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 To Virginia, Olivia,
Christopher and Annabelle Knutson
 TABLE OF CONTENTS

Introduction xi
About the Editor and Authors xxxv
Brazil
Flávio Gonzaga Bellegarde Nunes,
Maria Isabel de Almeida Alvarenga, Analucia Zuliani Réa,
Fabio Simões Castejón 1
Egypt
Borham Atallah 21
England
Robert Knutson 37
France
Marc Frilet 79
Germany
Wolfgang Rosener, Gerhard Dorner 87
India
Som Mandal, Pooja Dood 127
Japan
Kazuo Takayanagi 189
Malaysia
Wilfred Abraham, Rishwant Singh 229
Netherlands
Eric Eggink 251
Saudi Arabia
Charles G. Hammond 259
Sweden
Per Samuelsson, Lennart Iwar 277
Switzerland
Michael E Schneider, Matthias Scherer 313
United States of America
James J Myers, John P Giffune, Lisa K Miller 343
Index 385

ix
 INTRODUCTION

Many years ago now I was involved in negotiations with a German engineer
over the final construction cost of a hydroelectrical project in South Asia. The
contract used was a slightly modified version of FIDIC Red Book 3rd edition,
1977. We were discussing the fact that the total value of variations amounted
to about 10% of the original contract price. Our client had added a certain
percentage for overhead and profit to the ‘‘on-cost’’ of the variations, but the
Engineer refused to recognise what we said was our client’s entitlement to
overhead and profits. When the argument was explored during discussion the
Engineer finally pointed to clause 52(3) of the FIDIC third edition referring to
adjustments for the cost of overhead and profit and stated that this clause meant
that unless the contract price had changed by 15% or more no additional
variations were entitled to be valued or added to the original price.1 I found that
argument quite inexplicable and began to look for its source.
The German VOB contract did not to my knowledge exist in translated form
at that time so on a hunch I had some professional translators translate certain
provisions including the variations provisions. Then it all became clear: the
Engineer interpreted the FIDIC provisions found in clause 52(3) in the manner
he did, because that was the way the VOB worked, and works, as can be
seen from the analysis later in this book of FIDIC under German law by
Dr Wolfgang Rosener and Gerhard Dornher.
I had then one of those (in my case extremely) rare insights. If you could
understand the approach of other legal cultures and national construction com-
munities to their own contracts you could gain an important advantage under-
standing your opponents approach, and/or – when in international construction
contract negotiations you might gain an important advantage. If you view the
work/issue through the filter of the other parties own knowledge and experiences
and knew their approach at least on a basic level, you might be able to take
advantage of or use matters that they assumed to be axiomatic and/or make
arguments which would not work in your own culture but would work in theirs.
A simple example is bouleversement. The notion of ‘‘overthrowing the funda-
mental economic bases of the contract’’ is well embedded, at least as far as I
understand, in French construction culture, but does not exist in common law
systems. It would be so much easier to argue that there had been a bouleversement
than to attempt to show that the contract had been ‘‘frustrated’’ within the strict
terms of the English Common Law, especially if there is a civil law party on the
other side of the table.
The FIDIC suite of contracts, as is well known, was originally derived from
the English ICE fourth edition of engineering contract. That fourth edition was

1 We can see that in Egypt (and certain other countries) this type of misunderstanding could very
easily arise because of the operation of local laws relating to government contracts.

xi
xii FIDIC – AN ANALYSIS OF INTERNATIONAL CONSTRUCTION CONTRACTS

conceived of and developed for many years in the English Common Law context
of the early 20th century. Thus an obvious question naturally arises – what
happens when FIDIC is taken out of that English context and subjected to
examination under different national laws?
This is the question this book seeks partially to answer. I did not intend for
the book to be definitive with any particular answer – rather it is meant as a
guide for in-house counsel or junior lawyers who are asked during the hectic
pre-tender or initial argument period to give a thumb-nail sketch of the con-
sequences of having the contract subject to the law of country X. If country X
is found in this book it is hoped that our hypothetical lawyer will find some
indicators and even the name of an expert capable of expanding on particular
aspects of the law of that country. I would now like to turn to some of the
aspects of the reception of FIDIC in non-English law jurisdictions that I have
encountered over the years.

The English language v. English Law

Obviously the ICE 4th edition was intended by English engineers and lawyers
to be interpreted under English law. If the contract was used outside of England,
it would have been a natural product of the application of the principles of
conflict of laws ( private international law) to apply, in all likelihood, the law of
the place of performance. This would have different implications for different
parts of the contract. For example, recently while I was at the ICC in Paris, a
very eminent French lawyer arbitrator told me that he had been called upon to
interpret the concept ‘‘due diligence’’ as found in a construction contract under
the laws of a civil law jurisdiction, with civil law parties on both sides. He said
he had been greatly helped by an English QC serving on his panel, who had
provided him with various English reported judgments on the topic. My own
view was that this was not necessarily the best approach. ‘‘Due diligence’’ has
meaning in ordinary English usage, and one does not have to go beyond that –
it means ‘‘the proper amount of diligence’’, not too much and not too little. It
is not at all clear to me that English cases, putting a particular legalistic gloss
on that phrase, and embedded as they are in the English tradition of precedents
and the binding authority of judgments from higher courts, would assist in
understanding this issue. My acquaintance agreed.
What if my acquaintance had asked about the phrase ‘‘act of prevention’’? If
an educated native English speaking Londoner were asked what this means, he
or she would very likely say that it means something like – an act which has or
can prevent (something ). In fact, under English law (and probably the law of
New Zealand, Australia and Hong Kong, but not necessarily Canada) it has a
specific meaning – equating to an act or omission, or series of acts or omissions
by the Employer or attributable to him, which have the effect of preventing the
contractor from completing the project within the contractually specified time
for completion.2
This understanding cannot easily be arrived at by simply reading the words –

2 Peak Construction v Mckinney Foundations (1971) 69 L.G.R. 1 (English C.A.)

 INTRODUCTION xiii

English law has to be examined. It would be a question for argument, I assume,

in many jurisdictions as to whether or not arbitrators deciding under non-English
law, could simply import the English legal definition to arrive at the English
understanding.
One can readily appreciate that terms such as ‘‘Performance Security’’ (as
opposed to Guarantee or On Demand L/C) may have different nuances when
translated into another language. Certainly the FIDIC phrase ‘‘Defects Liability
Period’’ caused legal havoc for years in jurisdictions (again see Germany) which
allow parties to contract out of the legislated limitation period. This is apparently
not an isolated possibility in civil law systems, and may apply to all sorts of
areas, such as termination, force majeure and the obligation to complete with a
certain result. I hope that this book will clear up some of these areas for
our readers.

FIDIC in England

Not only was the FIDIC First Edition Red Book Contract for international
works of civil engineering derived from the English Institution of Civil Engineers
4th edition form, the ICE and FIDIC forms have tracked each other through
successive editions for a number of years.
The second FIDIC edition followed the first by only 3–4 years and was very
similar. The third edition (1977) benefited from the changes that had been
made to the ICE 5th edition, and it was only until the FIDIC 4th edition that
the International Contract began to look and feel like a contract unto itself, and
not an adaptation of the English form. Nonetheless, some of the key phrases in
FIDIC remain identical to the key phrases in the English forms, and parties
looking for informed interpretations of, for example, the adverse physical condi-
tions clause in FIDIC can look to the English cases on the ICE form for
precedents.

FIDIC in the Context of International Construction – The

Contract Rules – OK

It is important to bear in mind that while all systems of law emphasise the
principle of ‘‘pacta sunt servanda’’ (agreements must be observed), some systems
have different focuses. It is commonly said in summary that Common Law
systems will place greater relative importance on the literal written word and
civil law systems will place more emphasis on the parties underlying intentions
and less on the literal meaning of what was written. This is of course a gross
oversimplification and does damage to those systems in the common law that
look at the parties intentions (for example Ontario) and probably overemphasises
the degree to which civil lawyers are willing to bend the plain wording of
contracts, even when applying the notions/maxims associated with the doctrine
of good faith.
Lawyers sell ideas. Parties to international contracts work on (often different)
legal theories and fundamental/cultural notions. The fact is that the contract
xiv FIDIC – AN ANALYSIS OF INTERNATIONAL CONSTRUCTION CONTRACTS

language will solely govern the parties’ rights most of the time and any theories
more exotic than those relating to measurement of damages for contract breach
will not normally be needed. I do not wish to suggest that it is not useful to
know about the finer points of delictual theory, or for example, theories about
joining non-signatories to the contract to the arbitration, it is simply that most
of the time, those types of theories are not needed, and if they are the sole
foundation for a claim, caution should be exercised.

Contract Law Rules

All of the world’s legal systems focus on the sanctity of contracts, and damages
as the remedy for breach of contract. While it may seem like an impossible task
to understand or appreciate even a handful of different legal systems, the fact is
that it is not all that difficult. We have colonialism and imperialism to
(thank?/acknowledge) for this fact.

A Short History of World Law

Even then, people will look at the same contract language and actually under-
stand different things. This could be, and often is, because we all look at the
world through our specific cultural and historical perspectives.
Given that the same wording will be interpreted across systems and cultures,
the move in the 1999 Suite to uniform and relatively ‘‘international’’ language
has to be greeted favourably, but there are still linguistic issues which can
confidently be predicted to cause problems on many contracts, whichever version
of the Suite is used. One obvious example is the requirement to put disputes to
the Engineer/Employer under Clause 3.4/5. The strict ‘‘flow chart’’ system for
sending disputes first to the Engineer, who has to decide ‘‘fairly’’ and then on
to the DAB, then to arbitration, is bound to be misunderstood and misapplied
by parties, and will create even more problems than the previous requirements
to put disputes first to the Engineer.

