Dispute Resolution Mechanisms under the FIDIC Conditions of Contract

A presentation to

The British University in Dubai by

Nael G. Bunni, BSc, MSc, PhD, CEng, FICE, FIEI,
FIStructE, FCIArb, FIAE, RConsEI.
Chartered Engineer, Conciliator/Mediator and Registered Chartered Arbitrator

28th December 2011

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Synopsis Synopsis
The FIDIC Identity The FIDIC Forms of Contract Dispute Resolution The Introduction of ADR, 1987 The procedure set for claims and dispute resolution The Introduction of DAB, 1995, 1996, 1999 The Gap in Sub-Clause 20.7 of the 1999 Major Forms of Contract
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The FIDIC identity The FIDIC identity

FIDIC - Federation Internationale des Ingenieurs - Conseils Founded in 1913 in Ghent , Belgium by the national associations of consulting engineers of Belgium, France & Switzerland Has grown to represent associations from over 84 countries worldwide Secretariat is located in Geneva, Switzerland
Contd./2
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The FIDIC identity (Contd/2) The FIDIC identity (Contd/2)

One of the first committees established in 1913 was the Contract Documents Committee. Its Terms of Reference were:
To monitor contract documents of interest to consulting engineers regarding:

construction of objects or works;

erection and installation of works; maintenance of installations in operation; and supply of materials

To inform contractors, suppliers and officials concerning contract documents recommended by FIDIC
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The FIDIC Forms of Contract The FIDIC Forms of Contract

First standard form of contract published in 1957
It was the first edition of the Red Book for civil engineering works in the international field Since then FIDIC has become known outside the engineering profession for its standard forms of contract

The Red Book was followed by the Yellow Book for Electrical and Mechanical Works including erection on site Contd./2
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The FIDIC Forms of Contract The FIDIC Forms of Contract

(Contd./2) (Contd./2)

Standard Forms & Associated Documentation

Conditions of Contract for Works of Civil Engineering Construction (Red Book), 4th Edition, 1987; updated 88 & 92 Conditions of Contract for Electrical and Mechanical Works including erection on site (Yellow Book), 3rd Edition, 1987 Conditions of Contract for Design-Build and Turnkey (Orange Book), 1st Edition, 1995 Conditions of Sub-contract for Works of Civil Engineering Construction, 1st Edition, 1994 Tendering Procedure, 2nd Edition, 1994 Client/Consultant - model services Agreement (White Book), 3rd Edition, 1998; 4th Ed. 2006 Joint Venture (Consortium) - Agreement, 1st Edition, 1992 Sub-consultancy Agreement, 1st Edition, 1992 Dredging & Reclamation Form of Contract, 1st Edition, 2006
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The FIDIC Forms of Contract The FIDIC Forms of Contract

(Contd./3) (Contd./3)

First standard form of contract published in 1957: The first edition of the Red Book for civil engineering works in the international field; Second Edition 1967 & Third Edition 1977; Fourth Edition in 1987, Amended in 1988 and later significantly amended in 1992; The Yellow Book for Electrical and Mechanical Works including erection on site: First Edition in 1963, Second Edition 1977 & Third Edition 1987.
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The FIDIC Forms of Contract The FIDIC Forms of Contract

(Contd./4) (Contd./4) Standard Forms & Associated Documentation

Conditions of Contract for Works of Civil Engineering Construction (Red Book), 4th Edition, 1987; updated in 88 & 92 Conditions of Contract for Electrical and Mechanical Works including erection on site (Yellow Book), 3rd Edition, 1987 Conditions of Contract for Design-Build and Turnkey (Orange Book), 1st Edition, 1995 Conditions of Sub-contract for Works of Civil Engineering Construction, 1st Edition, 1994 Tendering Procedure, 2nd Edition, 1994; superseded in 2011 by the Project Procurement Guide Client/Consultant - model services Agreement (White Book), 3rd Edition, 1998; 4th Ed. 2006 Joint Venture (Consortium) - Agreement, 1st Edition, 1992 Sub-consultancy Agreement, 1st Edition, 1992 Dredging & Reclamation Form of Contract, 1st Edition, 2006

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The FIDIC Forms of Contract The FIDIC Forms of Contract

(Contd./5) (Contd./5)

