How to Ensure a DAB is Formed Correctly

A blog subscriber recently asked for some advice on the setting up and organisation of a Dispute Adjudication Board (DAB). They specifically wanted to know what might be done if one of the parties is trying to frustrate the dispute procedure by refusing to agree to the appointment of the DAB. The following advice is related to the FIDIC contracts but may be equally applied to other forms of contract that have dispute board provisions.

A proactive action would be to include a list of several potential DAB members in the Contract. If the list has been prequalified in terms of qualifications and experience, particularly for the type of project being undertaken, then agreement should be straightforward.

The Contract should state the time frame for the appointment of the DAB. FIDIC provides that the date should be stated in the Appendix to Tender. Contractors would be well advised to check that the date is reasonable.

If no list of potential DAB members is included in the Contract, FIDIC offers the following directions:

each Party shall nominate one member for the approval of the other Party. The Parties shall consult both these members and shall agree upon the third member, who shall be appointed to act as chairman.

I would suggest that the parties each nominate more than one member in case the other party has an objection, or in case the nominated member has a conflict of interest or is unavailable. When selecting potential members, it is very important to ensure that the person is properly experienced and qualified in terms of discipline, type of project and in adjudication. Also, think about the type of expertise required from the DAB as a whole. A good mix is to have three members from engineering, quantum, contractual and legal backgrounds. In this way, they can all add value. Otherwise, there might be a gap in knowledge if three people of the same discipline were appointed. When reviewing nominated members, selection should be undertaken in a spirit of agreement and cooperation between the parties, with the intention of appointing the best board possible.

Impartiality is vital. FIDIC’s General Conditions of Dispute Adjudication Agreement contains the following obligation:

‘The Member warrants and agrees that he/she is and shall be impartial and independent … The Member shall promptly disclose … any fact or circumstance which may appear inconsistent with his/her warranty and agreement of impartiality and independence.’

The Parties would be well advised to ask the question when making an initial approach. This way, you can identify any protentional conflicts of interest in the early stages of the process.

To return to the question posed by the blog reader: What happens when one of the parties is trying to wriggle out of the formation of the DAB?

FIDIC deals with this under Sub-Clause 20.3 (Failure to Agree Dispute Adjudication Board). This allows either party to request the ‘appointing entity or official named in the Appendix to Tender’ to make the appointment. It also states that ‘This appointment shall be final and conclusive’. For this to work however, there must actually be an appointing entity or official named in the Appendix to Tender. If not, it is going to be a challenge to reach resolution.

It seems from the questions asked, that our reader is a contractor with a dispute and is facing an employer who is reluctant to appoint the DAB because the Employer realises that a decision given by the DAB will go against him. The reader also advised that there was no list of DAB members, or an appointing entity included in the Contract.

This type of thing is not untypical and my advice to contractors is this: Before signing, always carefully check the whole contract for errors, omissions and conflicts. If any exist, approach the Employer and request that they be corrected. Once the contract is signed, you will be stuck with it for better or worse, and it’s usually worse.