FIDIC - THE NEW 2017 FIDIC RED,

YELLOW AND SILVER BOOKS

Wednesday 28th March 2018

TABLE OF CONTENTS
March 2018

1 Agenda
2 About Fenwick Elliott
3 Nicholas Gould Biography
4 Jeremy Glover Biography
5 Presentation slides
Agenda

Topic Speaker Time

Registration- Tea and Coffee 1.30 - 2.00pm

Overview Nicholas Gould 2.00 - 2.30pm

The Parties Nicholas Gould & Jeremy Glover 2.30 - 3.20pm

Risk Allocation, Design & BIM Nicholas Gould & Jeremy Glover 3.20 - 4.00pm

Tea/ Coffee break 4.00 - 4.15pm

Claims Management, Time and Money Nicholas Gould & Jeremy Glover 4.15 - 5.10pm

Suspension and Termination Nicholas Gould & Jeremy Glover 5.10 - 5.30pm

Disputes Nicholas Gould & Jeremy Glover 5.30 - 6.00pm

Q&A 6.00 - 6.30pm

Networking/ Drinks 6.30 - 7.30pm

ABOUT FENWICK ELLIOTT

For more than three decades Fenwick Elliott has been delivering first class service to
clients around the world in the building, engineering and energy sectors.

Fenwick Elliott is the UK’s largest specialist construction and energy law firm and provides
commercially driven solutions through a pragmatic and professional approach.

Fenwick Elliott provides a comprehensive range of legal services on every aspect

of the construction process. Its expertise includes procurement strategy; contract
documentation and negotiation; risk management and dispute avoidance; project
support; and decisive dispute resolution, including litigation, arbitration, mediation and
adjudication.

Fenwick Elliott has extensive experience advising on major construction, infrastructure

and energy projects in the Middle East. The firm has worked with clients for many years
on projects in the region, including in Afghanistan, Bahrain, Egypt, Iraq, Jordan, Kingdom
of Saudi Arabia, Kuwait, Libya, Oman, Qatar, UAE and Yemen. Reflecting the importance
of the Middle East market for the firm, it opened its first office in the region in 2015
in Dubai, UAE. This exciting development builds on the firm’s many years’ experience
advising clients on construction and energy projects in the region. Although many of
the large-scale projects the firm advises on in the Middle East have contractual regimes
governed by English law, it also frequently advises on contracts which are governed by
the law of the Arab Gulf states or third-country laws. What sets Fenwick Elliott apart from
its competitors is the unique combination of extensive knowledge of local laws, together
with its highly regarded international construction law expertise. As well as offering
project support, contract and documentation, dispute avoidance and dispute resolution
services, the firm is also very well placed to advise on various general commercial or
corporate matters in the UAE and MENA region, in both Arabic and English.

Areas of practice

Dispute avoidance and dispute resolution: Fenwick Elliott is highly experienced in this
field and is a leader in the use of alternative dispute resolution. Whilst the firm takes
whatever steps are necessary to resolve disputes, its primary focus is to avoid disputes
and much of its work is in the form of day to day project support, including strategic
advice and review of project correspondence/notices to enable its clients to manage
and effectively address problems as they arise, thereby avoiding formal proceedings.
The firm regularly advises upon and conducts complex international arbitrations. It has
experience of arbitrations under the DIAC, DIFC/LCIA, ADCCAC, QICCA, ICC, LCIA, SIAC,
UNCITRAL and ICSID arbitration rules, as well as under ad hoc and bespoke arbitration
rules. The firm is used to working closely with in-house counsel and local counsel. The
team is also well versed in FIDIC and other dispute resolution boards’ procedures.

The majority of the firm’s work in this field concerns disputes up to $2bn arising out of
major international construction, infrastructure and energy projects. The geographical
spread of the firm’s work is worldwide. It has developed a close relationship with a
number of major international contractors whom it is advising on a number of disputes
and strategic matters throughout the Middle East, Africa and the Caribbean. The firm
also traces assets and seeks enforcement around the world in respect of international
arbitration awards and makes calls on bonds or guarantees in many jurisdictions.

Procurement strategy, project, contract and documentation advice: Fenwick Elliott’s

expertise in construction projects documentation covers standard form and bespoke
contracts; design and build; engineer, procure and construct/turnkey (EPC); joint venture
agreements; partnering; alliancing and framework agreements; and service/supply
contracts.
Professor Nicholas Gould, Partner
Visiting Professor, King’s College London
1A (first floor) Silver Tower,
Cluster i, Jumeirah Lake Towers,
PO Box 283149, Dubai, UAE
M UAE +971 56 971 5993

Aldwych House, 71-91 Aldwych, London,

WC2B 4HN
M UK +44 7957 613660
ngould@fenwickelliott.com

Nicholas Gould is a partner in the specialist construction, engineering and energy

lawyers Fenwick Elliott LLP, where he conducts a mix of international dispute resolution
and non-contentious work. He is a solicitor-advocate, registered legal practitioner in
the UAE and DIFC, chartered surveyor, accredited adjudicator and CEDR Chambers
lead mediator. He acts for contractors, employers and governments in the building,
construction, engineering, infrastructure, transport, energy, nuclear, renewables, oil
and gas, and process engineering sectors.

Dispute resolution experience spans litigation, arbitration (domestic and international),

adjudication, DAB/DRB, mediation, early neutral evaluation and expert determination.
He regularly acts as lead mediator in multi-party multi million disputes. Nicholas is a
certified adjudicator and sits on international dispute boards and as arbitrator. Nicholas
is “rated very highly within the industry”, noted for his strong market presence in the
Middle East and his talent for both contentious and transactional work (Chambers &
Partners 2017). “Clients recommend the ‘eloquent’ Nicholas Gould, who has ‘excellent
advocacy skills’…” (Legal 500, 2016, FE listed as Tier 1). The IBA’s 2008 & 2013 edition
of International Who’s Who of Business Lawyers Today, listed Nicholas as one of the
“ten most highly regarded individuals internationally for construction law” and the IBA’s
Who’s Who Legal 2015 listed Nicholas in the top five in Europe.

Nicholas is a Visiting Professor at King’s College London and Vice President of the
ICC’s Arbitration Commission. He is past Chairman of the Society of Construction Law,
Adjudication Society and the DRBF (Region 2). He has published widely in the area of
construction law and international arbitration, and speaks regularly on construction law
and dispute resolution. Nicholas is lead author of the report “Mediating Construction
Disputes: An Evaluation of Existing Practice” published in February 2010, it received a
finalists CEDR Award for Excellence in 2010. Nicholas features as one of only 5 practitioners
in Europe in the inaugural edition 2017 of Who’s Who Legal: Thought Leaders.
Jeremy Glover, Partner

1A (first floor) Silver Tower,

Cluster i, Jumeirah Lake Towers,
PO Box 283149, Dubai, UAE

Aldwych House, 71-91 Aldwych, London,

WC2B 4HN
M UK +44 7957 613660
jglover@fenwickelliott.com

Jeremy has specialised in construction energy and engineering law and related matters
for most of his career. He advises on all aspects of projects both at home and abroad, from
initial procurement and strategic project advice to dispute avoidance and resolution. He
acts across a wide range of construction sectors in the UK and internationally, including
general construction, transport, communications, process plant, oil, gas, nuclear and
renewables.

Recommended in the area of International Arbitration in Chambers and Partners UK

and The Legal 500 UK, Jeremy is described as “extremely committed and hard-working”,
he “has great attention to detail and can always see the bigger picture, and he keeps
really calm under pressure”. Jeremy is listed as a leader in his field in Who’s Who Legal:
Construction 2016.

Jeremy also has extensive experience of all principal main contracts including JCT,
ICE, FIDIC, NEC, GC/Works, I CHEM E, subcontracts including DOM/1 and DOM/2, and
numerous bespoke forms used in international and domestic construction, energy and
infrastructure projects.
The New 2017 FIDIC Red,
Yellow and Silver Books

Australian Institute of Quantity

Surveyors (Gulf)
Wednesday 28th March 2018
Movenpick Hotel, Bur Dubai

Nicholas Gould Jeremy Glover

Partner, Fenwick Elliott LLP Partner, Fenwick Elliott LLP
Visiting Professor, King’s College London

Introduction

• Overview and fundamental FIDIC principles;

• The Parties to the Contract;
• Risk allocation;
• Design liability;
• Time management
• Payment
• Claims management and contract administration
• The FIDIC claims and dispute resolution procedure;
• Q&A.

FIDIC & the FIDIC Suite

of Contracts
FIDIC – Structure

• FIDIC - French acronym for ‘Fédération Internationale

Des Ingénieurs-Conseils’ (known in English as ‘The
International Federation of Consulting Engineers’).
• FIDIC President.
• Executive Committee and Secretariat:
• Membership Committee;
• Business Practice Committee;
• Contracts Committee;
• Capacity Building Committee;
• Sustainability Development Committee;
• Integrity Management Committee;
• Risk and Liability Committee.

FIDIC Suite of Contracts: 1999

• Red Book 1999 – Conditions of Contract for Construction for

Building and Engineering Works Designed by the Employer.

• Yellow Book 1999 – Conditions of Contract for Plant and Design

Build, for Electrical and Mechanical Plant, and for Building and
Engineering Works Designed by the Contractor.

• Silver Book 1999 – Conditions of Contract for EPC/Turn Key

Projects.

• Green Book 1999 – Short form of Contract.

• Note the FIDIC Guidance Memorandum to Users of the 1999

Conditions of Contract (1 April 2013).

FIDIC Suite Expanded

• Blue Book “Dredging Form” - Form of Contract for Dredging

and Reclamation Works (first Ed 2006).

• Gold Book – Conditions of Contract for Design Building and

Operate Projects (first Ed 2008).

• Pink Book “MDB Form” - Conditions of Contract for

Construction (Multilateral Development Bank Harmonised
Edition) for Building and Engineer Works Designed by the
Employer (Second Ed, 2006 and Third Ed 2010).
FIDIC Agreements

• White Book – Client – Consultant Module Services

Agreement (fifth Ed 2017).

• Sub-Consultancy Agreement (first Ed 1992).

• JV (Consortium) Agreement (first Ed 1999); Note this is

for a Consultant JV not a Contractor’s JV.

• Module Representative Agreement (first Ed 2013).

FIDIC Suite of Contracts - 2017

• Second Edition 2017:

• Red Book – Conditions of Contract for Construction for

Building and Engineering Works Designed by the Employer;

• Yellow Book – Conditions of Contract for Plant and Design

Build, for Electrical and Mechanical Plant, and for Building and
Engineering Works Designed by the Contractor; and

• Silver Book – Conditions of Contract for EPC/Turn Key

Projects.

