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Introduction

In this article, three members of the drafting committee for the 2015 ICC Dispute Board (DB) Rules1 provide key insights into those Rules. After a short introduction, Peter Wolrich describes the revision process and explains the main changes that were made to the provisions of the 2004 ICC DB Rules in the 2015 revision (1). Nael Bunni then considers the costs of Dispute Boards, which have been a subject of controversy and possibly even a deterrent to their use. He describes how costs have been addressed in the new ICC DB Rules (2). Finally, Pierre Genton discusses Dispute Boards in practice, draws some lessons from past experience and makes some recommendations on how to use the Rules to best advantage (3).

The ICC DB Rules were first introduced in September 2004 with the intention of offering contracting parties a standing mechanism that would help avoid disputes, not simply resolve them. The drafting of the Rules was a long and difficult exercise that lasted some four years and resulted in a unique product, which, unlike any similar rules, brought under a single umbrella three different types of dispute boards, namely:

• Dispute Review Board (DRB), which date from the early 1970s. they are widely used in the USA and recommended by the World Bank. DRBs issue 'Recommendations'.

• Dispute Adjudication Board (DAB), which since 1995 have been used in the Conditions of Contract of the International Federation of Consulting Engineers (FIDIC). They should not be confused with the judicial procedure of adjudication. DABs issue 'Decisions'.

• Combined Dispute Board (CDB), which were an innovation of the 2004 ICC DB Rules. They have the power to issue 'Recommendations' or 'Decisions' depending on the wishes of the parties and the circumstances of the case.

1. The revision process and principal changes introduced in the 2015 Rules

Since 2004, the ICC DB Rules had greatly assisted parties in resolving their differences. However, ten years after bringing into force the first ICC Dispute Board Rules, ICC decided to review the Rules to see whether any changes were genuinely useful or necessary. This review took into account the developments in the field over the prior ten years along with the suggestions for improvements that were received from various sources, based upon a consultation process.

Before the decision was taken to review the Rules, the question arose as to whether there was any real need for Dispute Board Rules at all. Some DB experts questioned their utility, opining that the Dispute Board Members are fully familiar with the process and do not need a set of rules to run a successful Dispute Board. However, the drafting committee and the ICC Commission on Arbitration and ADR as a whole considered that the Rules remain necessary, in particular for the following reasons:

• The Rules are incorporated by reference into the contract of the parties. They thus serve to obtain pre-agreement on important features before any problems arise. These include agreement to the three services set out in the Rules: the avoidance of Disagreements, informal assistance with Disagreements and the issuing of Conclusions to resolve Disputes.

• Many persons in different sectors and first-time users of Dispute Boards often do not adequately understand what Dispute Boards are and how they function. They may therefore be reluctant to use them in the absence of a set of Rules.

• The Rules set out a framework for Dispute Boards and provide the parties with advance knowledge of how the process operates.

Once it had been decided to revise the Rules, a designated task force was created, whose function was to make suggestions and review proposed amendments to the Rules. A special meeting of DB experts was held at which a number of proposals and suggestions were made. We also received a number of suggestions from the ICC International Centre for ADR based on its experience of rendering services under the Rules. A small committee was set up to draft proposed amendments to the Rules in light of the suggestions received. Its proposals were circulated to the task force and the DB experts for comments, and finally the revised Rules were carefully reviewed by the ICC Commission on Arbitration and ADR at its plenary session in Tokyo in October 2014. The revised Rules were then finalized and approved by ICC's Executive Board and came into force on 1 October 2015.

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The overriding principle that guided the revision was 'if it isn't broken, don't fix it'. The aim was not to revolutionise DB procedure but to introduce improvements based on suggestions from users and experts and give increased emphasis to dispute avoidance and informal assistance.

Below is a description of the principal changes that were made to the 2004 ICC DB Rules in the 2015 revision.

1.1. Services provided by Dispute Boards

The 2004 Rules contained a section entitled 'Procedures before the Dispute Board'. Article 16 of that section provided briefly that when all of the parties so agreed, the Dispute Board could help them resolve their disagreements through informal assistance. The greater part of that section (i.e. Articles 17, 18 and 19) dealt in depth with formal referrals.

