Whether to Choose Dispute Boards or Arbitration as the Optimal Dispute Resolution Method for Construction Projects: A Personal Perspective

Vol. 14 No. 3

By

Roberto Hernández-García is Managing Partner of COMAD, S.C., a law firm in Mexico. The firm specializes in international construction law, international public procurement, and compliance. Recognized by Chambers and Partners and Who’s Who Legal. Former Chair of the International Construction Projects Committee (ICP) of the International Bar Association (IBA). Member of the Steering Committee of Division 8, International Construction Projects, of the ABA Forum on the Construction Industry.

During a recent conversation with a representative of an international organization in Latin America, the representative explained that her organization had decided to delete the provisions requiring a dispute adjudication board (DAB) when using the model contract known as the "Red Book" published by FIDIC (International Federation of Consulting Engineers), at least for some projects in the region.

Surprised, I asked why. The representative told me she believed the organization considered the cost of a dispute board too expensive and a cost they did not want to incur.

Too expensive? In my opinion, this may indicate a flawed conception of dispute boards for the following reasons.

My latest experience as an adjudicator involved a strategic highway project in Central America. The government, on one side, and the subsidiary of a Spanish contractor, on the other, were stuck on several matters that they asked me to help resolve.

Not unusual for such projects, my appointment to act as a DAB was made during the last year of the project, when the parties attempts to resolve the many issues that arise over the course of a project had caused their relationship to become tense. During the almost two years of my tenure, I issued six determinations that helped the Project move forward and conclude. Some of the issues adjudicated were more complex than others, but the parties made a very important decision: they would accept my determinations as final so the project might be more successful.

In one of the final communications to me, one of the parties wrote:

"The employer considers that the work of the DAB has been exceptional and of great importance for the satisfactory development of the Project, as well as has given a great opportunity of valuable learning for the parties".

Upon receiving the above, I felt satisfied to have helped parties encountering conflicts to find a reasonable, legal and justified way to solve their disputes in a timely manner for the benefit of a project connecting one of the most important cities in the country with its capitol. The highway will allow thousands of people to reach their destinations under much better conditions.

Some opposition to dispute boards may come from a lack of education, other opposition from those who do not adequately consider a cost-benefit analysis. However, another detractor may be those who routinely use arbitration and have not taken the time recently to consider other options. Based on their past practice, they may not be aware of the effectiveness of dispute boards.

Another reason to consider dispute boards can be found in the rising voice given to possible problems with international arbitration in construction. About two years ago, the International Construction Projects Committee (ICP) of the International Bar Association, which I co-chaired until 2011, had a session titled "International Arbitration in Construction Projects: Is It Broken or Can It be Fixed?" This illustrates a public awareness that arbitration may not be desirable in all cases. Among issues sometimes cited are inexperienced or biased arbitrators, slow procedures, and ineffective action. All of these issues, including untimely assistance in resolving disputes, may impact the parties financially.

Although I support arbitration as a dispute resolution method for construction projects, practitioners also should consider that a dispute board might sometimes be the better choice.


Advertisement

  • Under Construction

  • Subscriptions

  • Contact Us