Construction projects are by their nature very complex. They involve a multiplicity of parties, each with their specific deliverables and with the sole intent to make the most of the relationship. The contract implementation itself is riddled with a multiplicity of ever-evolving issues during the project lifespan. It is therefore inevitable that issues, and subsequently disputes will arise. The involvement of multiple parties often lead to a clash on the parties roles, misinterpretation of the scope, misalignment on project priorities, failure to meet financial obligations as well as technical inadequacy of the contractor.

The FIDIC 2017 suite of contracts as reprinted in 2022 has adopted a deliberate as well as more pro-active approach to dispute resolution through the introduction of dispute avoidance as a key feature/role of the Dispute Adjudication Board. Through the renaming of the traditional Disputes Boards introduced in the 1999 Red book, there is a clear re-definition and re-purposing of the Dispute Boards towards a preventive approach to disputes.

Understanding Construction Disputes

The inherent character of construction projects is that they are extremely complex which exposes them to an unknown variant of hazards and risks leading to conflicts. According to the 2024 report by the Kings College London on Construction Adjudication, the leading causes of construction disputes include, but are not limited to;

a)        Inadequate contract administration rated at 50%

b)       Lack of competence of project participants at 42%

c)        Exaggerated claims at 30%

d)       Change of scope by the client at 30%

e)        Inadequate contract documentation at 19%

Indeed the causes of construction disputes have become fairly ascertainable over the years, making it possible for a pro-active framework of disputes resolution. Anticipating disputes over payment disagreements touching on payment schedules, project delays due material shortages, poorly managed scope changes and defective work or materials.

Over the last two decades, as infrastructure development has peeked not just in Kenya but across Africa coupled by the continuous adoption of technology and construction-based innovation in the monitoring and evaluation of construction projects, sources of construction disputes have become fairly predictable.

The introduction of competitive procurement processes in construction projects as well as the continuous adoption of standard construction contracts such as the FIDIC suit of contracts, have all been efforts to mitigate disputes and ensure the successful implementation of construction projects.

Over the years, FIDIC has adopted a multi-tiered format of dispute resolution, starting with the decision of the engineer, rolling over to either a standing Disputes Board or an ad-hoc one culminating in an arbitration process or litigation.

Disputes Boards-Avoidance And Adjudication Functions

A  Dispute Board, is not a new term within the context of construction and infrastructure development. It refers to a body of impartial professionals formed either at the beginning of the project (standing Boards) or as and when a dispute arises (ad-hoc Boards) charged with the critical mandate of assisting in the resolution of disputes that arises out of the projects.

For a long time, the critical function for disputes boards has been to adjudicate over disputes that rise out of the project, taking a re-active approach of waiting until a dispute is declared and referred to them by either party, before they can be involved. They have proved to be an effective informal disputes settlement framework, intervening in the project implementation to ensure that projects do not stall but are instead efficiently and effectively managed through timely intervention before escalation to the more formal arbitration or litigation processes.

In 2017, the FIDIC Redbook introduced the function of avoidance to complement the adjudication function for the Dispute Boards. At clause 21.1 and 21.3, FIDIC provides that parties may jointly request the (Dispute Avoidance/Adjudication Board) DAAB to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement that may have arisen between them during performance of the contract.

At Clause 21.4.3, the decision of the DAAB is binding on both parties and becomes final after the 28 days cooling off period and as such, compliance is expected promptly irrespective of whether or not a Notice of Dissatisfaction has been issued.

Conflict avoidance involves carefully and properly planning with clarity, the strategy for executing a project. It involves adopting a proactive conflict avoidance approaches that include;

Ø  carrying out a risk analysis;

Ø  the preparation, updating and maintenance of a risk register as well as proactively managing the risks that are on the register;

Ø  Adopting where, appropriate proper approaches to partnering

The Efficiency Factor in Avoidance

In the 2017 FIDIC suit of contracts as reprinted in 2022, time and expiry of  claims is a critical factor in the dispute avoidance/resolution journey.