The 1999 Red Book Conditions of Contract for Construction, (for Building and Engineering Works, Designed by the Employer) General Conditions, Guidance for the Preparation of the Particular Conditions; First Edition of a new Yellow Book, 1999: Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by the Contractor General Conditions, Guidance for the Preparation of the Particular Conditions; First Edition of the Silver Book, 1999: Conditions of Contract for EPC turnkey Projects, Designed by the Contractor General Conditions, Guidance for the Preparation of the Particular Conditions; 9 of 59 BUiDDisp Mech FIDIC Copyright NGB

The FIDIC Forms of Contract The FIDIC Forms of Contract

(Contd./6) (Contd./6)

First Edition of the Green Book, 1999 Short Form of Contract Agreement, General Conditions, Rules for Adjudication and Notes for Guidance; The Harmonised Multilateral Development Banks Form of Contract, 1st Ed. 2005, 3rd Ed. 2010; The most important development is the introduction of the Gold Book in 2008: for Design, Build & Operate projects; The Subcontract Form for the 1999 Red Book, published in 2010; The Project Procurement Guide 2011, replacing the Tendering Procedure of 1994; and Now working on many other updates and new documents.
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The Harmonised MDB Form The Harmonised MDB Form

MDB: The Harmonised Multilateral Development Banks Form of Contract, 2005; Intended for MDB funded projects; FIDIC retains copyright & Management; Based on the 1999 Red Book, which remains FIDICs recommended Form, but amended shifting many risks to the Contractor, including the reduced Authority of Engineer; The 3rd Ed. was issued in 2010; With many changes, some rightly heavily criticised: for example. Clause 20
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FIDIC Forms of Contract with contractor

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Model Services Agreement between Employer and Engineer

The White Book The White Book

Updated 4th Edition - Sept. 2006

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The Usual contractual arrangements in a construction project Employer or Owner

Engineer Sub-contractors

Contractor

Other Consultants
Direct contract Indirect relationship

Suppliers

Manufacturers

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Dispute Resolution Dispute Resolution

Until 1987, FIDIC opted for Arbitration Until 1987, FIDIC opted for Arbitration In 1987, FIDIC introduced AmDR In 1987, FIDIC introduced AmDR In 1995, FIDIC introduced DAB In 1995, FIDIC introduced DAB

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The Dispute Settlement Clauses in the pre-1999 FIDIC Forms

The Dispute Settlement Clauses in the pre 1999 Yellow Book are Clauses 2 & 50 of The Conditions of Contract: Amicable Settlement Arbitration; The Dispute Settlement Clause in the pre 1999 Red Book is Clause 67 of The Conditions of Contract: Amicable Settlement Arbitration; The Dispute Settlement Clause in the White Book is Clause 8: Negotiation Mediation Arbitration.
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Yellow Book 1987 Impartial Yellow Book 1987 Impartial Engineer, Sub-Clause 2.4 Engineer, Sub-Clause 2.4
Engineer to Act Impartially 2.4 Wherever, under the Contract, the Engineer is required to exercise his discretion by: (a) giving his decision, opinion or consent, (b) expressing his satisfaction or approval, (c) determining value, or (d) otherwise taking action which may affect the rights and obligations of the Employer or the Contractor, he shall exercise such discretion impartially within the terms of the Contract and having regard to all the circumstances.
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Red 1987/92 Impartial Eng. Clause 2.6 Red 1987/92 Impartial Eng. Clause 2.6 The Engineer to Act Impartially
2.6 Wherever, under the Contract, the Engineer is required to exercise his discretion by: (a) giving his decision, opinion or consent, (b) expressing his satisfaction or approval, (c) determining value, or (d) otherwise taking action which may affect the rights and obligations of the Employer or the Contractor, he shall exercise such discretion impartially within the terms of the Contract and having regard to all the circumstances.
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TheThe Relevant Dispute Settlement Dispute Settlement Clause, Y.B. The Relevant Dispute Settlement
Clauses in the Yellow Book Clauses in the Yellow Book
The relevant Clauses to Dispute Settlement in the pre 1999 Yellow Book are Clauses 2 & 50 of The Conditions of Contract. Clause 2:
2.1 Engineers Duties; 2.4 Engineer to Act Impartially 2.5 Engineers Decisions and Instructions; 2.8 Disputing Engineers Decisions and Instructions.
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The Dispute Settlement Clauses, Y.B. The Dispute SettlementClauses, Y.B. The Dispute Settlement Clause, Y.B.
2.7 Disputing Engineers Decisions and Instructions
If the Contractor disputes or questions any decision or instruction under Clause 2.5 or a written confirmation under Clause 2.6, he shall give notice to the Engineer within 28 days after receipt thereof, giving his reasons. The Engineer shall within a further period of 28 days by notice to the Contractor and the Employer with reasons, confirm, reverse or vary such decision or instruction. If either party disagrees with the action taken by the Engineer, or if the Engineer fails to reply to the Contractor's notice within the stipulated 28 days, and the matter cannot be settled amicably that party shall be at liberty, subject to Sub-Clause 50.1, to refer the matter to arbitration in accordance with the Contract. 20 of 59 BUiDDisp Mech FIDIC Copyright NGB

