FIDIC CONTRACTS - RIGHTS,

OBLIGATIONS AND TYPES

mostafa ashraf mohamed elazab

ID : 20106222 DR : Hesham elsafi
"FIDIC" stand for
International Federation of Consulting Engineers (commonly known as
FIDIC, acronym for its French name Fédération Internationale Des
Ingénieurs-Conseils) is an international standards organization for
Consulting Engineering and Construction best known for FIDIC family
of contract templates. The fact that FIDIC has a French title bears
testimony to its foundation in 1913 by three wholly or partly
francophone countries, Belgium, France, Switzerland. Today FIDIC has
members in 104 countrieshistory of FIDIC

History
There were 59 participants at the inaugural meeting during the World
Exhibition in Ghent, Belgium in July 1913 to discuss the possibility of
forming a global federation of consulting engineers. Of these, 19 were
official delegates from the USA, Belgium, Denmark, France, Germany,
Netherlands and Switzerland, with the remainder coming from Austria-
Hungary, Canada, Russia and the UK.

The meeting led to FIDIC's formal constitution on 22 July 1913. Some

countries, however, maintained only provisional links during the first few
years.

The founding members of FIDIC were Belgium, France and Switzerland.

FIDIC led a difficult life until the late 1940s with a changing number of
members, all from Europe. In 1959, these were joined by Australia, Canada,
South Africa and the USA to form FIDIC international. The first member
associations from the developing world joined in 1965 (Central Africa, now
Malawi, Zambia and Zimbabwe) and in 1967 Colombia joined.

About FIDIC
FIDIC organises World Consulting Engineering Conference seminars and
training courses. FIDIC training manual Guide to Practice-the business of a
professional services firm is known throughout profession of engineering.
FIDIC also runs a bookshop and publishes international contracts and
business practice documents which are used as guides and templates world
over. FIDIC is best known for its range of contracts that includes Dredgers
Contract, Short Form of Contract, Construction Contract, Plant & DB
Contract; DBO Contract, and EPC/Turnkey Contract. Details available in
FIDIC Bookshop. FIDIC publishes Client/Consultant Model Services
Agreement together with Sub-Consultancy Agreement and Joint Venture
Agreement. FIDIC publishes MDB Harmonised Edition of Construction
Contract used by MDB(Multilateral Development Banks) including World
Bank for their projects.

FIDIC is a global representative for the consulting engineering industry,

promoting the business interests of firms supplying technology-based
intellectual services for built and natural environments alike.

FIDIC is well known for its work drafting standard form Conditions of
Contract for the worldwide construction industry, particularly in the context
of higher value international construction projects, and is endorsed by many
multilateral development banks ("MDBs").

Companies and organisations belong to FIDIC national member associations

which now represent other professionals, such as architects. FIDIC also has
affiliate members interested in its work, such as lawyers and insurers.

FIDIC organises conferences, seminars and training courses and, until 2002,
FIDIC ran FIDICdirect, the International Directory of Consulting Engineers

What does the FIDIC Suite of Contracts cover?

A substantial amount. In 1999, FIDIC published a completely new suite of
contracts, the 'Rainbow Suite', various contracts having been updated. These
include:

 The Red Book: Conditions of Contract for Construction for Building

and Engineering Works designed by the Employer (1st Ed 1999).
 The Pink Book: Harmonised Red Book (MDB Edition) Conditions of
Contract for Construction for Building and Engineering Works
designed by the Employer (Version 3 2010) - for use as part of the
standard bidding documents by the Multilateral Development Banks
only. The Islamic Development Bank and the World Bank worked
with FIDIC in developing this contract.
 The Yellow Book: Conditions of Contract for Plant and Design-Build
- for electrical and mechanical plant, and for building works, designed
by the Contractor (1st Ed 1999).
  The Silver Book: Conditions of Contract for EPC/Turnkey Projects
(1st Ed 1999).
 The Orange Book: Conditions of Contract for Design - Build and
Turnkey (1st Ed 1995).
 The Gold Book: DBO Contract - Conditions for Design, Build and
Operate Projects (1st Ed 2008).
 The Green Book: Short form of Contract (1st Ed 1999).
 Sub-consultancy Agreement: (1st Ed 1992)
 The White Book: Client/Consultant Model Services Agreement (4th
Ed 2006)
 The Blue-Green Book: Dredgers Contract (1st Ed 2006)
 Conditions of Subcontract for Construction: Used in conjunction
with the Red Book and The Pink Book (Test Book 2009)

FIDIC RED BOOK

the FIDIC RED BOOK being a contract form where the design is
made by the Employer and the Contractor is paid on a measurement
basis.

