Current Issues with CFIDIC Dispute

Adjudication BoardsAdjudication Boards

Julian Bailey, SCL Vice-Chairman (UK), y, ( ),

White & Case LLP, London.

A presentation on Wednesday, October 22, 2014, at AUC New Cairo to introduce SCL-Egypt.

A onder of the orldA wonder of the world…

Ho as the Great P ramid b ilt?How was the Great Pyramid built?

Who were the workers? Government (Pharaoh) or private contractors?

Were there contracts? If so, what did they say?

Were there disputes? If so why? And how were they Were there disputes? If so, why? And how were they resolved?

Will k th t th ti ? Will we ever know the answers to these questions?

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FIDIC Disp te Adj dication BoardsFIDIC Dispute Adjudication Boards

DABs for short DABs for short.

Used in FIDIC 1999 suite (and beyond). Consider Red, Y ll d Sil B kYellow and Silver Books.

1 or 3 members (impartial / neutral).

DAB “adjudicates” on disputes -> binding decision.

Distinguish Dispute “Adjudication” Board from Dispute g p j p“Review” Board. (Both are “Dispute Boards”).

Standing DAB (Red) or ad hoc (Yellow and Silver) Standing DAB (Red) or ad hoc (Yellow and Silver).3

The FIDIC Disp te Resol tion CakeThe FIDIC Dispute Resolution Cake

Engineer’s / Employer’s decision.

DAB.

Amicable settlement.

I t ti l bit ti (ICC) International arbitration (ICC).

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Three c rrent iss es ith FIDIC DABsThree current issues with FIDIC DABs

Issue 1: No DAB in place.

Issue 2: Late decision by the DAB.ssue a e dec s o by e

Issue 3: Enforcement of the DAB’s decision.

(th l th i )(there are several other issues…see my paper).

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Iss e 1 No DAB in placeIssue 1: No DAB in place

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Iss e 1 No DAB in placeIssue 1: No DAB in place

DABs appointed by party nomination / agreement or failing that nomination by appointing entity / official -> all aftercontract has been signed.

What if a DAB is not appointed yet? Can a party go straight to pp y p y g garbitration?

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Iss e 1 No DAB in placeIssue 1: No DAB in place

Sub-Clause 20.8:“If a dispute arises between the Parties in connection with, or arising out of, the Contract or the execution of the Works and there is no DAB in place, whether by reason of the expiry of the DAB’s appointment or otherwise:

(a) Sub Clause 20 4 [Obtaining Dispute Adjudication Board’s Decision] and(a) Sub-Clause 20.4 [Obtaining Dispute Adjudication Board’s Decision] and Sub-Clause 20.5 [Amicable Settlement] shall not apply, and

(b) the dispute may be referred directly to arbitration under Sub-Clause 20.6 ( ) p y y[Arbitration]”.

Q: A good argument here?

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Iss e 1 No DAB in placeIssue 1: No DAB in place

A: No!

Swiss Federal Supreme Court case (7 July 2014) (Romanian S ss ede a Sup e e Cou case ( Ju y 0 ) ( o a aroads project – Red Book).

Peterborough City Council v Enterprise Managed Services Ltd Peterborough City Council v Enterprise Managed Services Ltd (England, TCC, 10 October 2014) (English solar energy plant – Silver Book)Silver Book).

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Iss e No 2 Late decision b the DABIssue No.2: Late decision by the DAB

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Iss e No 2 Late decision b the DABIssue No.2: Late decision by the DAB

DAB is to give its decision “within 84 days after receiving [the] reference, or within such other period as may be proposed by the DAB and approved by both Parties” (Red Book, Sub-Clause 20.4).

What if late, e.g. by 1 or 2 days?

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Iss e No 2 Late decision b the DABIssue No.2: Late decision by the DAB

Entitlement on each party to issue notice of dissatisfaction (Sub-Clause 20.4) -> may proceed to arbitration (Sub-Clause 20.6).

What status does the DAB’s decision have?

Depends on applicable law -> attitude of courts.

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Iss e No 2 Late decision b the DABIssue No.2: Late decision by the DAB

Freeman NO v Eskom Holdings Ltd [2010] ZAGPJHC 137 (South Gauteng High Court, Johannesburg).

NEC contract (similar to FIDIC):“It is clear from Core Clause 92.1 of the contract that the adjudicator settles the jdispute as independent adjudicator and not as arbitrator. His decision is enforceable as a matter of contractual obligation between the Parties and not as an

arbitral award. So, in the absence of a clause, which makes ‘time of the essence’ failure by an adjudicator, to deliver his or her award in the time stipulated in the contract, cannot be rendered as binding on the parties or of any force and effect”.

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Iss e 3 EnforcementIssue 3: Enforcement

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Iss e 3 EnforcementIssue 3: Enforcement

No “notice of dissatisfaction given” -> “final and binding” -> enforce in arbitration.

“Notice of dissatisfaction” given -> “binding” but not “final and binding”.

How do you enforce a “binding” DAB decision?

Sub-Clause 20.6 requires an arbitral tribunal to “settle” by international arbitration the “dispute in respect of which the DAB’s decision…has not

b fi l d bi di ”become final and binding”.

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Iss e 3 EnforcementIssue 3: Enforcement

PT Peusahaan Gas Negara (Persero) v CRW Joint Operation (Indonesia) [2011] SGCA 33:

“This request for arbitration shall be limited to giving prompt effect to the [DAB’s] [d]ecision dated 25 November 2008 in which [ ] [ ]instance shall be the fulfillment of [the Employer’s] obligation to perform payment of the US$17,298,834.57…to [the Contractor]”.p p y [ ]

Not legally effective!

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Iss e 3 EnforcementIssue 3: Enforcement

Persero (Singapore High Court, July 2014):

– Refer the “dispute” decided by the DAB to arbitration.

– Seek an interim award from the Tribunal to give effect to the “binding” DAB decision.

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Are DABs a good idea?Are DABs a good idea?

Relatively low cost (compare international arbitration).

Most disputes do not go beyond the DAB stage to arbitration.os d spu es do o go beyo d e s age o a b a o

Deals with issues on “live” projects promptly – maintains good relations / removes suspicions?relations / removes suspicions?

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And finall a ord from “the King”And finally, a word from “the King”…

“We can't go on together,With suspicious minds (suspicious minds),And we can't build our dreams,On suspicious minds”.

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