The Dispute Settlement Clauses, Y.B. Clause, Y.B. The Dispute SettlementClauses, Y.B. The Dispute Settlement
50 Disputes concerning Engineers Decisions
50.1 If either party is dissatisfied with a decision or instruction of the Engineer as confirmed, reversed or varied in accordance with Clause 2 he may refer the matter to arbitration pursuant to Sub-Clause 50.2. Unless the dissatisfied party has notified the other party and the Engineer within 56 days of such decision or instruction of his intention to refer the matter to arbitration, he shall be deemed to have accepted the decision as final. Reference to arbitration shall not relieve the Contractor of his obligation to proceed with the Works in accordance with the Engineer's decision or instruction, nor relieve the Employer of any of his obligations under the Contract. The Contractor shall in any such arbitration be at liberty to rely on reasons additional to the reasons stated in the notice given under SubClause 2.7. 21 of 59
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The Dispute Settlement Clauses, Y.B. The Dispute Settlement Clauses, Y.B.
50.2 Arbitration
If at any time any question, dispute or difference shall arise between the Employer and the Contractor in connection with or arising out of the Contract or the carrying out of the Works either party shall be entitled to refer the matter to be finally settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with those Rules, or by arbitration in accordance with such other rules as are specified in Part II. The Arbitrator(s) shall have full power to open up, review and revise: (a) any decision or instruction of the Engineer referred to arbitration pursuant to Sub-Clause 50. 1, and (b) any certificate of the Engineer related to the dispute.
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The Dispute Settlement Clauses, Y.B. The Dispute Settlement Clauses, Y.B.
50.3 Works to Continue
Performance of the Contract shall continue during arbitration proceedings unless the Employer shall order suspension. If any such suspension is ordered the reasonable costs incurred by the Contractor and occasioned thereby shall be added to the Contract Price. No payments due or payable by the Employer shall be withheld on account of pending reference to arbitration.

50.4 Time Limit for Arbitration

Formal notice of arbitration must be given to the other party, and where required to the appropriate arbitration body, no later than 84 days after the issue of the Final Certificate of Payment.
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The Dispute Settlement Clause, Red B. The Dispute Settlement Clause, Red B.
67.1 Settlement of Disputes
Engineers Decision

If a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with, or arising out of, the Contract or the execution of the Works, whether during the execution of the Works or after their completion and whether before or after repudiation or other termination of the Contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer, the matter in dispute shall, in the first place, be referred in writing to the Engineer, with a copy to the other party. Such reference shall state that it is made pursuant to this Clause. No later than the eighty-fourth day after the day on which he received such reference the Engineer shall give notice of his decision to the Employer and the Contractor. Such decision shall state that it is made pursuant to this Clause.
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The Dispute Settlement Clause, Red B. The Dispute Settlement Clause, Red B.
Unless the Contract has already been repudiated or terminated, the Contractor shall, in every case, continue to proceed with the Works with all due diligence and the Contractor and the Employer shall give effect forthwith to every such decision of the Engineer unless and until the same shall be revised, as hereinafter provided, in an amicable settlement or an arbitral award. If either the Employer or the Contractor be dissatisfied with any decision of the Engineer, or if the Engineer fails to give notice of his decision on or before the eighty-fourth day after the day on which he received the reference, then either the Employer or the Contractor may, on or before the seventieth day after the day on which he received notice of such decision, or on or before the seventieth day after the day on which the said period of 84 days expired, as the case may be, give notice to the other party, with a copy for information to the Engineer, of his intention to commence arbitration, as hereinafter provided, as to the matter in dispute. 25 of 59 BUiDDisp Mech FIDIC Copyright NGB