Over the years, it had become more and more apparent that Dispute Boards play a vital role in helping parties avoid and informally resolve disagreements before they become disputes that can be referred to the Dispute Board in a formal referral. To bring this to the fore, the 2015 Rules have a new section entitled 'The Three Services Provided by the Dispute Board', which comprises three Articles dealing respectively with each of the three services. Article 16 covers 'Avoidance of Disagreements'; Article 17 'Informal Assistance with Disagreements', and Article 18 and the following Articles 'Formal Referral for a Conclusion'. The idea was to stress that Dispute Boards have these three distinct functions, which are equally valuable. While formal referral is the most elaborate of the procedures and requires greater development in the Rules, this does not mean that the other services are less important.

Article 16 on Avoidance of Disagreements is entirely new. This first role that a Dispute Board can play has been called the 'scarecrow' function. In that role, the Dispute Board can encourage the parties to resolve their Disagreements on their own. Typically, during site visits or other meetings with the parties or through reading updates submitted by the parties, Dispute Boards often become aware of budding Disagreements between the parties that deserve attention. Article 16 of the 2015 Rules provides that whenever a Dispute Board believes that a potential Disagreement may be arising between the parties, it may raise the matter with them and encourage them to try to avoid the Disagreement on their own, without further involvement by the Dispute Board. In the avoidance process, the Dispute Board may nonetheless assist the parties in defining the potential Disagreement and may also suggest a specific process that the parties could follow in order to avoid the Disagreement. Thus, the 2015 Rules give particular emphasis and importance to dispute avoidance.

The provisions concerning the second and third services of Dispute Boards, namely informal assistance and formal referral, remain essentially the same as in the 2004 Rules. The Dispute Board can meet separately with the parties, organise joint meetings, and informally advise the parties as to how they might resolve their Disagreements. If informal assistance is successful, it will allow the parties to resolve their Disagreement themselves in light of the informal assistance provided by the Dispute Board.

A formal referral pursuant to Article 18 is a more elaborate and codified procedure, in which the parties produce a Statement of Case and a Response and then a hearing is held. The upshot of a formal referral is the rendering of a Conclusion by the Dispute Board, which is not enforceable like an arbitral award, but can become contractually binding on the parties if they do not express dissatisfaction with it pursuant to the Rules. If the parties have opted for a Dispute Adjudication Board, the Conclusion of the Dispute Board is provisionally binding on them, whether or not they express dissatisfaction with it. A party that expresses dissatisfaction pursuant to the Rules can then have the Dispute resolved by arbitration or national courts, depending upon the dispute resolution clause in the contract. As such, formal referral is the first of a two-tier mechanism, with arbitration or national courts as the second and final tier.

1.2. Compliance with contractually binding Determinations

During the consultation process leading to the drafting of the 2015 Rules, there were many requests for the new Rules to do as much as possible to ensure that, after formal referral, parties comply with any Conclusions issued by the Dispute Board that have become contractually binding on them. While it was agreed that this was a worthy aim, it is impossible for the Rules to impose obligations on external bodies, so they cannot bind arbitral tribunals or state courts. They are however contractually binding on the parties themselves as a result of the parties' agreeing to the Rules in their underlying contract. For this [Page47:] reason language that strengthens the obligations of the parties was added in the 2015 Rules, as follows:

• The Rules now expressly provide in Articles 4(4), 5(4) and 6(1) that a party that has failed to comply with a Conclusion of the Dispute Board when it was required to do so under the Rules shall not raise any issue on the merits as a defence to its failure to comply with the Conclusion. This should eliminate any attempt to re-argue the merits of any Conclusion that has become contractually binding.

• Conclusions are now referred to as being 'final and binding' as soon as the parties are contractually bound to comply with them. This represents a contractual agreement of the parties to treat such Conclusions as final and binding.

• In Articles 4(4), 5(4) and 6(1) the Rules now even more clearly specify that any party may refer a failure by another party to comply with a Conclusion directly to arbitration or a competent court, as the case may be, without having to refer it to the Dispute Board first. This also helps ensure compliance with contractually binding Conclusions.

