
In the 1999 Books for major projects FIDIC included the dispute adjudication
procedure:
SC 20.2: “Disputes shall be adjudicated by a DAB in accordance with Sub-Clause
20.4”.
Standing DAB Ad hoc DAB

9. Standing
DAB
Mobilized from the outset of
Contract performance
Carries out regular Site visits /
remains up to date with
project developments => more
efficient dispute resolution
Can assist in preventing disputes
(see Procedural Rule No.2 FIDIC
Pink Book, or Gold Book SC 20.5,
Red Book SC 20.2 - Opinions)
Ad’hoc
DAB
Mobilized if & when a dispute
crystallizes / Disbanded upon
decision issue
Enables the mobilization of
members with relevant skills &
experience to the dispute
Cheaper to the Parties

10. Second edition 2017 Red, Yellow
& Silver Books:
Fifth FIDIC Golden Principle:
All formal disputes must be
referred to a Dispute
Avoidance/Adjudication Board
(or a DAB, if applicable) for a
provisionally binding decision as
a condition precedent to
arbitration!

11. Agreement Employer/
Engineer
The Engineer
administrates the
FIDIC Contract for the
Employer
EMPLOYER
ENGINEER
CONTRACTOR
1999: DAB
2017: DAAB
Dispute Adjudication
Agreement
Employer/ Contractor
& DAB Member

12. •SC 20.2 [Appointment of the DAB]
•SC 20.3 [Failure to Agree DAB]
•SC 20.4 [Obtaining DAB's Decision]
•SC 20.7 [Failure to Comply with DAB's Decision]
•SC 20.8 [Expiry of DAB's Appointment]
Clause 20 GC
• General Conditions of Dispute Adjudication
Agreement
Appendix to GC
• Procedural Rules
Annex 1 to DAA
GC

13. Appointment of the FIDIC DAB
The DAB shall comprise, as stated in the Contract, either one or three
suitably qualified members.
If the number is not so stated and the Parties do not agree otherwise,
the DAB shall comprise three persons.
If the DAB is to comprise three persons, each Party shall nominate
one member for the approval of the other Party. The Parties shall
consult both these members and shall аgree upon the third member,
who shall be appointed to act as chairman.

14. 2008 Gold Book:
-1 or 3 member standing DAB before
the Commissioning Certificate;
-1-person standing Operation Service
DAB for a 5y term;may be reappointed
or new appointments follow in the
next 5y terms.
Second edition 2017 Red, Yellow
& Silver Books:
A standing DAAB
Dispute Avoidance/Adjudication Board

15. Ad hoc DAB YB/SB 1999: appointed after a dispute arises
Standing DAB RB 1999, DAAB 2017 RB/YB/SB:
• appointed 28 days after the Commencement Date
DAAB 2017 RB/YB/SB:
• The Parties propose members before the Contract is signed;
• SB: appointed 28 days after the Contract is signed.
• RB, YB: appointed 28 days after the Letter of Acceptance,
while the CA is signed 35 days after the Letter of Acceptance
Appointment of the FIDIC DAB

16. Failure to appoint DAB
If the Parties fail to agree upon the appointment, then the
appointing entity or official named in the Contract shall, upon the
request of either or both of the Parties and after due consultation
with both Parties, appoint the DAB.
1999 GCDAA, Clause 2 (b): the Dispute Adjudication Agreement is
effective when the Parties and Members sign!
2017:
• If the Parties fail to appoint the DAAB, the Parties and Members
shall be deemed to have signed the DAAB Agreement after the
appointment of the appointing entity named in the Contract Data;
• The arbitration court may take into account the extent to which a
Party failed to cooperate with the other Party in constituting a
DAAB, when awarding the costs of the arbitration.

17. Obtaining DAB's Decision
If a dispute of any kind arises between the Parties in connection with,
or arising out of, the Contract or the execution of the Works,
including any dispute as to any certificate, determination, instruction,
opinion or valuation of the Engineer, either Party can refer the
dispute in writing to the DAAB for its decision.
Each Party pays half of the DAB’s remuneration.

18. The Employer and the Contractor empower the DAB:
(а) establish the procedure to be applied in deciding a dispute;
(b) decide upon the DAB’s own jurisdiction;
(c) conduct any hearings as it thinks fit;
(d) take the initiative in ascertaining the facts;
(e) make use of its own specialist knowledge;
(f) decide upon the payment of financing charges in accordance with
the Contract;
(g) decide upon provisional relief such as interim or conservatory
measures;
(h) Open up, review and revise any certificate, decision,
determination, instruction, opinion or valuation of the Engineer,
relevant to the dispute.

