It is now almost three years since ICC introduced its Dispute Board Rules. Drafted by a task force within the ICC Commission on Arbitration, these Rules provide a framework for establishing and operating Dispute Boards.

A Dispute Board is a committee of experts, normally set up by parties at the beginning of a contract, comprising one or three members who know the contract and, by following its performance, are in a position to help resolve disagreements and disputes as and when they arise. Depending on the nature of the controversy between the parties and their wishes with respect to that controversy, the Dispute Board may provide either informal assistance or issue a Determination in response to the formal referral of a dispute.

The ICC Dispute Board Rules offer parties a choice between three different kinds of Dispute Boards: Dispute Review Board (DRB), Dispute Adjudication Board (DAB) and Combined Dispute Board (CDB). Following a similar pattern to ICC's other dispute resolution rules, the Dispute Board Rules cover the appointment of Dispute Board members, their obligations, the conduct of proceedings before the Dispute Board, the determinations made by the Dispute Board, and the costs associated with the creation and operation of a Dispute Board. The Rules are accompanied by three standard Dispute Board clauses-one for each of the three different kinds of Dispute Board-and a model Dispute Board member agreement for use by parties when engaging Dispute Board members.

The ICC Dispute Board Rules have already been used in a variety of situations and it has therefore been thought opportune to offer readers the observations of some leading practitioners on the Rules and their application in concrete situations. Messrs Naël Bunni,1 Paul-A. Gélinas,2 Pierre Genton 3 and Peter Wolrich,4 who have all acted as members or chairmen of Dispute Boards, kindly agreed to be interviewed by Mélanie Meilhac, Manager of ICC's ADR, Expertise and Dispute Board services.5 Separate interviews were held during May 2007 and the interviewees' answers have been collated and summarized below.

Mélanie Meilhac: What was the reason for drawing up a set of rules relating to Dispute Boards?

Pierre Genton: Alternative methods of dispute resolution are being increasingly used in commerce. As the world business organization, ICC wished to offer the business community a set of modern tools covering the prevention as well as the resolution of disputes.[Page44:]

Peter Wolrich: There was a desire to create a set of rules that was more flexible (i.e. suited not only to construction contracts, with respect to which Dispute Boards have been widely used, but also to other kinds of contracts) and innovatory (Combined Dispute Boards, for instance, did not previously exist).

Paul-A. Gélinas: ICC was originally known for arbitration and, to some extent, for conciliation. Given the developments taking place in dispute resolution services, the question then arose as to how far ICC was prepared to go in this direction. There was a risk in developing other dispute resolution services, namely that this could have an adverse impact on arbitration. Would it not lead to a fall in the number of cases submitted to arbitration? And, more generally, would it not undermine ICC's image in international arbitration? Despite these risks, ICC decided to take the plunge with its 'green' services. The reason for its doing so was a strong demand from the business community, and it was also encouraged by the fact that the wider role it was already playing in the dispute resolution field through its ADR, expertise and DOCDEX services had not created any conflict with its arbitration activities.

Naël Bunni: ICC wanted to see its dispute resolution services develop, and furthermore felt that Dispute Boards could be useful for other kinds of contracts, in addition to construction contracts.

Mélanie Meilhac: As there would appear to be a strong demand, why has ICC not received more cases involving the Dispute Board Rules than has happened over the last three years?

Naël Bunni: These Rules are brand new. We must give the business world time to adopt them, especially as there is stiff competition, for instance from the World Bank and FIDIC.

Paul-A. Gélinas: Dispute Boards are relatively new tools for preventing and settling disputes. Their usefulness has been officially endorsed by international lending institutions only in the last two or three years. There is no doubt that the ICC Dispute Board Rules will be resorted to increasingly over the coming years.