1.3. Provisional relief

During the consultation process, many comments were also received requesting that the Rules deal explicitly with provisional relief such as interim or conservatory measures. Article 15 of the 2004 Rules laid out a non-exhaustive list of powers of the Dispute Board, but said nothing expressly about provisional relief. The list that appears in Article 15 of the 2015 Rules specifically includes the power of Dispute Boards to decide upon any request for provisional relief.

1.4. Definitions

Certain changes have been made in Article 2 of the Rules entitled 'Definitions'. They help to emphasise the differences between the services offered by Dispute Boards and provide additional clarity and consistency. It has now been made clear that a Disagreement means any difference between the parties that has not been formally referred to the Dispute Board for a Conclusion. Once a Disagreement has been formally referred to the Dispute Board, it becomes a Dispute. A Conclusion means either a Recommendation or a Decision issued by the Dispute Board following formal referral. These new definitions make clear that the first two services of the Dispute Board - avoidance of and informal assistance with Disagreements - concern the provision of assistance to the parties before their Disagreements escalate into a Dispute. Disputes are dealt with by Dispute Boards under the third service, formal referral for a Conclusion. The term 'Conclusion' replaces, but has exactly the same meaning as, the term 'Determination' that was used in Article 2 of the 2004 Rules. The change of terminology was made to avoid confusion with the definition of 'Determination' in FIDIC documentation.

1.5. Flexibility

The ICC DB Rules were designed so that they could be adapted to the specific needs and desires of the parties and the DB Members. The revision has further emphasised this essential feature of the Rules.

In particular, the Rules can be used under all contracts where Dispute Boards can be of value. This includes not only construction contracts, where Dispute Boards have been greatly used, but also, for example, long-term shareholder agreements, production-sharing agreements, management agreements and so forth.

In addition, most of the provisions in the Rules can be modified by agreement among the parties and the DB Members. For example, Article 29 of the new Rules provides for the DB Members to receive a monthly management fee as well as a daily fee. The management fee is designed to cover a range of activities of the DB Members. These include being conversant with the Contract and its performance, studying progress reports, reviewing correspondence, coordinating the operation of the Dispute Board, covering fixed overhead expenses and being available to attend meetings. Nonetheless, the parties are entirely free to eliminate the management fee if they so desire.

Attached to the Rules is a Model Dispute Board Member Agreement. This is an instrument each DB Member must enter into with all of the parties. However, the document annexed to the Rules is merely a form of agreement designed to assist the parties and the DB Members in agreeing upon terms. The provisions in the model form can be modified to suit the needs of all concerned.

One of the difficulties in drafting the revised Rules was that the users and experts who were consulted often had contradictory views as to what should be included. Choices had to be made on the basis of consensus. However, given the inherent flexibility of the Rules, these choices are not locked in stone but can be modified by the parties to suit their needs.

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2. Costs

2.1. Introduction

It is accepted that Dispute Boards have played a vital role in helping parties to construction contracts avoid and resolve their disagreements before they become disputes. Where disagreements did turn into disputes, they have also played an important role in resolving those disputes and avoiding the need to resort to arbitration or litigation. However, use of a Dispute Board is an added cost in a project and this has been perceived by some as a major hurdle against greater or more popular employment of Dispute Boards. Others believed that this additional cost is well worth incurring. For instance, the March 2012 Dispute Board Manual of the Japan International Corporation Agency stated on page A-5 that:

it is to be remembered … that the Contract Parties are investing in the DB as a means of trying to avoid the much more costly and time-consuming process of international arbitration or litigation. To use an old English expression, it is important not to be 'penny wise but pound foolish'.

In the author's ten most recent arbitrations, the costs2 have varied from 2.58% to as much as 37% of the overall amount in dispute, with an average of 12.75%.3 Thus, the saving made by eliminating a single arbitration far exceeds the cost a Dispute Board represents, and in complex construction or engineering projects there may be several arbitrations!

Despite the high cost of arbitration and the obvious advantage of using Dispute Boards, particularly on major projects, owners have been reluctant to do so. Many attributed that reluctance to the cost of Dispute Boards, but without reliable proof. Others challenged the assumption, but failed to identify other possible reasons. Some even speculated that project owners' advisers removed references to Dispute Boards out of self-interest.

