Time-bound Arbitration and the Fidic evolution

Time-Bound Arbitration (TBA) emanated from the existing legal system and its tools, which deal with various disputes in the society.

In the construction industry, it is common practice for arbitration procedures and tribunals (courts) to be created or initiated only when there is a dispute. This often results in a substantial amount of money and time spent as well as delays.

Such situations only lead to justice being delayed and, ultimately, a denial of justice. Moreover, it will have a negative impact on the parties involved and on the industry as a whole.

Dilemma

The major problem of most employers, engineers, contractors, subcontractors and suppliers is resolving disputes arising from the execution of their projects in a cost-effective, timely and controlled manner.

Conventional dispute-resolving tribunals such as the courts and arbitration and adjudication bodies have so far failed in achieving the aforementioned objectives.

It is therefore important to have a mechanism in place to resolve disputes swiftly, while avoiding time-consuming negotiations in forming arbitration panels.

This can be achieved by forming the arbitration tribunal at the early stages of the contract. This is in many ways similar to forming a permanent dispute adjudication board, but with a time-controlled mechanism for its functioning and decision-making process.

Accordingly, all parties to the contract should agree on a specific time-bound mechanism during the tender stage and/or negotiation stage (before or during the awarding and signing of the tender) and on the appointment of an arbitrator or a panel of arbitrators, who will act as an ongoing arbitration panel to settle construction and even maintenance-related disputes.

Honeymoon period

The TBA tribunal must be created during the tender stage or during the signing of the contract or subcontract agreement. It is unlikely that there are negative sentiments and feelings and tension between the parties at this stage (the “honeymoon period”), which will make it easier to agree on the composition of the tribunal in a short time and under no duress or tension that is usually experienced during the construction stage.

The TBA tribunal members may be chosen from institutional listings of arbitrators by national or international establishments and the parties may agree on the composition through direct nomination in case of ad hoc arbitration.

The conditions for appointment, disqualification and replacement of arbitrators are similar to those in a regular arbitration tribunal.

There must also be alternate arbitrators to ensure the TBA continues to function in the event some members resign, are disqualified or are unable to function because of other issues.

Parties that are in disagreement may refer their claims to the tribunal a few weeks before its official meeting date. This will give the tribunal members ample time to study and verify documents, claims and counter claims from the parties and to carry out site visits when necessary.

The tribunal must be given the responsibility and opportunity to analyse and resolve the disputes and give a firm decision and judgment within 30 calendar days from the convening date or as may be agreed on and decided by the TBA tribunal, depending on the magnitude and complexity of the dispute in question.

The tribunal’s decision must be firm, final and binding on the parties, with no room for further recourse to litigation and/or other dispute resolution methods. The same should be clearly stated in the contract and agreed upon by the parties.

Fidic

The scope of work and responsibility of the TBA tribunal must be chartered very carefully in order not to interfere with the engineer’s role. The tribunal should receive complaints or disputes after they have been subjected to the engineer’s verification, recommendation and decision, which will enhance and support the engineer’s role and at the same time help reach a swift and decisive resolution to the disputes.

According to the International Federation of Consulting Engineers (Fidic) 1987 Edition, the engineer’s role is defined as “the person appointed by the employer to act as engineer for the purposes of the contract and named as such in Fidic Conditions”.

The Fidic 1999 Edition defines the engineer under subclause 1.1.2.4 as “the person appointed by the employer to act as the engineer for the purposes of the contract and named in the appendix to tender, or other person appointed from time to time by the employer and notified to the contractor under subclause 3.4 [Replacement of the Engineer]”.

It is obvious that the engineer receives payment solely from the employer. Therefore, he cannot act as a neutral arbitrator in case of disputes, bearing in mind the complex relations as well as the personal interests involved.

The above has been recognised in the formation of arbitration tribunals, adjudication boards and expert panels, whereby an equal share of the financial burden is well-established and implemented by Fidic and other contracts in this regard.

There is no reason whatsoever not to employ the same mechanism to the engineer’s role and the financial backing, bearing in mind that the overall cost elements of any project is entirely borne by the employer. It thus follows to properly subdivide and channel the financing of various elements to ensure reasonable transparency, equality and neutrality.

Drastic changes

Nowadays, the project’s magnitude, complexity and various types of trades and disciplines involved call for a more balanced, transparent and firm mechanism to address all parties’ concerns, viewpoints and claims. In comparison, projects and contracts were more confined and less complex when Fidic contracts were established 50 years ago.

Fidic contracts have changed drastically from centralised engineer-based design and heavy involvement to contractor-based design and involvement.

The above approach can be recognised from the latest editions of Fidic, represented by the yellow, silver and orange books. Even the well-known red book has left room for partial design induction by the contractor.

The above development questions the present set-up and the status quo of more than 100 years on Fidic’s reference to the engineer’s design role and responsibility and the magnitude of such involvement, bearing in mind that 75 per cent of its latest publications are geared towards design that is initiated and controlled by the contractor rather than the engineer, with its legal and contractual implications to liability and responsibility.

The time has come to replace the “consulting engineer’s role” with “construction engineer’s role”, in tandem with the new Fidic editions. This is also in recognition of the joint responsibility of the engineering profession as a whole and the wide spectrum of expertise available in the construction industry, and the ever-increasing joint cooperation based on the build, design and operate approach to major engineering projects, which reflects the reality and the developments in the past 20 years.

TBAT

With reference to Fidic 1996 and Fidic 1999, the Time-Bound Arbitration Tribunal (TBAT) is established instead of a Disputes Adjudication Board (Dab) to avoid unnecessary delays and wastage of time and resources due to the voluntary nature of the Dab and the parties having a decisive role in its functioning and outcome.

On the other hand, there is a more affirmative, compulsory and decisive approach with the TBAT, which is nominated by the parties and created by a contract, with specific time limits for its functioning, decision making and implementation.

The formation and setting up of the TBAT must be carried out in the same manner and mechanism that has been adopted in the creation and implementation of standard arbitration tribunals.

The above approach will help avoid simple disputes and problems, which arise during the practical execution of the contract between the parties, from snowballing.

Such an approach was recognised and appreciated in light of the fact that, in case there is a failure to agree on the Dab approach and its recommendations, the parties may refer back to arbitration to resolve disputes, in the absence of an amicable settlement.

The social, cultural and civil background of the parties as well as the dispute’s location, the site conditions and the circumstances play significant roles in this regard.

Advantages

The advantages of adopting the TBAT can be summarised as follows: