In early May 2021, the JCT, in conjunction with the Chartered Institute of Arbitrators (CIArb), released its anticipated Dispute Adjudication Board Documentation 2021 (the “DAB Documentation”). It is intended to work with the JCT 2016 Design and Build Contract (DB) and the JCT Major Project Construction Contract (MP). The current customer base for these forms are principally domestic private developers.

In introducing the DAB Documentation, the JCT is encouraging the use of Dispute Boards, particularly in the UK, by providing a proactive mechanism to assist the parties to avoid disputes during the project and by reducing the scope for the adoption of adversarial positions on issues which would likely lead to a referral to adjudication, or a need for subsequent arbitration or litigation.

Currently, public works in England and Wales are procured using the NEC forms, which are in their fourth iteration. International contracts are more likely to be FIDIC based or some hazardous bespoke variation of either the NEC or FIDIC forms. Both forms have their own dispute avoidance and dispute management regimes. Until now, the JCT had no similar offering.

The NEC and FIDIC offering

The FIDIC 2017 Rainbow Suite (Red, Silver and Yellow Books) has a requirement for the appointment of standing Dispute Avoidance and Adjudication Boards (“DAABs”). The FIDIC DAAB has two functions. Firstly, it has a dispute avoidance role, to provide informal advice and assistance to the parties, being careful to do so only in the presence of both parties unless they specifically agree otherwise. Secondly, if a dispute occurs, the DAAB has a formal adjudication role, to provide a decision within a specified time frame, which decision is binding on the parties at least temporarily. If the decision is not acceptable, then either party can give a notice of dissatisfaction and refer the dispute to arbitration or litigation. If no notice of dissatisfaction is given, then the DAAB decision becomes final and binding. Otherwise, FIDIC’s default means for final and binding dispute resolution is arbitration under the ICC Rules.

For NEC4, the NEC published a new Dispute Resolution Service Contract which replaced the old Adjudicator’s Contract. Included within the Dispute Resolution Service Contract is an option for the parties to appoint dispute resolvers to sit as members of a Dispute Avoidance Board. The material difference between the NEC DAB and the FIDIC DAAB is that the NEC DAB makes only non-binding recommendations.

There are now three substantive options within NEC4 for dispute resolution:

• W1, where the statutory adjudication scheme is not applicable, and the parties choose ad hoc adjudication.
• W2, which provides for statutory adjudication under the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “HGCRA”)
• W3 is the new option for NEC4 and provides for the appointment of a Dispute Avoidance Board.

There is no overlap between the three NEC mechanisms.

An important requirement under Option W3 is that, in order to avail themselves of arbitration or litigation to resolve a dispute, parties must first refer all potential disputes to a DAB for a recommendation. The recommendation is non-binding, but if it is not accepted, a notice of dissatisfaction must be given within four weeks of its receipt in order to preserve the right to bring a claim about the matter in dispute. If the notice is not given in time, the right to refer the disputed matter on to arbitration or litigation, as the case may be, is lost.

Although, like FIDIC 2017, NEC4 has been around for nearly four years now, there is little empirical evidence of the take up or value of utilizing the DAB process under Option W3, or whether, if used, the bar to bringing claims which have not been through the DAB process is retained by parties in the contract.

Similarly it is unclear whether there has been any improved take up of the FIDIC DAAB provisions. One of the enduring issues and causes of disputes under the FIDIC forms has been dealing with the fallout of parties’ reluctance or failure to appoint a DAB or DAAB. One of FIDIC’s (new) five Golden Principles, is to see all disputes referred first to a DAAB. Many practitioners would see this as a triumph of hope over experience and there is no reason to suppose that the reluctance to use the DAB process under the 1999 Rainbow Suite has been overcome by the introduction of the dispute avoidance function in the 2017 DAAB regime.

JCT’s offering

The JCT 2016 Design and Build form of contract does pretty much what it says on the tin, so it doesn‘t need any special explanation. The JCT Major Project Construction Contract form is also very much designed for large-scale construction projects where major works are involved. It is used by private sector employers who regularly procure large-scale construction work, and the work is carried out by contractors with the experience and ability to take greater risks than would arise under contracts made using other JCT standard forms.

The JCT DAB Documentation is designed and intended to enable parties to use these standard JCT forms not just for substantial domestic privately funded projects, which are likely also to be subject to the parties’ rights to avail themselves of statutory adjudication, but also for substantial international projects.

The interesting distinction between the JCT Documentation and the NEC4 and FIDIC provisions is that the JCT Documentation is intended to work with, and alongside, the English statutory adjudication scheme.