In particular, the reluctance to use Dispute Boards was attributed by some practitioners to the Monthly Retainer Fee, as it was called in the 2004 Rules, which was perceived as a source of excessive cost, despite the fact that the cost of not having a Dispute Board and proceeding to international arbitration instead is many times greater. These practitioners argued that the Monthly Retainer Fee would reflect time that might be spent and not actual time spent. Their argument reflected reports that the market's main objection to Dispute Boards was their cost and, in particular, the fact that the parties would be committed to paying DB Members on a monthly basis throughout the contract without knowing how much work, if any, they would have to do. The Monthly Retainer Fee was also criticised for being set by default at three times the Daily Fee indicated in the DB Member Agreement(s).

It was strongly argued that there should be no Monthly Retainer Fee but, instead, DB Members should work exclusively on the basis of time spent, as happens with Dispute Review Boards in the United States. They believed that this would overcome the market's hostility to paying for a service that might not be necessary. They did not believe that this would be less costly for the parties, and suggested that it might indeed be more costly, but they believed that it would help overcome the market's objections to the principle of a Monthly Retainer Fee.

Proponents of the Monthly Retainer Fee have argued that it amounts to compensation for the DB Member for the following activities, as was explained in Article 27 of the 2004 ICC DB Rules:

• being available to attend all DB meetings with the Parties and site visits;

• being available to attend all internal DB meetings;

• becoming and remaining conversant with the Contract and the progress of its performance;

• the study of progress reports and correspondence submitted by the Parties in the course of the DB's functions; and

• office overhead expenses in the DB Member's place of residence.

2.2. The criticisms and arguments on costs in perspective

Costs represent probably one of the most controversial aspects of the DB Rules, as they determine whether or not Dispute Boards are economically viable. Discussion of DB costs, and in particular how DB fees should be calculated, occupied a considerable amount of time and led to intense debates during the revision process.

Some critics of the Monthly Retainer Fee advocated instead just a Daily Fee, which they believed would be more acceptable to [Page49:] prospective parties. However, this would have several drawbacks. Experience shows that it could hinder performance of the Dispute Board's dispute-avoidance role for the following reasons:

• The provision of progress reports, minutes of meetings, correspondence and other documents is likely to be curbed in an attempt by the parties to reduce the DB Members' hourly input and therefore their charges. Yet, such documents are essential to the DB Members, who need to study them continuously.

• Lack of the above-mentioned material could inhibit the DB Members and adversely affect their ability to perform the role of helping to avoid or prevent Disputes. They constantly need to study such material if they are to perform that role effectively. It is important for them to be at all times conversant with the progress of a project. Whenever they go to a work site to take part in regular site visits they must be fully aware of the situation and any possible disagreements in advance of the visit. This is the most important reason for the Monthly Retainer Fee.4

• Disagreement over what material should be made available to the DB Members could be a source of conflict and misunderstanding between the DB Members and one or both of the parties as to what input into the DB process is expected from the DB Members.

• Disputes might emerge relating to the amount of time that the DB Members should properly devote to their tasks and obligations.

• To ensure the integrity of the process, it is important that there should be no risk of controversy over hours charged.

• Other possible problems, including underestimation of the budget for the DB process, are likely to occur.

The belief that it would be better to remove the Monthly Retainer Fee and to leave the DB Members to bill in respect of the hours spent by them in performing their duties is mistaken for many reasons, including but not limited to the following:

• It creates the impression of a lower budget, which would turn out to be false.

• It creates confusion and uncertainty over what is required from the Dispute Board in performing its duties in full.

• It may create a lack of trust between the parties and the Dispute Board.

• It ignores the reasons for the Monthly Retainer Fee.

• Other less serious problems relate to the monitoring of on-site work.

2.3. Articles 28 to 34 of the Rules

After extensive discussion of the different views that were expressed and the comments received, the issue of costs was addressed in the section entitled 'Compensation of the Dispute Board Members and the ICC' comprising Articles 28 to 34 of the new Rules. These provisions offer clearer reasoning and enable the process to be better understood than was previously the case. Articles 29 to 33 deal with the costs of the DB Members and Article 34 with the administrative costs of ICC, while Article 28 contains general provisions relating to costs. The titles of these Articles are as follows:

Article 28: General Considerations

Article 29: Monthly Management Fee

Article 30: Daily Fee

Article 31: Travel Costs and Other Expenses.

