at Russian
Institute
of Modern
Arbitration
at Russian
Institute
of Modern
Arbitration
Adjudication is a method of preventing and resolving disagreements and disputes in which independent experts (Dispute Boards) accompany the progress of a project, monitor the work being carried out, and assist in resolving issues either upon request of the parties or on their own initiative. The conclusion rendered through adjudication are binding on the parties and are typically subject to immediate compliance. If one of the parties disagrees with the conclusion, it may seek de novo review of the dispute in court or arbitration. The parties may agree to comply with the conclusion until a final ruling is issued to prevent project delays. If the parties do not dispute the conclusion but fail to comply with it, the issue of non-compliance may be referred to court or arbitration as a typical contract enforcement dispute.
This method is usually used in complex and long-term projects that require ongoing oversight and timely task execution. Adjudication is particularly useful for resolving disagreements that demand both promptness and specific knowledge. It is widely used in the construction industry to avoid delays and ensure stable cash flow. This mechanism is included in standard contracts by the International Federation of Consulting Engineers (FIDIC), enabling rapid and effective dispute resolution. Adjudication can also be beneficial for the prompt resolution of disputes in startups and IT development.
A Dispute Board (Dispute Review Board or Dispute Adjudication Board) is typically established at the start of a project, either when the contract is signed or shortly thereafter. Board experts monitor the project’s progress, identify potential issues, and help to avoid the costs of litigation or arbitration.
If a dispute arises, the Board can address it promptly since it is already familiar with the parties’ relationship. The Board issues a binding conclusion that becomes part of the contractual obligations of the parties.
When a permanent Dispute Board is unnecessary, an ad hoc Board may be established to address a specific dispute. Such a Board may comprise only technical experts or include specialists with diverse knowledge, including legal expertise.
The rules of adjudication provide for three types of Dispute Boards:
Dispute Review Boards (DRB)
Dispute Adjudication Boards (DAB)
Ad Hoc Dispute Boards
Step 1: Contract Formation
The parties typically agree on the establishment of a Board when the contract is concluded, but adjudication may be agreed upon at any stage of the contract’s performance.
Step 2: Selection of Expert(s)
Once the parties agree to adjudication, they proceed to form the Dispute Board. They may independently agree on the procedure for selecting adjudicators as well as the qualifications required of candidates.
If the parties cannot agree on the choice of adjudicators or the procedure for forming the Board, they may turn to the RAC. The RAC assists in forming a Dispute Board by selecting independent and experienced experts, even if adjudication is conducted under the rules other than RAC’s.
The Board begins its work after parties sign a Dispute Board Member Agreement with each adjudicator. This Agreement contains key rules and terms of operation, including the adjudicator’s duties, rights, and remuneration.
Step 3: Project Monitoring (Not Applicable for Ad Hoc Boards)
During the monitoring stage, the Dispute Board organises regular meetings with the parties concerning the project and the visits the construction site (if applicable). This allows the Board to oversee the progress of the work and also to identify potential issues that could lead to disputes, thus serving a dispute preventive function. To do so, the Board may provide recommendations, bring matters to the parties’ attention, and offer direct consultation during project implementation. These informal recommendations are non-binding but help the parties make informed decisions and avoid the costs of formal proceedings. If a disagreement escalates into a dispute, any prior recommendations are not binding on the Board when issuing its final conclusion.
Step 4: Dispute Settlement
Disputes are resolved promptly by exchanging the parties’ positions (with the option of oral hearings), taking into account the specific nature of the parties’ relationship. Legal counsel is typically unnecessary, as legal expertise is often not required. Parties’ positions are usually presented by those directly involved in the project.
The RAC has developed flexible Adjudication (Dispute Board) Rules based on global best practices. These rules, refined after discussion and revision, address contemporary trends and user needs.
Under the Rules, the RAC performs the following functions:
Assisting in the formation of Dispute Boards, removal of adjudicators, and determination of adjudicator fees. These tasks are handled by the Adjudication Committee, composed of experienced professionals.