The JCT DAB Documentation seeks to provide:

• a means of dispute avoidance through the offices of a standing DAB;
• the ability to obtain an informal “Recommendation” by a process using the same procedure as would be employed for an adjudication; and
• where requested, a formal Decision on a dispute referred to the DAB under a process which is compliant with the provisions of the HGCRA.

How the JCT offering is intended to work

The JCT has modified the CIArb Dispute Board Rules so as to provide for the establishment of a Dispute Adjudication Board which can fulfil the functions of a statutory adjudicator under the HGCRA. In essence, the JCT DAB Rules provide for the establishment of a DAB comprising one (for smaller projects) or three members who are suitably qualified and independent of the Parties. The DAB members each enter into a tripartite agreement with the Parties, the substantive terms of which are identical unless otherwise agreed by all DAB members. It is recommended that they be appointed at the outset of the project and fulfil the function of a standing DAB to provide effective dispute avoidance support.

Article 7 of the Rules specifically regulates the conduct of the DAB members so that there is no opportunity for them to engage in private communication with only one of the Parties. Article 7.6 makes it clear that meetings or communications may not take place with one party in the absence of the other, and all information received by the DAB must be made available to the other party on an open basis. All information provided to the DAB is confidential and supplied only for the purpose of avoidance, settlement or determination of disputes.

The DAB may provide an informal advisory opinion to assist the parties to avoid a dispute. If so, Article 9.3 provides that if it is later called upon to make a Decision or Recommendation on the same issue(s), the DAB is not bound by its earlier opinion and must make its Decision or Recommendation solely on the evidence submitted during the formal referral as provided in Articles 10 or 14 of the Rules.

The Parties may ask the DAB to provide a Recommendation (Article 14). Such a request is not a referral of a dispute to Adjudication under the Act, albeit that the procedure to reach the Recommendation is intended to be the same. A Recommendation is non-binding, but is admissible in later proceedings. One wonders at the utility of that provision.

Article 10 provides for the DAB to undertake statutory adjudication. Any hearings (Article 11) and the Decision (Article 12) are intended to be fully compliant with the HGCRA. To overcome the obvious issue with an “Adjudicator” comprising a three-person DAB the Rules provide that in making its Decision, the DAB shall make every effort to achieve unanimity but they provide also that in default, a Decision may be by a majority vote, or if there is no majority, by the Chairperson alone. Dissenting views are to be communicated to the parties but are not to form part of the Decision.

A major issue is whether a three person panel can constitute “an Adjudicator” under the HGCRA, and if it did, whether a Decision rendered other than unanimously would be considered a valid Decision under the Act. Clearly the JCT considers that its provisions are HGCRA-compliant, but until there is judicial scrutiny of these Rules, that remains to be seen. Commentators, including the writer, have reservations about these issues.

Another challenge for the JCT was to create a DAB process providing an effective dispute avoidance role during the project which would not create problems if the DAB was subsequently called upon to adjudicate under the HGCRA. There is an obvious tension between the two primary roles of the JCT’s DAB. The JCT and the market are very much alive to the risks inherent in the first role which have the capacity to undermine to legality of the second. Glencot Development and Design Co Ltd v Ben Barrett & Son (Contractors) Ltd[1] is a case in point. In that case, the Adjudicator acted previously as mediator, conducted the usual shuttle diplomacy and potentially received confidential information from one or both parties. He then acted as adjudicator. The TCC declined to enforce the Decision on the basis that a fair-minded observer would apprehend a risk of bias.

Some key questions:

• Has the JCT found a winning formula with its hybrid DAB/Adjudicator dispute avoidance and statutory adjudication offering?
• Is there a market for a standing DAB process in English construction contracting which combines dispute avoidance with statutory adjudication?
• Realistically, can the functions of the DAB be sufficiently detached from the role of Adjudicator under the Act to maintain the necessary independence of the latter?
• Can a three person DAB constitute an “Adjudicator” for the purposes of the HGCRA?
• Would a Decision rendered by a majority of a DAB, or a chairperson alone be a valid Decision by the Adjudicator for the purposes of the HGCRA?

Conclusion

For projects in England and Wales, particularly those that are “Construction Contracts” and amenable to statutory adjudication, the question is whether the provisions for dispute avoidance procedures, Recommendations and statutory adjudication are sufficiently defined and well-drawn to satisfy the statutory requirements of the HGCRA. As outlined, there are a number of risks in the JCT DAB structure the integrity of which will only be assessed when tested in the Courts. For international projects, the real question is whether the addition of the DAB Documentation by the JCT for its major forms is enough to lure potential developers away from the more established FIDIC and NEC forms. The further question is whether it will increase the use of Dispute Boards generally and that is altogether another matter.

This article was first published in Construction Law

[1] (2001) 80 ConLR 14; [2001] BLR 207.