Article 32: Taxes and Charges

Article 33: Payment Arrangements

Article 34: Administrative Expenses of the Centre

The salient aspects of these provisions are summarised below. At the outset, it should be emphasised that an essential feature of these provisions - and of the Rules in general - is their flexibility (the phrase 'unless otherwise agreed by the Parties' is repeated several times). Where indicated, the parties can therefore agree to modify the provisions prior to the commencement of a project or thereafter with the consent of the DB Members. It is up to the parties themselves to change particular aspects of the Rules and translate them into something that is more acceptable or suitable to their needs. Therefore, at all times in the DB process, party autonomy is of paramount importance.

Article 28: This Article specifies that all fees and expenses of the DB Members shall be shared equally by the Parties; if there are three or more DB Members, they are treated equally in that they receive the same fees irrespective of their countries of origin and the average national [Page50:] income in those countries; the fees shall be fixed for the first 24 months following the signature of the DB Member Agreement(s) and adjusted on each anniversary of the DB Member Agreement(s); and, most importantly, if the parties and the DB Members cannot agree on the fees of the DB Members, the Centre will fix them if requested to do so by any party or DB Member. The Centre's determination, which shall be made after consulting the parties and the DB Members, is binding, so the DB Members must either accept the determination or decline the appointment. By empowering the Centre to fix fees in the event of a lack of agreement, this last part of the Article tackles one of the most common causes of delay when setting up a DB process.

Article 29: This Article deals with the most controversial aspect of the provisions on compensation. The first decision made was to change the name 'Monthly Retainer Fee' to 'monthly management fee' in order to emphasise that this monthly fee is not simply for retaining the services of the DB, but for the various important management activities it performs, which include the following:5

• becoming and remaining conversant with the Contract and the progress of its performance;

• activities in managing and coordinating the operation of the DB;

• studying progress reports in order, inter alia, to evaluate the progress of performance and identify potential Disagreements;

• reviewing all correspondence between the Parties copied to the DB;

• being available to attend all DB meetings with the Parties, internal DB meetings, and site visits; and

• fixed office overhead expenses.

Like the Monthly Retainer Fee, the monthly management fee is equal to three times the daily fee set out in the DB Member Agreement(s) and is payable from the date of signature of the DB Member Agreement(s) until termination of the DB Member Agreement(s). This provision is subject to Article 10(2), which requires the parties to continue paying the DB Member the monthly management fee for a minimum of three months after termination, unless agreed otherwise. As stated earlier, the Rules are sufficiently flexible to allow the monthly management fee to be eliminated if the parties consider this to be wise in the circumstances and in view of the points discussed above.

Article 30: This Article deals with the daily fee, which covers the time spent for meetings and site visits; travel; internal meetings of the Dispute Board; study of documents submitted by the parties in connection with procedures before the Dispute Board; work in connection with avoidance of Disagreements; work in connection with informal assistance with Disagreements; and work in connection with a formal referral for a Conclusion, including hearings.

Article 31: This Article indicates on what basis travel costs and other expenses will be reimbursed. Other expenses include long distance telephone calls, courier services, photocopying, postage, visas, etc., which are reimbursable at cost.

Article 32: This Article is in two parts. The first states that: 'No taxes and charges, except for value added tax (VAT), levied in connection with the services rendered by a DB Member by the country of the residence or nationality of the DB Member shall be reimbursed by the Parties.' The second states that: 'All taxes and charges levied in connection with such services by any country other than the DB Member's country of residence or nationality, as well as VAT wherever levied, shall be reimbursed by the Parties.'