Pierre Genton: Cases are above all referred to ICC when difficulties arise, particularly in the initial stages of a contract, for example when the parties are unable to constitute the Dispute Board themselves and call upon ICC to appoint the Dispute Board members, or when the challenge of a Dispute Board member has to be decided. ICC's involvement is therefore sporadic and answers specific needs. It is conceivable that a Dispute Board operating within the ICC Rules might never resort to the ICC Dispute Board Centre.

Peter Wolrich: First of all, since ICC does not administer Dispute Board proceedings, as it does arbitration, ADR and administered expertise proceedings, parties can make use of the ICC Dispute Board Rules without informing ICC. Normally, ICC only knows about the use of its Dispute Board Rules when it is asked to play a role, such as appointing a Dispute Board member, deciding on a challenge of a Dispute Board member, or reviewing the Decision of a Dispute Adjudication Board or a Combined Dispute Board. Secondly, parties need time to become familiar with these new Rules.

Mélanie Meilhac: What are the other kinds of contracts to which the Dispute Board Rules could be applied?

Pierre Genton: Any mid- or long-term contract, in whatever field. Besides the construction sector, I could mention, in particular, banking, insurance and any other commercial contract such as purchase contracts performed over a period of several years.[Page45:]

Naël Bunni: Insurance policies relating to construction contracts. Dispute Boards would not have to meet as often as for construction contracts themselves, but would nonetheless be of great help.

Peter Wolrich: The Dispute Board Rules lend themselves to mid-term and long-term contracts where there is a possibility that several disputes could arise during the life of the contract. Besides construction contracts, this includes contracts performed through a succession of operations, and complex contracts involving the provision of various services or goods, such as those relating to the petroleum industry or large agricultural projects.

Paul-A. Gélinas: The inclusion of Dispute Board provisions can be of benefit to any contract that is performed over a period of time and requires some degree of cooperation between the parties. Besides construction contracts, other examples of such contracts include those relating to the joint development of products and product markets, the phased acquisition of companies dependent on earnouts or certain objectives being met, BOT and other PPP arrangements covering operations as well as construction, and the long-term supply of specialized or customized parts for aircraft assembly or large IT projects for example.

Mélanie Meilhac: What is new about the ICC Dispute Board Rules and what are their advantages?

Paul-A. Gélinas: In the Dispute Board Rules, ICC offers a framework of clear provisions. ICC is also available to provide specific services, namely the appointment of Dispute Board members, the deciding of challenges and the review of Dispute Board Decisions. The flexibility of the Rules is also worth noting. I would recall that the Rules are the result of a consensus reached in work and discussions between delegates representing a wide spectrum of viewpoints and cultures. Because of this universal aspect, they lend themselves to the majority of cases.

Peter Wolrich: Combined Dispute Boards are a new feature, as is the possibility for the ICC Dispute Board Centre to review Dispute Board Decisions with respect to form.

Naël Bunni: Informal assistance is one of the great advantages of the ICC Dispute Board Rules. No other sets of rules spell out this mechanism with such clarity. The FIDIC rules, for instance, refer to it only indirectly and, incidentally, will soon be amended to come more into line with ICC through the inclusion of a clause specifically devoted to informal assistance. The great advantage of informal assistance is its effectiveness in preventing a disagreement from becoming a dispute. Therefore, it is a prevention measure rather than a resolution mechanism. Given that it requires the parties to be in agreement, they are inevitably more relaxed and open, which explains why it very often avoids having to make a formal referral to the Dispute Board.

Pierre Genton: The ICC Dispute Board Rules are at the present time probably the only set of rules in the world that offers parties all three types of Dispute Boards, namely Dispute Review Boards, Dispute Adjudication Boards and Combined Dispute Boards 6 and, above all, that leaves the parties free to choose the most appropriate approach in a [Page46:] given context. Combined Dispute Boards are an innovation of ICC, allowing parties to benefit from the advantages of both Dispute Review Boards and Dispute Adjudication Boards. It is also worth mentioning that, before a dispute sets in after a request for a Recommendation or a Decision has been filed, the parties may present, discuss and obtain a preliminary opinion on questions of principle that binds neither the parties nor the Dispute Board. Such an opinion will allow each of the parties to reconsider its position and even to resume negotiations on a fresh basis and find a solution acceptable to both of them.

