RELIEF FROM COVID 19 FIDIC APRIL 20 CE - Silver Shemmings Ash · Title: Microsoft PowerPoint - RELIEF FROM COVID 19 FIDIC APRIL 20 CE Author: Julie Camp Created Date: 4/15/2020 2:09:39

Relief From The Impact Of The COVID-19 Virus Under FIDIC 2017

Presented ByChidi Egbochue, Partner


Presented By:Chidi Egbochue, Partner

Chidi is a non-contentious construction law specialist, and is also veryexperienced in disputes work, including payment disputes. He has 13years’ experience advising on construction projects across severalsectors, including rail, airport and other infrastructure, energy, oil andgas, and office, residential and mixed use developments, bothdomestically and internationally. He gained much of this experience at alarge worldwide law firm and a magic circle law firm. Prior to which, heworked as a disputes lawyer at a niche construction law firm for 4 years

He has extensive experience and knowledge of construction procurementand contracts, including the JCT, NEC, FIDIC, LOGIC, IChemE and MF/1forms. He has also drafted and negotiated numerous bespokeconstruction contracts for high speed rail, power (including solar, onshorewind, offshore wind and biomass), infrastructure and oil and gas projects,and drafted template energy and oil and gas contracts

Tel: 0207 167 6602Email: [email protected]

AgendaIntroduction1. Notices2. Assignment3. Compliance with Laws4. Exclusions of and caps on liability 5. Employer’s financial arrangements6. Contractor's performance security 7. Progress reports8. Security of the Site9. Nominated Subcontractors10. Programme


Agenda (Cont’d)11. Advance Warning12. Acceleration13. Suspension14. Partial completion15. Defects liability16. Variations17. Changes in Laws18. Price inflation19. Termination20. Risk of loss or damage21. Indemnities in respect of disease


Agenda (Cont’d)22. Exceptional Events23. Release from performance under the law24. Insurance25. Claims

Conclusion

Any Questions?



Introduction

This talk will cover relief from the impact of the COVID-19 viruspandemic (in particular, delay and disruption) that may be availableunder the FIDIC 2017 rainbow suite of contracts (comprisingsecond editions of the 1999 editions of Silver, Yellow and RedBooks)

FIDIC is intended for use on international projects. Between 1999and 2017, there have been several worldwide viruses, includingSARS (2002-04), swine flu (2009-10), MERS (2012 to present), Ebola(2013-2016) and Ziku (2015-16)

1. Notices

Notices are to be in writing and are to be either signed paperoriginals or electronic originals generated from systems ofelectronic transmission stated in the Contract or (if not so stated)acceptable to the Engineer (NB: Employer’s Representative underSilver Book), or both, as stated in the Conditions (Clause 1.3)


2. Assignment

Expressly provided that either Party may, as security in favour of abank or financial institution, assign his rights to any monies due,or to become due under the Contract without needing the otherParty’s agreement (Clause 1.7(b))


3. Compliance With Laws• Clause 1.13 states that, in performing the Contract, the Parties

must comply with all applicable Laws (Clause 1.13)• Contractor must comply with all applicable health and safety

regulations and Laws, and obligations specified in the Contract,comply with all directives issued by its health and safety officer,and take care of the health and safety of all persons entitled tobe on the Site (Clause 4.8).

• Employer must ensure that Employer’s Personnel and its othercontractors comply with the same obligations (Clause 2.3)


3. Compliance With Laws (Cont’d)• Contractor is responsible for customs clearance and permits,

and indemnifies Employer against claims related to the import,transport and handling of all Goods (Clause 4.16)

• Contractor must “take all necessary precautions to maintain thehealth and safety of the Contractor’s Personnel. In collaborationwith local health authorities, the Contractor shall ensurethat:...(b) suitable arrangements are made for all necessarywelfare and hygiene requirements and for the prevention ofepidemics” (Clause 6.7)

• Engineer may require the removal of any person employed onthe Site who “persists in any conduct which is prejudicial tosafety, health” (Clause 6.9(d))


4. Exclusions Of & Caps On Liability

The carve-outs from the mutual exclusion of liability for loss ofuse of any Works, loss of profit, loss of any contract or any otherindirect or consequential loss exclusion and from the cap on theContractor’s liability include “fraud, gross negligence, deliberatedefault or reckless misconduct by the defaulting Party” (Clause1.15)

