Dispute resolution mechanism under FIDIC Contract

  • By Azeez Nazar Sabri

Construction Contracts are very specific and complicated contracts. Every major construction and engineering project involves many contractual relationships.  Disputes can arise from any of those contractual relationships, ranging from Employer/ owner default in providing construction inputs in time i.e. possession of clear work front, release of drawing and release of payments etc.  to defaults of the Contractor in maintaining the desired progress and quality of works. There are many other reasons of disputes including but not limited to the disputes regarding certification by the Engineer, determination of extension of time and additional cost on account suspension, variations/ extra works, prolongation etc.

FIDIC Conditions of Contract for works of Civil Engineering Construction, (Ed.1987 ) provide three tiers dispute resolution mechanism.

Clause 67 of the FIDIC provides following dispute resolution mechanism.
1. Engineer’s decision.
2. Amicable settlement.
3. Arbitration.
However, in some contracts parties also agreed under Conditions of Particular Applications to add one more mode of dispute settlement in the form of Disputes Resolution Board ( DRB) or Disputes Adjudication Board ( DAB).

Engineer’s Decision
As per Sub-clause 67.1 if a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with or arising out of the Contract or the execution of the works, whether during the execution of the Works of after their completion and whether before or after repudiation or other termination of the Contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of the engineer shall be first referred in writing to the Engineer for his determination with a copy to the other party.  Within 84 days Engineer shall give his decision on the dispute (s).
If either party, Employer or the Contractor, is dissatisfied with the decision of the Engineer or the Engineer fails to give his decision within stipulated period of 84 days then the aggrieved party can give notice to other party, with a copy to Engineer, of his intention to commence Arbitration within 7 days after receipt of the Engineer’s decision or expiry of aforesaid 84 days period. If no such notice is given by either party the said decision of the Engineer shall become final and binding upon the Employer and the Contractor.
Similarly, where the parties agreed for DAB/DRB the DRB/DAB will give its decision within stipulated period and if it fails to give decision within stipulated period or the decision is not acceptable to one party, then such aggrieved party shall give notice to the other party, with a copy to DAB or DRB to commence Arbitration, within agreed stipulated time.  

Amicable Settlement
Under Sub-clause 67.2 where notice of intention to commence arbitration has been given by the aggrieved party under sub-clause 67.1, the parties shall attempt to settle such dispute(s) amicably before commencement of the Arbitration. Unless the parties otherwise agreed the arbitration may be commenced on or after 56 days after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made.

Arbitration    

As per Sub –Clause 67.3 if the decision of the Engineer has not become final and binding and the amicable settlement has not been reached within 56 days, shall be finally settled through Arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more Arbitrators appointed under such rules. However, the parties are free to choose the governing Rules and venue of the Arbitration and to give effect to the same they can make necessary changes under Conditions of the Particular Applications.   

( Author can be contacted at azeez_nazar@rediffmail.com) 

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