The Dispute Settlement Clause, Red B. The Dispute Settlement Clause, Red B.
Such notice shall establish the entitlement of the Party giving the same to commence arbitration, ., no arbitration in respect thereof may be commenced unless such notice is given. 67.2 Amicable Settlement Where notice of intention to commence arbitration as to a dispute has been given in accordance with Sub-Clause 67.1, the parties shall attempt to settle such dispute amicably before the commencement of arbitration. Provided that, unless the parties otherwise agree, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made.
(reasons for the Clause being obligatory) 26 of 59
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The Dispute Settlement Clause, Red B. The Dispute Settlement Clause, Red B.
67.3 Arbitration Any dispute in respect of which: (a) the decision, if any, of the Engineer has not become final and binding pursuant to SubClause 67.1, and (b) amicable settlement has not been reached within the period stated in Sub-Clause 67.2, shall be finally settled, unless otherwise specified in the Contract, under such Rules of .. .
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The Dispute Settlement Clause, Red B. The Dispute Settlement Clause, Red B.
67.4 Failure to Comply with Engineers Decision Where neither the Employer nor the Contractor has given notice of intention to commence arbitration of a dispute within the period stated in Sub-Clause 67.1 and the related decision has become final and binding, either party may, if the other party fails to comply with such decision, and without prejudice to any other rights it may have, refer the failure to arbitration in accordance with Sub-Clause 67.3. The provisions of Sub-Clauses 67.1 and 67.2 shall not apply to any such reference.
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The Engineer as an adjudicator under the 1992 Red Book

Dispute Reference to the Engineer
[84 days for the Engineer to make a decision]

The Engineer gives notice of his decision in writing

[70 days for Emp. or Cont. to disagree & give notice of intention to commence arbitration]

If notice of intention to commence arbitration is given, then attempt amicable settlement (56 days)
[If no settlement, arbitration may then commence. Place, no. of arbitrators & language may be inserted]

ICC Rules apply unless stated otherwise in Part II

[ Extreme care must be taken in amending this clause]
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The Procedural Steps under Cl. 67 of the Red Book, 1992

( See Figure 1) If no settlement is reached, arbitration will proceed using the ICC Rules, unless otherwise stated or agreed.
If Amicable Settlement is not successful, then either party may proceed to arbitration after 56 days of the notice as per Cl. 67.3

56 days

Amicable Settlement is to be attempted to settle the dispute

Notice to Intention to Refer the Dispute to arbitration is served if either Party is dissatisfied with the Engineers decision or where the

70 days
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Engineer fails give such decision.

( Decision of the Engineer is considered by the Employer & Contractor ).

Engineer shall give notice of his decision in respect of the Dispute is given in writing to the Employer and the Contractor.

84 days

( Dispute is to be settled by the Engineer ). Matter in Dispute is referred to the Engineer in writing, with a copy to
the other party, under Clause 67.1 of the Conditions. BUiDDisp Mech FIDIC Copyright

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The Dispute Settlement Clauses in the 1999 FIDIC Forms

The Dispute Settlement Clauses in the 1999 FIDIC Forms are Clauses 2.5, 3.5 & 20 of The Conditions of Contract:
Disagreement under any clause of the Contract; Claim leading to Dispute under 2.5 or 20; Negotiation under Sub-Clause 3.5 leading to a Determination by the Engineer; Reference to the DAB leading to a Decision; Amicable Settlement; Arbitration.
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The Engineer as a Negotiator The Engineer as a Negotiator and/or Determinator and/or Determinator under the 1999 Red & Yellow under the 1999 Red & Yellow

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Impartial or fair Red & Yellow Impartial or fair Red & Yellow SubClause 3.1 SubClause 3.1
3.1 Engineers Duties and Authority
.. . The Engineer may exercise (his) authority . as specified in or necessarily to be implied from the Contract. .. Except as otherwise stated in these Conditions: (a) whenever carrying out duties or exercising authority, specified in or implied by the Contract, the Engineer shall be deemed to act for the Employer; (b) the Engineer has no authority to relieve either Party of any duties, obligations or responsibilities under the Contract; and
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Impartial or fair 1999 Red & Impartial or fair 1999 Red & Yellow SubClause 3.1 Yellow SubClause 3.1
(c) any approval, check, certificate, consent, examination, inspection, instruction, notice, proposal, request, test, or similar act by the Engineer (including absence of disapproval) shall not relieve the Contractor from any responsibility he has under the Contract, including responsibility for errors, omissions, discrepancies and non-compliances.
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Impartial or fair Red & Yellow Impartial or fair Red & Yellow SubClause 3.5 SubClause 3.5
Determinations 3.5
Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter, the Engineer shall consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.
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Reference to the DAB under the FIDIC Contracts