Some of the (non-headline) elements of the allocation of risk in each and any
of the 1999 Suite contracts will conflict with either the practice or the law or
both in some legal systems. Obvious examples include legal systems where direct
payment to subcontractors will extinguish the Owner/Employer’s debt, and
systems dealing with the post completion responsibility of the parties, such as
those systems making the employer, contractor and architect all jointly and
severally liable for total or partial collapse of buildings for years after the comple-
tion took place.
In some jurisdictions the health and safety provisions of FIDIC are inadequate.
England is an example. The allocation of ground risk in FIDIC is not consistent
with some of the systems in which the contracts are going to be used. The
provisions relating to the payment of penalties are clearly liable to adjustment
in some jurisdictions.
The provisions relating to the extinguishing of the Employers’ liability will
 INTRODUCTION xv

not apply in jurisdictions which do not allow contractual waiver of liability in

cases of gross negligence or fraud (such as California).
In some systems, despite the careful use of the words ‘‘or otherwise’’ in the
disputes provisions, disputes relating to non-contractual claims will be held to
be not arbitrable. Pakistan and fraud are an obvious example.
Despite careful wording of the payment provisions, Employers around the
world will withhold payment claiming rights of ‘‘set-off ’’, ‘‘abatement’’ or sim-
ilar rights.
The FIDIC fraud provisions will mean that parties caught up in kick-backs
will face the prospect of termination of the contract even though they did not
particularly wish to be caught up in the situation in the first place. Solicitation
of bribes is not uncommon in this field.
In short, despite the standard form there are many potential traps for the
unwary.

Crossing Legal Systems for a Living

It is not particularly difficult learning about and arguing about different legal
principles in foreign legal systems. This is particularly so in the context say, of
an international commercial arbitration, where one is often paid to do just that.
Anyone reflecting on the process will realise that the argumentation is normally
quite structured, and once the dispute has arisen (normally about an alleged
underpayment), the scope for discussing and applying the relevant principles is
quite restricted in fact, to any pleaded and relevant principles of law which have
to be learned, construction of the contract, and the finer points of establishing
and proving the damages claimed.
What is difficult, indeed very difficult to do, is to know somehow magically
in advance about the principles of law, or the peculiarities, found in almost every
legal system, which can make a difference to the parties’ rights, and which not
everyone will know about. Examples might include the greater rights in Malaysia
in respect of misrepresentation, and the fact that under American law (see the
relevant chapters) when the responsibility has been impossible to determine in
cases of delay and disruption, the contractor will normally receive time, but not
money, for the extended period. In English law, the doctrines relating to acts of
prevention, frustration and particularising cause and effect are probably outside
the international norms for construction contracts. In many civil law jurisdic-
tions, an argument that the arbitration clause is invalid will often be defeated
simply by showing it is an international contract with a commercial purpose –
this is a relationship quite unknown in Common Law systems.

A Potted History of World Law

I commonly encounter lawyers of any given system who feel it is next to

impossible to contemplate dealing with disputes under any governing law other
than their own law. No doubt for all of us dealing with the familiar is easier
than attempting to learn the intricacies of a foreign law, but I would assert that
xvi FIDIC – AN ANALYSIS OF INTERNATIONAL CONSTRUCTION CONTRACTS

it is not as difficult as you might think. The reasons for this are many and varied,
but I will attempt in this section to indicate why this is the case.
First of all, the principle of pacta sunt servanda (already mentioned above) is
universal to all legal systems. In practice that means that the vast majority of
construction disputes are fought and won or lost primarily over the wording of
the contract (and alleged facts).
Secondly, the principles of law likely to be alluded to in construction cases
are often broadly similar across many legal systems. For example, the obligation
to mitigate ones loss/damage ( l’obligation de minimiser le dommage) is appar-
ently often found to exist in ICC construction arbitrations, including civil law
arbitrations.
Thirdly, in all non-common law countries, the law is found in the civil code
and tendering laws, and if you can find readable copies of these, you will often
have all that you need on a particular point. If you need more, you can go to
doctrine or local counsel/experts (which you should probably have engaged in
any event).
Finally, you can thank colonialism (a bit of a funny notion), and latterly the
United Nations for making most legal systems both accessible and relatively
easy to understand. All of the former English and French colonies have legal
systems. If you can develop a working knowledge of the most important construc-
tion related principles in French, English and German/Swiss law, you will have
a good entry into the legal systems of most of the rest of the world.
In particular, few English lawyers seem to be aware that virtually every
ex-British jurisdiction3 passed, around the time of the retreat of the British, an
Act variously called ‘‘the English law Act’’ or something like that, which incorp-
orates the then current state of English Common Law, and normally statutory
law, as at the date of the Act. Even the Hong Kong Basic Law of 1997 does
this. Of course English law continues to develop, and this leads to interesting
legal debates about whether there is one ‘‘Common Law’’ or many, but for
practitioners, the point to note is that if you know the law, say of arbitration, as
it stood in England in 1698, you will be able to navigate your way around
Sudanese arbitral law, which has not changed much since the adoption of the
English rules on the topic. Similarly, Company law in my home province of
British Columbia, Canada, is largely the English 1890 Act, with a few bolt-on
US style extras since then. It took me a period of residence in England to realise
that the English Law Act in British Columbia was not unique, but one of perhaps
dozens around the world.
Marc Frilet, the author of our French chapter, has told me that much the
same process took place in ex-French colonial possessions, and one might
reasonably look for similar examples in ex-Portuguese places, such as Brazil
(treated here in the Brazilian chapter) and Mozambique or Angola.
Naturally, you will have to add, at times, appreciation of local variations –
Shari’a, post colonial developments, and particular laws, so it is always best to
verify your observations with local counsel.

3 I think with the exception of America, although this makes little practical difference. As is
shown in our American chapter, America developed from English law while adding a few
enlightened improvements from civil law thought along the way.
 INTRODUCTION xvii

Specific Examples

The Indian Contract Act 1872, is in my opinion one of the better legacies of
the British in India, and applies in India, Pakistan, Sudan and Malaysia, and
could be used to inform the law in places such as the Maldives and Nepal. It is
a straightforward and easily readable codification of the Common Law of
Contracts with some enlightened improvements. The chapter from Fox Mandal
introduces how it works in relation to Indian law construction contracts. Note
that the law of misrepresentation under Indian law is more workable and useful
in some ways than its English counterpart.
Let us tackle a more difficult example, Middle Eastern law. Viewed geographi-
cally it is a hotchpotch of different colonial and local traditions and culture. It
seems different, however, if one knows that in the late 1920s or early 1930s, an
Egyptian jurist named Sanhouri took a doctorate in law in Lyons. I have been
told he went back to his native Egypt and (relatively speaking ) failed in politics.
His consolation prize was to rewrite the Egyptian Civil Code,4 which he did,
basing it on the French Civil Code of the time. It is also explained in great
length in his great works, including ‘‘Al Waseet’’. Sanhouri went on to rewrite,
I believe, the civil codes of Kuwait, Iraq and Syria. If you understand classical
French law principles therefore, you will have no problems with the commercial
law in those countries (or Cote D’Ivoire, Senegal, Togo etc).
What about Shari’a law? Here again, the Koran being the guide, you do not
have to look much beyond the Koran – al-Maidah: 1, ‘‘O ye who believe! Fulfil
your agreements’’. That having been indicated, the civil codes of the Middle
East, with the exceptions of Jordan and Pakistan, are transpositions of European
civil law.5 See also the learned description of the principles of Shari’a law in
Saudi Arabia, as the chapter by Charles Hammond sets them out in a remarkably
clear fashion. One must reflect on how different and refreshing the prohibition
on risk and uncertainty is in Saudi law. In the context of construction contracts,
this must give hope to contractors faced with unexpected costs.
The acts of historical borrowing go on around the world. Russian civil law
borrowed strongly from German law. Japan borrowed from either Switzerland
or Germany.
The approach does not always work perfectly, but if you know the origins of
legal systems, you can guess a lot about its laws. Check your guesses against a
good local lawyer, and you will soon know all you need to for your particular
dispute.
These great historical currents are reflected naturally in the descriptions of
the national systems found in this book. We have, as the main imperialistic
forbearers, chapters on English and French law. In the French law chapter,
Marc Frilet, who has done and is doing very valuable work in the countries of
Francophone Africa, sets out the broad outlines of the classical underlying
principles of French law; including the broad responsibility of the Contractor,
decennial liability, good faith and administrative law principles, as well as the