Thus the Red Book follows the traditional procurement route of

Design, Bid & Build. The Accepted Contract Amount is based on
estimated quantities. The Contractor is paid for the actual quantities
of work he carried out.

FIDIC YELLOW BOOK

the FIDIC YELLOW BOOK being a contract form where the design is
made by the Contractor and the Contractor is paid on a lump sum
basis. Thus the Yellow Book follows the design & build procurement
route. The Accepted Contract Amount is based on the Contractor´s
offer. In consideration of the Contractor is paid the Contract Price.
FIDIC SILVER BOOK
the FIDIC Silver Book (EPC turnkey) being a contract form
wherunder the Contractor does the design and construction. In
consideration of the Works the Employer promises to pay the Contract
Price. Under the FIDIC Silver Book most of the typical risk is
allocated to the Contractor. Hence the FIDIC Silver Book intends to
be unfair in terms of risk allocation meaning that the Contractor shall
make allowance for major risk in its bid or the Contract Price.

FIDIC GOLD BOOK

the FIDIC Gold Book being a contract form where the design is
made by the Contractor. Additionally the Contractor assumes
the resonsiblity for the construction and the operation of the
Works. Thus the Gold Book follows the design, build & operate
procurement route.

Axel Volkmar Jaeger and Dr. Sebastian Hök have developed a

comprehensive training kit on the DBO contract.Dr. Sebastian
Hök has held DBO trainings for instance in Manila, Bandung and Dar es
Salaam.

FIDIC SUBCONTRACT
the FIDIC Subcontract for construction is fit for use with the FIDIC
Red Book and with the FIDIC MDB harmonised version (the Pink
Book) if suitable amendments are made . The FIDIC Subcontract
enables the Main Contractor to subcontract parts of the Works under
the Main Contract on a back-to-back basis to a Subcontractor. The
back-to-back approach ensures a smooth and consistent way of
subcontracting, and reflects the commercial realities of subcontracting
in modern times. Essentially, this means that the Subcontractor shall
design (to the extent specified), execute and complete the Subcontract
Works, and also undertake all assistance and support efforts which are
needed in order to avoid the Main Contractor becoming liable under the
Main Contract for any lack of performance which the Main Contractor has
entrusted to the Subcontractor.
  FIDIC contracts do provide guidance on project specific sub-clauses
where Particular Conditions might be used.

Examples of non-project specific clauses (which should not be

modified) include the following:
1. The role and authority of the Engineer (where applicable, otherwise the
Employer’s Representative):

 Oversight and/or inspection of the Works

 Issues of Certificates
 Valuation of Variations
 Assessment, response to and determination of time/money claims
 Monitoring of the Contractor’s programme

If the Engineer is unduly constrained so that he cannot exercise independent

professional judgement, then problems with successful contract
management, dispute avoidance and timely completion can be confidently
anticipated!

2. Liability for errors in the Drawings/Technical Specifications or

Employer’s Requirements

3. Liability for proving access to and on the Site.

4. Liability for obtaining permits and approvals.

5. Liability for unforeseeable physical conditions.

6. Labour conditions.

7. Delays caused by authorities.

8. Defects liability, including latent defects.

9. Procedures for dispute settlement/resolution.

Advantages of Using FIDIC Contracts

 International standard: FIDIC is a true international standard, familiar to
Contractors throughout the world. Parties to a FIDIC Contract and their
advisers are familiar with it;

 Price competition: foreign contractors may be more comfortable

contracting under FIDIC than the AS contracts. This may allow increased
bid lists, encourage more price competition amongst tenderers, and
ultimately provide value for money for the Employer;

 Lower bid time and cost: Contractors unfamiliar with Australian Standards
contracts do not have to engage specialist advice regarding the Australian
Standards contracts, meaning preparing tenders should be at a lower cost and
take a shorter period of time;

 Practical clauses: FIDIC contracts are already intended for use on major
projects thus have practical clauses which are not contained in the AS
contracts, for example: Clause 2.2 [Permits, Licences and
Approvals](practical clause regarding Employer assistance to Contractor to
obtain approvals

