The use of DBs has grown significantly over recent decades, reflecting their increasing importance in managing disputes within construction projects. According to a 2024 survey conducted by the Centre of Construction Law and Dispute Resolution at the Dickinson Poon School of Law, King's College London, a total of 4,019 Dispute Boards were reported to be in place over the last six years.

Several institutions have adopted provisions and rules to incorporate and regulate DBs as a mechanism of dispute avoidance and resolution. The International Federation of Consulting Engineers (FIDIC) first introduced a Standing Dispute Adjudication Board in its Conditions of Contract for Design-Build and Turnkey (1995 Orange Book). Since then, FIDIC has consistently included DBs as a dispute avoidance and resolution mechanism in its FIDIC Suite of Contracts. Similarly, the International Chamber of Commerce (ICC) introduced Dispute Board Rules in 2004. Additional initiatives have emerged since, such as the Disputes Board Federation, the American Arbitration Association's Dispute Resolution Board Guide Specification, and the Spanish and Ibero-American Club of Arbitration's Dispute Boards Manual.

In December 2024, FIDIC's Dispute Avoidance and Adjudication Forum published its Practice Note II: Appointment of Dispute Boards (Practice Note). The Practice Note provides a list of twelve "Tasks" designed to serve as a guideline or checklist for selecting the right Dispute Board for a particular construction project under FIDIC contracts.

Below, we set out the key elements of the Practice Note and highlight important considerations for the selection of Dispute Boards in the context of FIDIC contracts and in general.

2. Key Elements of the FIDIC Practice Note

2.1 Deciding between a standing or an ad-hoc Dispute Board (Task No. 1)

A standing Dispute Board is established at the start of a project - typically shortly after the contract is signed or the commencement date – and remains in place for the duration of the contract. In contrast, an ad-hoc Dispute Boards is formed to decide on a specific dispute or series of disputes as they arise. The first Task in the process of appointing a Dispute Board is to determine whether a standing or ad-hoc DB is more suitable for the specific project's needs.

It is important to note that the choice between a standing or ad-hoc DB should be aligned with the project's risk profile and the nature of potential disputes. For example, projects with a high potential for frequent disputes or those that involve complex issues may benefit from a standing DB's continuous involvement.

The Practice Note reflects FIDIC's preference for standing DBs. FIDIC has opted for this type of DB in all of its forms of contract since 1999. The main advantage of standing DBs lies in their continuous involvement throughout the project, allowing their member(s) to monitor progress closely and proactively address issues before they escalate into formal disputes. This approach not only saves time and costs but also helps maintain the relationship between the parties.

The preference for standing DBs is also reflected in the results of the Survey conducted by King's College. Among the respondents – categorized as "Individuals" and "Entities" – 83% of Individuals expressed a preference for standing Dispute Boards, with 22% favoring institution-administered boards and 61% preferring boards directly managed by their members. Similarly, 71% of Entities indicated a preference for standing Dispute Boards, with 30% favoring institution-administered boards and 41% opting for boards managed directly by their members.

On the other hand, ad-hoc DBs offer the advantage of enabling parties to appoint DB members with the expertise relevant to the specific dispute. The Practice Note illustrates this with an example: in a dispute over unforeseen ground conditions involving complex quantum calculations, the most appropriate panel might consist of a geotechnical engineer, a quantity surveyor experiences in assessing claims and variations, and a construction lawyer. This approach allows the parties to select a three-member panel with the precise skill set required, in contrast to a standing Dispute Board that may lack the necessary specialized expertise.

2.2 Defining the number of Dispute Board members (Task No. 2)

Dispute Boards may be composed of either a sole adjudicator or a panel of three (or more) members. As the second "Task", FIDIC's Practice Note recommends determining the number of DB members and suggests opting for a three-member panel, provided the cost of the DB is not a critical factor.

A three-member panel has been the default arrangement in all FIDIC Form of Contracts since the 1995 Orange Book, with the exception of the 1999 and 2021 Green Books, which are designed for projects where parties do not wish to allocate significant resources to contract administration or where the perceived level of risk is minimal. The results of the King's College Survey also reflect a strong preference for three-member DBs, with 64% of Individuals and 67% of Entities favoring this composition.

Conversely, the main advantage of a sole adjudicator is cost efficiency, making this option more suitable for smaller or less complex disputes. It is ultimately up to the parties to assess, on a case-by-case basis, what constitutes a smaller or less complex project and to determine the threshold for appointing a three-member panel. As an indicative benchmark, the World Bank's Standard Procurement Document for Works provides for a sole arbitrator for disputes under USD 50 million, and a three-member panel where the value of the claims exceeds that amount. Another consideration is that while a sole adjudicator may reduce costs, it may lack the diversity of perspectives that a three-member panel can provide, particularly in complex cases.