4 In this book, see the review by Borham Atallah of Egyptian law.

5 Hilary Lewis Ruttley and Chibli Mallat, Commercial Law in the Middle East, Introduction, second
edition (from the SOAS website – soas.ac.uk)
xviii FIDIC – AN ANALYSIS OF INTERNATIONAL CONSTRUCTION CONTRACTS

limits to the validity of the FIDIC valuation of variations provisions. The need
for a clearly defined scope of the contract is touched upon, as well as the grand
theories of ‘‘sujetons imprevues’’, ‘‘imprevision’’, and ‘‘immixion’’.
Marc Frilet concludes with an important warning to those who think that
EPC contracts with too radical of a shifting of the risk (the FIDIC Silver
Book) can be running the risk that such contracts may be difficult to uphold in
countries with a French or French civil or administrative law tradition.
However, the chapter by Dr Wolfgang Rosener and Gerhard Dorner on
German law shows that this issue is not confined to countries of the French
tradition. In Germany, the law on the allocation of risk in construction contracts
directly calls into question certain of the more radical aspects of GC 17 and the
Silver Book allocation of risk.
Similarly, our Swedish authors show that the Silver Book, at least, departs
from the norms found in Swedish contracting, in an area of the World that has
never been too strongly affected by Imperialism (other than its own and Russian
expansionism at the gate).
Common law countries and traditions are reflected in the book in chapters
on India, America, England and Malaysia.
The United Nations contribution has helped in many different ways to assist
in international commerce, including construction. This is through the promo-
tion of uniform procurement laws, and treaties covering a lot of related areas,
including the sale of goods, limitation ( prescription) periods, carriage of goods
by sea and of course the enforcement of arbitral awards.
Various other ‘‘gaps’’ are provided for by NGOs, including standards for the
treatment of documentary credits and guarantees, the potential content of lex
mercatoria, and, of course, through the World Bank and other development
banks, guidance on the potential interpretations of the FIDIC and other standard
forms. The ICC itself publishes sanitised legal precedents in the form of awards
in real cases on numerous construction topics from jurisdictions around the
world. We have also seen important developments in the treatment of fraudulent
and criminal behaviour through the OECD. UNCITRAL and its guides are also
worth special mention. Perhaps a future edition of this book will deal with these
topics. Authors are always welcome! Despite all of this, the existence of a
‘‘Common Construction Law’’ remains speculative, as the differences outlined
here show.

Vive la difference

When it comes to arguing about specific local laws, the areas of local flavour
and difference are likely to include the following: limitations (three years in
India), proof of loss (the US and UK are among the most stringent), proving
entitlement to extension of time (many people, not yet converted, are sceptical
about the black box mysticality of the CPM).
Tortious/delictual responsibility (and criminal behaviour) are the areas of
greatest difference between jurisdictions, apart from different local customs
themselves. Cases are not often fought and won on the basis of alleged torts,
but they can make interesting differences to the way the case unfolds.
 INTRODUCTION xix

Examples here (from my Canadian point of view) might include the tort and
crime of business libel/defamation found in a number of civil law jurisdictions,
laws concerning the registration and effects of non-registration of local agents
(the penalty can be death) and companies, decennial liability, and liability
generally for the total or partial collapse of structures, the responsibility of
contractors to implement changes instructed by the Employer, and the corres-
ponding duty of Employers, past a certain point, to pay for changes.
While the principles relating to lump sum contracts6 and the obligation to
produce a result versus the obligation to apply the means sound as though they
would make great differences between civil and common law jurisdictions, not
to mention the obligation to act in good faith, I have not observed many
substantial differences in the final decisions of arbitral tribunals.
Finally, deep in the night, with no one else around, most lawyers in their
heart of hearts will admit – the Contract usually decides the issues, despite what
the law is. That is not to say there are not some pretty unusual interpretations
of FIDIC put forward from time to time!

The Interaction between the FIDIC Conditions and the

Governing Law/Law of the Arbitration

The 1999 FIDIC Suite simply requires the parties to state the governing law in
the Appendix. If it is not stated, then it ends up being argued on by the parties’
lawyers. If it is stated, the problems do not end there as the exact boundaries
of the governing law may not be clear. If the procedural law of any arbitration,
and the law of the site is the same, then you will have fewer problems. It may
be worthwhile to note at this point that I have never noticed any radically
different approaches to conflicts of law issues in non-European parts of the
world. There may be a tendency in some places to assert that the local law
governs for this or that reason,7 but once the scope of or application of any
particular is called into question the lawyers will normally call upon familiar
reasons to justify their arguments – the imperatives of local law, god, public
policy and so on. To the extent that more sophisticated conflicts theories are
used, they normally look like variations on the closest and most real connection
or place of performance tests.8
If the governing law of the contract is different from the law of the Site, a
whole host of complex issues could arise. Imagine a contract in India with
French governing law. Do the Indian contractors benefit from the French law
concerning direct payments? Do they have the right to plead l’exception de
l’inexecution (the right to stop work for non-payment) even if Clause 16 is not
adhered to?
Similarly, the standard FIDIC clauses all require compliance with the local
laws. What if those laws are in conflict both with the governing law, and the

6 See the Malaysian discussion of the meaning of ‘‘lump sum’’ in that jurisdiction.
7 See for example the Hub Arbitrations in Pakistan or National Power v Singer in India.
8 All international lawyers should know about the Rome Convention and its tests, but it is
debatable how often one needs to go beyond that. US methods, which de-emphasise ‘‘character-
istic performance’’ are easy to learn as needed.
xx FIDIC – AN ANALYSIS OF INTERNATIONAL CONSTRUCTION CONTRACTS

contractual obligations of the parties. An example might be various Treasury

regulations, which require Government parties/departments to follow certain
rules in relation to, for example, Variations, which directly contradict the contract
and the contractor’s rights. On the other hand differences in local laws may
appeal to contractors – see the Malaysian Chapter for an enlightened (in my
opinion in any event) approach towards liquidated damages/penalties. Many
jurisdictions have similar problems which can arise in relation to the mandatory
nature of local laws, although they may not be thought of as such, including
England (mandatory Health and Safety regulations).9
An interesting variation arises when arbitration (or DAB proceedings) take
place in a jurisdiction other than that of the Site. The procedure of that dispute,
and to be followed by the DAB, will be the law of the place where the dispute
resolution takes place. This rule was consecrated by the Geneva Protocol of
1923, and finds echos in the New York Convention of 1958. Summary deter-
minations such as those undertaken by the DAB could very well be open to
challenge. They will be attributed the legal aspects of an ‘‘expertise or expertise
legale’’ in civil law countries, and may or may not be assimilated to experts or
arbitrators in Common Law countries. They will probably be liable to challenge
in the place of the dispute resolution procedure, whatever other law governs the
other parts of the Contract.

The Interaction between the FIDIC Conditions and the

Mandatory Law of the Site

This is a problem that arises in those countries where there are mandatory
provisions of local law, for examples in relation to securing payments to
subcontractors/suppliers by the use of liens, local procurement or labour laws.
Unwary contractors sometimes find by way of illustration that their (foreign)
nationals cannot work in a given trade, because for example, they are not in the
appropriate local union. While professional bodies such as Architects
Associations may not think of themselves as trade unions, the same restrictions
often apply.10
Should a dispute arise, the Contractor may find that it has to go before some
local board, despite the clear DAB/Arbitration provisions in the contract, or that
the local party has gone to the local judiciary and obtained an order which is
intended by the local authorities to be binding. A good example of this is the
right to appoint a juge referee in France, despite the existence of the ICC
arbitration provision.11 These days in England foreign contractors may be equally
surprised by a Notice of Adjudication.
Further, in many countries, if parties apply to the local courts for some form
of interim or provisional relief, the local laws may dictate that they lose the right
to arbitrate altogether. This problem arises often in international arbitration.

9 See the English chapter.

10 See the Malaysian chapter for descriptions of the rules as they apply there.
11 This is a device that was used with good effect in both the Channel Tunnel and Euro Disney
cases.
 INTRODUCTION xxi

Although the problem is quite easily identified, it is difficult to deal with in

the abstract. ‘‘Early warning’’ provisions, such as ones which give a positive
duty to warn, may help avoid the impact of this type of problem, as may DABs,
but the simple FIDIC provisions requiring ‘‘point blank’’ compliance with local
laws, and no indication of what those laws are or how they are observed, leaves
the contractor in a weak position.
The next section of this Introduction seeks to identify some of the more
universal and commonly encountered problems one might experience when
contracting under the FIDIC 1999 conditions.

UNIVERSAL/COMMON PROBLEMS ARISING UNDER ANY

OF THE FIDIC CONDITIONS

There are aspects of these contracts that are going to give rise to potential
problems, almost regardless of the governing law. As most of these are not dealt
with globally by the individual authors in their national reports, I will deal shortly
below with some of the ones I am familiar with.

The Employer’s Claim Provisions

These provisions are new to the 1999 Suite and may add a new element to the
longstanding and world wide arguments about the scope of the arbitration clause
in the FIDIC Suite. There are Awards from all over the world deciding all sorts
of things about the scope of those provisions. For example, I have seen time bar
arguments defeated simply by the finding that they could not apply to legal as
opposed to technical arguments. The addition of a specific, and weak but
apparently all-embracing provision for Employer’s claims may take away one of
the arguments available to Employers lawyers who argue that their client is
entitled, despite the wide wording of arbitration clause, to ‘‘self help’’ remedies
such as withholding payments and calling bonds as a type of commercial
pressure.
FIDIC has, since the 4th edition Red Book in 1987, been expanding the use
of the phrase ‘‘or otherwise’’ in various places,12 and a word search will show
that it is used in the 1999 Suite to describe claims everywhere. It remains to be
seen if this will mean that claims under the contract or for breach of contract
are both susceptible to time bars, to the extent that they are allowed under the
governing law. Many civil law arbitrators will simply not allow them, as to do
so would violate the rules relating to good faith.

