{"id":8679,"date":"2018-10-05T08:25:04","date_gmt":"2018-10-05T08:25:04","guid":{"rendered":"https:\/\/bscl.prototype.bg\/?p=8679"},"modified":"2026-08-17T08:25:44","modified_gmt":"2026-08-17T08:25:44","slug":"daab-and-dispute-resolution-under-the-2017-fidic-forms-of-contract-by-eugenio-zoppis","status":"publish","type":"post","link":"https:\/\/bscl.prototype.bg\/en\/daab-and-dispute-resolution-under-the-2017-fidic-forms-of-contract-by-eugenio-zoppis\/","title":{"rendered":"“DAAB and Dispute Resolution Under the 2017 FIDIC Forms of Contract” by Eugenio Zoppis"},"content":{"rendered":"

DAAB and Dispute Resolution
\n<\/u><\/strong>Under the 2017 FIDIC Forms of Contract
\n<\/u><\/strong>Eugenio Zoppis
\n<\/strong>PhD Researcher,
\n<\/em>Centre for Construction Law and Dispute Resolution
\n<\/em>King\u2019s College, London<\/em><\/p>\n

Abstract<\/u><\/strong><\/p>\n

This article has been prepared for the ICC DRBF Conference in Sofia on 27th<\/sup>\u00a0\u2013 28th<\/sup>\u00a0September 2018. \u00a0It provides an overview on the evolution of dispute resolution in FIDIC Contracts and deals with the terms of Dispute Adjudication and Avoidance in 2017 FIDIC Forms of Contract, testing the proposition that FIDIC 2017 provides tools to avoid disputes which outweigh the drawbacks, if any, of the prescriptive claims and dispute procedures. The conclusions will remain theoretical until practically tested by FIDIC users, and then time will tell.<\/p>\n

Introduction<\/u><\/strong><\/p>\n

FIDIC has given a contractual voice to the ideas in dispute resolution, keeping in step with the\u00a0Zeitgeist<\/em>\u00a0of changing times. \u00a0The toolkit for dispute resolution provided by FIDIC contracts has evolved from the direct recourse to arbitration after the Engineer\u2019s decision, through the first dispute resolution boards that could provide recommendations, to the dispute adjudication boards in FIDIC 1999.\u00a0 The new suite of contracts issued in 2017 considered the importance of dispute boards as means of avoiding disputes, now called DAAB, i.e. Dispute Adjudication\/Avoidance Board as defined in Sub-Clause 1.1.22, and dedicated two separate clauses 20 and 21 respectively to claims and disputes resolution.<\/p>\n

This paper provides an overview of the evolution of dispute resolution in FIDIC Contracts and deals with the terms of Dispute Adjudication and Avoidance in 2017 FIDIC Forms of Contract. \u00a0The analysis focuses on the role of DAAB in the 2017 Edition and compares it with the Dispute Adjudication Board in the 1999 Edition, testing the proposition that FIDIC 2017 provides tools for avoiding disputes which outweigh the drawbacks, if any, of the prescriptive claims and dispute procedures.<\/p>\n

Dispute Resolution under FIDIC Contracts, before 1999<\/u><\/strong><\/p>\n

A two tiered approach to dispute resolution was included in the 1st<\/sup>\u00a0Edition of FIDIC Red Book[1]<\/a>\u00a0since 1957 (Baker et al.\u00a0FIDIC Contracts: Law and Practice<\/em>, 2009, Informa, p 505). \u00a0After the Engineer\u2019s Decision there was no access to Arbitration before the completion of the Works, which made the Engineer the Captain of the contractual ship, leaving any unsettled disputes to brew until the end. Under the Red Book 2nd<\/sup>\u00a0Edition in 1969, arbitration became possible also before completion, opening the way to an\u00a0early, ad hoc,\u00a0<\/em>final settlement of disputes.<\/p>\n