• Pre-Release Version Yellow Book unveiled 6-7 December 2016 at

the International Contract Users Conference in London.

FIDIC Sub-Contract

• Red Book subcontract first published in 2011.

• Applicable to the Red Book or the Pink Book.
• Assumes duties and obligations of the contractor in the main
contract that relate to the subcontract works, unless specifically
excluded, are stepped down to the subcontractor.
• Works and design liability as a subcontractor might be extensive.
• Pay when paid provisions included. Will they be effective in all
jurisdictions?
• Multistage and potential multiparty dispute escalation and
resolution procedure (quite complex).
• No version to tie in with the 2017 Rainbow Suite (yet…..)
New FIDIC contracts

• 2018/9? : new Tunnelling/Underground Contract, Emerald Book.

• 2018/9: new Operate, Design & Build (ODB) Form of Contract,

Bronze Book.

• ?? : contract for windfarms.

• ??: subcontracts to support the 2017 Rainbow Suite

Structure of the Contract

The Structure of the Contract

• FIDIC envisages the contract shall consist of a number of

documents. It is important to be clear which documents form the
Contract.
• The Yellow Book will typically comprise of the following:
• Letter of Acceptance
• Letter of Tender
• Particular Conditions of Contract
• General Conditions of Contract
• Employer’s Requirements
• Contractor’s Proposal
• Schedules
• Addenda
• Dispute Adjudication Agreements (if DAB provisions kept in)
Sequence of principle events under
the FIDIC Contracts

The Structure of the Contract

20 core clauses:

Clause 1 - General provisions Clause 11 - Defects Liability

Clause 2 - The Employer Clause 12 - Tests after Completion

Clause 3 - The Engineer Clause 13 - Variations and Adjustments

Clause 4 - The Contractor Clause 14 - Contract Price and Payment

Clause 5 - Design Clause 15 - Termination by Employer

Clause 6 - Staff and Labour Clause 16 - Suspension and Termination by Contractor

Clause 7 - Plant, Materials and Workmanship Clause 17 - Risk and Responsibility

Clause 8 - Commencement, Delays and Suspension Clause 18 - Insurance

Clause 9 - Tests on Completion Clause 19 - Force Majeure

Clause 10 - Employer’s Taking Over Clause 20 - Claims, Disputes and Arbitration*

* In the 2017 Second edition there are now 21 clauses, with clause 20
dealing with claims and clause 21 dealing with disputes

Particular Conditions (1999) or Special

Provisions (2017)

• Foreword:
“In the preparation of these Conditions of contract for
Construction it was recognised that, while there are many
sub-clauses which will be generally applicable, there are
some sub-clauses which must necessarily vary to take
account of the circumstances relevant to the particular
contract. The sub-clauses which were considered to be
applicable to many (but not all) contracts have been included
in the General Conditions.”
• Particular Conditions take priority over the General Conditions
• Particular Conditions + General Conditions = Conditions of
Contract
General provisions
Priority of Documents (Clause 1.5)

• What does the contract say?

• Although the contract documents are to be taken as ‘mutually explanatory’ FIDIC sets out an
express order of priority:
• Contract Agreement (if any)
• Letter of Acceptance
• Letter of Tender
• Particular Conditions
• General Conditions
• Employer’s Requirements
• Schedules
• Contractor’s Proposals and other documents
• Note the ERs override the CPs, but what about other documents not expressly referenced?
• Watch out for documents being incorporated by reference

• Important to check for inconsistencies and conflicts within the documents and address them prior
to entering into Contract

FIDIC’s core principles

FIDIC
• FIDIC Values:
• Quality
• Integrity
• Sustainability

• FIDIC Objectives:
• Promote and enhance the leading position of FIDIC’s
Forms of Contract.

• The FIDIC Forms of Contract :

• Prepared “by engineers for engineers”.
FIDIC Core Principles

• FIDIC’s Golden Principles:

• GP1: Duties, rights, obligations, roles and responsibilities
are generally as defined in the GCs;
• GP2: Clear and unambiguous drafting;
• GP3: Fair and balanced risk allocation;
• GP4: The parties have a reasonable time to perform their
obligations and exercise their rights; and
• GP5: Disputes to be referred to a DB for a provisionally
binding determination as a condition precedent to arbitration
or litigation.

FIDIC’s Philosophy Behind the

Update
• To enhance project management tools and mechanisms.
• Drafted by engineers experienced in design and construction.
• To reinforce the role of the “Engineer”.
• To achieve a balance risk allocation. The aim here is more
reciprocity between the parties.
• To achieve clarity, transparency and certainty (sounds like the NEC
philosophy).
• To reflect current international best practice.
• To address issues raised by users over the past 17 years arising out
of the use of the 1999 suite.
• To incorporate the most recent developments in FIDIC contracts, in
particular the Gold Book, which was published in 2008.

The New Contracts: Overview

• The 63 page 1999 Yellow Book is now 119 pages (69 to now 126 with
Appendices including the DAAB rules).
• Prescriptive.
• Particular Conditions, Contract Data and Special Conditions.
• Definitions:
• “Claim” – request or assertion
• “Dispute” – claim made, and rejected, and first party does not
acquiesce (submit or comply silently or eg by serving a NOD);
• “Cost Plus Profit” default is 5%;
• Interpretation:
• “shall” is mandatory
• “may” is optional
• “include” is a non-exhaustive list.
Dispute Avoidance

• A key theme in the revised Yellow Book is the increased emphasis on

dispute avoidance. This follows FIDIC’s philosophy.
• Dispute avoidance is promoted in several ways:
• distinguishing claims from disputes;
• changes to the role of the Engineer;
• emphasising the avoidance processes that dispute boards can offer;
and
• early warning.
• There are also changes to:
• Claims procedure and time bar (to encourage early recognition of
claims);
• Notices (they must be given); and
• Programme emphasis and extensions of time.

Reciprocal Rights

• Confidentiality.

• Permits and permissions.

• Claims relating to permits etc.

• Removal of personnel engaged in corrupt practices.

• Prohibition of recruitment of the other’s personnel.

The Role of the Engineer

 The Role of the Engineer
• Design

• Employer’s Agent

• Supervisor

• Resident Engineer?

• Certifier

• Dispute Resolution?

The Role of the Engineer and Employer’s

Representative

• Red and Yellow Book:

“Engineer means the person appointed by the Employer to act as the
Engineer for the purposes of the Contract …”

• Silver Book (clause 1.1.2.4):

“Employer’s Representative means the person named by the Employer in
the Contract or appointed from time to time … who acts on behalf of the
Employer …”

• Gold Book – Employer’s Representative (clause 1.1.35).

The 2017 Increased Role of the Engineer

• A new requirement that the “Engineer”:

• may be a legal entity rather than an individual;
• is a professional engineer, suitably qualified and experienced; and
• fluent in the language of the Contract.
• The Engineer may appoint a “nature person” to act.
• However, the Engineer could be represented on Site by a named individual
(Sub-Clause 3.3 [The Engineer’s Representative]).
• The Engineer is appointed to carry out the role and duties of the Engineer
assigned to him under the Contract.
• The Engineer cannot amend the terms of the Contract.
• If the Engineer exercises any authority for which the Employer’s approval is
required then deemed approval has been given.
• The Engineer may delegate to suitably qualified assistants.
 The Engineer: Variations
• Instructions:
• the Engineer can issue instructions to the Contractor at any time
including issuing additional or modified drawings necessary for the
execution of the Works; and
• the Contractor must comply, and may only take instructions from the
Engineer or a delegated assistant with the appropriate authority.
• If an instruction is a Variation then Clause 13 [Variations and
Adjustments] applies.
• If the Employer wants to replace the Engineer:
• the Employer is to give the Contractor 42 days’ notice before the
intended date of replacement identifying the replacement Engineer;
and
• the Contractor may raise reasonable objections (Sub-Clause 3.4).

Engineer’s Determination - 1999

• See Clause 3.5 of the 1999 Red Book.

• Adapted from Clause 66 of the ICE contract
• A Clause 3.5 determination requires the Engineer to:
• Consult with each Party “in an endeavour to reach
agreement”;
• In the absence of agreement make a fair determination in
accordance with the Contract;
• Give notice to both Parties of each agreement or
determination together with supporting particulars; and
• The Parties are bound by any agreement or determination
until revised under Clause 20 [Claims, Disputes and
Arbitration].

Engineer’s Determination - 2017

• Now Sub-Clause 3.7 (was 3.5).

• The Engineer shall act “neutrally” and “… shall not be deemed
to act for the Employer.” Neutrally is not defined, but FIDIC did
not mean “independent” or “impartial” but rather “non-partisan”.
• Old Red Book 1987 Edition:
“impartially within the terms of the Contract and having
regard to all circumstances”
• 1999 Red Book:
“whenever carrying out duties or exercising authority,
specified in or implied by the Contract, the Engineer shall
be deemed to act for the Employer”
Engineer’s Determination - 2017

• Consultation (Sub-Clause 3.7.1):

• consult promptly/jointly and/or separately to endeavour to
encourage the Parties to reach an agreement: and
• write it down and ask the Parties to sign.
• Within 42 days, or proceed to make a determination.
• Make a fair determination taking account of all relevant circumstances,
within 42 days.
• If the Engineer does not issue a Notice of agreement or determination:
• the claim is deemed rejected; or
• the “matter” is deemed to be a Dispute and may be referred to the
DAB (no NOD is required).

The Increased Role of the Engineer

• Agreement and determination under Sub-Clause 3.7 also applies

to:
• measurement of the Works;
• rates and prices;
• Variations; EOT and adjustments of the Contract price and
Schedule of Payments;
• Daywork;
• amount to be paid for plant and materials off Site;
• amounts not certified in an IPC; and
• disagreement as to the cause of a defect.
• In the 1999 version Determinations just applied to claims.

The Increased Role of the Engineer

• Deeming provisions, found throughout the 2017 Form.

• For example:
• Sub-Clause 5.2: If the Engineer does not provide a Notice
stating the Contractor’s Design fails to comply with the
Employer’s Requirements within the Review Period, then
the Engineer shall be deemed to have given a Notice of No-
Objection.
• Sub-Clause 8.3: If the Engineer does not give a Notice
stating the extent to which the initial Programme does not
comply with the Contract within 21 days, then the Engineer
shall be deemed to have given a Notice of No-Objection.
• Increased work-load on the Engineer.
Employer’s Obligations

Employer’s Obligations - 1999

• Possession (Sub-Clause 2.1):

• Shall give access to the site;
• Possession might not be exclusive; and
• As may be required in order to comply with the Sub-Clause 8.3
programme.
• Assist the Contractor to obtain permits, licences or approvals
(Sub-Clause 2.2).
• Ensure its employee’s co-operate (Sub-Clause 2.3).
• Provide “reasonable evidence” of financial arrangements (Sub-
Clause 2.4).
• Give notice to the Contractor of any claims (Sub-Clause 2.5).