Mélanie Meilhac: What is your view of Combined Dispute Boards?

Pierre Genton : In order to achieve efficiency in preventing as well as resolving disputes, Combined Dispute Boards are usually used as Dispute Review Boards and issue non-binding Recommendations, which allow a dispute to be settled directly by the parties through negotiation, thereby preserving the special relationship between the parties. When a dispute reaches a form that could jeopardize the performance of the contract, one of the parties, or even both of them, can request a Decision from the Combined Dispute Board. This situation implies that the Decision is made by a third party and is binding upon the parties, with the consequences this may have. In international contracts, a Combined Dispute Board also offers the possibility of adapting to the parties' mindsets, which may be very different. When the ICC Dispute Board Rules were being drafted, some distinguished members of the Task Force even expressed the view that the Combined Dispute Board could be sufficient in itself. At any rate, it offers a means of obtaining an efficient solution in the event of urgency while also encouraging reasonable behaviour by the parties, whether at the negotiating stage or during the performance of a contract.

Paul-A. Gélinas : The mission of a particular Dispute Board, at a given time, will depend on the circumstances. In small contracts greater headway can be made with a Dispute Adjudication Board, while in large contracts a Combined Dispute Board offers the flexibility of being able to act either as an adjudicator or as a kind of mediator, as circumstances may require.

Naël Bunni : Combined Dispute Boards are unique to the ICC Dispute Board Rules. For parties who wish to allow for the possibility of different kinds of Determinations in respect of different disputes, they make the ICC Dispute Board Rules an appropriate choice. This is because a Combined Dispute Board can issue a Decision rather than a Recommendation, if this is what the parties prefer or what the Dispute Board decides in the event of disagreement between the parties. However, it should perhaps be pointed out that Combined Dispute Boards are not necessarily the most effective mechanism available to parties in construction contracts. The need to decide between a Recommendation or a Decision could, for instance, create some uncertainty and inflexibility. Of course, there is no problem if both parties agree on the kind of Determination to be issued. However, if they do not, there are no clear and predictable rules to guide the Dispute Board in deciding which kind of Determination to issue for a given dispute. This contrasts with the FIDIC rules, where parties are admittedly offered only one kind of Dispute Board (Dispute Adjudication Board) but, if they find the Dispute Adjudication Board's decision unacceptable, have the possibility of triggering amicable dispute resolution that might lead to agreement, prior to referring the dispute to arbitration.

Peter Wolrich : In construction contracts, in particular, parties often have different interests: the contractor tends to prefer a Dispute Adjudication Board, whereas the owner tends to favour a Dispute Review Board. This is because Dispute Adjudication Boards render Decisions that are provisionally binding, so if the Decision holds that the [Page47:] contractor is entitled to a sum of money, the sum must be paid promptly following the Decision of the Dispute Adjudication Board, subject to a possible subsequent arbitration to finally determine the matter. Unlike FIDIC and the World Bank, both of which came down in favour of Dispute Adjudication Boards, ICC has not chosen between the two and also offers a further option, namely Combined Dispute Boards. A Combined Dispute Board could be helpful in construction contracts, since it represents a compromise between the Dispute Adjudication Board and the Dispute Review Board. Combined Dispute Boards may make Decisions or Recommendations. It is important to note that if the parties do not agree on what form the Determination should take, the Combined Dispute Board will decide in the last resort, with reference to the factors set out in Article 6(3) of the Dispute Board Rules. It is expected that the Dispute Board will use the same good judgment in deciding upon the form of Determination as it uses in making Determinations in general. There is therefore no risk of deadlock, especially as the parties cannot question the choice made by the Dispute Board. The time allowed for the Dispute Board to settle this question is not specifically provided. However, Article 6(3) states that when the Dispute Board decides between a Decision and a Recommendation, one of the factors it will take into consideration is the urgency of the situation. This is an indicator. In any event, the Dispute Board must issue its Determination within 90 days.

Mélanie Meilhac: More generally, what are the advantages of Dispute Boards?

Peter Wolrich : Dispute Boards are effective because they are present throughout the life of a contract and play an active role in resolving disputes as they arise. A Dispute Board may provide three levels of assistance: Firstly, there is a scarecrow effect. When a difficulty arises between the parties, the very existence and presence of a Dispute Board fully conversant with the performance of the contract and able to make Determinations quickly tends to lead the parties to seek a solution themselves before approaching the Dispute Board. In addition, Dispute Board members typically encourage the parties to resolve their own disputes. Secondly, the Dispute Board may provide informal assistance, as set forth in Article 16 of the ICC Dispute Board Rules. This is a very effective procedure, in which the Dispute Board may receive memoranda from the parties, meet with them separately or together, and provide informal advice for resolving a dispute. The advice may be given orally or in a short written statement. The third form of assistance is the formal referral of a dispute for determination by the Dispute Board pursuant to Articles 17 and following of the Dispute Board Rules. This procedure resembles a mini-arbitration and typically involves an exchange of memoranda by the parties, a hearing before the Dispute Board, and a written Determination by the Dispute Board.

Paul-A. Gélinas : The virtue of Dispute Boards lies in the fact that they act as an incitation to transparency. As the Dispute Board members are well acquainted with the contract and the parties, the parties are less inclined to conceal information. A Dispute Board needs to be seen as a permanent body associated with the implementation of a project and should be used as such by the parties for their overall benefit as and when required, including for the informal assistance it can provide.

Pierre Genton: Dispute Boards have proved to be an efficient management tool, provided they are correctly used by the parties with due respect for their contractual obligations. Dispute Boards allow for various approaches, each of which has its advantages. Dispute Review Boards, in which the emphasis is placed on settlement by consensus, allow disputes to be resolved while preserving good relations between the parties. Dispute Adjudication Boards reflect a more coercive approach for the parties, allowing decisions to be made more rapidly. Combined Dispute Boards combine these [Page48:] two advantages, insofar as they allow the parties to choose the kind of determination to be issued by the Dispute Board. Dispute Boards in general are a quick and cheap way of both preventing and resolving disputes.

Mélanie Meilhac: What role does the chairman of a Dispute Board play and how should a Dispute Board be composed?

Peter Wolrich: It is the chairman who decides in the event of disagreement between the members of the Dispute Board. Typically, it is the chairman who acts as spokesperson for the Dispute Board. The chairman should be a lawyer or, depending on the nature of the contract, either an engineer or a trade specialist with solid legal knowledge, for he or she will normally be required to supervise the hearing and may be required to decide questions concerning the interpretation of contractual provisions and national legislation. Legal knowledge is also important as the formal proceedings, insofar as the chairman's role is concerned, can be likened to arbitration. The other members of the Dispute Board can be engineers, trade specialists or lawyers, although, if the chairman is an engineer or a trade specialist, it is highly advisable for at least one of the other members of the Dispute Board to be a lawyer.

Paul-A. Gélinas: In a Dispute Board comprising three members, it is preferable to have the Dispute Board chaired by a lawyer with particular knowledge of the type of project involved. A legal background will help the chairman to conduct orderly meetings and take appropriate initiatives, in consultation with the other two members of the Dispute Board, so as to ensure that the atmosphere between the parties remains conducive to dialogue and business-like discussions. In addition, many matters arising may not only be technical but also call for the application and possible interpretation of the contract.