Article 33: This Article deals with DB Members' invoices and how they are to be processed and paid by the parties. If any party fails to pay its share of fees and expenses within 30 days of receiving a DB Member's invoice, the DB Member, in addition to any other rights, is entitled to suspend work 15 days after providing a notice of suspension to the parties and to any other DB Members. It is stated that such suspension will remain in effect until receipt of full payment of all outstanding amounts plus simple interest at one-year LIBOR plus two per cent, or the twelve-month prime interest rate in the currency agreed between the parties and the DB Members. Furthermore, in the event of a party's failure to pay its share of a DB Members' fees and expenses when due, any other party, without waiving its rights, may pay the outstanding amount. The party making such payment shall be entitled to reimbursement from the non-paying party of all such sums paid, plus, unless prohibited by applicable law, simple interest at one-year LIBOR [Page51:] plus two per cent, or the twelve-month prime interest rate in the currency agreed between the parties and the DB Members.

Article 34: This Article covers the administrative expenses of the ICC International Centre for ADR, which will apply only if the Centre is expressly requested to perform certain services. The Article is divided into six parts and supplemented by a Schedule of Costs as an Appendix at the end of the Rules.

Part 1 is an introductory provision explaining what the Centre's administrative expenses consist of. The following parts deal in turn with the expenses relating to each of the services offered by the Centre.

Part 2 provides that the amount specified in Article 1 of the Appendix is payable for each request for the appointment of a DB Member. This amount must be received before the appointment is made and the cost is shared equally between the parties.

Part 3 provides that for each decision upon a challenge of a DB Member, the Centre shall fix administrative expenses in an amount not exceeding the maximum sum specified in Article 2 of the Appendix and that no decision will be made on the challenge until that amount has been received. The cost of each decision is borne by the party making the challenge.

Part 4 provides that for the review of each Decision, the Centre shall fix administrative expenses in an amount not exceeding the maximum sum specified in Article 3 of the Appendix. The Centre will not approve a Decision unless it has received the amount fixed for that purpose. The cost of reviewing each Decision is shared equally by the parties.

Part 5 provides that the amount specified in Article 4 of the Appendix is payable for each request for the Centre to fix the fees of the DB Members. The Centre will not fix the DB Members' fees unless the requisite payment has been received. This cost is shared equally by the parties.

Part 6 provides that if a party fails to pay its share of the administrative expenses of the Centre, the other party is free to pay the full amount.

The Schedule of Costs annexed to the Rules indicates that for each service rendered by the Centre a non-refundable filing fee is payable, which comprises the totality of the administrative expenses for the appointment of DB Members and the determination of their fees, whereas in the case of challenges and the review of Decisions it is credited to the total amount of the administrative expenses fixed by the Centre for the service.

2.4. Concluding remark

There is no doubt that the use of a Dispute Board in any contract, particularly a long-term international contract, will bring additional costs, but these costs would be less than the costs of even the simplest international arbitration that might occur if a Dispute Board were not in place. Dispute Boards should therefore not be seen as a conventional dispute resolution mechanism, but rather as an insurance policy against the likelihood of long-running, complicated and cripplingly expensive arbitrations.

3. Dispute Boards in practice

3.1. Dispute Board proceedings

Dispute Boards, let it be recalled, have a dual function. They first help to avoid a dispute and, if this is not possible, then try to resolve it. As already indicated above, greater emphasis has been placed on the prevention of disputes in the 2015 Rules than in the 2004 Rules.

Under Article 16 of the Rules, whose purpose is made clearly explicit in its title - 'Avoidance of Disagreements' - the parties are strongly encouraged to resolve any Disagreements on their own. If this proves not to be possible, informal assistance may be given pursuant to Article 17 in an attempt to resolve the Disagreement, either at the request of one of the parties with the agreement of the other or at the initiative of the Dispute Board with the agreement of both parties. In principle, 15 days prior to a site visit, the Dispute Board is informed in a short paper, prepared jointly by the parties (if possible) or by each party, of the matter for which informal assistance is sought. This allows the Dispute Board to study the matter in advance. The Dispute Board will express its opinion orally or in writing (e.g. in the site visit report). If the Dispute Board is subsequently required to take a position on the matter in a formal referral, it is not bound by any opinions it may have expressed when giving informal assistance.