The Contractor’s liability for Delay Damages is not limited in “anycase of fraud, gross negligence, deliberate default or recklessmisconduct by the Contractor” (Clause 8.8)


5. Employer’s Financial Arrangements

Employer’s financial arrangements are to be detailed in theContract Data. If he intends to make any material change to them,or is forced to do so as a result of a change in his financial situation,he must immediately give a Notice to Contractor with detailedsupporting particulars (Clause 2.4)

If Contractor becomes aware of a material change in theEmployer’s financial arrangements which hasn’t been notified, hemay request reasonable evidence that Employer will be able to paythe remaining part of the Contract Price (Clause 2.4)


6. Contractor’s Performance SecurityClause 4.2:• Contractor required to obtain at his cost a Performance

Security in the amount and currencies stated in the ContractData

• Contractor must ensure that the Performance Security remainsvalid and enforceable until the issue of the PerformanceCertificate and compliance with Clause 11.11

• If Contractor fails to extend the validity of the PerformanceSecurity, Employer may claim the then remaining amount ofthe Performance Security


7. Progress ReportsClause 4.20 requires Contractor to submit monthly progressreports until the Date of Completion (or the completion ofoutstanding work listed in the Taking-Over Certificate) including:• detailed descriptions of progress, including procurement,

manufacture and delivery• health and safety statistics, including details of hazardous

incidents and activities• Comparisons of actual and planned progress, with details of

any events or circumstances which may adversely completion,and the measures adopted to overcome delays


8. Security Of The Site

The Contractor is responsible for the security of the Site, andkeeping unauthorised persons off the Site (Clause 4.21)


9. Nominated Subcontractors

These are Subcontractors named as such in the Specification orpersons who the Contractor, by an instruction of the Engineerunder Clause 13.4 [Provisional Sums], is required to employ as aSubcontractor (Clause 5.2.1)

In the absence of reasonable evidence that payments have beenmade to a nominated Subcontractor, Employer, at his solediscretion, may pay him directly (Clause 5.2.4)


10.Programme

The Contractor must submit a revised programme which accuratelyreflects the progress of the Works whenever he considers that anyprogramme (or the Engineer has given a Notice that theProgramme) ceases to accurately reflect progress or is otherwiseinconsistent with his obligations, including a supporting reportwhich includes his proposals to overcome the effects of anydelay(s) on progress of the Works (Clause 8.3)


11. Advance Warning

Each Party and the Engineer shall advise the others “in advance ofany known or probable future events or circumstances which may:(a) adversely affect the work of the Contractor’s Personnel; (b)....(c)increase the Contract Price; and/or (d) delay the execution of theWorks or a Section (if any).The Engineer may request the Contractorto submit a proposal under Sub-Clause 13.3.2 [Variation by Requestfor Proposal] to avoid or minimise the effects of such event(s) orcircumstance(s)” (Clause 8.4)


12. Acceleration

If progress has fallen or will fall behind the Programme other thanas a result of an EOT event, the Engineer may instruct Contractorto submit a revised programme describing revised methods toexpedite progress to achieve completion within the Time forCompletion. Engineer may by a Notice require Contractor toadopt these methods (Clause 8.7)

If revised methods (including acceleration measures) areinstructed by the Engineer to reduce delays caused by EOT events,Clause 13.3.1 [Variation by Instruction] applies (Clause 8.7)


13. Suspension

The Engineer may at any time instruct the Contractor to suspendprogress of part or all of the Works (Clause 8.9)

The Contractor is entitled to payment of the value of Plant and/orMaterials not delivered to Site if the work on Plant or delivery ofPlant and/or Materials is suspended for more than 28 days(Clause 8.11)

If delivery and/or erection of Plant and/or Materials is suspended,the Defects Notification Period (DNP) is limited to 2 years after thedate on which it would otherwise have expired (Clause 11.3)


13. Suspension (Cont’d)If the suspension continues for more than 84 days, unless a furthersuspension is agreed, Contractor may treat it as a Variation (anomission), or (if it affects all of the Works) terminate the Contract(Clause 8.12)

If Engineer fails to certify under Clause 14.6 [Issue of IPC], or Employerfails to comply with Clause 14.7 [Payment] or to provide reasonableevidence under Clause 2.4, and the failure constitutes a material breachof Employer’s obligations, Contractor may, by giving 21 days’ Notice,suspend work

The Contractor must not remove from Site any major items ofContractor’s Equipment without the Engineer’s consent (Clause 4.17)