Payment Provisions

It can now clearly be argued, purely as a matter of contractual intention, that it

must have been intended by the Employer’s claims provisions and the addition

12 It was first found in the 1987 Red Book clause 53.1 ‘‘Procedure for Claims’’ although it does
not appear in the 1987 E&M form (the Yellow Book).
xxii FIDIC – AN ANALYSIS OF INTERNATIONAL CONSTRUCTION CONTRACTS

of clause 14.8, to put in place a regime which ensures that the contractor is paid
whatever is certified, when it is certified, with disputes to be considered later.
In Common Law jurisdictions this may be rather unpalatable, but as set-off
and abatement claims are, sometimes at least, a prevaricator’s charter, such an
approach may be considered to be reasonable in principle. FIDIC set up a full
regime to achieve this in the 1999 Suites. It had been foreshadowed in earlier
editions, but was not conceptually possible until they had full payment provisions
in their drafts (which started with the 1987 version of the 4th edition Red Book).
Careful readers will have noticed long ago that the contracts called for all
claims of whatever nature to be determined by the Engineer or later in arbitration.
While the arbitral references of all disputes was perhaps slightly less controversial,
it is not uncommon to see Engineers, if faced with them, to refuse to decide
claims for some breach of contract, or non-contractual claims.
Given the wording of these disputes provisions, for many years now it has not
been clear that Engineers were acting within their rights to refuse to entertain
certain sorts of claims. Yet almost 20 years on Engineers still fail to deal with
claims for breach of contract, tort or late payment, simply because they were
claims that the Engineers consider are not their responsibility. Certainly it may
suit their view of their role to leave legal claims to one side, but a clause that
calls for them to decide ‘‘all disputes’’ should on its face require them to decide
all disputes.
With the 1999 Suite, the drafters of FIDIC took a unified and comprehensive
approach to this issue. First, the payment provisions set out that all claims to
payment of whatever nature, are to be put forward in the applications for interim
payment. Thus GC 14.3(e) requires the Contractor to claim ‘‘any other additions
or deductions which may have become due under the Contract or otherwise’’
(emphasis added), and the certifier is expected to certify the same sums.
Similarly, under the claims provisions, if the Contractor considers himself
entitled to any additional payment, under any clause of the Conditions or otherwise,
he must make that claim first to the Employer or Engineer as a claim, then pass
it to the Engineer (if there is one) for a determination (read GC 20.1 and GC
3.5 together), and then send it to the DAB. New in the 1999 Suite, GC clause
2.5 universally requires the Employer to do the same thing.
In both the claims and the payment provisions, the drafters followed their
own logic to a logical conclusion by requiring that any claim that has not been
put forward for payment or as a claim in accordance with the claims or payment
provisions falls to the wayside and is not to be taken account of: see GC 14.12
for payments, and 20.1 for claims. The only flaw in the contractual provisions
(if you follow this particular argument) is that under GC 20.1 penultimate
paragraph, the Engineer is only required to certify additional payment to which
the contractor is entitled under the Contract (not under the Contract or otherwise).
Perhaps this was added to spare Engineers blushes, or perhaps it is an uninten-
tional omission.
So what do the lawyers make of all of this? First of all, it is noticeable that
not a lot of comments have been made about it. Secondly, so far at least as
English law is concerned, these sweeping provisions mean that everything has
been swept up – see the judgement of Lord Mustill in Channel Tunnel Group v
Balfour Beatty and others, 1993 61 BLR 1, House of Lords. In that case, Lord
 INTRODUCTION xxiii

Mustill made it perfectly clear that on a text undistinguishable from that found
in the FIDIC 1999 Suite the Lords considered the dispute provisions to be
comprehensive, and that if the DAB equivalent in that case ordered the
Contractors by way of mandatory injunction to continue working – they had to
continue working.
The form of contract in that case is set out and is a matter of public record
as the Contract had to be deposited as a part of the procedure. It is an amended
form of FIDIC Third Edition Civil Engineering contract, with what were then
new provisions for the substitution of decisions of the Engineer by decisions of
a ‘‘Panel’’, whose decisions were contractually stated to be binding until revised
in arbitration. The House of Lords was considering a dispute resolution proced-
ure in a contract which was very similar in this respect to the whole of the 1999
FIDIC Suite (the drafters of which no doubt had regard to the wording of the
Channel Tunnel contract). Readers might note the ‘‘give effect’’ wording in
Clause 67(2) and the ‘‘revised by arbitration’’ phrase, which clearly show the
genesis of the current FIDIC wording.
One should also note Lord Mustill’s statement ‘‘... I would endorse the
powerful warnings against encroachment on the parties’ agreement to have their
commercial differences decided by their chosen tribunals, and on the inter-
national policy exemplified in the English legislation that this consent should be
honoured by the courts ... . ’’ Lord Mustill thus by analogy ‘‘endorsed’’ the
view taken in this text, namely that the wording GC 20.1, should itself given
effect to in these similar contracts, and practically identical disputes clauses. In
other words, sums certified should be paid, and decisions (on anything ) taken
by the DAB are to be given effect to until (and if ) revised in arbitration.
There was much discussion in the House of Lords between their Lordships
and Counsel about the nature of this clause, and whether it was entirely an
arbitration clause or a two stage clause in which the second part only was
arbitration – what came clear from the discussion (and is recorded in the
Judgment) was that there was no doubt that their Lordships took the view that
the whole clause was binding on the parties ‘‘unless it broke down’’ – see page
287 H. See also the discussion at page 289 D-G, and Lord Mustill’s indication
at page 290 that a mandatory injunction for specific performance by the Panel
would have had to be complied with – a reasonably radical measure compared
to say, an order for payment.
Finally, we should all note the Learned Lord’s reference to ‘‘... the duty of
the court to respect the choice of tribunal which both parties have made, and
not take out of the hands of the arbitrators (or other decision-makers) a power
of decision which the parties have entrusted to them alone.’’ These are wise
words of general application.
Under English law at least, the lesson for Engineers and contract adminis-
trators dealing with FIDIC around the World is quite clear – unless the parties
agree you do not have to, DAB’s should be deciding claims for breach of contract
or tortuous interference with the contract ( perhaps described as disruption) or
face having their non-decision treated properly as a failure to decide under the
contract.
The lesson for lawyers is also important – if you do not submit claims for
breach of contract at the appropriate stages, they may be barred. Having written
xxiv FIDIC – AN ANALYSIS OF INTERNATIONAL CONSTRUCTION CONTRACTS

that however, in over 3 years on the ICC Court, I cannot indicate that apparently
good claims in international arbitration are often barred because of language
like this. Faced with hard choices, most arbitrators seem averse to disposing of
good cases for such technical reasons.

The Effect of Certificates

On the other hand, one does come across, from time to time, claims which have
been successfully defeated because of the allegedly final or conclusive effect of
certificates. This is quite natural, because if one thinks about it, especially with
perishable or fungible goods, there is often only a relatively short period within
which their quality may be properly tested. If certificates, especially ones called
for by a contract and designated as final, were not normally conclusive, inter-
national commerce would find itself awash with disputes. Accordingly, one
should not be surprised to know that the contractually intended effect of certific-
ates is frequently honoured by arbitrators.
If one examines the wording of Clause 14, particularly Sub-Clauses 14.6,
14.7 and 14.8 it can be seen that the draughtspersons intend certified payments
to be promptly honoured, otherwise ‘‘financing charges’’ would not be immedi-
ately payable under Sub-Clause 14.8. However, the contracts do not set out the
intended effect of certificates as clearly as they might. It would have been useful
perhaps for the contracts to state that the certificates create debts immediately
due from the Employer to the Contractor. The reason this should be stated ‘‘ex
abundanti cautela’’ is that the legal effect of certified sums varies widely from
country to country, and if, as is apparently the case, the sums certified are
intended to be paid (more or less immediately), it behoves the draughtspersons
to say so – clearly. The discussion below of the position relating to set-off
outlines one reason (only) why this should be the case. Generally, every DAB
and subsequent arbitral tribunal will have the right, in light of their own experi-
ence and legal knowledge, to decide whether these contracts are worded in such
a way as to give a right to immediate payment. The clearer the wording is, the
less doubt there should be in any individual case.
The certificate issued on completion described in GC 14.10 through to 14.14
is in a slightly different position. It is described as a ‘‘Final Payment Certificate’’
and is clearly intended, subject to the DAB/arbitration provisions, to bring to a
close any controversies about the sums finally due to the Contractor.

