Case Law

Practical issues regarding the mandatory/optional character of DAB procedure in FIDIC contracts

by Bazil OGLINDĂ

Vice president International Court of Arbitration Attached to the CCIR

I. One of the solutions at hand for the Arbitral Tribunals or national courts, in case it finds that the DAB procedure is mandatory as a prearbitral procedure, is to stay the proceedings and request the parties to address their dispute to the DAB. This was the case in Peterborough City Council v Enterprise [2014] EWHC 3193 TCC. In this case, given that clause 20.2 provided for ad hoc DAB appointments, the judge accepted EMS’s argument and agreed with the fact that the contract required the determination of the dispute through DAB adjudication prior to any litigation. Moreover, the judge acknowledged that DAB decision might be “rough and ready” but as far as the parties had agreed to incorporate the FIDIC DAB mechanism into their contract, the mechanism has to be observed. Accordingly, the judge ordered that the court proceedings were to be stayed until a decision of the DAB is reached in the case.

II. In some cases, Arbitral Tribunals reached the same result as previously presented – the optional charater of DAB procedure – but for a different reasoning – the grammatical interpretation of the provisions of clause 20 FIDIC. This solution was reached in Decision no. 76/2015, Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania. In this case, the Arbitral Tribunal stated that the services of the Dispute Adjudication Board are not mandatory for the parties in accordance with the contractual provisions. In accordance with the provisions of the General Conditions of Contract and the Special Conditions of Contract, parties can choose to address their dispute to the DAB if they consider that a dispute has arisen. If the contractual provision uses the wording ”may”, this means that the provision is not mandatory and the party has the ability to choose whether to go or not to the DAB. If the procedure in front of the DAB were to be mandatory as a pre-arbitral procedure, it would have been used an imperative term as ”will” or ”must”. But, if the Special Conditions of Contract does not oblige the partied to seize DAB before filling an arbitration request, this means that parties have a free will in choosing or not to follow the procedure in front of the DAB. This is why it cannot be considered that Claimant filled premature claims in arbitration.

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Solutions in this area were divided in two categories: the first category characterized with more rigid solutions such as stay of the proceedings until the decision of the DAB is reached, and the second category characterized by flexible decisions which consider the optional character of DAB. As it can be observed from the above, both in Romanian and foreign case law, the tendency is to reach more and more flexible solutions with regard to the mandatory/optional character of the DAB in the sense of accepting jurisdiction of a claim in arbitration even in case parties did not previously addressed their dispute to the DAB. The issue of the DAB procedure remains a controversy. However, Arbitral Tribunals and even national courts are more open in reaching decisions in the advantage of the parties and in accordance with the idea of unblocking the issue and costeffectively solve the dispute.