DISPUTES UNDER THE FIDIC FORM OF

CONTRACT
CYPRUS DISPUTE RESOLUTION FORUM – 11 JUNE 2010

Rowan Planterose
 Dispute Resolution Procedure under Clause 20

A dispute arises under

Sub-Clause 20.1 or 2.5

The Dispute is referred to the DAB for its

decision under Sub-Clause 20.4

DAB provides its decision within 84 days DAB fails to do so within 84 days
under Sub-Clause 20.4 or under Sub-Clause 20.4

Yes
No
Is either
Party dissatisfied
with the decision?

Does that Party give

its notice of dissatisfaction Dispute is settled and the decision
No
under 20.4 in the time is final and binding. Sub-Clause
allowed (28 days)? 20.4

Is the dispute
settled amicably Yes
Yes Dispute is settled

No
The Parties have 56 days to
resolve the Dispute
amicably. Sub-Clause 20.5
Dispute shall be finally
settled by International Arbitration,
Sub-Clause 20.6
 Compliance with the Decision of the DAB
DAB provides its decision
within 84 days under
Sub-Clause 20.4

No Is either Yes
Party dissatisfied?

Does that Party give

No its notice of dissatisfaction Yes
within 28 days?

The decision is final Proceed under

and binding Sub-Clauses
20.5 & 20.6

Do the Parties Do the Parties

No comply with the Yes Yes comply with the No
DAB’s decision? DAB’s decision?

Non-compliant Party
Proceed to Sub-Clause is in breach of contract
Dispute will be settled
20.7 & refer the failure End Lacuna in 1999 Books
through arbitration
itself to arbitration Refer to Arbitration in Gold Book
FIDIC Contracts
Red Book - Conditions of Contract for Construction for Building
and Engineering works designed by Employer

Yellow Book - Conditions of Contract for Plant and Design Build for E&M Plant
Plant and for Building and Engineering Works designed
by Contractor

Silver Book - Conditions of Contract for EPC/Turnkey Projects

Gold Book - Conditions of Contract for DBO Projects

Slides are based around Red and Yellow books

Clause 20.1
“If the Contractor considers himself to be entitled to any extension of the
Time for Completion and/or any additional payment, under any clause of
these Conditions or otherwise in connection with the Contract, the
Contractor shall give notice to the Engineer (Employer in Silver Book,
Employer’s Representative in Gold Book), describing the event or
circumstance giving rise to the claim. The notice shall be given as soon
as practicable, and not later than 28 days after the Contractor becomes
aware, or should have become aware, of the event or circumstance.”
Claims
– Condition precedent

– Notice describing circumstance “not later than 28 days” after the

Contractor became aware, or should have become aware of event/
circumstance

– If no notice within time, no extension or additional payment

– Mitigated in Gold Book “If the Contractor considers there are

circumstances which justify the late submission, he may submit the
details to the DAB ‘for a ruling’. DAB can overrule this 28 day limit if
fair and reasonable.”
Records
– Contractor to keep contemporary records to substantiate the claim

– Engineer [Employer] may monitor record keeping without admission

of Employer’s liability

– Engineer [Employer] may instruct further record keeping without

admission of Employer’s liability

– Engineer [Employer] may inspect records

– References to [Employer] apply to Silver Book. Employer’s

Representative in Gold Book
Full Claim
– Within 42 days or period agreed, of date when Contractor became aware of
circumstance (or should have been aware) sends to Engineer [Employer]

– Full supporting particulars of the basis of the claim, of extension of time and
additional payment claimed

– Sanction: “If the Contractor fails to comply with this or another Sub-Clause
in relation to any claim, any extension of time and/or additional payment
shall take account of the extent (if any) to which the failure has prevented or
prejudiced proper investigation of the claim.”

– (Gold Book) If the Contractor fails to provide the contractual or other basis
of claim within 42 days, the Notice lapses, subject to DAB permitting late
submission. (This is additional sanction).
Ongoing Claims
– Fully detailed claim considered as interim

– Contractor sends further interim claims at monthly intervals, giving

accumulated delay and/or amount claimed, plus such further
particulars as Engineer [Employer or Employer’s Representative]
reasonably requires

– Contractor sends final claim within 28 days after end of effects of

event/circumstance (or within agreed period)

– Sanction: extension or additional payment takes account of extent (if

any) to which failure has prevented or prejudiced proper
investigation of claim.
Engineer’s Response
– Within 42 days (or agreed period) of receiving claim (or particulars
supporting a previous claim)