 Multiple languages: the FIDIC Rainbow Suite, any many of the other
FIDIC standards, are published in up to 20 different languages including
those of our major trading partners (Chinese, Bahasa Indonesian, Japanese,
French and Spanish). This means lower translation costs where the Contracts
need translation into the foreign language of the foreign contractor; 11

 Bankability: the FIDIC contracts are familiar to international banks

including MDBs who use them as a standard. This eases obtaining approval
of the Contract by banks and their advisers. Often a banking syndicate will
be advised by a foreign law firm who may not be familiar with the AS
contracts;

 Less Risk of Disputes: the FIDIC Guide, other FIDIC publications and
published papers, provide extensive commentary on the FIDIC Contracts
and the intended operation of each Clause. This means there is less
disagreement about what a particular provision is intended to mean. 7
Disadvantages of Using FIDIC Contracts :
 Unfamiliarity by Local Contractors: local contractors may not be familiar
with FIDIC and it may discourage them from tendering, reducing local
competition and increase their bid time and costs. This may also advantage
international contractors over local contractors;

 Limited Judicial Consideration / Precedent: as FIDIC contracts provide for

arbitration there is little guidance from the courts as to the intended
operation of particular clauses or precedent to follow. This compares to AS
contracts where there are significantly more decisions about the operation of
various clauses;

 Not tailored to local laws: FIDIC contracts are intended for international
use therefore do not take into account legislation applicable in Australia
(such as Security of Payment) or Australian laws and judicial precedent, for
example, meaning of consequential loss in Australia;

 Parochialism: Australian Principals, Contractors and their employees and

advisers may be wedded to use of the AS contracts through parochialism or
a patriotic loyalty to use “our standard”. This means that there may be
resistance to the use of FIDIC;

 DABs: Australia has limited experience with Dispute Adjudication Boards,

although interest in and possibly experience of Australians being appointed
to DABs, is increasing. The DAB process, followed by ICC Arbitration, is
too expensive except for major projects.

Reasons for using FIDIC and its applicability in Egypt:

 Flexibility:

Whereas construction contracts are considered an adhesion contract,

FIDIC contracts are more flexible and can be negotiated between the
parties. It is not a 'take it or leave it' contract as the construction one
but rather is created in a balanced form within the international scope
of big projects. Moreover, it is worth mentioning that FIDIC contracts
with its relevant rules, provisions, and clauses have been prepared by
subject matter experts possessing the necessary technical and legal
knowledge.
 Delay and Compensation:

Pertinent to the Tender and Auction Law No. 89 of the year 1998
(Article 23) the constructor does not get compensated for any delay
from the other party but he has the right to plead before the Egyptian
Courts, unless parties agree otherwise. Since many changes normally
occur to construction contract and that is being the nature of the
construction industry where designs might be inaccurate, the budget
changed, etc. FIDIC helps to avoid negations with constructor by the
rules and regulations which state:

The project owner has the right to amend the contract but with the
constructor right for the compensation.
 Dispute Settlement:

The Foreign Constructor may not prefer to settle the disputes through
the national Egyptian courts and therefore, FIDIC contracts give the
ability to settle the disputes, and for resolving the disputes the parties
need to follow these steps:
1. Claims
2. Adjudication board
3. Amicable settlment
4. Arbitration
References

 S Furst, V Ramsey (eds) 2011, Keating on Construction Contracts, Ninth Edition, Sweet &
Maxwell, London at [22-009] (Keating)
 Webster A, 2009, FIDIC in the Middle East, Paper Presented to Society of Construction
Law (Gulf), 18 October 2009, pages 1-2
 FIDIC 2006, FIDIC Contracts Guide Supplement: MDB Harmonised Construction, FIDIC,
Geneva
 D Charrett 2010, FIDIC Conditions of Contract for Construction Multilateral
Development Banks (MDB) Harmonised Edition Paper Presented to FIDIC Contracts
Users Conference Beijing, June 2010, Slides 8 and 9
 Booen P, 2000, The FIDIC Contracts Guide, FIDIC, Geneva 6 Al-Waddan Hotel Ltd v Man
Enterprise SAL (Offshore) [2014] EWHC 4796 (TCC) (12 December 16 2014) per Raeside
J. at [25], His Honour commenting on the FIDIC Guide to the Conditions of Contracts for
Works of Civil Engineering Construction, Part 1, 4th Edition 1987