June 10, 2024
Regardless of how well intentions parties may be, there is always the potential for disputes to arise on a project.
However, where parties take steps to avoid or mitigate the potential for disputes to distract from the project, it can often assist in ensuring best-for-project outcomes are maintained.
Utilising a Dispute Avoidance Board (DAB) is one such process that parties may seek to implement to ensure the expeditious resolution of disputes and ensure the focus remains on completing the project.
What is a DAB?
Whilst people might know DABs by various different names, including Dispute Resolution Boards, Dispute Boards, or Dispute Review Boards, they all effectively function in the same manner.
A DABs primary task is to deal with issues or problems as they arise. They are intended to act impartially and independently of the parties to seek an expeditious resolution to disputes.
In effect, a DAB is designed to address issues proactively and de-escalate disputes so they can be resolved between the parties. Practically, this allows for the focus to remain on the effective and efficient delivery of the project, instead of parties being distracted by a dispute process.
DABs in Practice
DABs are established under the relevant contract between the parties, which will govern how the DAB is formed and the scope within which it operates.
A DAB can be constituted by one or more individuals, who are typically selected by the parties based on their expertise or knowledge. By selecting an individual (or individuals) who have specialist knowledge on issues or matters likely to arise on the project, it allows the DAB to make informed and considered decisions and recommendations.
Parties may also turn their mind to procedural matters relevant to the DAB to be enshrined in the contract, including:
- how many individuals are going to be on the DAB and how they will be appointed (if there are three DAB members, then often each party will appoint one member, and those two members will jointly agree on the appointment of a third member);
- if the DAB will be empowered to engage in pro-active dispute avoidance steps (including through regular project meetings with both parties), or if it will only consider matters which are referred to it;
- if there will be any requirements on how materials are to be presented to the DAB (and any limits surrounding what a party can provide to the DAB);
- if the DAB will be empowered to provide advisory opinions to the parties if the parties request such;
- if the DABs decisions are to be final and binding, or if there is a specific process in place for challenging such a decision;
- if it is necessary to separately develop and agree on any operating procedures that are to govern the DAB; and
- the rules which are to govern the decision making powers of the DAB.
Benefits of a DAB
Key benefits of a DAB include:
- Avoidance: where empowered to act proactively, the DAB can aid in resolving disputes at a project level prior to them becoming larger issues. This may effectively function to avoid any larger disputes that might devolve into parties standing by entrenched positions.
- Timeliness: DABs can resolve any dispute expeditiously, or at least provide the parties with the tools and information that may assist with such. Pending the specific procedural rules governing the DAB, the parties are effectively given control over the ability of the DAB to resolve matters expeditiously.
- Informal: DAB process are informal in nature and do not attract the formality or adversarial underpinnings associated with more determinative dispute processes, such as arbitration or litigation.
- Confidentiality: any dispute, and the subsequent determination, will remain confidential, which may be of particular importance based on the parties involved and the nature of the dispute.
Limitations of a DAB
Notwithstanding the above, limitations of a DAB include:
- Costs: pending the specific procedural steps associated with the DAB, then the parties could each incur costs associated with maintaining a DAB for the duration of the project. Namely, a DABs biggest benefits are derived from it being established at project commencement and working proactively to resolve any disputes. However, to facilitate this the parties would incur the cost of engaging the DAB members for the duration of the project, even if a dispute has not arisen.
- Finality: the finality of a DABs decision will be determined by the parties. Where it is pre-agreed that a decision will not be final, then a DAB may merely be a procedural step that parties do not intend to be bound by.
The limitation associated with DAB can be mitigated through effective contractual drafting and agreement by the parties. Namely, costs can be limited through appointing only a sole member to the DAB, or electing for the DAB to be reactionary in nature and only established after a dispute needs to be referred to such. Similarly, finality issues can be resolved through the parties determining if the DAB will issue final and binding decisions, or if for a certain type of dispute (i.e. above a monetary limit) the parties may skip referring the matter to the DAB.
LPC Lawyers
The LPC Lawyers team have a wealth of experience to assist across contractual drafting and dispute process. Through providing clients support across the duration of a project’s lifecycle, we can assist in ensuring a project’s successful and efficient delivery.
If you have any questions or concerns about your current or future projects, please do not hesitate to contact LPC Lawyers for a discussion on how we can assist.
The contents of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Ryan Bryett
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