The Engineer under FIDIC forms of contract: Real-life questions
Introduction The 'Engineer' under the FIDIC forms of contract has long been a controversial figure – the Engineer is appointed by, may be deemed to act for, and is paid by the Employer, but nonetheless on many issues is required to act 'fairly' as between the Employer and the Contractor. This article looks at real-life questions which frequently arise in respect of the Engineer and considers how parties might best approach them. Under FIDIC forms of contract, the Engineer is a third-party administrator This means that the Engineer is not a party to the FIDIC construction contract, which is between
New Guidelines for Arbitration and Mediation in Indian Public Procurement Contracts: An Overview for International Practitioners
Introduction The Government of India has recently introduced important guidelines for arbitration and mediation in domestic public procurement contracts, representing a shift in how disputes under such contracts are to be resolved. These changes are particularly relevant for construction professionals and legal practitioners involved in India’s infrastructure and public sector projects. The Role of Arbitration in Indian Public Procurement Arbitration has long been considered a favourable alternative to litigation in resolving construction and procurement disputes, offering potential advantages such as speed, flexibility, and technical expertise. However, on 3 June 2024, the Procurement Policy Division of the Government of India published
CAB to Resolution: Steering Clear of Conflicts
Introduction FIDIC and the Singapore International Mediation Centre (SIMC) both promote Appropriate Dispute Resolution ('ADR'[1]) procedures within the construction and engineering sectors. In August 2024 SIMC introduced a new Integrated Appropriate Dispute Resolution Framework ('INTEGRAF') to help disputing parties "to unbundle disputes and apply the most appropriate dispute resolution mechanism to each aspect of a dispute". Even if a dispute cannot be fully resolved, INTEGRAF is designed to reduce or contain the conflict, so that only the most stubborn parts proceed to adversarial dispute resolution. The parties may include the model INTEGRAF clause in their contracts, which can be tailored
No Notice, No Claim? Conditions Precedent in FIDIC Contracts
How do you establish whether a notice provision is really a condition precedent (or time bar)? In Tata Consultancy Services Ltd v Disclosure and Barring Service,[1] Mr Justice Constable reviewed the key authorities[2] on conditions precedent and provided 7 "relevant matters" to consider. In this article we look at how FIDIC's claims procedures measure up against Constable J.'s 7 points. Although Tata is an English law case, it could be cited as persuasive authority in any FIDIC condition precedent arguments formed globally. The case Tata Consultancy Services Limited (‘TCS’) was a company supplying business process outsourcing and IT services. TCS
No Oral Modification Clauses Mean What They Say
Will an oral agreement override a written one that expressly prohibits oral modification? No. The UK Supreme Court in Rock Advertising Ltd - v - MWB Business Exchange Centres Ltd[1] brings welcome clarification to the English common law on “no oral modification” (NOM) clauses. The courts will now uphold them. Unless very particular circumstances are involved, the only means to vary a contract with a NOM clause is by doing so in writing. The Court’s judgment is interesting for its divergent views on the philosophy of what it means to have freedom of contract. But with conceptual objections now swept
The Highest UK Court Reviews the Law on Penalties
Introduction A penalty is now to be regarded as: “a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.” The UK Supreme Court has reviewed the English law of penalties and re-formulated the test in a landmark judgment on two unrelated appeals heard together: Cavendish Square Holding BV – v – Talal El Makdessi (“Cavendish”); and ParkingEye Ltd – v – Beavis ("Beavis").[1] The two appeals did not involve construction matters. The judgment will nevertheless be of great interest to construction
The Problem with Enforcing Arbitration Awards that have been Annulled