14. Partial Completion

At the Employer’s sole discretion, the Engineer may issue a Taking-Over Certificate for any part of the Permanent Works (Clause 10.2)

If the Employer uses a part of the Works before a Taking-OverCertificate is issued for it, Contractor may give a Notice and thatPart shall be deemed taken over by Employer (Clause 10.2)


15. Defects LiabilityThe Employer shall gives the Contractor a Notice if “a defectappears.....or damage occurs during the relevant DNP”. The Partiesjointly inspect the defect or damage, and the Contractor thenprepares and submits a proposal for necessary remedial work (Clause11.1)

“If the remedying of any defect or damage....is unduly delayed by theContractor”, the Employer may give a Notice which “shall allow theContractor reasonable time (taking due regard of all relevantcircumstances) to remedy the defect or damage”. If he fails to do so,the Employer may (a) carry out the work and claim his reasonablyincurred costs; (b) accept the defect or damage and claim a ContractPrice reduction; (c) treat the part of the Works as an omission; or (d)terminate the Contract if the defect or damage “deprives theEmployer of substantially the whole benefit of the Works” (Clause11.4)


16.VariationsVariations (which may include changes to sequence or timing ofexecution of the Works, or the omission of work) may be initiated bythe Engineer at any time before the issue of a Taking-Over Certificatefor the Works (Clause 13.1)

The Engineer may request a proposal from the Contractor beforeinstructing a Variation (Clause 13.3.2)

The Contractor must execute each Variation with due expedition andwithout delay unless it gives a Notice to the Engineer that (a) thevaried work was Unforeseeable, (b) the Contractor cannot readilyobtain the Goods required for the Variation; or (c) the Variation willadversely affect the Contractor’s ability to comply with Clause 4.8[Health and Safety Obligations] (Clause 13.1)


17.Change In Laws

The Contract Price shall be adjusted for any increase or decreasein Cost caused by a change in: (1) Laws of the Country, (2) anypermit, permission, licence or approval obtained by Employer orContractor under Clause 1.13(a) or (b), or (3) the requirementsfor any permit etc. to be obtained by Contractor under Clause1.13(b), which is made after the Base Date (Clause 13.6)

If it is necessary to make an adjustment to the execution of theWorks as a result of a “change in Laws”, Contractor shall give aNotice to Engineer, who shall instruct a Variation (Clause 13.6)


18.Price Inflation

Clause 13.7 provides for compensation for “any rises or falls in thecost of labour, Goods and other inputs to the Works, by the additionor deduction of the amounts calculated in accordance with theSchedule(s) of cost indexation”, but only applies if such Schedule(s)have been included in the Contract


19.TerminationEmployer may terminate the Contract if: (1) Contractor fails tocomply with a Notice to Correct, and such failure constitutes amaterial breach, (2) abandons the Works or otherwise plainlydemonstrates an intention not to continue with performance of hisobligations, (3) without reasonable excuse fails to proceed with theWorks, or the Employer would be entitled to Delay Damagesexceeding the cap, and the Contractor fails to remedy the samewithin 14 days after a Notice from Employer (Clause 15.2)

Employer may terminate the Contract at any time for hisconvenience, which takes effect 28 days after a Notice, but has topay lost profit and any other losses and damages (Clauses 15.5 and15.6)


19. Termination (Cont’d)Contractor may terminate the Contract if:(1) he does not receive reasonable evidence of Employer’s financial

arrangements within 42 days after a Notice under clause 16.1 for a failure tocomply with Clause 2.4

(2) Engineer fails, within 56 days after receiving a Statement, to issue thePayment Certificate

(3) he does not receive the amount due under a Payment Certificate within 42days after the date by when it should have been paid

(4) Employer substantially fails to perform an obligation which constitutes amaterial breach

(5) he does not receive a Notice of Commencement Date within 84 days afterLetter of Acceptance; or

(6) a prolonged suspension (more than 84 days) affects the whole of the Works,unless Employer remedies the matter (other than (6) above) within 14 days of aNotice (Clause 16.2)


19.Termination (Cont’d)

“If the execution of substantially the whole of the Works isprevented for a continuous period of 84 days by reason of anExceptional Event of which Notice has been given.....or for multipleperiods which total more than 140 days due to the sameExceptional Event, then either Party may give to the other Party aNotice of termination of the Contract”, which takes effect 7 daysthereafter (Clause 18.5)


