Real Estate Litigation Update - March 2025

Avoiding Arbitration? King’s College London (KCL) In-Depth Study Provides Valuable Insights into [or “Regarding”] the Use of Dispute Boards in Construction Projects

            The use of Dispute Boards (i.e., dispute avoidance or adjudication boards) on construction projects is a divisive topic.  In view of the time and resources required to see a complex technical dispute through to a final judgment or award, interim steps that may avoid the need for subsequent arbitration or litigation are increasingly attractive, not least where the decisions or recommendations obtained are both informed and impartial.  Equally, where a party dissatisfied with the results of the procedure can then simply commence arbitration or litigation, with the dispute considered anew, the utility of Dispute Boards has long been a matter of speculation – viewed by some as simply delaying the ultimate resolution of a dispute.  As a result, parties routinely delete pro forma Dispute Board provisions when using standard contractual forms as the basis for their negotiated agreement.

            Against that background, the release on December 9, 2024 of the results of the “2024 Dispute Boards International Survey: A Study on the Worldwide Use of Dispute Boards over the Past Six Years” – conducted and published by KCL’s Centre of Construction Law and Dispute Resolution – provides essential data both in informing how Dispute Boards can best be used, and improved upon.   This in turn permits those involved in the industry to make a more informed decision as to whether to include Dispute Board mechanisms in their contracts going forward. 

            As noted in the survey methodology, for the purposes of the survey Dispute Boards are defined as any: “job site dispute avoidance or resolution mechanism, constituted by individual(s) that should operate independently from the parties to the contract(s) and with the purpose of addressing the disputes of a specific project.”  Dispute Boards are distinct from other forms of alternative dispute resolution (i.e. covering mediation, negotiation and expert determination).  Done well, Dispute Boards take the form of an interim step, to permit the project to proceed, and with any remaining issues then falling to be addressed in final and binding arbitration (or litigation). 

            KCL’s impressive survey “gathered data on 4,019 dispute boards over a period of six years reported by 213 respondents and provides rigorous evidence-based perspectives on longstanding industry issues.”  The results indicate that the usual claims submitted to Dispute Boards concern extensions of time and associated cost claims, together with “hardship, force majeure, or unexpected events.” As highlighted by KCL, together the survey results paint a generally encouraging picture of Dispute Boards, suggesting that the cost of the procedure appears to be “justified by their effectiveness in avoiding or reducing the scope of disputes or resolving them altogether without the need for a much more costly arbitration”, and that “the rate of compliance with dispute board decisions is reasonably high.” 

            Specifically, of those responding to the survey 50% of individuals are reported to have found Dispute Boards “extremely useful” in avoiding disputes.  Whereas the figure was lower for entities (38% of whom reported that Dispute Boards are “somewhat useful” for avoiding disputes), it was higher for funders participating in the survey (75% finding Dispute Boards “very useful” in avoiding disputes).  

            Chief among the challenges identified by the survey, however, is finality of the Dispute Board decisions.  For example, 43% of entities surveyed reported that a lack of enforceability was the reason for deciding against including a Dispute Board procedure in their contracts.  In answer to the question “Would the construction industry benefit from the existence of an international convention facilitating the circulation and enforcement of the Dispute Board’s decisions?,” 58% of responding individuals agreed, as did 63% of entities, 92% of institutions, and 50% of funders – with the goals across the board including enforced compliance.  A clear issue is that drafting and agreeing a multilateral convention is likely to be a time consuming project.  In the meantime, the ultimate efficacy of Dispute Boards remains subject to what parties elect to agree in their project documentation.

            In that regard, it is of course open to parties to take the best features of Dispute Boards, coupled with other dispute resolution elements suitable to the types of disputes likely to arise.  Subject to their overall bargaining position, parties need not be wedded to traditional multi-tiered dispute clauses, and can seek to agree on a process that bypasses potentially lengthy arbitration but preserves the rigor applied by arbitral tribunals in determining claims and counterclaims presented to them.  By way of example, bespoke adjudication, with sufficient time and procedural steps to permit a robust claim review, can render a result acceptable to both sides of a dispute.

            Taken together, KCL’s excellent analysis very helpfully explores the strengths and weaknesses of current Dispute Board practice.  In addition, it readily informs what alternative procedures might look like, that obviate the need for subsequent proceedings.