JCT DAB 2021: Dispute Adjudication Boards and the Construction Act

United Kingdom

Earlier this month, the JCT released their Dispute Adjudication Board Documentation 2021 (“DAB 2021”). This publication builds on the existing CIArb rules for Dispute Boards published in 2014, but is intended to provide a Construction Act compliant procedure with a dispute board having an adjudication function. These new rules form part of a growing trend towards dispute avoidance and collaboration in the UK construction market and, subject to arguments over their compatibility with the Construction Act, may mark a significant change in the way domestic construction disputes are managed.

Introduction

Dispute boards have been used internationally in construction projects for many years to assist parties in identifying emerging issues and coming to a resolution where a dispute has arisen. To date, in the UK there has been limited use of dispute boards, in part due to the ability to refer disputes under construction contracts to adjudication as provided for by the Housing Grants, Construction and Regeneration Act 1996 as amended (the “Construction Act”) although they were also rarely used prior to that.

The aim of DAB 2021 is to provide for a Construction Act compliant dispute adjudication board to provide a proactive, rather than reactive, mechanism to resolve disputes whilst also allowing, where necessary, for the board to conduct an adjudication. These were preceded by the 2014 Chartered Institute of Arbitrators (CIArb) Rules which form the basis for DAB 2021.

Key Features

Included within DAB 2021 are a new set of JCT/CIArb Dispute Adjudication Board Rules (the “Rules”), a JCT Model Dispute Adjudication Board Tripartite Agreement and enabling provisions for both the JCT 2016 Design and Build Contract and the JCT Major Project Construction Contract, along with Guidance Notes. In broad terms the 2014 CIArb Rules and DAB 2021 are very similar. However, the key difference is the attempt by the JCT to make DAB 2021 compliant with the Construction Act. This can be contrasted with the position taken in the NEC4 contracts when introducing a Dispute Avoidance Board option (W3). The NEC Practice Note 5 states that the DAB option “is not suitable for use in the UK if the work under the contract is covered by the [Construction Act], as the Act requires that either party to the contract must be able to refer to adjudication any matter of dispute at any time”.

The intention within the DAB 2021 Rules is that a 1 or 3 person Dispute Adjudication Board (“DAB”) is appointed at the outset of the project to act as a standing board, allowing members to familiarise themselves with the project and maximising the potential for dispute avoidance. This includes regular (2 monthly is suggested) site visits or other meetings.

As with the expanded role of the Dispute Avoidance / Adjudication Board under the FIDIC 2017 suite of contracts, parties can request the DAB to provide an informal advisory opinion with a view to avoiding a dispute. That is provided to the Parties on a non-binding basis but would be intended to inform their handling of the issue having received that indication. There is also the ability to request a recommendation in relation to a dispute which has already arisen – essentially a form of non-binding adjudication.

In line with the intention of making DAB 2021 compliant with the Construction Act, there is also the separate option to refer a dispute to adjudication by the DAB, which would be temporarily binding in the usual way. In that case, any decision by the DAB would be due within the Construction Act timetable of 28 days from referral (extended as agreed) rather than the 84 days allowed for in the CIArb 2014 Rules.

Aims and benefits

Overall, these rules seek to establish a practical approach to dispute avoidance and resolution which has a track record internationally. The rules are in line with current market trends in this area in the UK. For example, the guidance issued by the Construction Leadership Council (“CLC”) in July 2020 in response to Covid-19 (“Covid-19: Managing Contractual Disputes and Collaboration”) advised that parties should “Realistically off-set the time and monetary costs of adversarial behaviour, against the savings and benefits of a collaborative commercial dialogue”.

This theme is also apparent in the Construction Playbook issued by the UK Government in December 2020 (our Law-Now on the Playbook can be accessed here). Amongst many other topics, it emphasised the requirement to move towards collaborative working and alternative dispute resolution, endorsing use of the Conflict Avoidance Pledge which calls for early intervention techniques throughout the supply chain to try to resolve differences of opinion before they escalate into disputes and the importance of embedding conflict avoidance mechanisms into projects with the aim of identifying, controlling and managing potential conflict. We also commented on these trends in the context of CEDR’s recently published 2021 Mediation Audit (see our Law-Now here).

Although the Rules are drafted for use with main contracts currently, JCT is considering the development of rules at sub-contract level. Whilst the use of dispute boards does tend to be focused on larger projects, it may be there is a place for a similar role on much smaller projects to deliver real-time advice and resolution where adjudication is not practicable due to the time and cost involved. There is certainly a demand for resolution of low value disputes, judging by recent statistics from CDR and Adjudication Society (see their most recent report here) which shows strong uptake of the new low value adjudication service launched on 1 April 2020. In addition, CDR’s research foresees an increase in referrals following the CIC Low Value Disputes Model Adjudication Procedure which was more widely launched in May 2020 and is aimed at disputes with a value of £50,000 or less. If similar rules or a form of DABs were to be developed for smaller projects, with a suitable cost structure, they may be of great value to parties with these types of disputes.

Challenges and uncertainties

The potential benefits of having a workable DAB procedure for domestic disputes subject to the Construction Act should be considered by parties alongside the degree of uncertainty which exists as to the validity of such a procedure under the Construction Act. There is no court guidance over the use of DABs under the Construction Act, but points to consider include:

  • Challenges to the jurisdiction of a DAB as adjudicator may be made on the basis that the Construction Act does not permit a three-person tribunal to act as adjudicator. The JCT’s foreword to DAB 2021 states its view that a three-person tribunal would not be inconsistent with the Act, but parties unhappy with an adjudication decision may seek to contest enforcement on this basis.

  • Whether or not a three-person tribunal will be able to act with the speed and flexibility required of an adjudication process under the Construction Act also remains to be seen. As noted above, the period originally allowed by the CIArb 2014 Rules was 84 days.

  • Questions may also arise as to whether a board which has provided advisory opinions and/or non-binding recommendations can subsequently fulfil the role of an impartial adjudicator. Furthermore, parties may not be willing to participate in meetings and provide documentation (as provided by the Rules) in an open and transparent manner with the DAB, if there is a possibility that members will later become an adjudicator.

Conclusion

Despite these uncertainties, the introduction of DAB 2021 is an indication that the pace of change in relation to dispute avoidance, management and resolution in construction contracts is increasing and there is significant momentum behind the use of more collaborative, less adversarial procedures. DAB 2021 now adds its voice to that.