Dispute Avoidance Processes in Oman - Friend or Foe

The costs associated with construction litigation are often disproportionate to the quantum in dispute due to their complex and technical nature, and the proliferation of associated documentation. Arbitration costs (often promoted as a less expensive and more expedient process as compared to the court process) often rival the costs associated with a court-adjudicated process.   Rarely does either party exit a litigious process unscathed.  A more collaborative philosophy of contracting and dispute resolution  may  be  helpful  in  this  region  to  effectively  resolve  construction  disputes  early  on, particularly if the relationship of the parties is ongoing and one that requires preservation.    Dispute review boards (“DRBs”) and dispute adjudication boards (“DABs”) are two dispute adjudication processes that have been effective in other jurisdictions at reducing the time and costs associated with resolving construction disputes.

What are DRBs and DABs?

DABs are designed to provide decisions in relation to matters arising between contracting parties throughout a project, and the parties are generally bound by these decisions if provided for by contract. However,  where  non-binding  recommendations  are  provided,  and  the  DAB  acts  in  an  advisory capacity, the DAB would generally be referred to as a DRB.  DRBs have the dual purpose of assisting the parties to avoid disputes and also resolving disputes, ensuring, as far as possible, that disputes do not escalate to a more adversarial and hostile forum.  DRBs and DABs are implemented at the outset of a project, rather than at the time of the dispute such as with an arbitration process.   The DRB has intimate knowledge of the project at all stages, attends site and meetings every few months and produces reports on an ongoing basis to the parties.  The board in each case is generally comprised of an engineer selected by each party and a third engineer, generally with dispute resolution and contractual interpretation experience selected by agreement of each party’s engineer.

Historically

DABs and DRBs have gained popularity in many jurisdictions over the years.  DABs are provided for in each of the FIDIC Red, Yellow, Silver and Gold Books and the International Chamber of Commerce (“ICC”) has released its own dispute board procedure in October 2014.     However, despite the significant success of dispute boards elsewhere in the world, neither DABs nor DRBs are popular in Oman.

Forms of dispute resolution in Oman have, to date, been primarily restricted to mediation and, more often, arbitration.  This, in part, is due to the prevalent use of the Oman Government Standard Form Construction Contracts that are based on a modified form of the standard forms of contract issued by FIDIC.  As standard, in the Oman Government Standard Form Construction Contract, provisions relating to resolution of disputes via arbitration are retained, and the clauses relating to DRBs/DABs are omitted.  It is normally not possible to amend these Standard Form Contracts.

Dispute adjudication processes

Currently, courts in Oman and across the Middle East are reluctant to enforce DAB or DRB decisions, particularly where an arbitration clause  is also in the contract  or  at  all.   Arbitrators are  likewise reluctant, or without jurisdiction, to enforce the decisions of a dispute board without hearing the issues in dispute afresh.  Additionally, during a DRB or DAB process, matters are not discussed on a “without prejudice” basis and information disclosed can be used if the matter proceeds to an arbitration or court- adjudicated process.  The absence of recognition of “without prejudice” negotiations is a major reason methods of alternative dispute resolution such as mediation or dispute boards are not used in the region.  Further, a contractually agreed confidentiality agreement does not afford reliable protection. The Oman courts may allow any evidence to be presented which sheds light on the matters before it. Further, and most importantly, dispute board decisions are not likely to be enforced by the courts in Oman.

Other jurisdictions have introduced a statutory framework to support the implementation of effective alternative dispute resolution methods, rather than simply a contractually agreed framework.  Such frameworks were introduced in the UK in 1996, followed by Australia in 1999, New Zealand in 2002 and Singapore in 2004 and have enabled alternative dispute resolution (particularly DABs and DRBs) to be a legitimate and enforceable means to resolve construction disputes.

Conclusion

It is advisable to seek legal advice before considering whether to contractually implement a dispute board to resolve contractual disputes at any stage of the dispute process.  There are considerable merits in that high-quality opinions from a DRB or DAB may provide the deep understanding and rational compass  for  construction  projects  necessary  to  keep  litigation  at  bay.  However,  the  lack  of enforceability of dispute board decisions continues to greatly detract from their usefulness in Oman.  If a statutory framework is developed in Oman such that dispute board decisions can be enforced, DRBs and DABs may become an attractive alternative to arbitration.