²  Firstly, A party is required to refer a dispute to the DAAB within 42 days from the NOD (engineer’s decision), or the NOD will expire thus confirming the Engineer’s determination that would then become binding.-this prevents the parties from delaying the process and ensures that there is compliance with deadlines thus encourage parties to positively resolve disputes rather than leaving them pending indefinitely, while at the same time allowing the claiming party to escalate its claim rather than losing the right to it.

²  Secondly, the DAAB is then required to render its decision within 84 days or in such time as otherwise decided by the Parties. This decision is binding but not final. Amounts decided by the DAAB shall be payable without further certification or notice.

²  Either Party must give their NOD with the DAAB’s decision within 28 days or such decision becomes final and binding.(Sub-Clause 21.4.4).

²  Once the NOD has been given, a 28 days cooling-off period is mandatory before referring the dispute to arbitration. During this period, parties are encouraged to attempt to settle the differences amicably. (Sub-Clause 21.5)

Enforcement Challenges

The introduction of avoidance as a function suggests a mandatory role for a standing Dispute Avoidance and Adjudication Board (DAAB). This board actively engages with the parties throughout the project, becoming familiar with the progress of the works, earning their trust and confidence, conducting periodic site visits, and fostering open communication. By doing so, the DAAB can effectively diffuse tensions, anticipate conflicts, and provide a reliable platform for ensuring smooth project implementation.

However, a critical question arises: Can an aggrieved party seek court intervention to enforce compliance with a DAAB decision? The answer is a resounding no. This is where confusion often arises, particularly among litigation lawyers, due to the terminology used—especially the phrase "final and binding." From a litigation perspective, when a decision is deemed final and binding, non-compliance typically leads to execution or enforcement action.

Can courts enforce a DAAB decision? The Kenyan legal system has grappled with this issue, as demonstrated in the case of Republic v. Director General of Kenya National Highways Authority & 3 others ex-parte Dhanjal Brothers Limited (eKLR 2018). In this case, the court mistakenly equated the enforcement of an adjudicator’s decision with the enforcement of an arbitral award under the Arbitration Act. The ruling stated:

“Further, the purported Adjudication Award has not even been registered with this High Court, pursuant to Section 36 of the Arbitration Act, No. 4 of 1995 and therefore is incapable of being enforced in any proceedings as a civil claim.”

This ruling highlights the legal challenges surrounding the enforcement of DAAB decisions, particularly the misconception that they can be enforced in the same manner as arbitral awards.

The FIDIC suit of contracts contemplates an escalation matrix all the way from the Engineer’s decision, to the DAAB’s decision all the way to the Arbitration. As such, where a party to an adjudication has failed to comply with the DAAB’s decision, the only route to enforcement is the institution of a fresh dispute by invoking the Arbitration Clause. This will not be an appeal from the DAAB since a completely new process will be started in the same way as it would have been prior to the introduction of adjudication. The only advantage at this stage is that the DAAB process is mostly likely would have refined the issues and would help improve the way parties frame, present and even argue out their cases.

It is only after the Arbitration award that a party can institute civil proceedings under the Arbitration Act, for recognition and enforcement.

What happens where the DAAB has acted beyond their prescribed scope/jurisdiction? Here, the scrutiny will be through an arbitration and court proceedings, so that where a DAAB did not have jurisdiction to make a decision, such a decision can be challenged by instituting arbitration proceedings. Issues of jurisdiction with respect to the DAAB, will commonly arise where the dispute is not covered in the Adjudication Agreement or where the decision is outside the terms of reference in the notice of adjudication.

BY ZAKAYO M ALAKONYA

MANAGING PARTNER, & PARTNER

IN-CHARGE OF CORPORATE COMMERCIAL DEPARTMENT,

 ALAKONYA LAW LLP