R e l e v a n t * c l a u s e Sub-Clause 20.1

Sub-Clause 2.5

S u bC l a u s e 3.5 Sub-Clauses 20.2 & 20.4

*For example, sub-clause 13.3 of the Y.B.
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Time limits for the procedure under Sub-Clauses 20.4 & 20.5 of FIDICs New Red Book - Standing DAB

DISPUTE DISPUTE
1. DAB - 84 days. If Employer or Contractor Dissatisfied 28 days

2. Notice of dissatisfaction with Decision Parties must give effect to DABs Decision Parties must attempt Amicable Settlement 56 days 3. of 59 37 If unsuccessful, go to Arbitration BUiDDisp Mech FIDIC
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Background Background
In an article The Gap in Sub-Clause 20.7 of the 1999 FIDIC Contracts for Major Works, [2005] ICLR 272, besides identifying the gap, were highlighted the practical problems that might arise as a result of that Gap. The anticipated problems did arise and had to be dealt with not only by Arbitral Tribunals but most recently and cogently by the High Court in Singapore & subsequently this year by there. 59 the Court of AppealMech FIDIC BUiDDisp Copyright NGB

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1. Introduction 1. Introduction
In Sub-Clause 20.4 of the 1999 FIDIC Forms, the decision of a DAB will become binding on the parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award as described below. Unless . Although non-compliance is tantamount to a breach of contract, compensation for which will be damages, but such damages might not be satisfactory.
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Sub-Clause 20.7 provides: Sub-Clause 20.7 provides:

In the event that: (a) neither Party has given notice of dissatisfaction within the period stated in Sub-Clause 20.4 [Obtaining Dispute Adjudication Boards Decision], (b) the DABs related decision (if any) has become final and binding, and (c) a Party fails to comply with this decision, then the other Party may, without prejudice to any other rights it may have, refer the failure itself to arbitration under Sub-Clause 20.6 [Arbitration]. Sub-Clause 20.4 [Obtaining Dispute Adjudication Boards Decision] and Sub-Clause 20.5 [Amicable Settlement] shall not apply to this reference.
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The Gap in Sub-Clause 20.7 The Gap in Sub-Clause 20.7

Considering the Gap in Sub-Clause 20.7 of the 1999 FIDIC Contracts for Major Works, the question that arises is therefore: What happens if the DABs related decision has not become final and binding? (i.e., If one or all the Parties have given a Notice of Dissatisfaction NoD with respect to the decision of the DAB?)
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The DABs Decision may result in: The DABs Decision may result in:
any one of the following situations: - neither party gives a NoD, the decision becomes final and binding and both parties accept and implement it; - neither party gives a NoD, the decision becomes final and binding but one party or indeed all parties refuse to implement the decision; or - one party or indeed all parties, issue a NoD and one party or all parties refuse to implement the decision of the DAB.
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A lacuna or a gap A lacuna or a gap

The Singapore High Court (Ang Saw Ean J) concluded in PT Perusahaan Gas Negara (Persero) TBK v. CRW Joint Operation [2010] SGHC 202, that, There appears to be a lacuna or gap in the 1999 Red Book in so far as it does not confer an express right on a winning party to refer to arbitration a failure of the losing party to comply with a DAB decision that is binding and not final in nature.
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FIDIC has recognised the problem with the wording of Sub-Clause 20.7 and rectified it in the Gold Book (the equivalent Sub-Clause is 20.9), published in 2008, as follows: In the event that a Party fails to comply with any decision of the DAB, whether binding or final and binding, then the other Party may, without prejudice to any other rights it may have, refer the failure itself to arbitration under Sub-Clause 20.8 [Arbitration] for summary or other expedited relief, as may be appropriate. Sub-Clause 20.6 [Obtaining Dispute Adjudication Boards Decision] and SubClause 20.7 [Amicable Settlement] shall not apply to this reference.
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Sub-Clause 20.9 of the DBO Form Sub-Clause 20.9 of the DBO Form