‘‘Performance Security’’ GC 4.2

The wording of these provisions is such that, while the notions underlying the
words feels quite familiar, they are not that specific, and probably intentionally
are capable of being understood in a number of ways. While this may be laudable
from some points of view, it is very unfortunate when one goes to consider that
the law of guarantees, indemnities, letters of credit and related topics is very
specific, and often very developed. This means, generally, that ‘‘woolly’’ language
may not accomplish that which the beneficiary hoped for.
Another random document with
no related content on Scribd:
 Writing to the Secretary of State, Lord Townsend, Edinburgh, 9th
August 1726, he says: ‘I can with satisfaction assure your lordship
that the Disarming Act has fully answered all that was proposed by it,
there being no arms carried in the Highlands but by those who are
legally qualified; depredations are effectually prevented by the
Highland companies; and the Pretender’s interest is so low, that I
think it can hope for no effectual assistance from that quarter.’
Dating from Killiwhimmen [Fort Augustus] on the 16th of the
ensuing month, he tells his lordship:
‘I have inspected the new roads between this place and Fort
William, and ordered it to be enlarged and carried on for wheel-
carriage over the mountains on the south side of Loch Ness, as far as
the town of Inverness, so that before midsummer next there will be a
good coach-road from that place, which before was not passable on
Horseback in many places. This work is 1726.
carried on by the military with less expense
and difficulty than I at first imagined it could be performed, and the
Highlanders, from the ease and convenience of transporting their
merchandise, begin to approve and applaud what they at first
repined at and submitted to with reluctancy.’
Writing, in September 1727, to Lord Townsend, he states that he
had lately found the Highlands in perfect tranquillity, ‘and the great
road of communication so far advanced, that I travelled to Fort
William in my coach-and-six, to the great wonder of the country
people, who had never seen such a machine in those parts. I have
likewise given directions for carrying on another great road
southward through the Highlands from Inverness to Perth, which
will open a communication with the low country, and facilitate the
march of a body of troops when his majesty’s service may require it.’
The general’s coach-and-six had been brought to Inverness by the
coast-road from the south, and Burt assures us that ‘an elephant
exposed in one of the streets of London could not have excited
greater admiration. One asked what the chariot was. Another, who
had seen the gentleman alight, told the first, with a sneer at his
ignorance, it was a great cart to carry people in, and such like. But
since the making of some of the roads, I have passed through them
with a friend, and was greatly delighted to see the Highlanders run
from their huts close to the chariot, and, looking up, bow with their
bonnets to the coachman, little regarding us that were within. It is
not unlikely that they looked upon him as a kind of prime minister,
that guided so important a machine.’[653]
Wade, writing to Mr Pelham from Blair, 20th July 1728, says: ‘I am
now with all possible diligence carrying on the new road for wheel-
carriage between Dunkeld and Inverness, of about eighty measured
English miles in length; and that no time may be lost in a work so
necessary for his majesty’s service, I have employed 300 men on
different parts of this road, that the work may be done during this
favourable season of the year, and hope, by the progress they have
already made, to have forty miles of it completed before the end of
October,[654] at which time the heavy rains make it impracticable to
proceed in the work till the summer following.
‘There is so great a scarcity of provisions 1726.
in this barren country, that I am obliged to
bring my biscuit, cheese, &c., for the support of the workmen, from
Edinburgh by land-carriage, which, though expensive, is of absolute
necessity. There is about fifteen miles of this road completely
finished, and, I may venture to assure you, it is as good and as
practicable for wheel-carriage as any in England. There are two
stone-bridges building on the road that was finished last year
between Inverness and Fort William, and two more are begun on this
road, all which will, I hope, be completed by the middle of October.
The rest that will be wanting will be eight or ten in number to
complete the communication, which must be deferred to the next
year.’

The Society of Improvers at this date July.

made a suggestion to the governors of
George Heriot’s Hospital (magistrates and clergy of Edinburgh)
which marks a degree of liberality and judgment far beyond what
was to be expected of the age. They recommended that the boys of
that institution, all being children of persons in reduced
circumstances, should have instruction in useful arts imparted to
them along with the ordinary elements of learning. Such a practice
had already been introduced in Holland and France, and even in
England (in workhouses), with the best effects. They at the same
time recommended that the girls in the Merchant Maiden Hospital
should be taught the spinning of flax and worsted, and be put in twos
and threes weekly into the kitchen to learn house affairs. A
committee was appointed to confer with the magistrates upon this
plan; but the matter was afterwards put into the hands of the
Trustees for the Encouragement of Manufactures.[655]
It would appear as if some practical result had followed, at least for
a time, as in December 1730, the Edinburgh newspapers advert in
terms of admiration to two girls of the Merchant Maiden Hospital,
who, ‘upon being only three weeks taught the French method of
spinning, have spun exceeding fine yarn at the rate of twelve and a
half spindle to the pound avoirdupois, which is thought to be the best
and finest that ever was done in this country.’

Inoculation, or, as it was at first called, Sep. 10.

engrafting for the small-pox, was reported
from the East to British physicians as early as 1714, but neglected.
Lady Mary Wortley Montagu, visiting 1726.
Turkey with her husband, the British
ambassador, found it in full vogue there, and reported it at once so
safe and so effectual, that people came together as to a party of
pleasure to have it performed upon them by old women. It was in
March 1718 that her ladyship, viewing the matter in entire
independence of all silly fears, submitted her infant son to the
process. Finding it successful, she exerted herself, on her return to
England, to have the practice introduced there, and, by favour of
Caroline, Princess of Wales, gained her point against the usual host
of objectors. Her own daughter was the first person inoculated in
Great Britain. It was then tried on four criminals, reprieved for the
purpose, and found successful. Two of the princess’s children
followed, in April 1722. The process was simultaneously introduced
into Boston, in Massachusetts.
Lady Mary tells us next year, that inoculation was beginning to be
a good deal practised. ‘I am,’ says she, ‘so much pulled about and
solicited to visit people, that I am forced to run into the country to
hide myself.’[656] Yet the fact is, that it made its way very slowly,
having to encounter both the prejudices of medical men, who
misapprehended its scientific nature, and the objections of certain
serious people, who denounced it as ‘taking the Almighty’s work out
of his hands.’[657] Just as the two young princesses were recovering,
appeared a pamphlet, in which the author argued that this new
invention is ‘utterly unlawful, an audacious presumption, and a thing
forbid in Scripture, in that express command: “Thou shalt not tempt
the Lord thy God.”’ It would appear as if there never yet was any
valuable discovery made for the alleviation of misery, or the
conferring of positive benefits on mankind, but there are some
persons who find it irreligious, and would be rejoiced in seeing it fail.
It must have been under such a spirit that some one inserted in the
prints of the day a notice desiring ‘all persons who know anything of
the ill success of inoculation, to send a particular account thereof to
Mr Roberts, printer in Warwickshire.’ Only 897 persons (of whom
seventeen died) were inoculated during the first eight years.[658]
The operation appears not to have been introduced in Scotland till
upwards of five years after its introduction in London. A letter of the
date noted, from Mr R. Boyd in Edinburgh to the Rev. Mr Wodrow at
Eastwood, gives the following among other 1726.
matters of familiar intelligence: ‘The story
of Abercromby of Glassaugh’s child being inoculated in this country,
and recovered of the small-pox, is in the written letter and some of
the prints.’[659] From the reference to a written letter—namely, a
periodical holograph sheet of news from London—we may infer that
the infant in question was inoculated there, and that the practice was
as yet unknown in our country.

An interesting and singular scene was Oct. 19.

this day presented in the streets of
Edinburgh. Five men, named Garnock, Foreman, Stewart, Ferrie,
and Russell, were executed at the Gallowlee on the 10th of October
1681, and their heads put up at the Cowgate Port, while their bodies
were interred under the gallows. Some of their friends lifted and re-
interred the bodies in the West Churchyard, and also took down the
heads for a similar purpose; but, being scared, were obliged to
inhume these relics, enclosed in a box, in a garden at Lauriston, on
the south side of the city. On the 7th October of this year, the heads
were discovered as they had been laid there forty-five years before,
the box only being consumed. Mr Shaw, the owner of the garden, had
them lifted and laid out in a summer-house, where the friends of the
old cause had access to see them. Patrick Walker relates what
followed. ‘I rejoiced,’ he says, ‘to see so many concerned grave men
and women favouring the dust of our martyrs. There were six of us
concluded to bury them upon the nineteenth day of October 1726,
and every one of us to acquaint friends of the day and hour, being
Wednesday, the day of the week upon which most of them were
executed, and at 4 of the clock at night, being the hour that most of
them went to their resting graves. We caused make a compleat coffin
for them in black, with four yards of fine linen, the way that our
martyrs’ corps were managed; and, having the happiness of friendly
magistrates at the time, we went to the present Provost Drummond,
and Baillie Nimmo, and acquainted them with our conclusions anent
them; with which they were pleased, and said, if we were sure that
they were our martyrs’ heads, we might bury them decently and
orderly.... Accordingly, we kept the foresaid day and hour, and
doubled the linen, and laid the half of it below them, their nether
jaws being parted from their heads; but being young men, their teeth
remained. All were witness to the holes in 1726.
each of their heads, which the hangman
broke with his hammer; and, according to the bigness of their skulls,
we laid their jaws to them, and drew the other half of the linen above
them, and stufft the coffin with shavings. Some pressed hard to go
thorow the chief parts of the city, as was done at the Revolution; but
this we refused, considering that it looked airy and frothy, to make
such show of them, and inconsistent with the solid serious observing
of such an affecting, surprising, unheard-of dispensation: but took
the ordinary way of other burials from that place—to wit, we went
east the back of the wall, and in at Bristo Port, and down the way to
the head of the Cowgate, and turned up to the churchyard, where
they were interred closs to the Martyrs’ Tomb, with the greatest
multitude of people, old and young, men and women, ministers and
others, that ever I saw together.’
A citizen of Edinburgh heard from a lady born in 1736 an account,
at second-hand, of this remarkable solemnity—with one fact
additional to what is stated by Walker. ‘In the procession was a
number of genteel females, all arrayed in white satin, as
emblematical of innocence.’
 A proceeding in which the same spirit was evinced is noted in the
Edinburgh Courant of November 4, 1728. ‘We hear that the
separatists about Dumfries, who retain the title of Cameronians,
have despatched three of their number to Magus Muir, in Fife, to
find out the burial-place of Thomas Brown, Andrew ..., James Wood,
John Clyde, and John Weddell, who were there execute during the
Caroline persecution for being in arms at Bothwell Bridge, and have
marked the ground, in order to erect a monument with an inscription
like that of the Martyrs’ Tomb in Greyfriars’ Churchyard, to
perpetuate the zeal and sufferings of these men.’
A few months later, we learn from the same sententious
chronicler: ‘The Martyrs’ Tomb in the Greyfriars’ Churchyard is
repaired, and there is added to it a compartment, on which is cut a
head and a hand on pikes, as emblems of their sufferings, betwixt
which is to be engraved a motto alluding to both.’