1999 Sub-Clause 2.4

• Contractor can request at any time:
• “reasonable evidence of financial arrangements have been made
and are being maintained which will enable the Employer to pay the
Contractor Price (as estimated at that time) in accordance with
Clause 14 [Contractor Price and Payment]”.
• Employer must provide “reasonable evidence”.
• Contractor may suspend work on 21 days notice if reasonable evidence is
not provided within 28 days (Sub-Clause 16.1).
• Contractor is entitled to an EOT and payment of Costs incurred plus profit
(Sub-Clause 16.1, 4th paragraph).
• Must recommence work “as soon as reasonably practical” once
reasonable evidence is provided.
• Contractor may terminate on 14 days notice if “reasonable evidence” is not
provided within 42 days from the Sub-Clause 16.1 notice (Sub-Clause
16.2) (a).
 Sub-Clause 2.4 Continued…

• On termination (Sub-Clause 16.4 and Sub-Clause 19.6):

• Performance security returned;
• Employer must pay for work done;
• Employer to pay for costs or liabilities “reasonably incurred
by the Contractor in the expectation of completing the
Works”;
• Employer to pay demobilisation costs; and
• Employer to pay loss of profit or other loss or damage
caused by the termination.

NH International (Caribbean) Limited v National Insurance

Property Development Company [2015] UKPC 37

• Construction of a public hospital in Tobago.

• Arbitration, Trinidad & Tobago High Court, Court of Appeal and then Privy
Counsel, London.
• Chronology:
• 3rd September 2004 – 2.4 request issued;
• 29th December 2004 – project administration unit, Ministry of Health, issued
letter stating the Cabinet approved additional funding for the project of TT$
59.1 million;
• 28th April 2005 – Further 2.4 request made;
• 23rd June 2005 – Contractor reduces rate of work;
• 5th July 2005 – Permanent Secretary, Ministry of Health issues letter
estimating final costs of TT$ 286,992,070 stating that “without prejudice that
funds are available in sum to meet the final cost to completion”; and
• 8th July 2005 – Contractor queries meaning of “without prejudice”. Has
Cabinet approved funding?

NH International (Caribbean) Limited v National

Insurance Property Development Company Continued...

• 23rd September 2005 – Contractor suspends work.

• 19th October 2006 – New Permanent Secretary writes stating:
• Project is of the highest priority;
• The current estimated value of the work is TT$ 224,129,801.99;
• Funds are available from the consolidated fund to pay the Employer, for
onward payment to the Contractor;
• Money certified will be paid by the Government;
• Government stands fully behind the project and will meet the contractual
financial requirements for completion.
• 27th October 2006 – Contractor requests confirmation that Cabinet has approved
the funds.
• 3rd November 2006 – Contractor issued notice of termination under clause 16.2.
Decision in Arbitration

• Arbitrator concluded that evidence had not been provided, so

Contractor entitled to terminate.

• This was based on evidence that funding for Government

projects in Trinidad required Cabinet approval.

• As a result “reasonable evidence” should for Trinidad include

some evidence of Cabinet approval.

• Even though the Cabinet had approved funding, sufficient

reasonable evidence had not been provided to the contractor.

Court, Trinidad & Tobago

• High Court - Approved the arbitrators’ award.

• Court of Appeal - Reversed the decision at first instance.
• CA considered that the errors included:
• A written assurance from the Government should not have
been disregarded;
• Direct mandate from the Government was reasonable
evidence; and
• Cabinet approval would have been the best evidence, but the
assurance came from a relevant person within the
Government (the Permanent Secretary) and that was
sufficient.

Court of Appeal, Trinidad & Tobago

• The test in relation to “reasonable evidence” is an objective one.

You do not have to meet the Contractor’s subjective expectations.

• The Sub-Clause 2.4 notice might have lapsed by the time the
contract was terminated (noted by the courts but not argued by the
parties).

• Arbitrator was wrong (error in law) in holding the Employer to the

higher sum of TT$ 286 million when the Engineer had certified only
TT$ 224 million.
NH International – Privy Counsel
Decision
• Arbitrator’s award was partially upheld.
• No error of law. The arbitrator had jurisdiction to consider what “reasonable
evidence” was and this was a question of fact not law. The court should not
intervene in an arbitrator’s consideration of the facts.
• The Court of Appeal had in reality considered that the arbitrator had applied a
higher standard in relation to “reasonable evidence”. The court must not
replace the arbitrator’s judgment.
• The Privy Counsel did give some guidance, by approving some of the Court of
Appeal’s analysis:
• A relevant consideration is the wealth and financial ability of the Employer
to pay the contract price; and
• Permanent Secretary assurances in writing are reasonable evidence.
Reasonable evidence needed only to relate to the properly assessed
contract sum, not a higher figure proposed by the Contractor.

Ramifications of NH International

• Will Employers delete Sub-Clause 2.4?

• Could Sub-Clause 2.4 be further clarified to identify the meaning of
reasonable evidence and how the contract price is to be ascertained
at the particular point of time for the purposes of reasonable
evidence?
• Is 28 days enough for an Employer?
• Are repeated requests from a contractor unreasonable?
• Must the contractor suspend and terminate promptly in accordance
with the clause in case the notice is lapsed?
• How does one objectively asses the documentation provided by the
employer?
• What sources of finance might be available in the public domain that
could inform both parties about the financial arrangements?

2017 Employer’s Financial Arrangements

• Sub-Clause 2.4 has been amended.

• Financial arrangement to be detailed in the Contract Data.
• The Employer must give Notice with supporting particulars if the
Employer:
• intends to make a “Material Change”; or
• has to amend the financial arrangements because of “changes in the
Employer’s financial situation”.
• The Contractor can request reasonable evidence that financial
arrangements have been made and are being maintained for the
Employer to pay the balance of the Contract Price if:
• a Variation exceeds 10% or the cumulative value of Variations exceed
30% of the Accepted Contract Amount;
• does not pay in accordance with Sub-Clause 14.7; or
• there is a material change in the Employer’s financial arrangements.
 Clause 2.5 – Employer Claims
• If the Employer considers himself to be entitled to payment “under or in
connection with the Contract”, then the Employer or Engineer shall give notice
and “particulars” to the Contractor.
• Notice not required for payments in relation to electricity, water, gas, employers
equipment, free issue materials or services requested by the contractor (Sub-
Clause 4.19 & Sub-Clause 4.20).
• Notice to be given, as soon as practical after the Employer became aware of
the event or circumstances given rise to the claim. Notice extending the
defects notifications period must be given before the expiry of that period.
• “Particulars” must specify the clause or other basis of the claim and should
include substantiation of the amount and extension to which the Employer
considers himself entitled.
• Engineer shall proceed in accordance with Sub-Clause 3.5 [Determination].
• Amount may be deducted from the contract price and payment certificates, but
Employer can only set off if Sub-Clause 2.5 mechanism is followed.

NH International

• Arbitration – Sub-Clause 2.5 is not a condition

precedent.

• T&T High Court and Court of Appeal – agrees.

• Privy Counsel – overturns – Sub-Clause 2.5 is a

condition precedent.

NH International – Sub-Clause 2.5, Privy

Counsel
• Any claims which the employer wishes to raise (whether they are to be
relied on as set offs or cross claims) are not to be allowed unless they are
subject to Sub-Clause 2.5 notice.
• The notice must be given as soon as practicable.
• Failure to serve a notice might not prevent a claim in abatement (i.e. one
that reduces the price due because of the defective or badly completed
nature of the work). Note that a notice in relation to abatement is probably
still required before completion of the defects notification period.
• Employer’s claims that have not been notified under Sub-Clause 2.5 “must
be disallowed” unless they are true abatement claims.
• Notification of Employer’s claims is a condition precedent to recovery
and/or set off.
• The notice must be particularised when it is issued.
Sub-Clause 2.5 - Ramifications

• Note the time barring nature of Sub-Clause 2.5.

• Employers and in particular the Engineer must review any claims and
issue Sub-Clause 2.5 notices as soon as possible. If in doubt a notice
should be issued.
• Employers now need to behave like Contractors in relation to Sub-Clause
20.1 and issue notices, and manage claims and adjustments to the
Contract Price as the work proceeds
• Delete Clause 2.5?
• Amend Sub-Clause 2.5 – state that it is not a condition precedent to
recovery?
• Amend Sub-Clause 2.5 – identify time periods?
• Amend Sub-Clause 2.5 – set out what particulars are required, perhaps
giving a longer period for their submission?

Sub-Clause 2.5 - 2017

• Sub-Clause 2.5 has been deleted

Contractor’s Obligations
2017 Contractor’s Obligations - Clause 4

• Execute the Works, provide plant, be responsible for adequacy, stability

and safety etc, (Sub-Clause 4.1);
• Deliver performance security to the Employer within 28 days of the
Letter of Acceptance (Sub-Clause 4.2).
• Extend the performance certificate until the works have been completed
or defects remedied.
• Appoint a contractor’s representative and give them authority (Sub-
Clause 4.3).
• Not subcontract the whole of the works (Sub-Clause 4.4):
• Obtain prior consent from the Engineer for subcontractors; and
• Notify the engineer not less than 28 days before the commencement
of the subcontractor.

Contractor’s Obligations Continued…

• Cooperate with the Engineer (Sub-Clause 4.6).

• Deemed to be satisfied as to the sufficiency of the accepted contract

amount (Sub-Clause 4.11).

• Deemed to be satisfied as to the suitability and availability of the

access to the site (sub-Clause 4.15).

• Be responsible for all power, water and other services for the works
(Sub-Clause 4.19).

• Issue detailed progress reports (Sub-Clause 4.21).

• Keep unauthorised persons off the site (Sub-Clause 4.22).

