Mediation and Sole Member DRB for Operation Support and Maintenance Contract for a Gas Turbine Power Plant

Location:

Japan

Owner:

Japanese Company

Contractor:

Japanese Company

Subcontractor:

Japanese Subsidiary Company of a Foreign Manufacturer

A foreign Manufacturer supplied a Gas Turbine Generator to a Japanese company (Owner). A Contractor made a contract agreement with the Owner for operation and maintenance of the plant and subcontracted to a Japanese subsidiary company established by a foreign company, who supplied the generator to the Owner, for operation support and maintenance of the plant.

The contract between the Contractor and the Subcontractor was made for 15 years operation. There were gaps in the scope of work between two contracts, i.e., a contract between the Owner and the Contract and another contract between the Contractor and the Subcontractor. These gaps were the source of disputes between the Contractor and the Subcontract.

Mediation

5 years after commencement of the subcontract, there were a lot of disputes between the parties unresolved. They started Mediation and Dr. Toshihiko Omoto was appointed as Mediator through ICC in 2007.

After studying claims and responses from both sides, the Mediator instructed the parties to create a Scott Schedule to summarize all disputes. Then he instructed them to book a hotel for all the participants in the hearing for a week. The parties were represented by their own in-house counsels and the operating staffs. The Subcontractor sent its in-house counsels from its foreign head office. The process of hearing and negotiation were very hard and took time. In the early morning, at 2 O’clock, of fifth day, all the disputes were amicably settled and the parties signed the mediation agreement.

Sole Member DRB

At a coffee break during the above mediation hearing, the Mediator, Dr. Toshihiko Omoto, explained what a Dispute Board was to the participants of the hearing. One foreign manager took note and asked some questions. Three weeks later, D. Toshihiko Omoto received an email from that manager that the parties had agreed to establish a DB with one member and he was appointed as the Sole Member. This Board is a rare one which is not for a construction project.

The DB visited the power plant and had the first DRB Meeting in which the format of the DRB Meeting was established as follows:

• Meeting is to be held every six months
• A Scott Schedule is to be prepared before the Meeting
• Hearing is to be held at the Meeting
• If the parties agree, they can ask for Recommendation to the DRB and the DRB will issue Recommendation

During the Meetings, many disputes were resolved by negotiation but some of them were not. Unresolved disputes were referred to the DRB for Recommendation. The DRB issued 15 recommendations in 5 years and all of them were accepted by the parties whether they liked or not.

In 5 years after commencement of the DB, the parties cleared most of the disputed areas and the parties and the DRB agreed to terminate the DRB agreement.

We sincerely thank you for all the good guidance and the patient you had during Mediation and the seven DRB’s.  A dispute solving technique I learnt through you is the “Scott-Table (Schedule)”. I believe it is a practical and fair way to lists the arguments, is comprehensive and understandable, and which may, because of this, lead to an agreement acceptable to both parties.

Parties