Died Sir Alexander Ogilvy of Forglen, 1727. Mar. 30.

Baronet, a judge of the Court of Session
under the designation of Lord Forglen. There is no particular reason
for chronicling the demise of a respectable but noteless senator of the
College of Justice, beyond the eccentric and characteristic
circumstances attending it. According to a note in the unpublished
diary of James Boswell, the biographer of 1727.
Dr Johnson—when Lord Forglen was
approaching the end of his life, he received a visit from his friend Mr
James Boswell, advocate, the grandfather of the narrator of the
anecdote. The old judge was quite cheerful, and said to his visitor:
‘Come awa, Mr Boswell, and learn to dee: I’m gaun awa to see your
auld freend Cullen and mine. [This was Lord Cullen, another judge,
who had died exactly a year before.] He was a guid honest man; but
his walk and yours was nae very steady when you used to come in
frae Maggy Johnston’s upon the Saturday afternoons.’ That the
reader may understand the force of this address, it is necessary to
explain that Mrs Johnston kept a little inn near Bruntsfield Links,
which she contrived to make attractive to men of every grade in life
by her home-brewed ale. It here appears that among her customers
were Mr Boswell, a well-employed advocate, and Lord Cullen, a
judge—one, it may be observed, of good reputation, a writer on moral
themes, and with whose religious practice even Mr Wodrow was not
dissatisfied.
Dr Clerk, who attended Lord Forglen at the last, told James
Boswell’s father, Lord Auchinleck, that, calling on his patient the day
his lordship died, he was let in by his clerk, David Reid. ‘How does
my lord do?’ inquired Dr Clerk. ‘I houp he’s weel,’ answered David
with a solemnity that told what he meant. He then conducted the
doctor into a room, and shewed him two dozen of wine under a table.
Other doctors presently came in, and David, making them all sit
down, proceeded to tell them his deceased master’s last words, at the
same time pushing the bottle about briskly. After the company had
taken a glass or two, they rose to depart; but David detained them.
‘No, no, gentlemen; not so. It was the express will o’ the dead that I
should fill ye a’ fou, and I maun fulfil the will o’ the dead.’ All the
time, the tears were streaming down his cheeks. ‘And, indeed,’ said
the doctor afterwards in telling the story, ‘he did fulfil the will o’ the
dead, for before the end o’‘t there was na ane o’ us able to bite his ain
thoomb.’[660]
 REIGN OF GEORGE II.: 1727–1748.

The accession of George II., while not disturbing in England that

predominance of the great Whig nobles which had existed since the
Revolution, and leaving the practical administration, as before, in the
hands of Sir Robert Walpole, produced no change in the system of
improvement which the Union had inaugurated. Under the rule of
the Argyles, the Dalrymples, and one or two other eminent Whig
families, with the mild and virtuous Duncan Forbes as Lord
Advocate, the country enjoyed peace, and was enabled to develop its
long dormant energies, in the pursuits of agriculture, of
manufactures, and of commerce. All but a few of the Highland clans
had apparently given their final submission to the Guelph dynasty;
and though the Stuart cause was known to be upheld by some, it was
generally thought that there was very little chance of further civil war
on that subject.
The general tranquillity was broken in 1737 by a riot in Edinburgh,
arising out of the harsh measures required for the enforcement of the
Excise laws, and ending in the violent death of a public officer who
had rendered himself obnoxious to the populace. For an account of
this affair, reference is made to the chronicle.
About the same period, there was considerable agitation in the
church, in consequence of the insubordination of a small group of
clergymen, of ultra-evangelical views, who were at length, in 1740,
expelled, and became the founders of a separate church under the
name of the Associate Synod.
In 1744, Great Britain was engaged in a war which involved most
of the great powers of Europe. The French minister, Cardinal de
Tencin, conceived that an invasion of England on behalf of the House
of Stuart would be an excellent diversion in favour of the arms of his
country. The time was in reality long past for any effective movement
of this kind. New men and new things had extinguished all rational
hopes in the Jacobite party. Still there were some chiefs in the
Highlands who had never abandoned the Stuart cause. In the
Lowlands, there were discontents which seemed capable of being
turned to some account in effecting the desired revolution. Prince
Charles Edward, the eldest son of the so-called Pretender, was an
ardent-minded youth, eager to try a last chance for the restoration of
his family. The Cardinal really made some preparations for an
expedition to be conducted by the Prince; but it was prevented by a
storm and an opposing English armament, from leaving the French
coast. Disappointed of the promised aid, Charles secretly voyaged
with seven friends to the western coast of Inverness-shire, and,
landing there towards the close of July 1745, was soon surrounded by
a few hundreds of friendly Camerons and Macdonalds. He raised his
standard at Glenfinnan on the 19th of August, and expressed himself
as determined with such as would follow him, to win back a crown,
or perish in the attempt.
The best of the national troops being engaged in service abroad,
the government could only oppose to this enterprise a few raw
regiments under the commander-in-chief for Scotland, Sir John
Cope. But Sir John, making an unlucky lateral movement to
Inverness, permitted Prince Charles, with about eighteen hundred
clansmen, to descend upon Perth unopposed, and even to take
possession of Edinburgh. On the 21st of September, having returned
by sea to the low country, Cope was encountered at Prestonpans by
the Highlanders, and driven in a few minutes from the field. For
several weeks, Prince Charles Edward held court at Holyrood, in
undisputed possession of Scotland. Marching in November into
England by the western border, he captured Carlisle, was well
received at Manchester, and pushed on to Derby, where he was only
a hundred and twenty-seven miles from London. But here the
courage of his little council of chiefs gave way before the terrors of
the three armies by which they seemed surrounded. Accomplishing a
hurried, yet well-managed retreat to Scotland, they laid Glasgow
under contribution, and came to a halt at Stirling, where many fresh
clans joined them, making up an army of nine thousand men.
A well-appointed English army under General Hawley met Prince
Charles Edward at Falkirk (January 17, 1746), and was driven back to
Edinburgh with the loss of camp, cannon, and baggage. The king’s
second son, the Duke of Cumberland, soon after took command of
the forces in Scotland, and on his advancing to Stirling, the Highland
army made a hasty retreat to Inverness, where they spent the
remainder of the winter. As soon as the return of spring permitted
the English army to march, it was conducted against the rebels by its
royal commander. In a regular engagement which took place on
Culloden Moor, near Inverness (April 16), the Highland army was
broken and dispersed with great slaughter. Prince Charles fled to the
west coast, and after several months of fugitive life, during which he
endured incredible hardships, escaped back to France. The Duke
advanced to Fort Augustus, and there superintended a system of
burning, slaughtering, and despoliation, throughout the disaffected
territory, by which he hoped to make further efforts for the House of
Stuart impossible. These acts, and his having ordered a general
slaughter of the wounded Highlanders on the field of battle, have
fixed on him indelibly the appellation of ‘the Butcher.’
Further to strike terror into the Jacobite party, two leaders of the
rebel army, the Earl of Kilmarnock and Lord Balmerino, with about
seventy prisoners of inferior rank, were put to death as traitors. Lord
Lovat, who, while preserving an appearance of loyalty, had sent out
his clan under his son, was afterwards tried and executed for treason.
Scotland generally suffered for some time under a military
oppression, for the government, in their ignorance of the country,
did not see by how small a part of the community the late
insurrection had been supported. It now effected, however, some
measures which enlightened men had long felt to be wanting for the
cause of civilisation. One of these was for a more effectual
disarmament of the Highlanders; another for abolishing the use of
their tartan habiliments, which it was supposed had a certain effect
in keeping up their warlike spirit. There remained two acts of much
more importance, passed in 1748. One took away the hereditary
sheriffships and other jurisdictions of the nobility and gentry, so as
to render the sovereign in Scotland, as heretofore in England, the
fountain of all law and justice. In terms of this statute, the privileges
taken away were compensated for by sums of money, amounting in
all to £152,000. The other act abolished what was called the tenure
of ward-holdings—that is, the holding of lands on the condition of
going out to war whenever the superior desired. Tenants and the
common people were thus for the first time in Scotland rendered
independent of their landlords, or of the great men on whose
property they lived. In fact, they now became for the first time a free
people.