19. Day Claimant DAB Respondent
D 0 Dispute referral with
Statement of Case
D 28 Response to the
Statement of Case
D 42 Possible Rebuttal to
the Response
May request clarification /
further information
D 49 May organize hearings Possible Reply to the
Response
D 56 Possible Hearings
closing submissions
May request clarification /
further information
Possible Hearings
closing submissions
D 84 Decision per SC 20.4
DAB – Decision process - Example

20. Dispute
referred to
DB
DB
Decision
Satisfied? NOD
Amicable
Settlement
Arbitration
As agreed
As decided by DB
As decided
84 days 28 days Min. 56 days
2017: 28 days
Yes
Yes
NoNo
Payment

21. DAB Preventive Function
Red Book 1999
SC 20.2:
The Parties may jointly refer at any time a matter to the DAB for it to
give its opinion.
Neither Party shall consult the DAB on any matter without the
agreement of the other Party.
General Conditions of DAA, Clause 4
(k) The DAB Member shall be available to give advice and opinions,
on any matter relevant to the Contract when requested by both the
Employer and the Contractor, subject to the agreement of the Other
Members (if any).

22. DAAB preventive function
Second Edition
New SC 21.3 [Avoidance of Disputes]:
The Parties may jointly request the DAAB to provide assistance or
informally discuss and attempt to resolve any issue or disagreement
that may have arisen between them.
Proactive DAAB:
If the DAAB becomes aware of an issue or disagreement, it may
invite the Parties to make such a joint request.

23. DAB benefits
When selected carefully and established as a standing DB at the
outset of the project, it shall be:
o The GURU:
 The experienced DB shall explain the contractual procedures and possible
pitfalls;
 The inquisitorial DB shall ask questions to point the problems and carefully
guide the Parties to solve the potential disagreements;
 The persuasive DB shall explain the parties that they can use his advice and
jointly refer for opinions for difficult interpretations or other escalating
disagreements.

24. o The GUARDIAN of the relationships:
 The impartial DB shall influence the parties not to fall down
the slope of adversarial correspondence;
 The presence of the DB familiar with the project shall restrain
the Employer from pressing the Engineer to reject all
Contractor’s claims;
 The objective DB makes useless any attempt of the Contractor
to corrupt the Engineer.
 The proactive DB shall simplify all procedures and invite joint
referral for opinion during the site visits and meetings, cooling
the negative emotions with his reasons.

25. o The RELATIVE always ready to help:
 The DB is part of the project administration: he is checking the contemporary
records on a quarterly basis during the site visits, if not every month;
 The DB members are professionals with decades of experience with similar projects
and contracts, restricted from interference in the project execution and supervision,
but clever enough to find a way to point out potential risks and give advice (asking
questions or proposing the parties further tests, meetings, negotiations, etc).
 The DB is supportive - always ready to advice about meeting the funders’
requirements in case of variations, unforeseeable events and delayed payments.
 The DB is economic: its cost is less than 1% of the project budget and even if the
adversarial culture of the parties is predominant, the DB shall sort the numerous
referrals, deal quickly with the easy straightforward ones to cool the passions,
explain the parties how devastating may be the arbitration/litigation for the project,
their relationships and their pockets. As a result, at least 50% of the disputes shall be
solved, all contemporary records shall be sorted and analysed and the DB
determinations shall be recognised as reliable expert evidence in further dispute
resolution procedures.

26. Number of DB members: 1 or 3?
Estimate of total cost of DB
Inclusion of the total cost of DB at appraisal
Inclusion of 1/2 estimated cost of DB as a Provisional
Sum in BQ for use of Invitation to Tender
Prior to Award, review of build-up of Provisional
Sum; Employer, Engineer, Contractor to participate
Contractor willbe paid 1/2 of payment to DB
members by Employer
DB members submit invoices for fees and
expenses to Contractor
Contractor pays 100% of fees and expenses
to DB members
JICA (the Japan International
Cooperation Agency)
“JICA recognizes the DB as a mechanism
for sound contract management rather
than conflict settlement procedures,
and deems the cost for the DB eligible
to be financed by the Loan.”
JICA, DB Manual (version 1.0, March 2012) iv,
https://www.jica.go.jp/activities/schemes/finance_co/pr
ocedure/guideline/pdf/DisputeBoardManual_201203_e.
pdf

27. The 2017 Edition strengthens the DAB role:
 The DAB shall be DAAB, emphasising its preventive function;
 The Employer’s and Contractor’s claims are together in Clause 20,
thus demonstrating, that the Contractor’s claim notification is an
early warning, important for the risk management, not an
adversarial act leading to disputes;
 A new Clause 21 is created for disputes;
 Clause 21 includes a special SC 21.3 [Avoidance of Disputes];
 If a Party is dissatisfied with only part of the DAAB’s decision, this
part shall be identified in the NOD and the remainder of the
decision shall become final and binding;
 An additional ground for termination: if a Party fails to comply with
a DAAB decision and such failure constitutes a material breach of its
obligations under the Contract;
 The failure to comply with the DAAB decision may be referred to
arbitration/ court for enforcement by way of summary or other
expedited procedure as interim/provisional measure/award.

28. Thank you!
Adriana Spassova
Тел.: +359 888 464928
email: aks@eqe.bg