Naël Bunni: The chairman has a key role. It is often the chairman who drafts the Determinations and decides the way in which informal assistance and hearings will take place. The conduct of the proceedings as a whole lies on his shoulders. This is why the chairman of the Dispute Board must have two important attributes: he or she should be familiar with the subject matter and definitely have legal knowledge. This does not necessarily require him or her to be a lawyer, but a legal grounding is indispensable for understanding and interpreting the contract (in practice, Dispute Boards are required to interpret contract conditions more than pure law). The other members of the Dispute Board may be mere 'technicians'.

As far as relations between Dispute Board members are concerned, the chairman has a difficult and sensitive role to play where there is disagreement between the Dispute Board members and one of the members disagrees with a Determination and decides to communicate to the parties in a separate written report his or her reasoning for the disagreement, but in doing so the member undermines the integrity of the Determination. This might sometimes give rise to problems. The report bears some similarity to a dissenting opinion in arbitration, which, if misused, can be detrimental to understanding between the members of the arbitral tribunal. I once chaired an arbitral tribunal in which a co-arbitrator issued a dissenting opinion and used that opinion to undermine the majority award through false allegations. It is unlikely that I could have continued working with the co-arbitrator in question, had this been necessary. In the event, it was not, as the award to which the arbitrator objected was the final award in the case and was subsequently upheld by a State court. Dispute Boards, on the other hand, will invariably need to continue their work after the dissenting report has been circulated. If the dissenting report is misused, as in the arbitration case I mentioned, this could damage relations between the members of the Dispute Board and have an adverse impact on the quality of the work subsequently done by it. It is therefore important to be aware of and to try to avoid this danger.[Page49:]

Pierre Genton: It is important that Dispute Board members should be professionals who are not only specialists in the subject matter of the contract, but are also of such a disposition as to be capable of working together and rendering Recommendations or Decisions over several years. In the construction field, for instance, it is preferable to choose engineers, provided they have the necessary basic knowledge of a technical, financial, administrative and contractual nature, and even of a legal nature. The chairman of a Dispute Board plays a role very similar to that of the chairman of an arbitral tribunal, but in addition is able to deal with and freely discuss technical problems with the parties, naturally with the support of his or her colleagues. A Dispute Board can be chaired by an engineer, an economist, a lawyer or any other professional with the necessary versatility and experience. It may be wise to have a lawyer on the Dispute Board. For instance, a Dispute Board comprising two engineers and a lawyer would appear to be balanced. It is, however, not advisable for one of the parties to directly choose a lawyer as a Dispute Board member. This is because the other party, too, would feel obliged to do likewise, which would make it impossible for the parties to benefit from the experience of professionals in the field and obtain Recommendations or Decisions on a direct and practical basis. In other words, the Dispute Board would be unbalanced and would not be able to render the service expected of it without outside assistance or within the time allowed.

Mélanie Meilhac: What do you think of the procedure for appointing Dispute Board members? The Dispute Board Rules state that the parties shall jointly appoint the first two members of the Dispute Board (Article 7(4)). This is a nice idea, but in practice doesn't each party continue to choose 'its' member, as happens in arbitration?

Paul-A. Gélinas: Indeed, parties would appear not to abide strictly by this provision. It may be assumed that once the parties become familiar with this provision, they will be more inclined to comply with it. It is far better if all members are accepted by the parties. In order to avoid possible mistrust later, it is in many instances recommendable that none of the Dispute Board members should have the same nationalities as the parties.

Pierre Genton: It is general practice that in a three-member Dispute Board each party chooses an independent member and the two chosen members select a third member. The three members are then approved and appointed by both parties when the parties sign their contract. Each member has to complete a statement of independence. The approval of all members of the Dispute Board by all of the parties is essential to the parties' trust in the Dispute Board and to the proper functioning of a body that will be required to successively consider a number of requests over several years. There is usually no difficulty in obtaining such approval when the contract is signed or, at the latest, when it is just starting to be performed.

Peter Wolrich: The appointment of the first two Dispute Board members jointly by the parties is a key feature of the Dispute Board Rules. When members are appointed jointly by the parties, they are encouraged to seek consensus, so this provision is conducive to the harmony that needs to be maintained within the Dispute Board.