Defects Liability

• FIDIC forms do not define ‘defects’ – general view is any works or materials not in
accordance with the contract
• Clause 4.1 – Contractor must complete Works and ‘remedy any defects in the
Works’
• Clause 11.1 - Contains an obligation for remedying defects or damage after Taking
Over and throughout the Defects Notification Period on notice by the Employer
• Clause 11.2 - all defects or damage shall be executed ‘at the risk and cost of the
Contractor’ save for items not the Contractor’s fault which shall be dealt with under
the Variation Procedure (Clause 13.3)
• Clause 11.3 – Defects Notification Period shall extended (but not beyond 2 years) if
Works cannot be used as a result of a defect or damage under Clause 2.5
[Employer’s Claims]
• Clause 11.4 – Failure to remedy defects within a reasonable time entitles the
Employer to get (i) others to carry out remedial works at the Contractor’s
reasonable cost (ii) an Engineers Determination for a reasonable deduction or (iiii)
if the
Risk Allocation

Risk Allocation

• Red Book – risk is perhaps shared equally.

• Yellow Book – much of the risk is with the

contractor.

• Silver Book – places almost all of the risks

with the contractor.

Employer’s Responsibilities

FIDIC seeks to allocate risks based on which party is best placed to

take on the risk. By contrast the Silver Book adopts a market practice
approach of placing the majority of risk on the Contractor. Under the
Yellow Book, the Employer takes on risks such:

• the Employer’s Requirements (under certain conditions)

• setting out (under certain conditions)
• unforeseeable physical conditions
• force majeure (such as acts of war, terrorism and natural disasters)
• planning and environmental permits
• changes to the law
 Risk Allocation

• Risk Allocation under Clauses 4 and 5:

• Unforeseeable ground conditions;

• Setting out;

• Design liability; and

• Errors in the Employer’s Requirements.

• See also Clause 17 [Risk and Responsibility] and Clause 18

[Insurance].

Unforeseeable Physical
Conditions
• FIDIC Red Book Sub-Clause 4.12 (Yellow Book is the same):
“Physical Conditions means natural Physical Conditions and man made and
other physical obstructions and pollutants, which the Contractor encounters
at the Site when executing the Works, including sub-surface and
hydrological conditions but excluding climatic conditions”.
• The Contractor gives notice to the Engineer as soon as practicable.
• The Contractor must also issue a Sub-Clause 20.1 Notice in so far as an EoT
and/or additional costs are claimed.
• The Contractor is to proceed in accordance with the Sub-Clause 3.5
[Determinations].
• The Engineer may consider and review whether the physical conditions are
similar or more favourable than could reasonably have been foreseen when the
Contractor submitted the Tender. If so a reduction could be determined.
However, there should be no net reduction in the Contract Price.

Unforeseeable Physical Conditions

(Cont.)
• Gold Book – same as Red/Yellow except notice is given to the
Employer’s Representative.
• Silver Book – is quite different:
• The Contractor is deemed to have obtained all necessary
information as to the risks, contingencies and other
circumstances which may influence or affect the Works;
• The Contractor accepts total responsibility for having foreseen all
difficulties in costs successfully completing the Works; and
• The Contract Price shall not be adjusted to take account of any
unforeseen difficulties or costs.
 Setting out Information

• FIDIC Red Book – Sub-Clause 4.7 Setting Out:

• The Contractor sets out the Works based on the “points, lines and
levels specified” in the Contract or notified by the Engineer;
• The Contractor is responsible for any error in the setting out;
• The Employer is responsible for any errors in the specified or notified
reference and items, but the Contractor is to use reasonable efforts
to verify their accuracy;
• If the Contractor suffers delay or cost because “an experienced
Contractor would not reasonably have discovered such error and
avoided this delay and/or cost” the Contractor must give a Sub-
Clause 4.7 Notice and once again the usual Sub-Clause 20.1 Notice;
• The Engineer is to issue a Sub-Clause 3.5 Determination.

Setting out Information (Cont.)

• FIDIC Silver Book – Clause 4.7:

“The Contractor shall set out the Works in relation to the original
points, lines and levels of reference specified in the Contract. The
Contractor shall be responsible for the correct positioning of all parts
of the Works, and shall rectify any error in the positions, levels,
dimensions or alignment of the Works”.

Design Liability
Employer’s Requirements

• Clauses 1.9 and 5.1 are often amended to relieve the Employer from
any responsibility for documents or design provided by it and to place
a full design and ER risk on the Contractor

If this is the case:

• Ensure sufficient time at tender stage has been provided to

adequately review the ERs and carry out necessary assessments
and checks

• Check what, if any, warranties and/or reliance you shall be

receiving from the parties who have prepared the ERs and its
design

• Has this additional risk been adequately priced for?

FIDIC Silver Book

• FIDIC Silver Book – Sub-Clause 5.1:

“The Contractor shall be deemed to have scrutinised, prior to the Base
Date, the Employer’s Requirements (including design criteria and
calculations, if any). The Contractor shall be responsible for the design
of the Works and for the accuracy of such Employer’s Requirements
(including design criteria and calculations), except as stated below.
The Employer shall not be responsible for any error, inaccuracy or
omission of any kind in the Employer’s Requirements as originally
included in the Contract and shall not be deemed to have given any
representation of accuracy or completeness of any data or information,
except as stated below. Any data or information received by the
Contractor, from the Employer or otherwise, shall not relieve the
Contractor from his responsibility for the design and execution of the
Works”.

FIDIC Silver Book (Cont.)

“However, the Employer shall be responsible for the correctness of the

following portions of the Employer’s Requirements and of the following
data and information provided by (or on behalf of) the Employer:

(a) Portions, data and information which are stated in the Contract as
being immutable or the responsibility of the Employer;
(b) Definitions of intended purposes of the Works or any part thereof;
(c) Criteria for the testing and performance of the Completed Works;
and
(d) Portions, data and information which cannot be verified by the
Contractor, except as otherwise stated in the Contract”.
Design Liability

• FIDIC Yellow Book – Sub-Clause 5.1 General Design Obligations.

• The Contractor is to carry out and be responsible for the design of the
Works as if prepared by qualified Engineers who comply with any
criteria set out in the Employer’s Requirements.
• The Contractor warrants that the designers and design
subcontractors have experience and the capability for the design.
• The Contractor is to give notice to the Engineer of any error, fault or
other defect found in the Employer’s Requirements.
• The Engineer then determines whether a Sub-Clause 13 [Variations
and Adjustments] is required by considering if an experienced
Contractor exercising due care would have discovered the error, fault
or other defect when examining the Site or the ERs before submitting
the Tender.

2017 Design Review

• Sub-Clause 5.2 [Contractor’s Documents]:

• Contractor’s Notice issued with documents for review;
• Engineer reviews within 21 days, and may issue a Notice:
• of No-objection (with minor comments); or
• stating documents fail (with reasons).
• Deemed acceptance if no Notice issued in time.
• Engineer may require documents to be revised.
• If so any money and time claims will require a Sub-Clause
20.2 Notice.

2017 Design and Errors in the ERs

• Design Clause 5:
• Contractor to design the Works using designers that “are engineers or
other professionals, qualified, experienced and competent in the
discipline of the design for which they are responsible.”
• Promptly after Commencement to scrutinise the ERs.
• Errors in ERs Sub-Clause 1.9:
• Scrutinise and report within 42 days (and after) from the
Commencement date;
• Engineer proceeds under Sub-Clause 3.7 to agree or determine if
there is an error and its cost and time implications;
• If an experienced contractor would not have discovered the error then
a Variation shall apply; and
• Money and time claims will require a Sub-Clause 20.2 Notice.
Design Obligations: NEC & FIDIC

• FIDIC Sub-clause 4.1:

“When completed, the Works shall be fit for the purposes for
which the Works are intended as defined and described in the
Employer’s Requirements.”
• NEC Core Clause 20.1:
“The Contractor Provides the Works in accordance with the
Scope.”
• NEC 4 X15.1:
“The Contractor is not liable for a Defect which arose from its
design unless it failed to carry out that design using the skill
and care normally used by professionals designing works
similar to the works.”

What is fitness for purpose?

Common law: an absolute duty:

“The virtue of an implied term of fitness for purpose is that it

prescribes a relatively simple and certain standard of liability based on
the ‘reasonable’ fitness of the finished product, irrespective of
considerations of fault and of whether its unfitness derived from the
quality of work or materials or design.”

Judge John Davies

Viking Grain Storage v T.H. White Installations Ltd
[1985] 33 BLR 103

What is fitness for purpose?

UAE:

• There is no implied fitness for purpose requirement.

• Instead, the architect (designer) is jointly liable with the contractor

for any total or partial collapse occurring within ten years (Article
880 of Civil Code).
MT Højgaard A/S v E.ON Climate and
Renewables UK Robin Rigg East Ltd & Anr

• Clause 8.1 of the Contract:

“The Contractor shall … design, manufacture, test, deliver
and install and complete the Works:
(i) with due care and diligence expected of appropriately
qualified and experienced designers, engineers and
constructors (as the case may require)”;

• Paragraph 3.2.2.2 of the Technical Requirements:

“The design of the foundations shall ensure a lifetime of 20
years in every aspect without planned replacement.”

MT Højgaard A/S v E.ON Climate and

Renewables UK Robin Rigg East Ltd & Anr

“the existence of an express warranty of fitness for purpose by the

Contractor can trump the obligation to comply with the specification
even though that specification may contain an error”

“It is not uncommon for construction and engineering contracts to

contain obligations both to exercise reasonable skill and care,… and
to achieve a particular result” ; and

“the two obligations are not mutually incompatible and therefore can
co-exist side by side.”
Mr Justice Stuart-Smith

MT Højgaard A/S v E.ON Climate and

Renewables UK Robin Rigg East Ltd & Anr

Lord Justice Jackson: “multiple authorship” containing “much loose

wording” and including many “ambiguities,
infelicities and inconsistencies”

Lord Neuberger: “certainly long, diffuse and multi-authored”

Did this mean that the inconsistency was:

“too slender a thread upon which to hang a finding that MTH gave a
warranty of 20 years life for the foundations”.
Per Lord Justice Jackson
MT Højgaard A/S v E.ON Climate and
Renewables UK Robin Rigg East Ltd & Anr

“While each case must turn on its own facts, the message from
decisions and observations of judges in the United Kingdom
and Canada is that the courts are generally inclined to give full
effect to the requirement that the item as produced complies
with the prescribed criteria, on the basis that, even if the
customer or Employer has specified or approved the design, it
is the Contractor who can be expected to take the risk if he
agreed to work to a design which would render the item
incapable of meeting the criteria to which he has agreed.”
Lord Neuberger

Decennial Liability
Article 880 of the UAE Civil Code:
“If the subject of the construction contract is the erection of buildings or other
fixed structures the plans for which have been made by an architect [engineer]
with the intention that the contractor shall carry them out under his supervision;
they shall be jointly liable to pay compensation to the employer for any total or
partial destruction occurring within 10 years to the buildings they have
constructed or the installations they have erected, unless the contract provides for
a longer period of time, or unless it was the intention of the parties that such
installations should remain for a period shorter than ten years. The liability to pay
compensation as aforesaid shall endure notwithstanding that the defect or
collapse arises out of a fault in the land itself or that the employer consented to
the erection of defective buildings or installations.”

