UK & Europe
Projects & Construction
The JCT standard forms of construction contract are the most common family of standard forms used in the UK construction industry. Since the introduction of statutory adjudication under The Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Act”), the JCT forms have provided for parties to refer disputes to adjudication, before turning to arbitration or litigation. What the JCT forms haven’t done, until now, is provide for the use of dispute boards. This changed in May this year, when JCT published its Dispute Adjudication Board Documentation 2021 (“JCT DAB”).
The JCT DAB contains a set of rules and enabling provisions for the establishment and running of a Dispute Adjudication Board (a “DAB”) under the JCT 2016 Design and Build and Major Project forms of construction contract.
Dispute boards were originally born in the USA in the 1960s. They were typically composed of experienced, independent, construction industry professionals, who would be retained by the parties to a major project, to follow the progress of it, and make swift recommendations for the resolution of any disputes which might arise, and to assist the parties to settle them quickly. (This would help avoid the heavy costs of major litigation in the USA).
Since those early days, dispute boards have traditionally become more popular on international projects. By way of example, the FIDIC forms of contract, a commonly used standard form for international projects, provided for DABs in its 1999 suite. The DAB is a decision-making body, which can have one or three members. The limited use of DAB as a decision-making body (rather than a body which simply makes recommendations) in the UK is in part due to the success of UK statutory adjudication, which allows parties to a construction contract to refer a dispute to adjudication at any time for a swift decision. It is seen as a quicker and cheaper alternative to arbitration or litigation; an alternative that does not always exist in other jurisdictions. Dispute boards thus fill that gap on international projects and provide a means for parties to work with an independent panel (or occasionally a sole member) to try and resolve disputes before becoming embroiled in formal proceedings.
The 2017 suite of the FIDIC forms developed DABs into “Dispute Avoidance and Adjudication Boards” or “DAABs”. It did so by emphasising the powers which the members of the dispute boards should have, to encourage the parties to resolve their disputes rapidly, cost-effectively and amicably.
With the publication of the JCT DAB, JCT has recognised the increasing role of disputes boards and the benefits of taking a proactive and conciliatory approach to brewing disputes between parties on ongoing projects. The JCT DAB rules are heavily based on the 2014 CIArb dispute board rules but have been amended to be Act compliant. The rules focus on dispute avoidance but also allow the DAB to run an Act compliant adjudication, if necessary. We discuss some of the potential advantages and disadvantages of the JCT DAB below.
Notwithstanding the potential pitfalls discussed above, a move towards a more collaborative dispute avoidance approach should be welcomed and the JCT DAB offers this opportunity where other standard forms used in the UK don’t. As noted above, the CIArb rules are not Act compliant. The NEC form is often used for large-scale infrastructure or engineering projects and NEC4 introduced a Dispute Avoidance Board option (Option W3), but it is not suitable for use in the UK if the contract in question is subject to the Act. Following user feedback, NEC issued NEC Practice Note 5 in 2019 which provided a Z clause for the use of the Dispute Avoidance Board in contracts subject to the Act. However, the Dispute Avoidance Board can only provide recommendations and adjudications are dealt with separately under Option W2. In its 2017 suite, FIDIC introduced the DAAB. In a similar manner to the JCT DAB, the DAAB can issue informal advisory opinions and recommendations, as well as formal binding decisions. Contrast this with the ICC, whose rules provide for different types of board: a Dispute Review Board, which is tasked with producing non-binding deliverables, in the form of informal advice and recommendations, a Dispute Adjudication Board, which is permitted to issue binding decisions, or a combination of the two. This affords parties with lots of flexibility but the ICC rules, like the others, are not Act compliant.
Uptake of the JCT DAB remains to be seen, and the relative benefits to each project of establishing (and funding) a DAB will vary with their complexity and scale, but at least parties involved with UK-based projects now have a workable alternative to statutory adjudication, with a form of contract that many will be familiar with.