From the eagerness of the proprietors of 1727. June.

the Equivalent Stock to be engaged in some
profitable business, as detailed under December 1719, it might have
been expected that they would sooner or later fall upon some mode
of effecting their wishes. All attempts to come into connection with
the Bank of Scotland having failed, they at length formed the bold
design of setting up a new bank—bold, in as far as it was entirely a
novelty, there being no thought of a second bank even in England,
where business was conducted upon so much greater a scale than in
Scotland. It seems to have been by engaging the good-will or interest
of the Earl of Islay, that the object was attained. The Bank of
Scotland in vain published a statement shewing how it was quite
competent, with its thirty thousand pounds of paid-up capital, to
conduct the business of the country, and really was conducting it
satisfactorily. In vain did Scottish jealousy try to raise a cry about the
large proportion of English shareholders in the new concern. It
received a royal charter, which was the last document of the kind
prepared before the king set out on his fatal 1727.
visit to Hanover, and required a warrant
from the new sovereign before the seal could be appended to it. The
Earl of Islay was made governor, and the Lord President Dundas
became deputy-governor. In December they opened their office, with
a capital of £111,000; and in the first week of the new year, they
began to issue notes ‘having his present majesty King George II.’s
picture in front.’[661] At first, these notes were expressed in Scots
money; but the time had now come when the people of Scotland
began pretty generally to adopt the English denominations, both in
their accounts and in common parlance; so this fashion was not kept
up by the Royal Bank above two years. It is unnecessary to remark
that the new bank prospered, and now ranks second to none in
respectability. But this only makes the more remarkable the dreary
anticipations which were formed at the time by those whom it
rivalled.
 ‘Whatever was said while the Equivalent Society’s charter with
banking powers was a-seeking, or what has been said since the
passing thereof, that there was no design of prejudicing the Old Bank
—nobody that knows the nature of banking does believe that two
banks can be carried on in the same country; for it is impossible to
manage and keep them up, without interfering and rubbing upon
one another, unless rules and regulations could be made to prevent
it; and it is impossible to digest regulations for executing such a
design, but what must make the interests of the two companies
reciprocal, and the product of their trade mutually to be
communicated; and so two different offices, under distinct
management and direction, would be a needless charge and trouble.
Therefore the gentlemen of the [Old] Bank did from the beginning
lay their account with an attack from an enemy, and a foreign one
too, with home alliances.’[662]
Following up this terrible view of the case, the Bank of Scotland,
for some time before the new establishment was opened,
discontinued lending money, as a matter of precaution, thus creating
considerable distress among the mercantile classes, and of course
justifying, so far, the establishment of a new source of
accommodation. When the Royal Bank was fairly afloat, the Bank of
Scotland proceeded to the yet greater extremity of calling up former
loans, thus deepening the distress. ‘The country,’ says Mr Wodrow in
a kind of despair, ‘is not able to bear both banks. The new bank
would fain have the old coalescing with them; but they bear off. It’s a
wonder to me how there’s any money at all 1727.
[663]
in the country.’
A pamphlet having been published in the interest of the Bank of
Scotland on this occasion—being the Historical Account already
more than once quoted—another soon after appeared in justification
of the Royal Bank, though professedly by a person unconnected with
it.[664] ‘It can be no secret,’ says this writer, ‘that a great number of
people of all ranks were creditors to the public in Scotland by reason
of offices civil and military, and that the Equivalent stipulated by the
act of Union fell short of their payment; that in 1714 they obtained an
act of parliament constituting the debts due to them, but that no
parliament provision was made for a fund for their payment till the
year 1719, when a second act was made, appropriating to that
purpose a yearly fund of £10,000 sterling, payable out of the
revenues of customs, Excise, &c., preferable to all payments except
the civil list. Between the first and the second act, many of the
proprietors, being doubtful that any provision would be made for
them by parliament, and others being pressed by necessity, chose to
dispose of their debentures (these were the legal vouchers
ascertaining the debts due to the persons named in them) as they
best could, and to the best bidder. Many of them were carried to
London, but a very considerable part of them still remains in the
hands of Scots proprietors, partly out of choice, partly by reason of
some legal bars that lay in the way of issuing debentures, and partly
by purchasing them back from England.’
In consequence of powers in the act of 1719, ‘his late majesty did,
by letters-patent in 1724, incorporate all persons who then were, or
thereafter should be, proprietors of the debentures whereby that
public debt was constituted, to the end that they might receive and
distribute their annuity.’ His majesty having at the same time
promised powers and privileges to the corporation as they might
request, it petitioned him for those of a bank in Scotland, which he
and his successor complied with, limiting the power to ‘such of the
company as should, on or before Michaelmas 1727, subject their
stock, or any share of it, to the trade of banking.’
There is, further, a great deal of angry controversial remark on the
Old Bank; but the most material point is the allegation, that that
institution ‘divided 35, 40, 50 per cent.’ by 1727.
the use of ‘other people’s money.’ The
author adverts with bitterness to the harsh measures adopted by the
Old Bank in prospect of rivalry. ‘It is a hard thing,’ says he, ‘to defend
the conduct of the Old Bank upon the prospect of a rivalship.
Lending is superseded; a tenth is called from the proprietors, and all
their debtors threatened with diligence for a certain part or for the
whole of their debts, which diligence has since been executed.... Why
did they carry their revenge (as it is universally known they did) to
every one who had the least relation, alliance, friendship, or
connection with the proprietors of that bank [the Royal]?... Why
were the first examples of their wrath made out of the most known
friends of the present establishment, and why were the disaffected
remarkably and visibly spared?’
 Considering that the Bank of Scotland had never yet had more
than thirty thousand pounds sterling of capital paid up, the fact of
the larger stock of the Royal, and their having £30,000 of specie to
trade with distinct from their stock,[665] become features of
importance, as shewing the increasing business of the country.
From a folio broadside[666] containing the ‘Rules to be observed by
such Persons as keep a Cash-accompt with the Royal Bank of
Scotland,’ it appears that ‘no sum paid into the bank or drawn out of
it, be less than 10l. sterling, nor have in it any fraction or part of a
pound; and in case of fractions arising by the addition of interest at
settling an accompt, such fractions are to be taken off by the first
draught or payment thereafter made.’ Sums of five pounds and
upwards are now taken in and given out at all the Scottish banks
(1860).

Witchcraft, now generally slighted by June.

persons in authority in the south, was still a
subject of judicial investigation in the far north. Wodrow, in his
Renfrewshire manse, continued to receive accounts of any
transactions in that way which might be going on in any quarter,
and, under 1726, he is careful to note ‘some pretty odd accounts of
witches’ which he had received from a couple of Ross-shire brethren.
One of them, ‘at death,’ he says, and it is to be feared that her death
was at the stake, ‘confessed that they had by sorcery taken away the
sight of one of the eyes of an Episcopal 1727.
minister, who lost the sight of his eye upon
a sudden, and could give no reason of it.’[667]
Early in the ensuing year—if we may depend upon the authority
quoted below[668]—two poor Highland women, mother and daughter,
natives of the parish of Loth, in Sutherlandshire, were accused of
witchcraft before the sheriff-depute, Captain David Ross of
Littledean, and condemned to death. The mother was charged with
having ridden on the daughter, who had been transformed on the
occasion into a pony, and shod by the devil. The girl made her
escape, and was noted ever after, in confirmation of the charge, to be
lame in both hands and feet. The mother suffered at Dornoch in
June, being burned in a pitch-barrel. It has been handed down by
tradition, that, ‘after being brought out to execution, the weather
proving very severe, she sat composedly warming herself by the fire
prepared to consume her, while the other instruments of death were
making ready.’[669] ‘It does not appear,’ says Sir Walter Scott in 1830,
‘that any punishment was inflicted for this cruel abuse of the law on
the person of a creature so helpless; but the son of the lame daughter
—himself distinguished by the same misfortune—was living so lately
as to receive the charity of the present Marchioness of Stafford,
Countess of Sutherland in her own right.’[670]
For a generation, the linen manufacture had been passing through
what might be called a prosperous infancy. A public paper in 1720
states that there was annually imported from Scotland into England
the value of £100,000 in white linen, and as much in brown, the flax
being of ‘a spunsie quality,’ which gave it a preference over the
similar products of both Ireland and Germany.[671] [The same
document estimated the English woollen cloths exported to Scotland
at £400,000 per annum.]
By an act of parliament passed this year, a Board of Trustees was
established in Scotland for the administration of an annual sum set
aside for the encouragement of manufactories and fisheries. The sum
at first given was four thousand pounds, which might be considered
as calculated to go a great way in so poor a country. The activity and
serviceableness of the Board was, in its earlier years, chiefly shewn in
the promotion of the linen manufacture, 1727.
which, under the stimulus afforded by
premiums, rose from an export sale of 2,183,978 yards in 1727, to
4,666,011 in 1738, 7,358,098 in 1748, and 12,823,048 in 1764. It is
curious, regarding an institution which has since occupied, as it still
does, so conspicuous a place in the public eye, to trace the difficulties
it had to contend with at starting, in consequence of the monetary
vacuum produced by the conflict of the two banks. The Lord
Advocate, Duncan Forbes, wrote on the 26th June 1728 to the Duke
of Newcastle: ‘The trustees appointed by his majesty for taking care
of the manufactures, proceed with great zeal and industry; but at
present credit is run so low, by a struggle between the bank lately
erected by his majesty and the old bank, that money can scarcely be
found to go to market with.’[672]

Oct.
 Wodrow, who never failed to hear of and
note any misfortune that happened to Glasgow—hopeful, always,
that it would be ‘laid to heart’—makes us aware of an obscure sorrow
which was now beginning to beset the thriving burghers. ‘The vermin
called bugs,’ he says, ‘are at present extremely troublesome at
Glasgow. They say they are come over with timber and other goods
from Holland. They are in many houses there, and so extremely
prolific, there is no getting rid of them, though many ways have been
tried. It’s not twenty year since they were known, and such as had
them kept them secret. These six or seven years, they are more
openly compleened of, and now the half of the town are plagued with
them. This is chiefly attributed to the frequent alterations of
servants, who bring them from house to house.’[673]
Soon after, having occasion to deplore the death of Provost Peady,
a person of great firmness and piety, he speaks of the many ‘strokes’
which the industrious city had met with of late. Their losses during
1727 had been reckoned at not less than twenty-eight thousand
pounds sterling! ‘It’s a wonder to me how they stand throo.’ The
worthy pastor of Eastwood would evidently have not been greatly
distressed had his Glasgow neighbours been subjected to a repetition
of a few of the plagues of Egypt, so needful were they of something to
check their growing fatness and pride. He might have been expected
to hail the frogs with a fraternal feeling; and we can imagine him
marking with hopefulness, not unmingled with sympathy, the spread
of the murrain among the burghers’ kine at 1727.
the Cowcaddens. The present entomological
corrective was evidently regarded by him with a satisfaction too deep
to admit of many words.

