Dispute boards in construction disputes

What is a dispute board and how is it regulated?

Normally, disputes are resolved in general courts or through arbitration. However, there are several alternatives, one of which is the dispute board. The dispute board procedure is therefore not the same as arbitration and is not regulated under Swedish law or, for example, in the standard agreements AB 04, ABT 06, ABA 99, or among the Stockholm Chamber of Commerce Arbitration Institute (SCC) rules. Neither does the draft for the upcoming AB 25 and ABPU 25 include such regulation. However, the dispute board procedure is regulated, among others, in FIDIC’s international standard agreements and in the International Chamber of Commerce’s (ICC) Dispute Board Rules.

A dispute board usually consists, similar to an arbitral tribunal, of three members, with each party appointing one member. What distinguishes a dispute board is that it is established already when the parties enter into the construction contract and that it remains active throughout the entire construction period to continuously resolve any disputes that arise.

Dispute boards primarily exist in three different forms, with the main difference being the legal effect that the decision has between the parties. A dispute board that issues non-binding recommendations is usually called a Dispute Review Board (DRB), and a dispute board that issues decisions is called a Dispute Adjudication Board (DAB). There is also a type that combines both DRB and DAB elements, known as a Combined Dispute Board (CDB).

How does a dispute board work?

The parties meet regularly with their dispute board to provide ongoing updates on the project and raise any issues or disagreements. This open communication itself can help prevent disputes from arising. If a dispute nevertheless occurs, the parties must refer the matter to their dispute board to quickly receive a decision to follow. The quick processing and low threshold offer several advantages: it prevents multiple contentious issues from piling up and reduces the risk of both escalating conflicts and construction delays. In this way, dispute resolution can become both more time- and cost-efficient for the parties.

A decision from a dispute board (DAB) becomes binding on the parties immediately. A party dissatisfied with the decision may issue a notice of dissatisfaction within a certain time period. The notice of dissatisfaction prevents the decision from becoming final, but the decision remains binding and serves as a notification that the party intends to refer the dispute to a court or arbitration for a final ruling. A recommendation from a dispute board (DRB), on the other hand, does not become binding until the time for issuing a notice of dissatisfaction has expired; at that point, the recommendation becomes both binding and final simultaneously.

If the parties make use of a dispute board, there is also an opportunity for "informal assistance" (see, for example, Article 16 of the ICC Dispute Board Rules). Informal assistance means that the parties can pose smaller and more informal questions to their dispute board to receive guiding answers. The answer is not binding but can nonetheless give an indication of how the matter would likely have been decided. The possibility of informal assistance can contribute to good cooperation by allowing the parties to focus on project progress instead of wasting time arguing.

Dispute boards in Sweden?

Although the procedure has many advantages, it is relatively untested in Sweden. As far as is known, dispute boards have been used in only a few very large infrastructure projects, such as the construction of the Öresund Bridge.

Establishing a dispute board involves fixed and ongoing costs. It is also important to remember that a decision from a dispute board can neither be enforced nor has legal res judicata effect. A dispute board’s decision therefore does not exclude the possibility that the dispute escalates into a lengthy court case or arbitration. A dispute board clause also likely does not constitute a dispositive procedural bar similar to an arbitration clause. However, if a party refuses to follow the decision, this constitutes a breach of contract.

The use of dispute boards may increase in Sweden as the use of FIDIC’s standard agreements becomes more widespread. The Swedish Transport Administration, for example, has opened up to procuring construction projects under that standard agreement. Moreover, since 1995, the World Bank has required the establishment of a dispute board for the financing of major construction projects. Experiences abroad have been clearly positive, and the limited use in Sweden has also yielded good results. This indicates that the procedure may be a good solution for larger construction projects in Sweden as well.

Author: Elvira Eriksson, Associate at Advokatfirman Lindahl in Uppsala, wrote her thesis in 2024 on the topic “Dispute Boards in Construction Disputes – An Investigation of the Dispute Board Procedure and Its Legal Effects in Sweden.”