2.3 Streamlining the appointment process (Tasks No. 3-8)

Tasks 3 to 8 focus on the process of appointing either a sole adjudicator or Dispute Board members, as the case may be.

Under the FIDIC 2017 Rainbow Suite, a sole adjudicator is typically jointly appointed by the parties from a pre-approved list of potential members included in the contract. For three-member panels, each party nominates one member, and the chair is jointly selected after consultation with the "wing" members.

The FIDIC Forms of Contract specify the following time limits for the appointment of DB members:

• 1999 Red Book: a DB should be appointed within 28 days of the Commencement Date;
• 2017 (Reprinted 2022) Rainbow Suite: a DB should be appointed within 28 days of the contractor receiving the Letter of Acceptance;
• 1999 Yellow Book (ad hoc DB): a DB should be appointed within 28 days after a party gives notice to the other party of its intention to refer a dispute to a DB. 

It is important that the appointment process is completed within the specified timeframes to ensure that the DB can be operational in a timely manner. Delays in appointing a DB can lead to prolonged dispute resolution processes and a negative impact on project timelines.

The Practice Note outlines several essential criteria that prospective DB members should meet:

• Independence and impartiality: DB members must demonstrate neutrality to ensure unbiased decision-making;
• Availability: DB members must have the necessary time and commitment to manage the appointment effectively;
• Expertise and Experience: DB members must have experience and/or knowledge relevant to the work being performed by the contractor;
• Language proficiency: DB members must be fluent in the language of communication specified in the contract;
• Understanding of Contractual Terms: DB members should ideally have  experience in interpreting and applying the relevant contractual documentation.

Other considerations may also influence the selection process, such as the location of the project and the prospective DB members, their nationality and profession. By considering the above criteria from the outset, parties can ensure the appointment of a DB that is well-suited to manage disputes and contribute to the progression and success of the project.

2.4 Agreeing on Dispute Board member fees (Task No. 9)

The parties and the DB members must agree on the fees to be paid to the DB. As a benchmark for determining a reasonable fee, the Practice Note refers to the Memorandum on Fees and Expenses for Arbitrators published by the World Bank's International Centre for Settlement of Investment Dispute (ICSID). The most recent version of the ICSID Memorandum on Fees and Expenses (2022) sets an hourly rate of USD 500. In addition, it provides for a per diem allowance of USD 900 or USD 200, depending on whether overnight accommodation is required. The memorandum serves as a useful reference for parties when negotiating DB fees, ensuring that they align with established industry standards.

That said, the fee structure should be tailored to the specific project requirements and the expected complexity of potential disputes. This flexibility ensures that the DB's compensation aligns with the scope of work and the level of expertise required.

2.5 Approaching the appointing authority if the parties cannot agree on the appointment of Dispute Board member(s) (Task No. 10)

In certain scenarios, if the parties are unable to reach an agreement on the appointment of DB members, they may seek assistance from the designated appointing authority to nominate a suitable DB member.

Under the 1999 Rainbow Suite, it is for the parties to specify the appointing authority in the Appendix to Tender. Indeed, it is advisable for parties to identify a suitable appointing authority in advance to avoid potential delays in dispute resolution when disagreements arise regarding appointments.

The 2017/2022 Rainbow Suite, on the other hand, provides for the FIDIC President (or a person appointed by the President) as the default appointing authority where the parties are unable to agree on an appointment.  

2.6 Signing the Agreement and thinking outside the box (Tasks No. 11 and 12)

The Practice Note offers additional practical guidance on  the constitution and functioning of Dispute Boards under the FIDIC Forms of Contract. For example, it suggests that parties could consider appointing a single DB for multiple projects within the same jurisdiction and under the same owner, thereby reducing costs. Alternatively, the parties might opt for a panel of five members to ensure that a majority of DB members remain available throughout the project, improving flexibility and decision-making capacity.

3. Conclusion

The FIDIC Practice Note offers a valuable guideline or checklist for determining the most suitable dispute resolution mechanism for a FIDIC (or other) type of contract.

To this end, the contracting parties will need to assess, on a case-by-case basis, which type of DB is most suited to the specific project. While smaller, less complex construction projects may benefit from the lower running costs of an ad hoc sole adjudicator, large infrastructure projects may benefit from the ongoing support of a standing DB with three (or more) members. However, this may not always be the case. Other considerations, such as the parties' experience, preferences, prior commercial relationships or any other aspect that may increase or decrease the perceived level of risk, may also play a significant role in determining the type of DB to include in the contract.

We recommend that parties carefully consider the FIDIC Practice Note, alongside all other relevant factors or documentation, to design an effective dispute resolution mechanism tailored to their specific project. If needed, consulting with experienced legal counsel early in the process is also advisable.

For advice on the right type of Dispute Board for a particular project or representation in Dispute Board proceedings, please contact our International Arbitration and Construction Practice Group.