Mr John Boyd gives his friend Wodrow 1728. Feb. 8.

an account of a duelling affair which had
befallen in Edinburgh. ‘Ane officer in the Dutch Guards, son to Mr
Walter Stewart, late Solicitor, was ill wounded by are officer in the
Canongate [Lieutenant Pilkington, of Grove’s Regiment]. The officer,
when in custody of the constables, was rescued by the guard there,
who carried him off; but at Musselburgh, the people there
apprehended him, and made him and twenty-two guards prisoners,
who were all brought to prison here.’ There were hopes of the
wounded man’s recovery.[674]

At four o’clock in the morning, a smart Mar. 1.

shock of an earthquake was experienced in
Edinburgh and throughout the south of Scotland, if not in other
quarters. At Selkirk, every house was shaken, and some people were
tumbled out of bed, but no damage was done.[675]

Mr Wodrow was at this time informed ‘by Mar.

very good hands,’ that there had been for
some years in Edinburgh a little gambling fraternity, who made it
their business to trace out and decoy young men of rank and fortune,
and make plunder of them. ‘One of them will lose fifty pounds in a
night till the young spark be engaged; and then another comes and
soon gains the whole; and, it may be, a third comes, and stands at the
back of the person they design to rifle, and by signs and words
unknown to others, discovers his game to the other; so by one
method or other they are sure to win all at last.’ It was alleged that
the society would divide 25,000 merks [about £1400] a year by these
vile practices—much calculated ‘to fill our cup of judgments.’
As a trait of the time—On the news reaching Glasgow that an
attempt to unseat Campbell of Shawfield had failed, his friends went
down to Govan, to celebrate the affair, and write a letter of
congratulation to him. Mr William Wishart, a clergyman, deserted
the synod then sitting, to go with them, and help in drawing up the
letter. By and by, the minister left them; but they sat still till they
became so befuddled, that it became necessary to bundle them into a
boat, and so carry them back to the city. 1728.
That evening, some other gentlemen of the
same way of thinking, went through the streets of Glasgow, with a
fiddler playing before them, and singing: ‘Up with the Campbells,
and down with the Grahams!’ and it was a wonder that a riot was
avoided.
About the same date, Mr Wodrow adverts to the fact, that Anthony
Aston’s playhouse in Edinburgh was ‘much frequented;’ and amongst
‘persons of substance and leisure,’ there was consequently a great
tendency to laxity of morals. There was even a talk of building a
playhouse in Edinburgh. The manager, however, was not without his
troubles. One Ross, ‘master of the Beau’s Coffee-house’—a son of
Bishop Ross, and a great encourager of the playhouse—had sold a
quantity of tickets, on which he was to be allowed a penny each; but
he ultimately refused to take this commission, though amounting to
about ten pounds—‘a vast sum,’ says Wodrow, ‘for tickets at a penny
apiece in one coffee-house.’ Aston having reserved this money to
himself, instead of accounting for it to his company, according to
agreement, a terrible squabble arose among them, and a process was
threatened before the magistrates, or some other court. How the
matter ended, we do not hear.
To complete his general picture of the profaneness of the age, Mr
Wodrow tells us that Allan Ramsay, the poet, got down books of
plays from London, and lent them out at an easy rate—the beginning
of Circulating Libraries in Scotland. Boys, servantwomen, and
gentlemen, all alike took advantage of this arrangement, whereby
‘vice and obscenity were dreadfully propagated.’ Lord Grange
complained of the practice to the magistrates, and induced them to
make inspection of Ramsay’s book containing the names of the
borrowers of the plays. ‘They were alarmed at it, and sent some of
their number to his shop to look through some of his books; but he
had notice an hour before, and had withdrawn some of the worst,
and nothing was done to purpose.’[676]

The conflict between the Bank of Scotland Mar. 27.

and its young and pretentious Whig rival,
the Royal Bank, led to a temporary stoppage of payments at the
former establishment, the last that ever took place. The Royal Bank
‘having all the public money given in to them, has at present worsted
[the Bank of Scotland], and run them out of 1728.
[677]
cash.’ In their own advertisement on the
occasion, they attribute the calamity to ‘the great embarrassment
that has been upon credit and circulation of money in payments for
some months bygone, arising from causes and by means well known
both in city and country.’ In this very crisis, the Bank announced its
dividend of four per cent, on its capital stock, but appropriating it as
part of ten per cent, now called up from the shareholders, ‘the other
sixty pounds Scots on each share to be paid in before the 15th of
June.’ The directors at the same time ordered their notes to bear
interest during the time that payment should be suspended.
It must have been a draught of very bitter gall to the Old Bank,
when their young rival came ostentatiously forward with an
announcement that, for the ‘relief of such people as wanted to go to
market,’ they would give specie for the twenty-shilling notes of the
Bank of Scotland till further notice.
The Bank of Scotland resumed paying its twenty-shilling notes on
the 27th of June.

The convivialities indulged in at funerals May 9.

were productive to-day of a tragedy long
remembered in Scotland. Mr Carnegie of Lour, residing in the burgh
of Forfar, had a daughter to be buried, and before the funeral, he
entertained the Earl of Strathmore, his own brother James Carnegie
of Finhaven, Mr Lyon of Bridgeton, and some others of the company,
at dinner in his house. After the ceremony, these gentlemen
adjourned to a tavern, and drank a good deal. Carnegie of Finhaven
got extremely drunk. Lyon of Bridgeton was not so much intoxicated;
but the drink made him rude and unmannerly towards Finhaven.
Afterwards, the Earl of Strathmore went to call at the house of Mr
Carnegie’s sister, Lady Auchterhouse, and the other gentlemen
followed. Here it may be remarked that the whole of this group of
persons were, like a large proportion of the Forfarshire gentry, of
Jacobite prepossessions. The earl’s late brother and predecessor in
the title had fallen at Sheriffmuir, on the Chevalier’s side; so had
Patrick Lyon of Auchterhouse, husband of the lady now introduced
to notice, and brother of Bridgeton. The presence of a lady, and that
lady a widowed sister-in-law, failed to make Bridgeton conduct
himself discreetly. He continued his boisterous rudeness towards
Finhaven; rallied him coarsely about his not 1728.
being willing to marry one of his daughters
to Lord Rosehill, about his having no sons, about his debts; took him
offensively by the breast; and even used some rudeness towards the
lady herself. In the dusk of the evening, the party sallied out to the
street, and here Bridgeton went so far in his violence towards
Finhaven as to push him into a deep and dirty kennel, which nearly
covered him from head to foot with mire. Finhaven, now fully
incensed, rose, and drawing his sword, ran up to Bridgeton, with
deadly design; but the earl, seeing him advance, pushed Bridgeton
aside, and unhappily received the lunge full in the middle of his own
body. He died forty-nine hours after the incident.
Carnegie of Finhaven was tried on the ensuing 2d of August for
premeditated murder; an absurd charge absurdly supported by long
arguments and quotations of authority, in the style of that day. In his
‘information,’ the accused man called God to witness that he had
borne no malice to the earl; on the contrary, he had the greatest
kindness and respect for him. ‘If it shall appear,’ said he, ‘that I was
the unlucky person who wounded the earl, I protest before God I
would much rather that a sword had been sheathed in my own
bowels.’ All that he admitted was: ‘I had the misfortune that day to
be mortally drunk, for which I beg God’s pardon.’ He declared that,
being in this state at the time, he did not so much as remember that
he had seen the earl when he came out of the kennel. The defence
proposed for him by his counsel was, that, the circumstances of the
case considered, he was not guilty of murder, but of manslaughter.
Strange to say, the court, sacrificing rationality to form and statute,
overruled the defence: they found the fact that the prisoner having
really given the wound whereof the Earl of Strathmore died, to be
relevant to infer the pains of law against him. The killing being
indisputable, Carnegie would have been condemned if the jury
should merely give a verdict on the point of fact. In these
circumstances, his counsel, Robert Dundas of Arniston, stood forth
to tell the jury that they were entitled to judge on the point of law as
well as the point of fact. He asserted that the only object for their
deliberation, was whether they could conscientiously say that
Carnegie had committed murder, or whether his guilt was not
diminished or annihilated by the circumstances of the case. The jury,
almost beyond expectation, gave a verdict of ‘Not Guilty,’ thus
establishing a great constitutional principle.[678]
The noted fierté of the Scottish nobility 1728. Aug. 15.
and gentry was beginning at this time to
give way somewhat, under the general desire to promote the arts of
industry, and partly because of the hopelessness of public
employments for young scions of aristocracy in all but favoured Whig