Under the Red Book, FIDIC 4th<\/sup>\u00a0Edition 1987, the settlement of disputes on any matter is, in the first place, entrusted to the Engineer who has to make a decision within 84 days from the date of referral under Sub-Clause 67.1.\u00a0 Such Decision has to be made\u00a0impartially<\/em>\u00a0and the parties have to promptly give effect to such decision, unless and until the same is revised by amicable settlement or arbitration.\u00a0 Then, there are 70 days to accept or express dissatisfaction with the Engineer\u2019s Decision, or the decision either becomes final and binding or the dispute must be referred to arbitration by means of a notice to commence arbitration.\u00a0 Arbitration may commence on\/after a cooling period of 56 days in which the parties make an attempt to reach an amicable settlement (Sub-Clause 67.2).\u00a0 The amicable settlement clause was by then innovative, but embodied the dichotomy of being both mandatory (shall)<\/em>\u00a0and yet enabling arbitration to commence \u2018whether or not any attempt at amicable settlement \u2026has been made<\/em>\u2019 (Sub-Clause 67.2).\u00a0 The procedure gives the opportunity to finally settle disputes through arbitration as they arise, after the Engineer\u2019s Decision.<\/p>\n

In 1995, the Orange Book (Design \u2013 Build and Turnkey<\/em>) included a three-tiered provision for dispute resolution with a full-term dispute adjudication board giving binding decisions[2]<\/a>.\u00a0 In the same year, also the\u00a0World Bank Standard Bidding Conditions<\/em>\u00a0imposed the parties to incorporate a Dispute Review Board (DRB) under the particular conditions of contract which made\u00a0recommendations<\/em>\u00a0that could bind the parties only if there were no objections.[3]<\/a>\u00a0 In the author\u2019s personal experience, this advisory system effectively prompted the parties to reach an amicable settlement.<\/p>\n

The initiative of the World Bank was a turning point to have dispute boards in FIDIC and, in 1996, FIDIC adopted the Dispute Board in the supplement to FIDIC 4th<\/sup>\u00a0Edition of Red and Yellow Books (Baker et al. 2009, p 506 – 507).<\/p>\n

As a matter of fact, and without suggesting any direct connection, in 1994 Sir Latham published in England an influential report,\u00a0Constructing the Team<\/em>, recommending that\u00a0\u201cAdjudication should be the normal method of dispute resolution\u201d\u00a0<\/em>and promoting the idea of referring disputes\u00a0immediately<\/em>\u00a0and to a\u00a0neutral<\/em>\u00a0adjudicator.[4]<\/a>\u00a0\u00a0In 1996, under the jurisdiction of England and Wales adjudication had become a statutory right, fast (28 days) and available\u00a0at any time<\/em>.[5]<\/a><\/p>\n

Dispute Resolution under FIDIC Contracts, 1999 Suite<\/u><\/strong><\/p>\n

In FIDIC 1999, the duty to act\u00a0impartially<\/em>\u00a0has been redefined: the Engineer makes \u201cfair determinations<\/em>\u201d under Sub-Clause 3.5.<\/p>\n

Clause 20 regulates\u00a0Claims Disputes and Arbitration<\/em>. In case the Contractor considers himself entitled to an extension of time or additional payments, he is obliged to give notice of claim under Sub-Clause 20.1 and keep contemporary records[6]<\/a>, followed by detailed particulars in 42 days.\u00a0 However, the contract does not always call for a Sub-Clause 20.1 notice, and not all claims are subject to notice under Sub-Clause 20.1 e.g. Sub-Clause 12.3, 13.3, 14.7. \u00a0The Engineer is obliged to respond to a claim within 42 days with approval, disapproval or comments. \u00a0Without a clear procedural link with the foregoing or any time limit, Sub-Clause 20.1 provides that<\/p>\n

The Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) the extension (if any) of the Time for Completion \u2026 in accordance with Sub-Clause 8.4 [Extension of Time for Completion] and\/or (ii) the additional payment (if any) to which the Contractor is entitled under the Contract.<\/em><\/p>\n