Naël Bunni: There are various ways of ensuring objectivity in the procedure for appointing Dispute Board members. One method is for the appointing authority named in the parties' contract to provide both parties with a list of candidates and for each party to rate the candidates according to its preference. The two candidates obtaining the highest combined scores are appointed as the first two Dispute Board members. Another method is for each party to provide a separate list of candidates and for each of [Page50:] them to choose from the other's list. Both methods have proved successful in avoiding partiality in the appointment of Dispute Board members.

Mélanie Meilhac : What comments, if any, do you have about the compensation paid to the various members of the Dispute Board?

Peter Wolrich: Article 26 of the Dispute Board Rules lays down a principle of equality between the different members of the Dispute Board with respect to monthly and daily fees. In practice, the sums paid to Dispute Board members are closer to those paid to engineers than those paid to lawyers.

Paul-A. Gélinas: It is necessary that the principle of equality should apply to the remuneration of Dispute Board members. Although it is true that the chairman does more work than the other members, the difference is not big enough to justify breaking with equality. Even if the hourly rate does not compare favourably with rates applicable in international arbitration, the difference pales away when the monthly retainer is taken into account, especially when the project gives rise to few formal referrals, or none at all, as often happens.

Pierre Genton: The members of a Dispute Board should all be paid in the same way and at rates that are commensurate with the duties they perform. Experience shows that some parties have a tendency to try to abnormally reduce the cost of a Dispute Board by putting pressure on the chosen members. The direct result is usually that the appointment is refused and/or the quality of the Dispute Board falls. Moreover, this is totally contrary to the main purpose of a Dispute Board and the parties' interests, namely to prevent and resolve disputes competently during the performance of the contract. Another system encountered in an emerging country is the direct payment of a chosen member by one of the parties. This method is not only difficult for the other members to accept but also creates problems vis-à-vis that member's independence. The best method is therefore to allow the Dispute Board members to confer with each other and put forward a proposal, and not for the parties to try to impose a rate and/or inappropriate conditions. Attention should also be drawn to the principle whereby payment is split 50%/50% between the parties. The ICC Rules lay down principles for compensation and it is highly advisable that they be followed in order to ensure that the Dispute Board functions properly.

Naël Bunni: The principle of equality is important. However, it is possible for the chairman to earn more when working additional hours. What is important is equality in the hourly rate. Problems sometimes arise from the fact that Dispute Board members are paid at rates close to those usually used for engineers. This may make it difficult to appoint lawyers, who are used to being paid higher rates. The solution would be to seek an overall increase in the hourly rate rather than abandoning the principle of equality. Even as an engineer, I have been offered opportunities at rates too low to accept.

1
Chartered engineer, registered chartered arbitrator, mediator/conciliator; visiting professor in construction law and contract administration, Trinity College, Dublin, Ireland.

2
Member of the Bars of Paris and Montreal, arbitrator.

3
Arbitrator, mediator, court expert; chair of the ICC Commission on Arbitration Task Force responsible for drafting the ICC Dispute Board Rules.

4
Attorney at the Bars of New York and Paris; arbitrator; managing partner of the Paris office of Curtis, Mallet-Prevost, Colt & Mosle LLP; chair of the ICC Commission on Arbitration.

5
Thanks are also due to Alexandre Vermynck, intern with ICC's ADR, Expertise and Dispute Board services, for the assistance he provided.

6
For a fuller discussion of the ICC Dispute Board Rules, see P.M. Genton, 'An Efficient Dispute Management Tool : The Dispute Board and the ICC DB Rules' in J.C. Goldsmith, A. Ingen-Housz & G.H. Pointon, ADR in Business (Kluwer Law International, 2006) 93; C. Koch, 'ICC's New Dispute Board Rules' (2004) 15:2 ICC ICArb. Bull. 10.