Dispute Resolution Boards (“DRBs”) continue to grow in popularity, particularly for major infrastructure projects. As such, we can expect that construction lawyers will increasingly be advising clients on whether to send a dispute to the DRB or go directly to arbitration. In this post, we outline a few of the factors that may inform whether your client should submit a dispute to the DRB or go straight to arbitration.
DRBs (also known as “Review Boards”) are most common in major infrastructure projects. They typically consist of three independent and impartial experts, such as engineers. Lawyers can also make up the DRB. The DRB is actively involved in the project from its inception so its members are familiar with the parties and need little time to get up to speed on the events leading to a dispute.
When disputes arise, the parties may refer it to the DRB. The DRB will then typically investigate the dispute, hear submissions from each side through an informal process, and render either a binding or a non-binding opinion, depending on the nature of the DRB. The precise process followed by a DRB depends on the terms of the applicable contract.
DRBs usually play a very important role in major projects by dealing with issues as they arise on site. By providing prompt decisions, they allow construction projects to proceed without delay. Real-time prevention and resolution by the DRB often promotes open communication, trust, and cooperation between the parties.
When considering whether to refer a dispute to the DRB, clients may be concerned that most DRB decisions are non-binding recommendations. There is a risk the parties will still need to arbitrate (or even litigate) after a DRB recommendation is rendered. Fortunately, it appears that the vast majority of disputes resolved by DRBs do avoid further dispute resolution steps.1
However, DRBs may also have some downsides. In Canada, there are reports that parties are increasingly seeking a lawyer to chair the DRB committee because of their knowledge of legal processes.2 The emphasis on legal procedure may erode the cost and time-saving benefits of the DRB while leaving the parties without the benefits of arbitration, such as finality of the decision.
Moreover, the nature of the dispute may not be within the DRB members’ expertise. While members of the DRB with engineering expertise may be well positioned to adjudicate technical disputes, claims involving contract interpretation and other legal matters may be outside their expertise. Such disputes might be better left to an adjudicator with legal training.
Parties should also consider whether they will end up arbitrating or litigating related disputes. In one high profile project involving the construction of a subway station in Toronto, Canada, one dispute was resolved through the DRB but over 40 individual claims are still being litigated.3 If the parties are already incurring the expense of complex litigation, there may be little benefit gained by hiving off one issue for a separate hearing through the DRB.
The DRB’s heavy involvement in the project can sometimes be problematic too. Depending on the relationships that form on site, parties may benefit from the fresh perspective of an arbitrator who is new to the project. An arbitrator may alleviate any concerns about bias from members of the DRB who have worked on site for months or years.
Overall, DRBs are usually an excellent option for resolving disputes in real time on site. However, it is still important to weigh the other dispute resolution options carefully before choosing to proceed with the DRB.
Author Laura Brazil is a partner in the Toronto office of McMillan LLP. Her practice is focused on construction and real estate disputes. She primarily acts for owners and contractors but also represents subcontractors, material suppliers, designers and other members of the construction pyramid.
Author Anthony Labib is an articling student in the Toronto office of McMillan LLP. He is a graduate of Western University’s Faculty of Law.
1 “Construction Dispute Resolution Arbitration and Beyond”, American Jurisprudence Trials, August 2021 Update, by Thomas H Oehmke and Joan M Brovins.↩
2 https://canada.constructconnect.com/dcn/news/government/2019/10/dispute-resolution-board-use-on-the-rise-in-canada.↩
3 Walsh Construction Company Canada v. Toronto Transit Commission, 2020 CarswellOnt 8055, 2020 ONSC 3688.↩
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