In fact, there is no predefined time limits for the Engineer to issue a Determination in reply to Contractor\u2019s claims under Sub-Clause 3.5.\u00a0 There is however a notional limit under Sub-Clause 1.3 [Communications<\/em>] which states that determinations shall not be unreasonably withheld or delayed.<\/p>\n

Under the Red, Yellow and Silver books, Sub-Clause 2.5 requires the Employer to give notice with particulars\u00a0as soon as practicable<\/em>\u00a0after he becomes aware (not when he ought to), and then the Engineer shall proceed to make a Determination under Sub-Clause 3.5.<\/p>\n

In the DBO (Design, Build, Operate) Gold Book of 2008 there is no separate Sub-Clause 2.5 for the Employer\u2019s claims but the claims of both parties are determined under the same Sub-Clause 3.5.<\/p>\n

The MBD Harmonized Pink Book, FIDIC 2010, includes a separate procedure for the Employer\u2019s claim under Sub-Clause 2.5, but provides that a 28 days\u2019 notice shall be given by the Employer as well as the Contractor.<\/p>\n

In the FIDIC Suite 1999, Sub-Clause 3.5 requires the Engineer to consult both parties in the endeavor to reach an agreement, without any positive obligation to make any such effort and assigns to the Engineer, who is an Employer\u2019s Personnel without any duty to be neutral or impartial, the task of finding an amicable solution between his employer and the Contractor.\u00a0 Any Determination then becomes binding to both parties until and unless revised under Clause 20.<\/p>\n

Sub-Clause 1.1.2.9 defines the DAB as “The person or three persons so named in the Contract, or other person(s) appointed under Sub-Clause 20.2 [Appointment of the Dispute Adjudication Board] or Sub-Clause 20.3 [Failure to Agree Dispute Adjudication Board]<\/em>”<\/p>\n

The DAB may give advice and opinions \u2018when requested by both Employer and the Contractor<\/em>\u2019 (Sub-Clause 20.2, Red Book only). The contract provides no further details, but this advice and opinions are not binding. \u00a0The idea is that \u2018by providing its opinion on the matter in contention or on the disagreement the Dispute Adjudication Board may throw a revealing light on the rights and obligations of the parties and thus prevent a matter from becoming a dispute\u2019\u00a0<\/em>(Bunni,\u00a0The FIDIC Form of Contract<\/em>\u00a0– Third Edition<\/em>, 2005, Blackwell, p 625).<\/p>\n

Clause 20.4 [Obtaining Dispute Adjudication Board\u2019s Decision<\/em>], provides that in front of a dispute of any kind in connection with, or arising out of the contract, either party may refer the dispute to the DAB, that will give its decision within 84 days after the referral.\u00a0 The decision is binding and must be promptly given effect.\u00a0 However, each party may give a notice of dissatisfaction within 28 days as a condition precedent to commence arbitration and, if no such notice is given, the Decision becomes final and binding.<\/p>\n

In order to activate this provision, the\u00a0claim<\/em>\u00a0must have evolved in a\u00a0dispute,<\/em>\u00a0and the contract does not define what a dispute is.\u00a0 Therefore, a definition must be searched at law, with the possibility of finding different answers under each jurisdiction. For example, the English law provides the following guidance:<\/p>\n

\u201cA \u2018dispute\u2019 can only arise once the subject-matter of the claim, issue or other matter has been brought to the attention of the opposing party and that party has had an opportunity of considering and admitting, modifying or rejecting the claim or assertion<\/em>.<\/em>[7]<\/a><\/p>\n

This definition[8]<\/a>\u00a0is important because the \u2018no dispute\u2019 defence to defer dispute resolution is not unusual.<\/p>\n

Sub-clause 20.5 [Amicable Settlement<\/em>] provides a 56 days\u2019 cooling off period, imposing an obligation (shall) on the parties to attempt to settle the dispute amicably and then the dispute may be referred to arbitration.[9]<\/a><\/p>\n