In the event that a Disagreement cannot be avoided or overcome informally, the matter becomes a Dispute, subject to the more regulated procedure of formal referral. From then on [Page52:] informal conversations and separate meetings are forbidden; instead, a short request is filed, followed by a concise answer and then a hearing of limited duration, but which allows each party to present its case, respond to the other party and answer the Dispute Board's questions. It is important not to consider DB proceedings at this stage as equivalent to arbitration. Submissions should be made by the representative of each party in charge of the operation (e.g. project director or project manager), who may be assisted by external experts, if required. DB proceedings should be kept concise, simple, and free of tactical manoeuvres and procedural difficulties. It is also recommended that the number of expert reports, affidavits and oral testimonies be limited.

Most of the DB proceedings that have taken place during the last ten years have followed the principles described above, and disagreements arising in the context of major construction projects such as the Xiaolangdi Multipurpose Dam Project in China or the Karahnjukar Hydroelectrical Project in Iceland have been overcome amicably through extensive use of informal assistance. The success rate of Dispute Boards in resolving disagreements has been estimated at over 95%. However, in recent years there have been attempts by a few parties to complicate DB proceedings through a lack of awareness of their true role and purpose (which is the amicable resolution of disagreements) and an unwillingness to compromise, or to transform them into a test case to obtain an initial ruling on the merits and quantum of an important claim before entering into full-blown arbitration proceedings.

The distortions described above are often due to the attitudes of the parties' representatives, who may fear that they will be accused of not having done all they could to protect the parties' interests or of being responsible for the onerous consequences of mismanaging a contract. In cases where an amicable settlement is reached through informal assistance, they might also expose themselves to accusations of dilapidation of public goods or even corruption. However, such risks should not be allowed to disfigure DB proceedings or adulterate their role in preventing disputes. It may be that the ethos of Dispute Boards had not been made sufficiently clear, or that recourse to a Dispute Board was not the appropriate approach in the circumstances. It should be recognized that other approaches may be necessary in certain situations.

There have been occasions when parties have failed to honour their obligations by delaying payments due under a DB Decision. As this represents a breach of contract, the injured party may refer the failure directly to arbitration pursuant to Article 5(4) of the revised ICC DB Rules, without further formalities. Several ICC arbitration cases have had to address such failures. In the well-known Persero case,6 the arbitration panel wrongly decided on the magnitude of the amount to be paid by the defaulting party instead of restricting its decision to the issue of breach of contract and ordering the defaulting party to comply with the Dispute Board's decision. The award was challenged in Singapore's Supreme Court, which rightly set it aside as the arbitration panel was not entitled to specify any amount, given that the amount determined by the Dispute Board was an interim decision, not a final and binding decision.

Another infelicitous case was that in which, in DB proceedings, a party refused the phase of informal assistance and restricted the scope of the Dispute Board's work to formal referrals. By taking such a stance the party in question saw the Dispute Board's role as being simply to decide on the case. Such a view is at odds with the spirit of DB proceedings. It represents a one-shot approach typical of the permanent adjudication proceedings used in England to limit the number of cases submitted to the courts. DB proceedings are quite a different concept.

Every effort should be made to avoid procedural difficulties in DB proceedings. Notwithstanding the sometimes very large amounts at stake, DB proceedings should remain as brief and efficient as possible. This is the reason why, in Articles 19 to 21, the ICC DB Rules clearly set forth how submissions should be filed by the parties and how hearings should be held, especially in light of the tight deadlines set. These provisions constitute a basic framework and will help to avoid misunderstandings. It may be useful for the Dispute Board to draw up additional rules, which it will submit to the parties for approval at the beginning of the proceedings. Parties should be ready to discuss them and they should be approved without delay. Such additional rules can help the parties to better understand the procedure and prepare their submissions and the hearing in the most appropriate manner, keeping documentation to a minimum.

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Sometimes, a party to DB proceedings has doubts over the ability of its project director and other staff to properly defend its interests. It may therefore be tempted to call on the assistance of lawyers, as would happen in arbitration. However, this is to disregard the principle that in DB proceedings it is above all the persons who accompanied and managed the project who should dialogue with the Dispute Board. It is important not to be side-tracked into long contractual or legal debates. The presence of lawyers might be necessary, but only as experts called by the party's project officer. We have known of a case in which a DB hearing lasted an entire week and was attended by some fifty persons, over ten of whom were counsel representing the parties. This completely disregarded the spirit and purpose of DB proceedings and in effect transformed them into what was tantamount to an arbitration.