But the liability of the architect will be limited to design defects if he has no role in
supervising the construction performance (Article 881)

Contract Risk Management

• No matter what contracts, protocols, guidance notes, or otherwise

are required on a particular project, it is important to understand
your obligations, liabilities and limitations within each document;
• If the contract documents do not align with each other and/or are
not considered sufficiently in detail, this can lead to ambiguity and
uncertainty;
• With regard to BIM, the devil is in the detail. All contract documents
need to align obligations clearly; and
• Make sure you understand what you are being asked to do as
depending on the terms of your contract, these could be binding
documents with obligations contained therein which you need to
understand and be alert to.
BIM

“BIM is an acronym for Building Information Modelling. It

describes the means by which everyone can understand a
building through the use of a digital model. Modelling an
asset in digital form enables those who interact with the
building to optimise their actions, resulting in a greater
whole life value for the asset … BIM is a way of working
…”

www.nbs.com

BIM
• 2013 the Dubai Municipality issued circular (196), mandating the
use of BIM for architectural and MEP work on certain projects. This
was subsequently widened by circular (207) in 2015 to include
architectural and mechanical works for:
• buildings higher than 20 floors;
• buildings and facilities with areas larger than 200 thousand
square foot;
• special facilities like hospitals and universities;
• government projects; and
• projects by foreign offices.
• The Opera House, Downtown Dubai, the Midfield Terminal
Complex Development at Abu Dhabi Airport and the Louvre
Museum in Abu Dhabi.

BIM: the importance of collaboration:

Karavanke tunnel on the Slovenian and
Austrian border
The FIDIC BIM Advisory Note

• According to FIDIC, BIM is:

“founded on a team approach and successful projects
utilising BIM encourage collaboration.”
• There is no FIDIC BIM Protocol. Note the Second Edition of
the CIC Protocol is due out in April 2018.
• FIDIC has indicated that it is currently preparing two
documents:
“Technology Guideline”
“Definition of Scope Guideline Specific to BIM”

The FIDIC Advisory Note

• FIDIC has identified the key risk areas on any BIM-enabled project:
• Misunderstanding of scope of services.
• Use of data for an inappropriate purpose and reliance on
inappropriate data.
• Ineffective information, document or data management.
• Cyber security and responsibility for “holding” the models or data.
• Definition of deliverables, approval and delivery.
• The Winfield Rock Report
• http://www.ukbimalliance.org/resources/request-a-copy-of-the-
winfield-rock-report/

Key features of the BIM protocol

• Definitions;
• Establishes priority of the contract documents;
• Obligations of the Employer:
• Put a Protocol in place for everyone;
• Appoint the Information Manager.
• Obligations of project team members:
• Produce the specified models as agreed;
• Collaborative working practice.
Key features of the BIM protocol

• Electronic Data Exchange:

• No warranty for data integrity.
• Mandate use of Information Management standards such
PAS 1192-2
• Use of models:
• Copyright;
• Licences related to permitted purposes.
• Limitations on liability associated with models.

Reviewing design responsibility in

contracts

1. Obtain and review a copy of the complete Contract – are any

documents incorporated by reference?
2. Check the priority of documents is correct for the project
3. Check the clauses dealing with discrepancies/inconsistencies
4. What is the duty of care – RSC vs. FFP?
5. Consider expressly excluding fitness for purpose
6. Check all technical documents for any departures from the agreed
duty of care
7. Consider a financial cap for design liability
8. Check any provision with the professional indemnity insurers

Limits on liability and

insurance
Limitations on Liability

• Set out at Clause 17.6 - often heavily negotiated

• The Contractor's liability is limited to the amount of the Accepted

Contract Amount or the amount stated in the Particular
Conditions

• Watch out for carve-outs to the limitation of liability – can

completely undermine the purpose of a cap

• Typical "carve-outs" include death, personal injury, monies

recovered under insurances, fraud and gross negligence

• Cap should be guided by insurance protection instead of a

percentage of the Contract Amount

2017 Risk and Insurance

• Limitation of liability moved from Sub-Clause 17.6 to Sub-Clause 1.15

• Neither Party liable to the other for any loss of use of the Works, loss
of profit, indirect or consequential loss; and
• Contractor’s total liability set out in Contract Data or by default the
Accepted Contract Sum.
• Care of the Works and Insurance (including Insurance after Taking Over)
covered by Clauses 17 and 19;
• Indemnities for personal injury, death and property damage, and
insurance;
• PI insurance for any “act, error, or omission … in carrying out the
Contractor’s design obligations” Amount in Contract Data or to be
agreed with Employer; and
• Optional PI insurance for the fitness for purpose obligations.

Time Management
2017 Management Meetings

• Management meetings under Sub-Clause 3.8 provide

that:

• the Engineer or CR may require the other to attend

management meetings;

• others may also attend (Employer’s other contractor,

suppliers etc); and

• the Engineer is to keep a record.

2017 Quality Management and Compliance

• Quality Management Sub-Clause 4.9:

• the Contractor to prepare and implement a QM System within 28
days of the Commencement Date;
• to ensure Notices, as-built records etc “can be traced”;
• to ensure proper coordination and interface; and
• for submission of documents for review.
• Engineer may Review the QM system within 14 days.
• Deemed acceptance after 21 days.
• Failure to implement – Engineer may issue a Notice.
• Internal audits – once every 6 months.
• External audits – Contractor to notify Engineer of any failings.
• Compliance Verification System to demonstrate design, materials,
workmanship, all comply with the Contract (Sub-Clause 4.9.2).

2017 Advanced Warning

• FIDIC introduced the concept of advanced warning in the Dec 2016 version.
An early warning notice is issued in relation to a potential problem.
• The parties are then to work together in order to try to overcome the
difficulty.
• New Sub-Clause 8.4 follows the Gold Book. 2017 Sub-Clause 8.4 provides:
“Each Party shall advise the other and the Engineer, and the Engineer
shall advise the Parties in advance of any known or probable future
events or circumstances which may:
a) adversely affect the work of the Contractor’s Personnel;
b) adversely affect the performance of the Works when completed;
c) increase the Contract Price; and/or
d) delay execution of the Works or a Section (if any).
The Engineer may request the Contractor to submit a proposal under
Sub-Clause 13.3.2 [Variation by Request for Proposal] to avoid or
minimise the effects of event(s) or circumstance(s)”.
Commencement, EOT and Programme

• Engineer gives contractor 7 days notice of the commencement

date (Sub-Clause 8.1) within 42 days after the Letter of
Acceptance.
• Complete by the Time for Completion including passing any Tests
on Completion and completing all of the work in the contract (for
any section as necessary).
• Delay caused by authorities – if Contractor diligently follows
procedures laid down by authorities then any delay or disruption is
unforeseeable may be claimed (Sub-Clause 8.5).
• If the rate of progress is slow, the engineer may instruct the
Contractor to submit a revised programme to expedite progress
and complete within the Time for Completion.

Commencement, EOT and

Programme Continued…
• Delay damages – for failure to complete by the Time for
Completion. May be subject to a maximum amount set out in the
appendices to tender. These are the only damages for delay,
other than in the event of termination.
• Suspension of work:
• Engineer may suspend any time (Sub-Clause 8.8);
• Contractor due an EOT and payment of any costs; and
• Engineer must issue a Sub-Clause 3.5 determination.
• Prolonged suspension – after 84 days the Contractor may
request permission to proceed. If no permission after 28 days the
Contractor may give notice to treat the suspension as an
omission of the affected works or termination (Sub-Clause 8.11).

Programme – Sub-Clause 8.3

• The Contractor must submit a detailed programme within 28 days

of receiving the Notice for Commencement of the works.
• A revised programme should be submitted when a previous
programme is inconsistent with actual progress.
• A programme must include:
• The order in which the Works are to be carried out;
• Stages for design, submission of Contractor’s documents,
procurement, manufacture, delivery of plant, construction,
erection and tests on completion;
• Any stages to be carried out by a nominated subcontractor;
• The sequence and timing of any inspections and tests.
Programme – Sub-Clause 8.3
Continued…
• A supporting report describing the method which the
Contractor intends to adopt, for the major stages as well as the
execution of the works, and provide details of the Contractor’s
planned resources (number of person etc).
• The Engineer has 21 days to review the programme.
• The Contractor must promptly give notice of “specific probable
future events or circumstances which may adversely effect the
work, increase the contract price or delay the execution of the
work”.
• The Engineer may request the Contractor at any time to provide a
revised programme.

EoT – Sub-Clause 8.4

• If the Contractor considers himself to an EoT, then he must

serve:

• Sub-Clause 8.4 notice identifying the cause or causes; and

• A Sub-Clause 20.1 [Contractor’s Claims] notice.

• The Engineer may review previous determinations, and may

increase an EoT, but may not decrease the total EoT.

Concurrent Delay

Sub-Clause 8.5:

“If a delay caused by a matter which is the Employer’s

responsibility is concurrent with a delay caused by a matter which
is the Contractor’s responsibility, the Contractor’s entitlement to
EOT shall be assessed in accordance with the rules and
procedures stated in the Special Provisions (if not stated, as
appropriate taking due regard of all relevant circumstances).”
Concurrent Delay

• Article 291 of the UAE Civil Code:

“If a number of persons are responsible for a harmful act, each

of them shall be liable in proportion to his share in it, and the
judge may make an order against them in equal shares or by
way of joint or several liability.”

• UAE law recognizes apportionment approach, where liability for

the delay is apportioned between the parties in accordance with
their respective degrees of fault.

Taking Over: the UAE

Under Article 884 of the UAE Civil Code:

“the Employer shall be bound to take delivery of the work done when
the Contractor has completed it and placed it at his disposal.”
BUT
• This transfer will be subject to any specific procedures and
conditions for handing over and taking delivery of completed
works: i.e. clauses 48 and 10 of the 1987 and 1999/2017 FIDIC
Red Books; and
• That date for the transfer of risk and care in the UAE is likely to be
the end of the delay damages period, the date of transfer of
insurance obligations and the date that retention monies should be
released.