If the DAB\u2019s Decision is not given effect by any one of the parties, then the dispute may be referred directly to arbitration without falling back into the dispute adjudication loop[10]<\/a>. While this provision has been stated under Sub-Clause 20.7 [Failure to Comply with DAB Decisions<\/em>], after the\u00a0Persero<\/em>\u00a0case[11]<\/a>\u00a0FIDIC issued a Guidance Memorandum[12]<\/a>\u00a0closing \u201cthe gap\u201d and directing that also\u00a0binding but non-final<\/em>\u00a0Board\u2019s decisions may be referred directly to arbitration.\u00a0 Sub-clause 20.8 [Expiry of Dispute Adjudication Board\u2019s Appointment<\/em>] sets out that disputes arising when the DAB is not in place may be referred directly to Arbitration, which is a way of resolving disputes when the other \u2018reluctant party<\/em>\u2019 is frustrating the appointment of the DAB.<\/p>\n

Under the FIDIC 1999 Red Book, the Dispute Adjudication Board is appointed on a \u2018standing\u2019 basis.<\/p>\n

In the Yellow and Silver Books, the Dispute Adjudication Board is appointed on \u2018ad-hoc\u2019 basis on each dispute, with the effect that the board gets called in only when the claim has already become a dispute between the parties, practically excluding any proactive, prevention role of the DAB.<\/p>\n

Another drawback of calling an\u00a0ad-hoc<\/em>\u00a0DAB, is the time lost in putting the DAB in place when a dispute is ongoing, and the difficulties of getting the board appointed if one of the parties has a tactical interest in postponing a DAB\u2019s Decision on a dispute.\u00a0 In the author\u2019s experience, the advantage of avoiding the situations mentioned above, outweigh any expenses that may be saved in comparison with a standing board.<\/p>\n

Under the Blue Book\u00a0Dredging and Reclamation Contract<\/em>\u00a0that was issued in 2006, there is no stand-alone procedure to refer Contractor\u2019s claims to engineer\u2019s determinations, but disputes may be referred to a full-term Dispute Adjudication Board.<\/p>\n

In the DBO (Design, Build, Operate) Gold Book of 2008 there is no separate Sub-Clause 2.5 for the Employer\u2019s claims. This form of contract provides for a standing Dispute Board and, unlike the other contracts, includes a Sub-Clause 20.5 called\u00a0Disputes Avoidance<\/em>, and involving the action of the DAB that recites as follows:<\/p>\n

If at any time the Parties so agree, they may jointly refer a matter to the DAB in writing with a request\u00a0to provide assistance and\/or informally discuss and attempt to resolve any disagreement that may have arisen between the Parties during the performance of the Contrac<\/u>t. Such informal assistance may take place during any meeting, Site visit or otherwise. However, unless the Parties agree otherwise, both Parties must be present at such discussions. The Parties are not bound to act upon any advice given during such informal meetings, and the DAB shall not be bound in any future Dispute resolution process and decision by any views given during the informal assistance process, whether provided orally or in writing.\u00a0<\/em>[emphasis added]<\/p>\n

FIDIC 2010, MDB Harmonized Pink Book, provides for disputes to be referred to a full term Dispute Adjudication Board, in case of dissatisfaction with the Engineer\u2019s determinations. \u00a0This form of contract did not take up the innovation of the Gold Book, but reverted to the usual format of\u00a0Amicable Settlement<\/em>\u00a0under Sub-Clause 20.5.<\/p>\n

Disputes Resolution under FIDIC Contracts 2017 Edition.<\/u><\/strong><\/p>\n

The new\u00a0FIDIC<\/em>\u00a0suite issued in December 2017, has addressed many of the points mentioned above, such as the need for reciprocity between the obligations of the parties, albeit opening other points for discussion, e.g. the prescriptive nature of the dispute procedure. \u00a0In 2017, the Clause 20 of FIDIC 1999 has bifurcated in two clauses, separating the procedure for claims from that for disputes[13]<\/a>:<\/p>\n