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Singapore High Court (Ang Singapore High Court (Ang Saw Ean J) concluded in PT Saw Ean J) concluded in PT Perusahaan Gas Negara Perusahaan Gas Negara (Persero) TBK v. CRW Joint (Persero) TBK v. CRW Joint Operation [2010] SGHC 202 Operation [2010] SGHC 202

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The Facts in the CRW case in 2010 The Facts in the CRW case in 2010
The Contract in this case was for the design, procurement, installation, testing and precommissioning of a 36 inch in diameter pipeline in Indonesia. The Contract was based on the 1999 Edition of the FIDIC Red Book with some modifications. During the course of the contract, a dispute arose between the Parties in respect of 13 Variation Orders, which was, pursuant to SubClause 20.4 of the Conditions of Contract referred to a Dispute Adjudication Board for resolution. The DAB heard the dispute and rendered a number of decisions all of which save for one was accepted by the Respondent (PGN).
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The Facts in the CRW case in 2010 The Facts in the CRW case in 2010
The one that was not accepted was a decision directing the Respondent pay the Claimant (CRW) the sum of US$17,298,834.57 and accordingly the Respondent submitted a Notice of Dissatisfaction in that respect. The Claimant subsequently filed a Request for Arbitration with the ICC International Court of Arbitration wherein it adopted the position that in accordance with Clause 20 of the Conditions of Contract, notwithstanding the Notice of Dissatisfaction, the Respondent was obliged to pay the sum of US$17,298,834.57 to the Claimant. However, the Claimant also made the case that a second dispute had arisen in this matter, i.e., the Respondents refusal to comply with the DAB decision and pay such sum to the Claimant. 48 of 59 BUiDDisp Mech FIDIC Copyright NGB

The Facts in the CRW case in 2010 The Facts in the CRW case in 2010
The arguments presented by the Parties were relatively straightforward. On the one hand the Claimant argued that the Notice of Dissatisfaction did not affect the binding nature of the DAB decision and that in accordance with Sub-Clause 20.4, the Respondent was still obliged to promptly give effect to the DAB decision. On the other hand, the Respondent argued that as a result of the Notice of Dissatisfaction, the DAB decision had not become final and binding since the merits of the decision had not been the subject-matter of a review by an arbitral tribunal.
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The Facts in the CRW case in 2010 The Facts in the CRW case in 2010
An Award was rendered by a majority of the Arbitral Tribunal wherein it was decided that the DAB decision was binding on the Parties and therefore, the Respondent was obliged to make an immediate payment to the Claimant under the Contract. The Majority Award dismissed the Respondents argument that the Tribunal should open up and review the DAB decision but noted that the Respondent could nonetheless commence a separate arbitration to open up, review and if necessary, revise the DAB decision.
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The Facts in the CRW case in 2010 The Facts in the CRW case in 2010
The Respondent (PGN) referred the matter to the High Court of Singapore and submitted that the Final Award should be set aside pursuant to Article 34(2)(a)(iii) and (iv) of the UNCITRAL Model Law and further, pursuant to Section 24(b) of the International Arbitration Act. Its claim was particularised as follows:

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(a) In contravention of Article 34(2)(a)(iii) of the Model Law, the Majority Members exceeded their mandate and jurisdiction in converting the DAB decision into a final award without first determining the merits of the parties underlying dispute and/or without determining whether the DAB decision had been made in accordance with the contractual provisions between the Parties;
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The Facts in the CRW case in 2010 The Facts in the CRW case in 2010
(b) In contravention of Article 34(2)(a)(iv) of
the Model Law, the arbitral procedure was not in accordance with what the parties had agreed to which required the merits of the underlying dispute and/or the accordance of the DAB decision with the contractual provisions between the Parties be determined prior to the issuance of a final award; and
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The Facts in the CRW case in 2010 The Facts in the CRW case in 2010
(c) In contravention of Section 24(b) of the International Arbitration Act, the Majority Members, in breach of the rules of natural justice, refused and/or failed to hear the parties on the merits of the underlying disputes and/or the accordance of the DAB decision with the contractual provisions between the parties.[1]
[1] There was a fourth ground upon which the Respondent sought to have the Final Award set aside that was on the premise that the DAB had not applied the governing law of the contract (Indonesian law) to its decision and/or added new claims to the claims originally submitted, but this ground was rejected at the outset of the High Court Hearing and therefore did not form any part of the Appeal.

