Jeremie Witt, partner at CMS, warns that the desire among both contractors and employers to kick disputes down the road has been the biggest challenge to dispute board adoption.
Speaking to an international audience about the role and challenges of dispute boards in Africa and the Middle East, CMS partner Jeremie Witt pointed out that legacy had a big part to play.
Outlining the phenomena, Witt pointed to the ongoing use of historic contracts rather than more recent standard FIDIC contracts. “Historically there has been a tendency to still use the 1987 red book in the Middle East. It’s still appearing on about half of projects. Interestingly, what I’m not seeing much of is the ‘butchery’ of clauses but traditionally the 1987 red book already had a harsh risk allocation on contractors compared to more recent counterparts that are more balanced.”
“It was not uncommon a few years ago to have conditions of between 80 and 100 pages, and so it was not acting as a FIDIC contract because it had changed unrecognisably. But since around 2017 I’ve seen a lot less of that.”
More recent contracts do include dispute boards and he noted that this had led to other challenges of clauses being removed: “The FIDIC Rainbow Suite from 1999 has become more common in many of these regions, but acting for the contractor or client, I was being asked to butcher the dispute resolution clause except for the arbitration clause.”
Asked why that happened, he explained: “The main reason articulated to me is the desire by employers to kick things down the road. They don’t want the potential of decisions going against them during the project, or to make it easy to bring more claims.”
“The employer’s perspective was often that contractors would always have claims so they wanted to push it to the end and make it expensive for them to pursue. But that ignores the fact that if you manage issues as they arise, you can avoid disputes and problems growing.”
“Perhaps more surprisingly, contractors also used to pushback against those clauses and their reason was that it was too much paperwork. They just wanted to build something and get paid rather than get distracted by dispute resolution through the process.”
In one respect, Covid has shifted that mindset for both contractors and employers because it was so unprecedented and really brought to the forefront the need for good lines of communications and management of challenges.”
Misunderstanding what boards are for
“I think this comes from a misunderstanding of the role of a board and the value of resolving issues early, because resolving things early means the project carries on and the cost is likely to be less than having to do that three years later through the arbitration when the relationship has soured.”
There is a lot of work in preparing cases for dispute boards but I’m not sure it is as bad as people think. It is work that will need to be done later anyway, when everything is less fresh in minds if they use arbitration after the project.”
Jeremie Witt was speaking at the FIDIC Middle East and Africa Contract Users Conference on 11 May 2022.