Daniel Albuquerque writes about the Dispute Board of ICC. He introduces another institution known as FIDIC which is closely connected with ICC that deals exclusively with engineering and construction disputes on international level. The case presentation, however, brings out the problems of aligning the company with multiple dispute resolution institutions. The Dispute Board can solve problems which other ADRs cannot
Dispute Boards are not arbitral tribunals and their conclusions are not enforceable like arbitral awards. Rather, the parties contractually agree to be bound by the conclusions under certain specific conditions set forth herein. In application of the Rules, the International Chamber of Commerce (the “ICC”)…(Article 2, ICC Dispute Board Rules)
Context The context in which we are dealing here below is about the institutions of dispute resolution in international business environment. Increasingly businesses have become collaborative, crisscrossing the political and jurisdictional boundaries of justice delivery systems. In addition to the already in vogue International Chamber of Commerce (ICC) and its Dispute Arbitration Resolution (ADR) there is another Fédération Internationale Des Ingénieurs Counseils (French) – International Federation of Consulting Engineers (FIDIC). Both of these are related closely not only due to their French origin, but also because they work together.
While ICC deals with all kinds of business disputes, the FIDIC deals only with construction and real estate disputes, hence the name denoting federation of consulting engineers. However, there is no guarantee that multiplicity of dispute resolution institutions and organisations are going to solve problems. The very cures can become worse than the disease. The following is a case to prove such a point.
Case: Zillion Infra Projects Pvt. Ltd, the petitioner, contracted business with Alstom Systems India (P) Ltd. in three separate businesses. The dispute issue consisted of bank guarantees, running into several crores of rupees.
The petitioner’s prayer to restrain one of the respondents to remit money to another respondent met with failure. Hence the petitioner challenged the same in the Delhi High Court with the same prayer under Section 29 of the Arbitration Act, 1940 and Section 9 of the Arbitration and Conciliation Act 1996.
The said business contract had in its contract accepted the jurisdiction of the Delhi High Court, and in addition it also agreed for arbitration by both ICC as well as FIDIC.
The Court applied its mind to the suit. The judge at the lower court had concurred with the respondent: “Advance payment would be as an interest free loan for mobilisation and design to be secured by a guarantee and this advance payment shall be repaid through percentage deductions from the running bills certified for payment as and when the work is executed.”
The two-judge bench of the Delhi High Court reasoned in the following manner: “The contractual duty owed by an issuing or confirming bank to the buyer to honour the credit notified by him on presentation of apparently confirming documents by the seller was matched by a corresponding contractual liability on the part of the bank to the seller to pay him the amount of the credit on presentation of the documents.
The bank’s duty to the seller was only vitiated if there was fraud on the part of the seller. The fraud pleaded by the appellant is that notwithstanding respondent being in default, it has invoked the bank guarantees; and this would be fraud. The plea of fraud contemplated by law is fraud of an egregious nature i.e. outstandingly bad and shocking.” The appeal, therefore, was dismissed by the Court.
Lessons: The first lesson to be learnt is to draw the business contract with great care for facts and after due consideration of the viability of the business. Secondly, evaluate all the risks. Third and most the important is to settle financial matters truthfully, give guarantees which are deliverable. Finally, put all the management systems in place. Never forget that a contract is a covenant that cannot be broken or rescinded without damning consequences.
Dispute Board: To avoid the above situation, where the disputants go to extreme lengths and still far from addressing the situation the Dispute Board could be a fair solution. The ICC’s Dispute Board is known by several names such as Dispute Review Board (DRB), Dispute Adjudication Board (DAB) and Alternate Dispute Board (ADB). Unlike Arbitration Dispute Resolution (ADR) system, the structure of the Dispute Board is characterized by its participation in business contracts from the latter’s very initiation. In other words, when two businesses draw their contract, the Dispute Board becomes its part and parcel to resolve any disputes of the future.
The board, consisting of three members, guides and monitors the business activity, thus preventing any dispute, loss of time and resources. This mechanism has been the most successful one in the area of business disputes which believe in prevention than in cures. This is the reason why experts consider Dispute Board to be the future of business dispute resolution. When considered with the combined efforts of ICC-FIDIC, problems become easier to solve than when businesses seek adjudication from the courts.
National Committees: I would like to bring to the notice of the Indian companies that if your company is a member of the State Chamber of Commerce which in turn is the member of the Federation of Indian Chambers of Commerce and Industry (FICCI) then your company belongs to this world-wide organization.
Given the correct approach by which your company adopts Dispute Board as part of your contract, your company would be considered as perpetually well prepared to deal efficiently and quickly with any dispute that may arise in the future.
Conclusion: The Dispute Board may be described as an agent of continuous mediation. You include it right at the inception of your business contract and it will be a vigilant helper lest you falter. Howard Raiffa (1924-2016), the celebrated author of The Art and Science of Negotiation who was professor of business management at Harvard University wrote: “The mediation of inner conflicts can be resolved by linkages with other problems.”
It is a strategy both for one’s own individual problems as well as of between the companies
The columnist is a writer with Oxford University Press and a published author. Email: albuquerque.daniel@gmail.com