– May approve

– May disapprove with detailed comments

– May request Particulars, but must also respond on principles

– Must include substantiated amounts in Payment Certificates/interim

payments

– Applies to Employer under Silver Book, and Employer’s Representative

under Gold Book
Failure to Respond
• Additional Clause in Gold Book

• If the Employer’s Representative does not respond in accordance with

the foregoing procedures and timetable, either Party may consider that
the claim has been rejected by the Employer’s Representative, and
either Party may refer the matter to the DAB…
Formality
– Engineer proceeds in accordance with Sub-Clause 3.5
(Determinations) to agree or determine

• Extension of the Time for Completion

• Additional payment

– Employer under Silver Book

– Employer’s Representative under Gold Book

Sub-Clause 3.5 (Red & Yellow
Books)

“Whenever these Conditions provide that the Engineer shall proceed in

accordance with this Sub-Clause 3.5 to agree or determine any matter,
the Engineer shall consult with each Party in an endeavour to reach
agreement. If agreement is not achieved, the Engineer shall make a fair
determination in accordance with the Contract, taking due regard of all
relevant circumstances.

The Engineer shall give notice to both Parties of each agreement or

determination, with supporting particulars. Each Party shall give effect to
each agreement or determination unless and until revised under Clause
20 [Claims, Disputes and Arbitration].”
Referral to a Dispute Adjudication
Board

– Applies to a dispute (of any kind whatsoever) arising out of the

Contract or execution of the Works (Gold Book – specific application
to Employer’s claims)

– Includes disputes about any certificates, determination, instruction,

opinion, valuation of the Engineer

– Claimant refers dispute to DAB with copies to other Party and

Engineer
Contd…
Referral to a Dispute Adjudication
Board

– Under the Red and Gold Books the DAB will already exist. Must be
appointed by date stated in Appendix to Tender or Contract Data.
Default is 28 days after Commencement Date (i.e. commencement
of execution of the works)

– Under Yellow and Silver Books DAB appointed within 28 days of

notice of intention to refer a dispute. Particular Conditions replace
Appendix to Tender in Silver Book

– In Gold Book, notice of dissatisfaction with determination of

Employer’s Representative within 28 days of determination. If no
notice, determination deemed accepted. Referral within further 28
days
Composition of DAB
– One or three members as stated in Appendix to Tender (or
equivalent in other forms)

– Default is three members

– Each party nominates one member for approval of other

– Parties consult these members and agree on third, who acts as

chairman

– If Contract contains a list, member selected from that list, unless

unwilling/unable to act
Agreement with DAB Member
– Must incorporate General Conditions of Dispute Adjudication
Agreement

– These conditions contained in an Appendix to General Conditions

– However, may be amended by the Parties

– Remuneration must be agreed by both parties

– Each party pays half

Replacement of Member
– Parties may appoint a replacement member at any time

– Unless otherwise agreed, appointment effective if a member

• Declines to act
• Dies
• Is disabled from acting in some way
• Resigns
• Appointment is terminated

– Appointment of replacement chairman again requires consultation

with other members
Termination of Appointment of
Member

– By mutual agreement of Parties, but not by either acting alone

– Unless otherwise agreed, under Red Book all appointments

terminate when Clause 14 discharge effective (discharge is
submitted with Final Statement confirming total of Final Statements
represents full and final settlement of all monies due to Contractor
)
– Under Yellow and Silver books, appointments expire when DAB has
given its decisions unless other disputes have meantime been
referred.

– Under Gold Book, later of 28 days after decision or upon issue of

Commissioning Certificate
Failure to Agree DAB
If
– Parties fail to agree sole member DAB within time period

– Either Party fails to nominate a member (for approval by the other Party)
within time period

– The Parties fail to agree a Chairman within time period

– The Parties fail to agree a replacement within 42 days of refusal to act,

death etc.

Appointment made by entity or person named in Appendix to Tender or

equivalent in other forms in consultation with Parties – who pay half of
appointing fee each.
General Conditions of Dispute
Adjudication Agreement(1)

– Tripartite Agreement – each Party and Member

– Effective when last member signs an agreement

– Personal appointment

– Warranty of impartiality and independence, except as disclosed

– Warranty of suitable construction experience, experience of

contractual interpretation and fluency in contract language

– Confidentiality obligation
General Conditions of Dispute
Adjudication Agreement(2)

– Mutual obligations not to request or give advice on the Contract

except in normal course of DAB activity (unless agreed)

– Member cannot be appointed arbitrator

– Member cannot be called as witness

– Be liable for his actions as Member, unless bad faith. Indemnified.

Procedure of DAB
• Annex contains Procedural Rules which are not detailed. Note Gold Book
contains specific requirement of a response in 21 days

• DAB visits normally every 70-140 days

• DAB shall

(a) act fairly and impartially as between the Employer and the Contractor, giving
each of them a reasonable opportunity of putting his case and responding to the
other’s case, and

(b) adopt procedures suitable to the dispute, avoiding unnecessary delay or

expense.
Contd….
Procedure of DAB
• DAB may conduct a hearing. May request written documents and
arguments prior to or at hearing.