Introduction The purpose of the 1958 New York Convention is to facilitate, so far as possible, the international recognition and enforcement of foreign arbitral awards. Nevertheless, it provides that a court may refuse to do that if such an award has already been set aside or suspended at its “seat”. The English courts have interpreted this word "may" as giving themselves a wide discretion. But in practice, it is likely to result in a refusal to enforce. When an award has been set aside at the seat of the arbitration, the enforcing court will first have to consider the status
The Dangers of Employer Set Off in your FIDIC Contract: Suspension and Termination
Introduction If an Employer sets off a sum of money in a way that it is not entitled to do, it is likely to impact on the Contractor’s cash flow and may give the Contractor a right to suspend or reduce the rate of working. In extreme circumstances, it may also entitle the Contractor to terminate. Unfortunately, under the FIDIC Red and Yellow Books 1999, the Employer's right to set off from an unpaid amount, which has already been certified in a Payment Certificate, is inexplicit. Once the Employer has a Sub-Clause 3.5 determination, it may ask the Engineer to
FIDIC Sub-Clause 20.5 – A Condition Precedent to Arbitration
The 1999 FIDIC forms of contract contain a number of obligations and/or conditions precedent that require: a party to give notice of a claim (Sub-Clauses 20.1 and 2.5); refer the claim to the Engineer (Sub-Clauses 20.1 and 3.5); and submit the dispute to a Dispute Adjudication Board (“DAB”) (Sub-Clause 20.4). If either party gives a notice of dissatisfaction relating to the DAB’s Decision, Sub-Clause 20.5 provides that:[1] “Where a notice of dissatisfaction has been given under Sub-Clause 20.4 above, both Parties shall attempt to settle the dispute amicably before the commencement of arbitration. However, unless both Parties agree otherwise, arbitration
FIDIC Silver Book – Payments Due Shall Not Be Withheld… Really?
Introduction There is a substantial difference between the payment provisions of the FIDIC 1999 Red and Yellow Books compared with the Silver Book. This article explores how a court in Queensland (Australia) dealt with the Silver Book’s provision. Contractors have good cause to be wary. Role of Interim Payment Certificate In Dawnays Ltd v F G Minter and Trollope & Colls Ltd,[1] the English Court of Appeal judge, Lord Denning, expressed the view that: “an interim certificate is to be regarded virtually as cash, like a bill of exchange.” This bold statement was however quickly rejected by the higher English
FIDIC 2017: Sub-Clause 1.15 – Limitation of Liability
Introduction The substance of this provision was already in Sub-Clause 17.6 in the 1999 Edition and has now been separated from other provisions dealing with Risk and Responsibility. As before it generally exempts parties from liability to the other for “loss of use of any Works, loss of profit, loss of any contract or any indirect or consequential loss” except in respect of a list of identified Sub-Clauses. The list has been extended and several of the changes are very significant. It also limits liability to certain levels in some circumstances. Finally, it excludes parties from cover by the exemption
FIDIC 2017: Clause 14 -Contract Price and Payment
Introduction This important clause sets out the method of payment, certificates, and release from liability. The overall methodology has not changed, but there are several procedural adjustments and some inconsequential tidying. Some of the procedural changes will be welcomed by Contractors, but several will entail further delay in payment to the Contractor. There is a determined effort to ensure that all claims are dealt with during the contract period or very shortly thereafter. Sub-Clause 14.2 – Advance Payment Guarantee There is a new sub-clause specifically dealing with Advance Payment Guarantees. The most significant change (a very useful one for the
FIDIC 2017: Clause 13 – Variations and Adjustments
The Power to Vary and its Limitations While the process of ordering a variation has not changed dramatically, the 2017 Edition substantially clarifies (although some may say “additionally limits”) the limits on the Engineer’s power to vary. Under the 1999 and all earlier Editions, the power to vary was expressed in open-ended terms and it was left to the underlying law to say whether or not this power was limited. Most legal systems do recognise that variations cannot depart significantly from the original scope of the contract. Under English Law there is probably an implied term, based on the concept
FIDIC 2017: Clause 12 – Tests after Completion