EOT Causes – Sub-Clause 8.4

• Causes of an EoT are:

• A Variation (unless an adjustment to the Time for Completion
has been agreed);
• A substantial change in the quantity of an item;
• A recognised cause of delay under any of the Conditions;
• “Exceptionally adverse climatic conditions”;
• Unforeseeable shortages in availability for personal or Goods
caused by epidemic or Government actions; and
• “Any delay, impediment or prevention caused by or
attributable to the Employer, the Employer’s Personal or the
Employer’s other contractors on the Site”.
Taking Over

• The Contractor may apply for a Taking Over Certificate not earlier
than 14 days before the Works will in the Contractor’s opinion be
complete (Sub-Clause 10.1).
• The Engineer has 28 days to issue a Taking Over Certificate
stating the date on which the Works or section were completed
(save any minor defects) or reject the application giving reasons.
• If the Engineer fails to respond within 28 days a Taking Over
Certificate is deemed to have been issued on the last day of that
period.
• The Engineer may at the sole discretion of the Employer issue a
Taking Over Certificate for any part of the permanent works (Sub-
Clause 10.2).

Taking Over Continued…

• Tests on Completion (Sub-Clause 9.1):

• Contractor gives the Engineer at least 21 days notice of the date of the
tests;
• The Engineer takes account of any use of the Works by the Employer that
may have had an impact on tests;
• Contractor submits a certified report of the results to the Engineer;
• If the Tests on Completion are unduly delayed by the Contractor the
Engineer may give the Contractor 21 days notice to carry out the test
(Sub-Clause 9.2);
• If the Contractor fails to comply with that notice the Employer’s Personal
may proceed with the tests at the risk and cost of the Contractor; and
• If any Tests are failed then the Engineer or Contractor may require the fail
test to be repeated (Sub-Clause 9.3).

Taking Over Continued…

• If the Tests fail (on Retesting) the Engineer has an option:

• Order a repetition of the Tests;

• If the failure “deprives the Employer substantially the whole

benefit of the Works….” reject the Works….; and

• Issue a taking over certificate if the Employer agrees.

Payment

Payment Events Sequence

Price and Payment

• The Contract Price shall be agreed or determined under Sub-Clause

12.3 [Evaluation] (Sub-Clause 14.1).
• If Bills of Quantities apply, then it is the correct and actual quantities
that are applicable.
• An Advanced Payment is an interest free loan for mobilisation once the
Contractor submits a guarantee (Sub-Clause 14.2).
• Interim payments – Sub-Clause 14.3.
• Schedule of payments – Sub-Clause 14.4.
• Interim payment certificates – Sub-Clause 14.6.
• Payment within 56 days after the engineer receives the statement and
supporting documents (Sub-Clause 14.7).
• Delayed payment – finance charges (Sub-Clause 14.8).
• Payment of retention – Sub-Clause 14.9.
Price and Payment Continued…

On completion
• Statement at completion – 84 days after taking over the Contractor
submits a statement at completion and all supporting documents (Sub-
Clause 14.10).
• Application for Final Payment Certificate – 56 days after receiving a
performance certificate the Contractor submits a draft final statement
with supporting documents. (Sub-Clause 14.11)
• Discharge – the Contractor confirms the total final statement represents
the full and final settlement (Sub-Clause 14.12).
• Issue of Final Payment Certificate – 28 days after receiving the final
statement and written discharge the Engineer issues the final payment
certificate (Sub-Clause 14.13).

Payment on Delivery

• UAE Civil Code Article 885: payment becomes due upon

delivery of the work unless there is an arrangement or a
convention to the contrary;

• UAE Civil Code Article 884: delivery must be taken at the

latest “when a Contractor has completed the work and
placed it as his disposal”;

• Interim payments not usually recognised, but Federal

Government projects may attain interim payments up to a
maximum of 90%.

General Contract
Administration and Claims
Management under the
New FIDIC Form
General contract administration: the
problem

• How to minimise claims from Day 1 of your project;

• Understanding the typical project risks;

• Preventing claims from becoming disputes;

• Using the tools the contract gives you;

• Do parties really leave the contract in a drawer?

• Getting paid your proper entitlement.

Typical project risks

• Design, and concept design;

• Assumption (deeming) of responsibility for accuracy of
Employer Requirements;
• Performance and “fitness for purpose”;
• Single point responsibility for design and installation;
• Lump-sum price;
• Adverse site conditions;
• Site access, coordination, and efficiency on site;
• Damages for delay and penalty damages;
• Retention; and
• Defective works.

Top causes of disputes on

construction projects globally?

Rank Cause

1 Failure to properly administer the contract

2 Poorly drafted or incomplete and unsubstantiated claims

3 Errors and/or omissions in the contract document

Arcadis - Global Construction Disputes 2016-2017

Avoiding claims: three core skills

1 Technical: technical management and construction of the

project to the specification and design;

2 Good communication: keeping the right and appropriate

organisations informed about the project and the proactive
management of the project; and

3 Use the contract: carrying out the work and

communicating in accordance with the contract.

Avoiding claims

• Know the contract from the outset: make use of it;

• Record progress;

• Keep all communications measured and factual;

• Do not exaggerate;

• Address issues as the project goes along.

Making use of the Contract

• “New” Sub-Clause 3.8: management meetings, to promote

effective communication. Note: not a replacement for progress
meetings;
• “New” Sub-Clause 4.20/ old Sub-Clause 4.21: Progress Reports;
• Clause 13: process and substantiation of change;
• Clause 14: payment procedure – applications, notices, timing,
certification, final date for payment;
• “New” Sub-Clauses 1.1.7, 1.1.69 and 4.9: use and follow your
Quality Management System and Compliance Verification
System; and
• Clause 20: keep a record of claims Notices and claims, by “new”
Sub-Clause 4.20(f), a requirement of Progress Reports.
Update those records as you go along:
the programme
• The Contractor “shall” submit a revised programme accurately reflecting
progress whenever the current one no longer does;
• Look at the increased programme requirements of “new” Sub-Clause 8.3;
• What are the key delivery dates? Have they been met?
• Do you have to show the critical path and float? Should you?
• Order and timing: design, documents, procurement. manufacture,
delivery, construction, erection and testing;
• Supporting report, method and execution, labour resource; and
• “New” Sub-Clause 14.3(c): every payment application must include the
monthly Progress Report including a detailed description of progress.

Early Warning

• “New” Sub-Clause 8.4:

“Each Party shall advise the other and the Engineer, and the
Engineer shall advise the Parties, in advance of any known or
probable future events or circumstances which may: (a) adversely
affect the work of the Contractor’s Personnel; (b) adversely affect
the performance of the Works when completed; (c) increase the
Contract Price; and/or (d) delay the execution of the Works or a
Section (if any).
The Engineer may request the Contractor to submit a proposal
under Sub-Clause 13.3.2 [Variation by Request for Proposal] to
avoid or minimise the effects of such event(s) or circumstance(s).”
• First introduced by Sub-Clause 8.4 of the Gold Book.

Importance of records

“New” Sub-Clause 20.2.3 - “contemporary records”:

“records that are prepared or generated at the same time, or
immediately after, the event or circumstances giving rise to the
Claim.”;
The Contractor’s records may be monitored by the Engineer who can
instruct the Contractor to keep additional contemporary records; and
Any award of additional payment or EOT shall take into account the
extent to which a failure to comply with “new” clause 20 has prejudiced
proper investigation of the claim.
 Project Records

• Records that should be kept (as a minimum):

• Progress;

• Resource levels – operatives and staff;

• Access issues;

• Instructions to stop work;

• Plant/equipment (if provided by Employer or others);

• Delays;

• Costs.

• Is your subcontractor keeping their records?

• You may need subcontractors’ records for claims against the

Employer

Digital construction reports?

• Project record apps?

• Real-time data;
• Data can be synched among all team members;
• Time saving device?
• Importance of report form/template;
• Allocation: how much time did you take to complete that task?
• How is data stored?
• Too much information?

Project Records: SCL Delay & Disruption

Protocol 2nd Edition, 2017

Core Principle B1:

“Contracting parties should reach a clear agreement on the type of
records to be kept and allocate the necessary resources to meet that
agreement.”
Clause 1.5: the parties should consider:
The types of records to be produced, the format in which they are to be
kept, and the frequency with which they are to be updated;
Who is responsible for keeping and checking those records?
Clause 1.6: an Employer should:
Set out its requirements in the tender to enable a contractor to consider
these. Any change to these might be considered to be a variation.
A reminder: what are contemporary records?

“original or primary documents, or copies thereof, produced or

prepared at or about the time giving rise to a claim, whether by or
for the Contractor or Employer.”

Sub-Clause 53.4 of the Old FIDIC Red Book 4th Edition,

Attorney General for the Falkland Islands
v Gordon Forbes Construction (Falklands) Ltd
[2003] BLR Vol.1 280

Identification of relevant facts and

supporting evidence – contemporary records
What is required is the maintaining of records or evidence necessary for substantiating
a Contractor’s claim;
The word “records” refers to evidence, namely documents: written, printed or
electronic, evidencing matters that have occurred in the past;
The word “contemporary” deals with time. Therefore the records must be
contemporary, that is created, obtained or produced, at the same time with the facts or
events upon which the claim is based;
BUT
A failure by a Contractor to keep such records does not prevent recovery, although it is
to be taken into account in any assessment insofar as it may prejudice or prevent a
proper investigation of the claim.
Judge Jones

National Insurance Property Development Co. Ltd v NH International (Caribbean) Ltd

Claim No.CV2008-04881/CV2008-04998

Proving Claims– contemporary records

“Contemporaneous documents are a useful starting point when trying to
work out what was happening on site at any given time, and what the
relevant individuals thought were the important events on site during the
works…….To the extent that the contents of the contemporaneous
documents comprise a credibility test to be applied to the OSR claims,
then I consider that, particularly in respect of the crossings (which is by
far the largest single claim now made), they comprehensively fail that
test.”

“That the reports and other contemporaneous documents in this case

make so few references to standing time or disruption, and the fact that
detailed claims were not made in the large amounts now advanced until
months, even years, after the period in question, are plainly factors
undermining the credibility of OSR’s claims in these proceedings.”
Van Oord UK Ltd & Anor v Allseas UK Ltd

[2015] EWHC 3074 (TCC)

Proving Claims– contemporary records

Scope of the Works:

“one of the fundamental difficulties with the insurance claim was the
absence of any record of the works actually carried out. There was no
specification or schedule of works, or even a basic inventory. It is
therefore impossible to say with certainty, even now, precisely what was
done and, perhaps more importantly, what was not done. The absence
of any clear fixed scope of work has now rebounded on the insurers as
they struggle to prove the subrogated claim against the defendants.”