• DAB may adopt inquisitorial procedure

• DAB may proceed in absence of party, provided notified

• DAB may grant provisional relief

• DAB may open up, review, revise, any certificate, determination,

instruction etc. of Engineer.
Decisions of the DAB
• DAB must not express opinions on merits of argument during hearing

• Convenes meetings after a hearing, to have discussions and prepare

decision

• If not unanimous, majority may require minority Member to prepare a

report for Employers and Contractor

• Two members may normally proceed in absence of third, unless a party

does not agree, or absent chairman instructions other Members not to
make decision.
Decision Time, etc.
• DAB makes decision within 84 days of Reference unless otherwise
agreed. [Gold Book 84 days from Response or 105 from Reference if
no Response]
• Decision is reasoned
• Decision is binding and must be given effect to
• But “unless and until it shall be revised in an amicable settlement or an
arbitral award”. [This wording excluded from Gold Book]
• If no decision within 84 days (or other agreed period) either party may
give notice of dissatisfaction within 28 days
• Decisions made outside 84 days will probably not bind the parties – see
ICC case 10619
Dissatisfaction with DRB Decision

• Within 28 days of receiving decision, Party gives notice to other Party of its
dissatisfaction. Gold Book requires copy to Chairman of DAB

• Notices of dissatisfaction must set out matter in dispute and reason for
dissatisfaction (but not binding in arbitration)

• Valid notice of dissatisfaction normally condition precedent to arbitration

• Gold Book only: if decision of DAB requires a payment, DAB may require payee
to provide an appropriate security.

• Decision becomes final and binding upon both parties if no notice of

dissatisfaction given within 28 days
Amicable Settlement (Clause 20.5)

Where notice of dissatisfaction has been given, both parties attempt to

settle the dispute amicably before commencement of arbitration.
However, unless both Parties agree otherwise, arbitration may be
commenced on or after the 56th day after the day on which notice of
dissatisfaction was given, even if no attempt at amicable settlement has
been made.
Arbitration Basis (Clause 20.6)
• May be commenced prior to or after completion of the Works
• ICC Rules of Arbitration apply
• Three Arbitrators
• Language is that of language of contract communications (as stated in
Appendix to Tender)
• Full power to open up, review, revise, any certificate, determination,
instruction etc. of Engineer and decision of DAB
• Engineer may be witness
• Parties not limited to arguments and evidence before DAB
• DAB decision admissible in evidence
Failure to comply with DAB Decision
(Clause 20.7)

• Where a DAB decision has become final and binding and a Party fails
to comply with the decision, then the other Party may refer the failure
itself to arbitration. (No attempt at amicable settlement is necessary)

• But a lacuna in Red, Yellow, Silver books as to enforcement where

decision not final and binding can probably be enforced by arbitration.
See Interim Award in ICC Case 10619 (2008) 19 ICC Bulletin No 2.

• Specifically dealt with in Gold Book. “In the event that a party fails to
comply with any decision of the DAB, whether binding or final and
binding, then the other party may… refer the failure itself to arbitration…
for summary or other expedited relief…”
Direct referral to Arbitration
If a dispute arises between the Parties in connection with, or arising out of,
the Contract or the execution of the Works and there is no DAB in place,
whether by reason of the expiry of the DAB’s appointment or otherwise:

(a) Sub-clause 20.4 [obtaining Dispute Adjudication Board’s Decision]

(b) The dispute may be referred directly to arbitration

ICC Case 10619
• Under 4th Edition form 1987 – so Engineer’s Decision

• Claims for extension of time and additional payment on 2 road contracts

• Engineer’s Decision requested by Contractor. Engineer granted

contractor money. Both parties gave notices of dissatisfaction.

• Contractor made further claims and again Engineer awarded sums in

his favour

• None of decisions of Engineer complied with by Employer

ICC Case 10619
• Contractor filed Request for Arbitration at ICC, including claim for
“Respondent’s failure to give effect to Engineer’s decision”. Covered all
Contractor’s claims

• Interim Award sought requiring Respondent to give effect to Engineer’s

Decisions

• Inter alia, Respondent argued decisions deprived of binding character

by notice of dissatisfaction. Also argued decision were not binding as
outside period for making decision.
ICC Case 10619
• Tribunal agreed second decisions were out of time and “they cannot
bind the parties”. But first decisions were in time.

• First Decisions “… must be considered as capable of producing

immediate legal effect on the parties for as long as they are not revised
or set aside by the parties in an out of court settlement or by an arbitral
award…

• This was a contractual right; even though the decision might later be
reversed.