Clause 12 deals with Tests after Completion It is more common overall for Tests on Completion to be the final test required rather than Tests after Completion. However, Tests after Completion are commonly required for process and power contracts. There may, for example be a requirement for a “reliability” test during a period of initial functioning. Sometimes the tests are required to be carried out in different seasons of the year to test functioning under different conditions – whether from weather or load. Thus, by definition the Plant is likely to be under the control of the Employer by the
FIDIC 2017: Clause 11 – Defects After Taking Over
Introduction While the general shape of the Clause has been left unchanged, it has been substantially elaborated upon. Many of these changes do increase its clarity, but some of the interfaces with other changed Clauses in the Contract produce outcomes which were perhaps not intended. The positives In several Sub-Clauses where the 1999 Edition was not specific about the needs for notices and periods, detailed provisions have been There is reference to a DNP for Parts. A suspension which is the fault of the Contractor no longer prevents the extension of the DNP. The consequences of failure to remedy have
FIDIC 2017: Clause 7 – Plant, Materials and Workmanship
Introduction Clause 7 deals with a variety of issues relating to Plant Materials and Workmanship. All sub-clauses have been subject to some change: in several cases these changes are of significance. Sub-Clause 7.1 – Manner of Execution The 1999 Edition only applied the obligations under 7.1 to manufacture of Plant, production and manufacture of materials, and generally to the execution of the Works. It is now extended to cover manufacture, supply, installation, testing and commissioning and/or repair of Plant, the production, manufacture, supply and testing of Materials, and all other operations and activities during the execution of the Works. Sub-Clause
FIDIC 1999 Books – Commentary on Clause 16
Summary Clause 16 deals with suspension and termination by the contractor. Sub-Clause 16.1 deals with the Contractor’s right to suspend work, in the event that the Engineer fails to certify in accordance with Sub-Clause 14.6 [Payment Certificates], or the Employer fails to comply with Sub-Clause 2.4 [Employer’s Financial Arrangements] or Sub-Clause 14.7 [Payment]. Prior to the Contractor suspending work it must give 21 days’ notice. The right to suspend does not affect the Contractor’s entitlement to terminate or claim financing charges. In the event that the Contractor suffers delay or cost as a result of suspension, it must give notice
FIDIC 1999 Books – Commentary on Clause 12
Summary FIDIC 1999 is a re-measurement contract, so that the Employer takes the risk of variations to the quantities and, in certain cases, to the rates and prices which may be applied for the work executed. If the Employer wishes to employ a Contractor on a lump-sum or cost-plus basis, then this clause needs to be deleted. Sub-Clause 12.1 deals with the measurement of the works. Sub-Clause 12.2 does not include a reference to any standard method of measurement but states that the works are to be measured in accordance with the Bill of Quantities or other applicable Schedules. The
FIDIC 1999 Books – Commentary on Clause 9
Summary Clause 9 deals with the Tests on Completion (which are a defined term at Sub-Clause 1.1.3.4): Sub-Clause 9.1 requires the Contractor to give notice when it is ready to carry out the Tests on Completion. Sub-Clause 9.2 deals with delayed testing caused by either the Employer or the Contractor. Sub-Clause 9.3 deals with retesting after a failure to pass the Tests on Sub-Clause 4 deals with a failure to meet the requirements of the contract after retesting. Origin Of Clause There is no clause similar to Clause 9 of FIDIC 1999 within the FIDIC 4th Edition; although there was
Cofely v Knowles – From Appointment to Disappointment
There have been two High Court cases within the last 15 months that lift the lid off what some perceive to be questionable practices (particularly in relation to the Eurocom case) that have developed over the last few years in the world of adjudication and arbitration in the UK. The first, in November 2014, was a decision of Ramsey J sitting in the Technology and Construction Court in Eurocom v Siemens PLC[1], and the second, which is the focus of this article, was a decision of Hamblen J, in the Commercial Court in Cofely Limited v Anthony Bingham and Knowles