3.2. The key role of the parties

It is important that parties include in their contract a dispute resolution clause that makes adequate provision for dispute prevention. They should carefully consider the following when entering into their contract or at an early stage of the project:

3.2.1. Degree of commitment to dispute prevention

The parties should assess, at the outset of the contract, whether they are both willing to try to resolve the disagreements that will inevitably occur by amicable means and ready to seek compromises when needed in the course of the project. If this is the case, a Dispute Board will be an optimal tool and they would be well advised to provide for the application of the ICC Dispute Board Rules (for which purpose standard clauses recommended by ICC are available for their use7). If this is not the case, then other options may be envisaged before referring a dispute to arbitration or litigation. They include one-shot adjudication (previously referred to incorrectly by FIDIC as an ad hoc DAB) and permanent adjudication by a panel of adjudicators (POA).

3.2.2. Type of Dispute Board to be used

The three different forms of Dispute Board - Dispute Review Board, Dispute Adjudication Board and Combined Dispute Board - offer three different approaches. The DRB is less coercive, the DAB is more coercive, and the CDB lies in-between. All have been adopted in practice by users. ICC in its neutral position does not recommend one approach rather than another. Parties are invited to consider the pros and cons of each approach in light of the efficiency sought, the commitments they are willing to make, prevailing customs and their own practices, outlook and inclinations. They should decide jointly which is the most appropriate approach, best tailored to their needs.

3.2.3. Selection of DB Members

The parties' attention is drawn to the importance of the composition of the Dispute Board, which will be a key to its success. Selecting the right persons is a difficult task and the parties can, and may need to, call upon the ICC International Centre for ADR for assistance (Article 7(7) of the Rules). The selection criteria are key. The candidate must be independent, neutral and have no conflicts of interest. He or she must of course also be available. Other than that, the most important criteria are practical experience and familiarity with the parties' obligations and expectations. DB Members should be conversant with the technical and financial aspects of the project, the type of contract and the applicable law. For construction projects, engineers with experience of dispute resolution are to be preferred, but lawyers specialising in construction law might also be suitable. The panel could be composed entirely of engineers who combine experience of the technical and financial questions raised by the nature of the project with adequate knowledge of the contractual and legal aspects of the case. Alternatively, a panel made up of two engineers and a lawyer might be an attractive solution.

3.3. Concluding remark

In 2004, when they were first introduced, the ICC Dispute Board Rules were widely regarded as the most modern and comprehensive set of rules for Dispute Boards the world over. This continues to be the case following the 2015 revision, which has benefitted from the close cooperation of specialists from both ICC and FIDIC. It is a matter of regret that the 2015 Rules have not yet been adopted by FIDIC for incorporation in its Conditions of Contract but it is hoped that this will be done when the new editions are prepared.

1
Terms defined in the Rules are used in this article with the meaning that is ascribed to them in the Rules.

2
Said costs include all the costs of the parties, the arbitral tribunal and the administering institution's costs, if any.

3
See N.G. Bunni, 'What Has History Taught Us In ADR? Avoidance of Disputes!' (2015) 81:4 Arbitration 176 to 180. The exact figures are 2.58%, 3.04%, 4.34%, 4.8%, 6.9%, 13.14%, 18.8%, 24.2%, and 37%.

4
See N.G. Bunni, 'Dispute Boards in the Middle East', part of the proceedings of the DRBF Conference in Paris in May 2013, Section 6A: Africa and the Middle East.

5
It is worth noting that the General Conditions of the Dispute Adjudication Agreement annexed to the 1999 FIDIC Red Book (Conditions of Contract for Construction) likewise provide for a monthly retainer fee for management activities similar to those listed in the 2015 ICC DB Rules. This is a further indication of the importance of the Dispute Board's dispute-avoidance function and the obvious need for Dispute Board Members to be properly paid for this service.

6
Perusahan Gas Negara (Persero) TBK v. CRW Joint Operation [2010] SGHC 202 (Singapore High Court and Court of Appeal).

7
The standard clauses can be viewed and downloaded at www.iccadr.org.