20. Risk Of Loss Or Damage

The Contractor is responsible for the care (and therefore bears therisk of loss or damage) of the Works, Goods and Contractor’sDocuments, or in respect of the relevant Section or part of theWorks, from the Commencement Date until the relevant Date ofCompletion, whereupon responsibility transfers to Employer (otherthan in respect of outstanding work) (Clause 17.1)

The Contractor has no liability for any such loss or damage causedby any Exceptional Events under Clause 18.1 (Clause 17.2)


21. Indemnities In Respect Of DiseaseThe Contractor indemnifies the Employer, the Employer’sPersonnel and their respective agents against third parties’ claimsfor bodily injury, sickness, disease or death of any person arisingout of or in the course of or by reason of the Contractor’sexecution of the Works unless attributable to any negligence,wilful act or breach of the Contract by the Employer, theEmployer’s Personnel or any of their respective agents (Clause17.4)

The Employer indemnifies the Contractor, the Contractor’sPersonnel and their respective agents against third parties’ claimsfor bodily injury, sickness, disease or death which is attributable toany negligence, wilful act or breach of the Contract by theEmployer, the Employer’s Personnel or any of their respectiveagents (Clause 17.5)


22. Exceptional EventsAn Exceptional Event is “an event or circumstance which: (i) isbeyond a Party’s control; (ii) the Party could have reasonablyprovided against before entering the Contract; (iii) having arisen,such Party could not reasonably have avoided or overcome, and (iv)is not substantially attributable to the other Party”, including (if (i)to (iv) above are satisfied) war, hostilities, rebellion, terrorism, riot,strike or lockout, encountering munitions of war or naturalcatastrophes such as earthquake, tsunami, volcanic activity ortyphoon (Clause 18.1)

The affected Party must give a Notice within 14 days after itbecame or should have become aware of the Exceptional Event,and is then excused performance of only the “preventedobligations” (Clause 18.2). It also gives further Notices every 28days (Clause 18.3)


23. Release From Performance Under The law

In addition to any any other provision of Clause 18, if an eventarises outside the Parties’ control (including an Exceptional Event)which makes it impossible or unlawful for either Party or bothParties to fulfil their contractual obligations, or under the governinglaw entitles the Parties to be released from further performance,and they cannot agree an amendment of the Contract to permitcontinued performance, then after either Party gives a Notice, theyare discharged from further performance


24. InsuranceThe insurances required to be provided under Clause 19 are theminimum required by the Employer, and the Contractor may at hisown cost add such other insurances as he deems prudent (Clause19.1)

The Contractor shall insure in joint names of the Parties, againstliabilities for death or injury to any person arising out of theperformance of the Contract and occurring before the issue of thePerformance Certificate (Clause 19.2.4)

The Contractor shall insure against liability for claims arising out ofthe execution of the Works in respect of injury, sickness, disease ordeath of any of his personnel (Clause 19.2.5)


25. ClaimsThe Contractor may claim for EOT and Cost Plus Profit under Clause20.2 if:• Engineer fails to issue a notified drawing or instruction within a

reasonable time (Clause 1.9)• Employer fails to obtain the planning, zoning or building permit

or similar permits (Clause 1.13)• Employer fails to give Contractor access to, and possession of,

Site (Clause 2.1)


25. Claims (Cont’d)• “Unforeseeable shortages in the availability of personnel or

Goods (or Employer-Supplied Materials, if any) caused byepidemic or governmental actions” (Clause 8.5(d)) (NB: EOTonly)

• The relevant legally constituted public authorities or privateutility entities in the Country delay or disrupt the Contractor’swork, if he has diligently followed their procedures and thedelay or disruption was Unforeseeable (Clause 8.6) (NB: EOTonly)


25. Claims (Cont’d)• Engineer instructs suspension of the Works (Clause 8.10)• Unreasonable delay by Employer in permitting access to the

Works (access to be permitted until 28 days after issue ofPerformance Certificate) (Clause 11.7) (NB: Cost Plus Profitonly)

• There is a change in Laws after the Base Date (Clause 13.6)(NB: EOT and Cost only)

• An Exceptional Event occurs (Clause 18.4) (NB: EOT only)


25.Claims (Cont’d)

The Employer may claim for additional costs under Clause 20.2 if:• Contractor fails to obtain “all other permits, permissions

licences and/or approvals as required by the Laws inrelation to the execution of the Works” (Clause 1.13)


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