Clause 20.3: Failure to Agree Dispute Adjudication Board

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Table of Contents

Purpose and Implications

Clause 20.3 serves as a safety net in the FIDIC contract framework, ensuring that the Dispute Adjudication Board (DAB) remains functional even when parties fail to agree on the appointment of a new member. This clause is activated under specific circumstances, such as the death, disability, resignation, or termination of a DAB member. The appointing entity or official named in the Appendix to Tender steps in to make a final and conclusive appointment, ensuring that the dispute resolution process is not stalled. Both parties are equally responsible for the remuneration of the appointing entity or official.

Interaction with Other Clauses

This clause closely interacts with other clauses related to dispute resolution, such as Clause 20.2 (Appointment of the Dispute Adjudication Board) and Clause 20.4 (Obtaining Dispute Adjudication Board’s Decision). It acts as a bridge to ensure the continuity of the DAB, thereby allowing other clauses to function effectively.

Key Points to Keep in Mind

Timeliness: The appointing entity has 42 days to make a new appointment.
Cost-Sharing: Both parties share the cost of the appointing entity or official.
Finality: The appointment made is final and conclusive.

Real-World Instances and Case Studies

In a construction project in Southeast Asia, the parties couldn’t agree on a new DAB member after the resignation of the previous one. Clause 20.3 was activated, and the appointing entity stepped in to make a new appointment, ensuring that a pending dispute was resolved without unnecessary delays.

Checklists for Clause 20.3

Checklist for Proficient Execution of Clause 20.3

Task	Responsible Party	Deadline	Status
Identify triggering event for Clause 20.3	Both Parties	Immediate	Pending
Notify the other party of the triggering event	Initiating Party	7 Days	Pending
Consult with the other party for a new appointment	Both Parties	14 Days	Pending
Request appointing entity to act	Both Parties	42 Days	Pending
Confirm new appointment	Appointing Entity	42 Days	Pending

Checklist for Overseeing Clause 20.3

Task	Checkpoint	Verification Method
Triggering event identified	Yes/No	Documented Evidence
Other party notified	Yes/No	Written Communication
Consultation between parties	Yes/No	Meeting Minutes
Request to appointing entity sent	Yes/No	Written Request
New appointment confirmed	Yes/No	Official Letter

Checklist for Monitoring Clause 20.3

Step	Completed	Notes
Identification of triggering event	Yes/No
Notification to the other party	Yes/No
Consultation for new appointment	Yes/No
Request to appointing entity	Yes/No
Confirmation of new appointment	Yes/No

This comprehensive guide should provide a well-rounded understanding of Clause 20.3: Failure to Agree Dispute Adjudication Board and its practical implications within the FIDIC framework.

Sample Letters

Sample Letter 1: Request for Replacement of DAB Member

[Your Company’s Letterhead]

[Date]

[Recipient’s Address]

Subject: Request for Replacement of DAB Member under Clause 20.3

Dear [Recipient’s Name],

We refer to the contract dated [Contract Date] for [Project Description].

It has come to our attention that [Name of DAB Member] has declined to act/is unable to act due to [Reason]. As per Clause 20.3 of the FIDIC Yellow Book 1999, we are required to agree upon the appointment of a replacement member within 42 days.

We propose [Name of Proposed Replacement] as the replacement member for the Dispute Adjudication Board (DAB). Kindly confirm your agreement to this appointment by [Date].

If we fail to agree upon the appointment within the stipulated 42 days, we will have to involve the appointing entity as specified in the Appendix to Tender.

Please acknowledge receipt of this letter and confirm your agreement or provide an alternative proposal within [Number of Days].

Yours sincerely,
[Your Name]
[Your Position]

Sample Letter 2: Request to Appointing Entity for Replacement Member

[Your Company’s Letterhead]

[Date]

[Appointing Entity’s Address]

Subject: Request for Appointment of Replacement DAB Member under Clause 20.3

Dear [Appointing Entity’s Name],

We refer to the contract dated [Contract Date] for [Project Description].

As per Clause 20.3, we have failed to agree upon the appointment of a replacement member for the Dispute Adjudication Board (DAB) within the stipulated 42 days.

We hereby request you to appoint a replacement member after due consultation with both Parties. This appointment will be final and conclusive, and each Party will be responsible for paying one-half of your remuneration.

We look forward to your prompt action in this matter.

Yours sincerely,
[Your Name]
[Your Position]

Flowcharts

Start: The flowchart begins when Clause 20.3 is triggered.
Conditions: Four conditions can lead to the activation of this clause.
- Parties fail to agree on a sole member: When the parties can’t agree on a single DAB member.
- Failure to nominate a member: When either party fails to nominate a member.
- Failure to agree on a third member: When the parties can’t agree on the third DAB member.
- Failure to appoint a replacement within 42 days: When a replacement isn’t appointed within the stipulated time.
Appointing Entity: In all these cases, the appointing entity named in the Appendix to Tender steps in.
Final and Conclusive Appointment: The appointment made by the entity is final and binding.
Each Party pays one-half of remuneration: Both parties are responsible for paying half of the remuneration for the appointing entity.
End: The process concludes.

Start: The flowchart begins at the activation of Clause 20.3.
Conditions: Similar to the first flowchart, it outlines the conditions that can trigger this clause.
Appointing Entity: The appointing entity named in the Appendix to Tender is involved in all scenarios.
Final and Conclusive Appointment: The appointment is final and binding.
Each Party pays one-half of remuneration: Both parties share the cost.
Refer to Clause 20.6 Arbitration: If the DAB’s decision is not satisfactory, the matter may be referred to arbitration as per Clause 20.6.
End: The process concludes.

Frequently Asked Questions (FAQs) about Clause 20.3: Failure to Agree Dispute Adjudication Board

What is Clause 20.3 in FIDIC Contracts?

Clause 20.3 deals with the scenario where parties fail to agree on the appointment of a Dispute Adjudication Board (DAB). It outlines the steps to be taken when such a failure occurs.

When is Clause 20.3 activated?

This clause is activated when the parties involved in the contract fail to agree upon the appointment of a DAB member or a replacement member within a stipulated time frame, usually 42 days.

What happens if the parties can’t agree on a DAB member?

If the parties can’t agree on a DAB member, the appointing entity or official named in the Appendix to Tender will step in to make the appointment.

Is the appointment made by the appointing entity final?

Yes, the appointment made by the appointing entity is final and conclusive.

Who bears the cost of the appointing entity?

Both parties are responsible for paying one-half of the remuneration of the appointing entity or official.

What are the conditions that can lead to the activation of Clause 20.3?

There are four main conditions:

Parties fail to agree on a sole DAB member.
Either party fails to nominate a DAB member.
Parties fail to agree on a third DAB member.
Failure to appoint a replacement within 42 days.

Can Clause 20.3 lead to arbitration?

Yes, if the DAB’s decision is not satisfactory, the matter may be referred to arbitration as per Clause 20.6.

How does Clause 20.3 interact with other clauses?

Clause 20.3 is closely related to other clauses in the FIDIC contract, such as Clause 20.1 for Contractor’s Claims, Clause 20.2 for Appointment of the DAB, and Clause 20.6 for Arbitration.