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The High Court Judgment The High Court Judgment

In determining the challenge to the majority award, the Court considered the provisions of Article 34(2)(a)(iii) of the UNCITRAL Model Law noting that there were two situations that might fall within its ambit. The first was where the arbitral tribunal exceeded its jurisdiction by dealing with matters in its award that had not been referred to it and the second concerned the situation whereby the dispute referred to the arbitrators was one that went beyond the scope of the arbitration agreement entered into between the parties. It was this latter situation that the Court concluded arose in this case, i.e., a dispute that was not within the Arbitration Agreement, or that it went beyond the scope of that agreement. The Court went on to examine the dispute that was referred to arbitration in this case, noting that the arbitration had been commenced by the Claimant pursuant to Sub-Clause 20.6 of the Conditions of Contract, which states as follows:
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Unless settled amicably, any dispute in respect of which the DABs decision (if any) has not become final and binding shall be finally settled by international arbitration. . The Court stated that Sub-Clause 20.6 made it clear that a dispute that may be submitted to arbitration under Sub-Clause 20.6 was one that had been referred to a DAB, but by its own admission, the Claimant had characterised the non-compliance with the DAB decision as a Second Dispute. The Court opined that this was not only a different dispute, but was also one that had not been referred to the DAB yet. Given the opening words of sub-cl 20.6, the Second Dispute was plainly outside the scope of sub-cl 20.6 of the Conditions of Contract. It follows that the Majority Tribunal, and hence the Majority Award, exceeded the scope of the Arbitration Agreement; the Majority Award is therefore liable to be set aside under Article 34(2)(a)(iii) 55 of 59 BUiDDisp Mech FIDIC Copyright NGB

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The High Court Judgment The High Court Judgment

The High Court elaborated even further on its interpretation of Sub-Clause 20.6 pointing out that even if the second dispute as identified by the Claimant could be referred to arbitration without first being dealt with by a DAB, its provisions did not allow an arbitral tribunal to make a final and binding DAB decision without first hearing the merits of that DAB decision. The Court quoted the powers bestowed on an arbitral tribunal pursuant to Sub-Clause 20.6, stating that [a]n arbitral tribunal is bound by the perimeters of the claims submitted to it and, thus, may not order interim measures without the request of a party. However, that did not make the Majority Award valid. Clause 20 of the Conditions of Contract did not allow for an arbitral tribunal to make final a DAB decision without first hearing the merits of that DAB decision. In context, the Arbitral Tribunals powers under sub-cl 20.6 was expressly to open up, review and revise the DAB Decision, which meant that an adjudication on the Second Dispute without determining the correctness of the DAB Decision would be tantamount to converting that binding but nor final decision into a final arbitration award and ignoring the provisions of the Conditions of Contract concerning dispute resolution. 56 of 59
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The Court concluded its findings on the provisions of Article 34(2)(a)(iii) of the UNCITRAL Model Law by the following: To summarise, the real dispute was clearly whether the DAB Decision was correct and following that, whether CRW was entitled to the payment of the sum which the DAB had decided was due. However, CRW tried to limit the dispute to only whether payment of that sum should be made immediately and, in doing so, wrongly relied on sub-cl 20.6. In fact, there is no express right of a party to refer to arbitration under sub-cl 20.7 a failure of the other party to comply with a binding but not final decision of the DAB. An arbitration commenced under sub-cl 20.6 requires a review of the correctness of the DAB decision.

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First, CRWs reference to arbitration involved a dispute, which was never referred to the DAB. Second, the reference was not on the merits of the DAB Decision (unlike ICC Case No. 10619 where the issue regarding the immediate enforceability of the Engineers decision was pursued as an interim or partial award under the auspices of the arbitration on the merits of the Engineers decision. Accordingly, the Majority Tribunal exceeded its powers by rendering a final award pertaining to: (a) a dispute that was not referred first to the DAB, bearing in mind that before a dispute can be subject to arbitration, it must first have been referred to the DAB and the appropriate NOD must have been served ; and (b) a dispute that was not within the scope of the Arbitration Agreement (similar to the factual scenario in Tiong Huat Rubber). Hence, the Majority Award was liable to be and was indeed set aside under Article 34(2)(a)(iii) of the Model Law. 58 of 59 BUiDDisp Mech FIDIC Copyright NGB

The Court of Appeal Judgment The Court of Appeal Judgment

The Judgment in this case can be found by going to Google & searching for: the Appellants Case filed by CRW on 1 October 2010

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