Mr Justice Coulson

Brit Inns Ltd & Ors v BDW Trading Ltd [2012] EWHC 214

Proving Claims– contemporary records

Inadequate Invoices

“The inadequacies in the invoices in this case are too numerous to

identify comprehensively. The most important were these. First, the
invoices failed to identify with any sort of precision what work was the
subject of the claim in the invoice. Secondly, if the work was carried
out pursuant to particular instructions, those instructions were not
identified or listed. Thirdly, no details were given as to rates or any
other way in which the sum claimed in the invoice might be broken
down and valued. Most of the invoices are one or two line claims for
relatively large sums of money with a generic description of what was
carried out. They are almost impossible to analyse retrospectively.”
Mr Justice Coulson

Brit Inns Ltd & Ors v BDW Trading Ltd [2012] EWHC 214

Proving Claims – contemporary records

The Council had:

One photograph from 2011;
Samples of two sections of road dressing from a single site;
No samples of the chippings purchased in 2010;
There were no plans or other written records documenting the nature and extent
of each of the failures.
As a consequence, the Council alleged that an unidentified defect must have
caused the problem on grounds that all other possible causes could be
eliminated.
BUT: such a claim will only have a chance of success if the factual background
unambiguously points towards one conclusion.
Dundee City Council & Others v D. Geddes (Contractors) Ltd [2017] ScotCS CSOH 108
 Common law and civil law: different
approaches to claim quantification?

• The ultimate answer to the question is “no”. You must retain sufficient
records to substantiate your claim;

• In some civil law jurisdictions, a party cannot “create” evidence

supporting its case. The witness testimony of those who have an
interest to win the case may often be inadmissible or given little
weight;

• In common law jurisdictions, the testimony of witnesses is much more

likely to be more acceptable, subject of course to their credibility as
proven or otherwise in cross-examination.

• The more time that passes, the more memories fade, the more you
have to rely on documents.

Documents v memory?
“Having listened carefully to Mr Conlon and observed him in the witness
box my overall impression is that he is a well-meaning man. However, he
was placed in a very difficult position as he did not have the detail of
events which occurred some time ago close at hand. He was being
asked to confirm a case which did not originate with him and which was
drafted by lawyers.
...
He was asked to speak to detailed witnesses statements which were
prepared by lawyers and understandably he faltered in that exercise. He
was also asked to remember events long ago and to remember a letter
that he had not volunteered himself.”
Keegan J, Glen Water Ltd v Northern Ireland Water Ltd
[2017] NIQB 20

The likely impact of the revisions to the old

Yellow Book?
The purpose of the new revisions:

• Enhanced project management tools and mechanisms;

• Clarity, transparency and certainty;

• Balance and reciprocity;

• Avoid late, old and stale claims.

Result:

• Increased burden on parties to follow new administrative

requirements;

• An increased likelihood that if you fail to follow the rules, you lose the
right to make a claim.
Solutions: remember the following

• The importance of communication;

• Familiarity of FIDIC approach, language and demands is

essential;

• Use the correct terminology;

• Effective pro-active contract administration;

• Claims under FIDIC: the clause 20.1 condition precedent;

Solutions: remember the following

• The importance of clear detailed programme delivery;

• Record keeping;

• Deal with change contemporaneously;

• Manage time and changes in cost every month;

• Manage claims

• Resolve disputes early if possible.

Conclusions

“A party to dispute, …, will learn three lessons (often too

late): the importance of records, the importance of records
and the importance of records.”

Max Abrahamson
Engineering Law and the ICE contracts, 1979
Suspension and
Termination

Contract Annulment

• UAE Civil Code Article 275: parties are required to return any
performance received;

• It is also held that a construction contract is one of a continuous

nature, and termination does not have an impact on
accumulated rights;

• UAE Civil Code Articles 272(2) and 274: if it is not possible to

restore the parties to their respective positions, compensation,
including loss of profit may be awarded in lieu.

Termination by Employer

• Termination for default (on 14 days notice):

• Employer issues a Notice to Correct requiring rectification
within a reasonable period; and
• Contractor fails to comply.
• If the Contractor:
• Fails to provide or maintain performance security;
• Abandons the Works or demonstrates the intention not to
continue;
• Without reasonable cause the Contractor fails to commence
the works as soon as reasonably practicable;
• Fails to proceed with “due expedition without delay…”; or
• Subcontracts the whole of the Works or assigns without
consent.
Termination by Employer Continued…

• Employer can terminate immediately if:

• The contractor becomes bankrupt or insolvent; or
• Contractor or its personnel, agents or subcontractors give or
receive, directly or indirectly a bribe, gift, gratuity, commission
etc.
• Termination for convenience – on 28 days notice (Sub-Clause
15.5).

Obrascon Huarte Lain SA v AG Gibraltar

(Court of Appeal) [2015] EWCA Civ 712

• Construction of a road and tunnel under the runway at Gibraltar

Airport.
• Two year contract duration.
• Terminated after two and a half years, but only approximately
25% of the work complete.
• Interpretation of termination provisions in Sub-Clause 15.1/15.2
(FIDIC 1999).
• Notice requirements under Sub-Clause 20.1.
• Liability of the Contractor in respect of information provided by
the Employer under Sub-Clause 4.10.

Clause 4.10 – Site data

“the Employer shall have made available to the Contractor for his information,
prior to the Base Date, all relevant data in the Employer’s position on the
sub-surface and hydrological conditions at the Site, including environmental
aspects. The Employer shall similarly make available to the Contractor all
such data which come into the Employers position after the Base Date. The
Contractor shall be responsible for interpreting all such data.

To the extent which was practicable (taking account of cost and time), the
Contractor shall be deemed to have obtained all necessary information as to
risks, contingences and other circumstances which may influence or effect
Tender or Works. To the same extent, the Contractor shall be deemed to
have inspected and examined the Site, it’s surroundings, the above data and
other available information, and to have been satisfied before submitting the
Tender as to all relevant matters, including (without limitation):
• The form and nature of the Site, including sub-surface conditions”.
 Obrascon – Site Data and
Unforeseeable Conditions

• Employer included a desktop study to tenders indicating 10,000 metres

cubed of contaminated soil. This turned out to be a significant
underestimation.

• CA held the contractor cannot just rely on the site data. It must make its
own assessment.

• Contractor’s claim was dismissed.

• CA stated that the Contractor should make provision for a “possible worse
case scenario”. (Paragraph 223 of TTC decision confirmed by CA).

Obrascon – Termination by
Employer
• A Notice to Correct (Sub-Clause 15.1) should only be issued for “more than
significant contractor failures”.
• So for a trivial breach a Notice to Correct should not be issued. This is a
question of fact.
• However, a breach need not amount to a repudiatory breach in order to
trigger termination.
• A Notice to Correct can only be issued in relation to actual failures (not
estimated or potential future failures).
• The time for correcting the works must be reasonable in all the
circumstances prevailing time at which the notice was issued. It should take
into account problems that are solely at the Contractor’s risk.
• It can also take into account the circumstances leading up to the Notice to
Correct. If the Contractor has ignored requests then less time might be
reasonable, but if the notice were issued immediately without any prior
warning.

Suspension and Termination by Contractor

• Contractor may suspend (Sub-Clause 16.1):

• If the Employer fails to certify and interim payment; or
• If the Employer fails to comply with Sub-Clause 2.4; or
• Make payment.
• After giving not less than 21 days notice to the Employer, may
suspend or work at a reduced rate until remedied.
• If remedied, the Contractor is to resume normal working as soon as
practicable.
• Contractor entitled to an EOT and/or any costs plus reasonable
profit.
• Engineer must make a Sub-Clause 3.5 determination.
Termination by Contractor –
Sub-Clause 16.2
• Contractor is entitled to terminate if:
• Reasonable evidence under Sub-Clause 2.4 not received within 42
days.
• Engineer fails within 56 days after receiving a statement of
supporting documents to issue a payment certificate.
• Payment of an interim payment is not made within 42 days of the
expiry of the payment period.
• The Employer “substantially fails to perform his obligations under the
Contract”.
• The Employer fails to issue the contract agreement for signature or
attempts to assign the contract.
• The Employer becomes bankrupt or insolvent etc.
• Upon 14 days notice to the Employer the Contractor may terminate.

Actions on termination

• After the notice of termination the Contractor shall:

• Cease all further work (unless it relates to the protection of life or
property or safety);
• Handover documents, plant and materials providing payment has
been made in relation to them; and
• Remove all of the goods from the Site, except as necessary in order
to keep the Site safe.
• In relation to payment the Employer shall:
• Return the Performance Security;
• Pay the Contractor in accordance with Sub-Clause 19.6 [Optional
Termination, Payment and Release];and
• Pay to the Contractor loss of profit or other loss or damage sustained
by the Contractor as result of termination.

Force Majeure – Clause 19

• Force Majeure means:

• “an exceptional event or circumstance:
a) Which is beyond the Parties control;
b) Which such Party could not reasonably have provided against
before entering into the Contract;
c) Which, having a reason, such Party could not reasonably have
avoided or overcome; and
d) Which is not substantially attributable to the other Party”.
• Force Majeure may include war, hostilities, invasion, act of foreign
enemies, rebellion, terrorism etc.
• Notice is given within 14 days after the party became aware, or should
have became aware, of the relevant event or circumstances amounting
to force majeure (Sub-Clause 19.2).
Force Majeure – Clause 19
Continued…

• If the Contractor incurs delay or costs then the Contractor

should issue a Notice under Sub-Clause 19.4 and as always a
Sub-Clause 20.1 Notice.
• The Engineer should then issue a Sub-Clause 3.5
determination.
• Optional Termination, Payment and Release (Sub-Clause 19.6).
• If the force majeure event continues for 84 days; or
• Multiply periods of not more than 140 days; then
• Either party can terminate the contract by giving a 7 day
notice.
• The Engineer values the work done and issues a payment
certificate.

1999 Claims & Dispute

Resolution Procedure

1999 Claims and Dispute Resolution

• Notice of a claim (condition precedent).

