Ps – Changes to the FIDIC Form of Contract

Our Annual Review goes to press in October 2016. This is just before FIDIC finally announces what changes it is making to the 1999 Suite of Contracts. We understand that FIDIC will be releasing a details of the Yellow Book draft amendments in December 2016 and then revised draft Yellow, Red and Silver Books in the Spring of 2017.

We thought we might take out our crystal ball and try and predict what FIDIC might do.

Introduction

Understandably, FIDIC have kept a fairly close lid on what they are intending to do. However, it is likely that guidance can be found in the 2008 Gold Book, and perhaps the 2011 Red Book Sub-contract. It is also likely that, in keeping with the general contract trends, there will be an added focus on dispute avoidance.

Claims and disputes

This is a relatively easy one as FIDIC themselves have made it clear, in talks given at conferences, that they are going to split Clause 20 in two. The reason for this is to try and make clear that making a Claim is not the same as a Dispute. To put forward a claim is to make a request for an entitlement under the Contract. A Dispute arises if that Claim is rejected (in whole or in part) or ignored.

Clause 20 will deal with Claims and Clause 21 with Disputes.

The Claims Procedure and the Sub-clause 20.1 Condition Precedent

The FIDIC Form currently requires both the Employer and Contractor to submit claims. This will continue. It may be that the process for both parties to submit claims will become more closely aligned. If there is a clearly defined process, that can help maintain relationships as both parties will know exactly where they stand and why the other is taking the steps they are to submit their claim.

It is also very likely that the condition precedent, the timebar or deadline for making claims and providing detailed particulars of those claims, will apply to both Contractor and Employer claims. This change, whilst potentially controversial (and possibly likely to be subject to frequent deletion) will be justified on the grounds of balance.

In doing this, FIDIC might be thought to be reflecting recent caselaw, as the Privy Council in the 2015 case of NH International (Caribbean) Ltd v National Insurance Property Development Company Ltd (Trinidad and Tobago),1 to many people’s surprise, held that Sub-clause 2.5 of the 1999 FIDIC Form was actually a condition precedent. The change FIDIC are likely to introduce is to ensure that the timebar is set out in a clearly defined period, presumably 28 days.

Dispute Adjudication Boards (“DABs”)

FIDIC will undoubtedly look to extend the dispute avoidance role of the DAB.

In Clause 21, all DABs will be standing DABs, although the Guidance Notes will include an option for the use of an ad hoc DAB, as and when a dispute arises.

Although FIDIC did give serious consideration to adopting the updated ICC Dispute Board Rules, they have,
we understand, decided to retain the FIDIC DAB Rules. Again, these are likely to follow the Rules to be found in the FIDIC Gold Book, albeit with added focus on dispute avoidance.

It is therefore likely that the Parties to the Contract will be given the power found in Sub-clause 20.5 of the Gold Book to:

“jointly refer a matter to the DAB in writing with a request to provide assistance and/or informally discuss and attempt to resolve any disagreement that may have arisen between the Parties during the performance of the Contract.”

It is important to note that both the Contractor and Employer must agree to do this but it is a helpful recognition of the fact that, with a standing DAB, the role of that DAB can be to endeavour to prevent potential problems or claims from becoming disputes.

The Engineer

It would be in keeping with the increased importance of dispute avoidance for FIDIC to try and expand the role of the Engineer. Currently under Sub-clause 3.5, before making a determination, the Engineer is required to consult with each Party in an endeavour to reach an agreement. Only if agreement is not achieved is the Engineer supposed to go on to make a fair determination. It may be that this feature is enhanced.

Equally, given FIDIC’s desire for clarity, it might be the case that a clearer timeline is set out for the making of Engineer’s determinations.

Advance warning

Another feature of dispute avoidance is the concept of advance warning, giving early notice of a potential problem. By encouraging the parties to do this, it is hoped that they can then work together to resolve the potential difficulty at an early stage when it is relatively minor and thereby prevent it from escalating into something altogether more serious.

Currently Sub-clause 8.4 of the Gold Book provides that each Party shall endeavour to advise the other Party in advance of any known or probable future events or circumstances which may adversely affect the work.

BIM

None of the FIDIC forms currently mention BIM. That will change. However, the adoption and use of BIM is perhaps something that is more likely to be dealt with in the Guidance Notes rather than being dealt with formally within the main 21 Clauses.

Force majeure and exceptional risks

Again, FIDIC here is likely to follow the Gold Book which is considered to represent a more collaborative, risk sharing approach than the 1999 suite of contracts. The Gold Book does not follow the 1999 Clause 19 force majeure provisions. Instead, it drops Clause 19 completely in favour of a new Clause 18 that is headed “exceptional risks”, and Clause 17 (which was formerly risk and responsibility) has been re-named “risk allocation”. The definition of exceptional risks is very similar to the force majeure definition at Clause 19.

However Clause 17 is rather different, setting out the risks that the Employer and Contractor are to bear in a very detailed manner with the Contractor being entitled to an extension of time and its costs if there are any exceptional risks or Employer risks during the Design/Build Period.

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  • 1. [2015] UKPC 37. The Privy Council is effectively the Supreme Court for many Caribbean countries

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