New FIDIC practice note on DAABs

Key features of the new practice note 5 min read

A new practice note on dispute avoidance and adjudication boards (DAABs) was released by the International Federation of Consulting Engineers (FIDIC) late last year.¹ The practice note focuses on raising awareness of the dispute avoidance function of DAABs (also known as dispute resolution boards or 'DRBs'). Due to their cost, DAABs (or DRBs) are generally only used on major projects. The practice note may provide project participants and DAAB members with strategies for maximising the effectiveness of DAABs to resolve disputes at an early stage and avoid more formal (and larger) disputes materialising later. Given the many changing market factors parties are grappling with on major projects, strategies that maximise early resolution of disputes can only be beneficial.

What is a DAAB (or DRB)?

DAABs (or DRBs) are a dispute avoidance and resolution mechanism designed to avoid and/or resolve disputes between parties to a construction contract. This may occur informally or formally, by the DAAB issuing advisory opinions or determinations on issues that have either been referred by the parties, or raised by the DAAB for consideration.

The structure of the DAAB is agreed by the parties at the time of negotiating the construction contract and can be as flexible in design as the parties require.

Ordinarily, a DAAB is comprised of a panel of three senior professionals within the industry who have extensive experience and relevant specialist knowledge (but can be comprised of a single individual on smaller projects).

Best practice techniques

The practice note presents five key tasks for DAABs to perform, which are aimed at enhancing the parties' awareness of the dispute avoidance functions of DAABs:

1. Raising the parties' awareness of the dispute board's dispute avoidance role as early as possible

   DAABs should bring the parties together during the pre-commencement phase of the project for an 'introductory' meeting. The purpose of this meeting is to explain the procedural rules of the dispute board and how dispute avoidance techniques can be successfully implemented to avoid disputes early on.² Throughout the project, the DAAB is also encouraged to remind parties of its ability to assist in the avoidance of disputes, for example, by including 'matters of concern' in the agenda for site visits and raising issues with the parties before they crystallise into disputes.³ 

2. Building and maintaining trust with the parties
   

   DAABs should promote open dialogue and create an environment of inclusion between the parties through a clearly defined communication policy. DAABs are also expected to behave impartially, independently, and professionally throughout the course of the project, and (where required) produce clear and well-reasoned opinions and determinations.⁴ 

3. Determining when / where dispute avoidance should ideally take place
   

   Dispute avoidance should take place when all the relevant representatives of the parties are present in one location, either physically, via email or teleconference. FIDIC recommends that DAABs take a flexible approach to dispute avoidance and try to avoid disputes as early as possible.⁵ For example, DAABs should make it clear to the parties that they do not have to wait until the next site visit or meeting to request informal assistance and that the DAAB can be approached at any time.⁶

4. Identifying and communicating to the parties examples of matters that are appropriate for dispute avoidance
   

   The practice note gives several examples of matters that may be appropriate for dispute avoidance, including questions of contractual interpretation and evaluations of whether an instruction by an engineer constitutes a variation. The parties and DAABs should continually look for opportunities to identify and resolve disputes as they arise.⁷

5. Identifying the best form for dispute avoidance 
   

   The parties are encouraged to regularly engage with the DAAB to request assistance, either through informal discussions or by issuing opinions.⁸ Informal discussions may assist parties to resolve a dispute by assisting the parties to adopt a joint reading of the contract or facilitating a negotiation between the parties.⁹ Opinions can be oral or in writing and may be helpful for the parties to avoid disputes, as they provide a useful indication of the dispute boards view on a particular issue. The non-binding nature of opinions (compared to DAAB determinations) also means that parties can maintain control over the dispute resolution process, which can assist the parties to achieve a settlement.¹⁰

It has been our experience that successful DAABs (or DRBs) will utilise most of these techniques when discharging their function. DAABs, particularly during a live project, will often be focused on preserving the relationship between the parties and will push the parties to resolve issues commercially. For this reason, DAABs typically prefer to issue advisory opinions over binding determinations to avoid the parties taking an overly legalistic approach to resolving issues on the project.