• Formation of Dispute.
• Referral of dispute to the DAB.
• Standing or Ad Hoc DAB (cf Red, Yellow, Silver)
• 84 day procedure.
• Written DAB decision.
• Notice of Dissatisfaction – 28 days.
• Referral to arbitration:
• Amicable Settlement (Sub-Clause 20.5);
• Sub-Clause 20.6; or
• Sub-Clause 20.7.
1999 Sub-Clause 20.1 – Contractor’s
Claims
“If the Contractor considers himself to be entitled to any extension of the
Time for Completion and/or any additional payment, under any Clause of
these conditions or otherwise in connection with the Contract, the Contractor
shall give notice to the Engineer, describing the event or circumstances
giving rise to the claim. The Notice shall be given as soon as practicable,
and no later than 28 days after the Contractor became aware, or should of
become aware, of the event or circumstance.
If the Contractor fails to give Notice of a claim within such period of 28 days,
the Time for Completion should not be extended, the Contractor shall not be
entitled to additional payment, and the Employer shall be discharged from all
liability in connection with the claim….”
The Contractor “shall keep such contemporary records as may be
necessary to substantiate any claim…”

Is Sub-Clause 20.1 of the FIDIC Contract a

Condition Precedent?

The common law position in 2007

“Contractual terms requiring a Contractor to give prompt notice of

delay serve a valuable purpose; such notice enables matters to
be investigated while they are still current. Furthermore, such
notice sometimes gives the Employer the opportunity to withdraw
instructions when the financial consequences become apparent.”

Mr Justice Jackson – Multiplex v Honeywell

Are Sub-Clauses 2.5/20.1 of the 1999

FIDIC Contract a Condition Precedent?

The Position at Civil Law

Freedom of Contract:
Article 243 (2) of the UAE Civil Code states:
“With regard to the rights (obligations) arising our of the contract,
each of the contracting parties must perform that which the contract
obliges him to do .”

Article 265(1) of the UAE Civil Code states:

“If the wording of a contract is clear, it may not be departed from by
way of interpretation to ascertain the intention of the parties.”
Are Sub-Clauses 2.5/20.1 of the 1999
FIDIC Contract a Condition Precedent?

The Position at Civil Law

Good faith obligation:

Article 246 (1) of the UAE Civil Code states:

“The contract must be performed in accordance with its

contents, and in a manner consistent with the requirements of
good faith.”

Are Sub-Clauses 2.5/20.1 of the 1999

FIDIC Contract a Condition Precedent?
The Position at Civil Law

Unlawful exercise of rights:

Article 106 of the UAE Civil Code provides that the exercise of a right
shall be unlawful if it is disproportionate to the harm suffered by the
other party:

“A person shall be held liable for an unlawful exercise of his rights…

(2) (c), The exercise of a right shall be unlawful: (c) if the interests
desired are disproportionate to the harm that will be suffered by
others.”

Are Sub-Clauses 2.5/20.1 of the 1999

FIDIC Contract a Condition Precedent?
The Position at Civil Law

Unjust enrichment:

The UAE Civil Code provide that unjust enrichment is unlawful:

Article 318: “No person may take the property of another without
lawful cause, and if he takes it he must return it.”

Article 319 (1): “Any person who acquires the property of other
person without any disposition vesting ownership must return it if that
property still exists, or its like or the value thereof if it no longer exists,
unless the law otherwise provides.”
Dispute Events (Clause 20)

Notices – Practice Points

1. Review and document all condition precedent / time baring
clauses at the outset
2. Have template Notices ready
3. Make the Notice clear – look to quote the Contract and relevant
clause as closely as possible
4. Check what information is required in the Notice
5. Check the correct method of service and the correct address for
the Notice
6. More than one Notice may be required under the Contract
7. Watch out for continuing Notice obligations
8. Be careful of casual agreements not to service a notice
9. “It's better to regret what you have done than what you haven't”

2017 Claims & Dispute

Resolution Procedure
Claims and Dispute Resolution
• Claims – Clause 20:
• Claims (time, money and another relief) are just disagreements;
• Notice of a Claim (condition precedent), Engineer’s initial response;
• Fully detailed Claim (legal basis CP) contemporary records;
• Agreement or Engineer’s determination; and
• Monthly updates, assessment and payment.
• Disputes - Clause 21:
• Formation of Dispute;
• Referral of Dispute to the DAAB;
• 84 day procedure;
• Written DAAB decision;
• Notice of Dissatisfaction – 28 days; and
• Arbitration:
• NOD – Amicable Settlement - Arbitration (Sub-Clause 20.7); and
• DAAB compliance – Arbitration, and interim measures.

2017 Clause 20.2.1 – Notice of Claim

• Time and money claims require a Notice of Claim under Clause 20.2.1 in the
following terms:
• “The claiming Party shall give a Notice to the Engineer, describing the
event or circumstance giving rise to the cost, loss, delay or extension of
DNP for which the Claim is made as soon as practicable, and no later
than 28 days after the claiming Party became aware, or should have
become aware of the event or circumstance (the “Notice of Claim” in
these conditions).
• If the claiming Party fails to give a Notice of Claim within this period of
28 days, the claiming Party shall not be entitled to any additional
payment, the Contract Price shall not be reduced (in the case of the
Employer as the claiming Party), the Time for Completion (in the case of
the Contractor as the claiming Party) or the DNP (in the case of the
Employer as the claiming Party) shall not be extended, and the other
Party shall be discharged from any liability in connection with the event
or circumstance giving rise to the Claim.”
• While there is an overlap between the scope of a Claim as defined in Sub-
Clause 20.1 it is time and money claims that are caught by Sub-Clause 20.2.

Clause 20.2.4 – Fully Detailed Claim

• A “fully detailed Claim” includes:

“(a) a detailed description of the event or circumstance giving
rise to the Claim;
(b) a statement of the contractual and/or other legal basis of
a Claim;
(c) all contemporary records on which the claiming Party
relies; and
(d) detailed supporting particulars of the amount of additional
payment claimed (or amount of reduction of the Contract
Price in the case of the Employer as the claiming Party)
and/or EOT claimed (in the case of the Contractor) or
extension of DNP claimed (in the case of the Employer).”
Clause 21 - Disputes and Arbitration
• Dispute Avoidance/Adjudication Board (DAAB):
• A “Standing” DAAB in all contracts;
• One or three members;
• Default appointment by FIDIC;
• Parties are deemed to have signed the DAAB member agreements
(law of appointed same as the law of the Contract);
• Avoidance of disputes;
• Referral of a Dispute to the DAAB:
• If Sub-Clause 3.7 “applied” within 42 days of a Sub-Clause 3.7.5
NOD, ref to Sub-Clause 21.4.1, in writing to everyone;
• Both parties to make all information available inc access to the Site;
• Decision within 84 days of the reference (unless DAAB invoices not
paid);
• “binding on both Parties, who shall promptly comply…”

Compliance with a DAAB Decision

• DAAB Decision under Sub-Clause 21.4.3 states:

“The decision shall be binding on both Parties, who shall promptly comply
with it whether or not a Party gives a NOD with respect to such decision
under this Sub-Clause. The Employer shall be responsible for the
Engineer’s compliance with the DAAB decision.
If the decision of the DAAB requires a payment of an amount by one
Party to the other Party:
i. Subject to sub-paragragh (ii) below, this amount shall be immediately
due and payable without any certification or Notice; and
ii. The DAAB may (as part of the decision), at the request of a Party but
only if there are reasonable grounds for the DAAB to believe that the
payee will be unable to repay such amount in the event that the
decision is reversed under Sub-Clause 21.6 [Arbitration], require the
payee to provide an appropriate security (at the DAAB’s sole
discretion) in respect of such amount.”

Dissatisfaction with a DAAB Decision

• Sub-Clause 21.4.4.
• Either party can serve a NOD:
• stating clearly that it is a NOD:
• with reason(s);
• within 28 days after receiving the DAAB Decision; and
• may dispute all or part.
• After 28 days the DAAB Decision “… shall become final and
binding on both Parties.”
• Note that “… neither party shall be entitled to commence
arbitration of a Dispute unless a NOD in respect of that Dispute
has been given …”
• There are some exceptions.
Arbitration
• If a NOD has been served [Sub-Clause 21.5]:
• amicable settlement for 28 days after the date on which the NOD was
given; but
• no attempt to amicably settle need be made;
• ICC Arbitration [Sub-Clause 21.6]:
• one or three arbitrators;
• language of the Contract applies;
• may open up review, revise etc.;
• costs; tribunal may take account a Party’s failure to cooperate with
the other in constituting a DAAB;
• not limited to evidence put before the DAAB;
• may commence before or after completion of the Works; and
• if award requires payment then this is immediately due (no need for a
certificate etc).

Failure to Comply with the DAAB’s

Decision [Sub-Clause 21.7]
• Either Party may refer the matter directly to arbitration (whether the
Decision is binding or final and binding).
• Amicable Settlement does not apply.
• The arbitral tribunal may by way of “summary or other expedited
procedure” order or issue an award to enforce the DAAB’s decision.
• The merits are reserved under Sub-Clause 21.7:
“In the case of a binding but not final decision of the DAAB, such
interim or provisional measure or award shall be subject to the
express reservation that the rights of the Parties as to the merits of
the Dispute are reserved until they are resolved by an award”.
• Pay now and review the detail in the full arbitral procedure.
• The tribunal may also order or award damages or other relief in relation to
a DAAB’s decision.

No DAAB in Place

• Sub-Clause 21.8.

• If a DAAB has not been appointed, then:

• the requirement to obtain a DAAB’s decision and to attempt
settlement do not apply; and
• either Party can refer any Dispute directly to arbitration without
prejudice to any other rights they may have.

• What impact does this have on the mechanics of the Contract in

particular Clause 20?
Conclusions

• The importance of communication.

• Familiarity of FIDIC approach, language and demands is essential
• Use the correct terminology.
• Effective pro-active contract administration.
• Claims under FIDIC Sub-Clause 20.2 – the condition precedents.
• The importance of a clear detailed programme.
• Record keeping.
• Deal with change contemporaneously.
• Manage time and cost changes every month.
• Manage claims.
• Resolve disputes early if possible.

Questions?
Nicholas Gould & Jeremy Glover
Partners, Fenwick Elliott LLP Dubai

ngould@fenwickelliott.com
Visiting Professor, Kings College London
M UAE +971 56 971 5993
jglover@fenwickelliott.com
M UK +44 7760 175 672

1A (First Floor), Silver Tower, Cluster i,

Jumeirah Lake Towers,
Dubai, UAE
PO Box 283149
Fenwick Elliott LLP
Aldwych House
71 - 91 Aldwych
London WC2B 4HN

T +44 (0) 20 7421 1986

F +44 (0) 20 7421 1987
Fenwick Elliott LLP
Office 1A (first floor)
Silver Tower, Cluster I
Jumeirah Lakes Towers
PO Box 283149
Dubai, UAE

T +971 (0)4 454 2355

F +971 (0)4 454 2356

www.fenwickelliott.com