Day two of contracts conference focuses on practical use of FIDIC forms

08 Dec 2021

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The second day of the Official FIDIC International Contract Users’ Conference on 8 December 2021 focused on climate change implications for contracts, an update on the FIDIC 1999 and 2017 contract editions and a showcase of some large infrastructure projects using FIDIC forms.

Speakers discussed the use of the FIDIC 2017 contracts including dispute avoidance and resolution provisions. Delegates were able to benefit from a session showcasing some of the large-scale infrastructure projects around the world that are using FIDIC Contracts and the day concluded with a panel session discussing the application of different legal jurisdictions on the interpretation of FIDIC contract in different jurisdictions, force majeure and Covid and post-Covid challenges around the world

Opening day two of the conference, which was sponsored by FIDIC global strategic partner, international law firm CMS and day sponsor Fenwick Elliott, FIDIC board member Sarwono Hardjomuljadi said that he was proud that FIDIC was able to keep holding global events despite the challenges of the pandemic. Addressing the issue of construction disputes, he said that although it was inevitable that disputes would arise on projects, how these were addressed, resolved and where possible avoided was criucial.

Embedding the use of DAABs

FIDIC contracts committee chair Vincent Leloup introduced the first session on the 2017 FIDIC suite of contracts and gave an update on the sales of the contracts over the past year and also their use across various global markets. He highlighted the World Bank’s use of FIDIC contracts and the key recommendation for the use of dispute avoidance and arbitration boards (DAABs). The bank has made constitution of the DAAB as a key milestone in the construction schedule to be included in each bid, which Leloup said was a significant development as this was embedding the use of DAABs by a leading international funder.

Next speaker Siobhan Fahey, arbitrator and adjudicator and member of the FIDIC contracts committee, spoke about the use of a ‘standing DAAB’ in FIDIC contracts and the key advantages that accrue from this. She said that since 1999, experience in practice had shown that ‘standing’ dispute boards have proven undoubtedly to be more effective. “This is due to there being no delays in starting the decision process, the reduced costs from going down this route and the invaluable advantages for dispute avoidance given that the dispute board becomes a part of the project team and therefore has important knowledge of the personalities involved in a contract,” she said. It was crucial to “separate the people from the problem” when dealing with disputes and the use of the DAAB made this easier, said Fahey.

Christopher Seppälä, partner of counsel at White & Case and a legal advisor to the FIDIC contracts committee, outlined the main routes to arbitration as outlined in the dispute resolution provisions in FIDIC contracts. Seppälä quoted the relevant arbitration clause which says “unless settled amicably, […] any dispute in respect of which the DAAB’s decision (if any) has not become final and binding shall be finally settled by international Arbitration”. “This means that you may normally only arbitrate a dispute which has been referred to the DAAB for decision and where the decision, if any, has not become ‘final and binding’ because a notice of dispute was given within 28 days,” he said.

In addition, Seppälä highlighted that the International Chamber of Commerce (ICC) Emergency Arbitration Rules apply if a FIDIC contract is concluded after 1 January 2021 and that the ICC’s Expedited Procedure Rules apply if the amount in dispute does not exceed $2m or, if an arbitration agreement is concluded after 1 January 2021 and the amount in dispute does not exceed $3m. All this would help to streamline and simplify the disputes process, he said and neither party in an arbitration would be limited by what it had presented to the engineer or the DAAB.

Showcasing FIDIC contracts on key global projects

The second session of day two, chaired by FIDIC board member Martina Hess, showcased some large infrastructure projects around the world that have used FIDIC contracts and looked at some of the benefits and lessons learned. Contracts advisor Christaan Grosskopf spoke about the Dasu Hydropower Project in Pakistan, which used the FIDIC MDB 2010 set of conditions and the Koysha Hydroelectric Project in Ethiopia, which used the FIDIC Silver Book 1999 conditions. Following this, Pieter Mattelaer, deputy group leader at CERN described the use of the FIDIC conditions of contract on CERN projects.

Pieter Mattelaer said that as an international organisation, CERN has to use ‘internationally recognised’ construction contracts to facilitate bids from contractors from all member states and they use FIDIC contracts because they are recognised and used globally in many jurisdictions on all types of projects. He said that it was helpful that the contracts are in English and often translated into French, as both are CERN’s official languages. Mattelaer also said that CERN believes in the concept of DAAB, before arbitration, another plus from using FIDIC contracts.

Christaan Grosskopf highlighted the importance of the FIDIC Emerald Book in tunnelling work and made the point that despite the fact that the book was relatively new, it was becoming increasingly useful and well regarded by users, who clearly approved of the contract’s promotion of equitable risk allocation and the way it effectively addresses how to deal with conditions typically unforeseeable in tunnelling work.

Enduring effects of Covid on construction contracts

The final session of day two was chaired by Julio Bueno, partner at Pinheiro Neto Advogados, and looked at the use of FIDIC contracts under different jurisdictions, time and delays in exceptional events and an overview of Covid and post-Covid challenges. Speakers in this session included Nael Bunni, director of Bunni & Associates, Fenwick Elliott partner Nicholas Gould and Nicolai Ritter, a partner at CMS.

All the speakers have significant knowledge of the use of FIDIC contracts in practice and brought to bear that experience in a series of interesting and insightful presentations. From a Covid perspective, all the speakers expected to see some enduring effects of the pandemic in the contracts arena well into next year, so it was especially important that contract users were using FIDIC forms in the right way and following any Covid contract guidance that had been given. There was also some discussion on the inclusion of a Covid clauses in contracts and what should be the scope of such clauses. The detailed knowledge of the speakers really shone through when discussing the potential and ongoing effects of the pandemic and the delegates certainly benefited from some key insights as the panellists addressed a number of questions from the floor.

Summing up day two of the conference, FIDIC vice president Luis Villaroya, highlighted the key global role that FIDIC contracts play on some of the industry's most important and high-profile projects. FIDIC continues to be well regarded in the marketplace thanks to the diligence and professionalism of all those involved in the development of its contracts and to the enduring support of those who use them. Villaroya concluded the day by thanking FIDIC’s global strategic partner, international law firm CMS, for their continuing support for the conference and also thanked all the speakers for bringing their insights to the event and delegates for taking part in a successful and informative second day.

FIDIC would like to thank its global strategic partner, the international law firm CMS, for their support for the Official FIDIC Contract Users' Conferences.

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