Clause 20

Summary

Clause 20 deals with claims, disputes and arbitration.

Sub-Clause 20.1 deals with the Contractor’s claims. The Contractor must give
notice wherever it considers itself entitled to additional time and money within 28
days. The 28 day notice is a condition precedent to the Contractor’s entitlement to
time and money. Thereafter the Contractor must submit a fully detailed claim. The
Engineer is then required to approve or disapprove the claim and thereafter make a
Sub-Clause
3.5 determination. Each Payment Certificate must include such amounts for any
claim as have been reasonably substantiated.

Sub-Clause 20.2 deals with the Appointment of the Dispute Adjudication Board.
The Parties are required to jointly appoint a DAB by the date stated in the
Appendix to Tender. The DAB can be one or three people. The DAB is required to
incorporate the General Conditions of the Dispute Adjudication Agreement
contained within the Appendix to the Conditions. The terms of payment need to be
agreed and each Party is responsible for paying one-half of the remuneration.

Sub-Clause 20.3 deals with a failure to agree the DAB. In the event of a failure to
appoint a DAB the decision is made by the appointing entity or official named in the
Appendix to Tender.

A dispute of any kind arising out of the contract may be referred to the DAB. The
reference must however refer to Sub-Clause 20.4. The decision of the DAB should be
made within 84 days or within such period as approved by both Parties. The
decision is stated to be binding on both Parties who shall promptly give effect to it
unless and until it is revised in amicable settlement or an arbitral award. Sub-
Clause 20.4 also requires that a person dissatisfied with the decision may give a
notice of dissatisfaction and if that notice is not given the decision becomes final and
binding upon both Parties.

1
Sub-Clause 20.5 imposes a requirement for amicable settlement following the DAB
decision.

Sub-Clause 20.6 requires that disputes be settled by arbitration under the ICC
Rules of Arbitration.

Sub-Clause 20.7 deals with the failure to comply with a DAB decision. The sub-
clause provides that in the event that the DAB decision has become final and
binding and a party fails to comply within it then that failure can be referred
straight to arbitration.

Sub-Clause 20.8 deals with the situation where a dispute arises but there is no DAB
in place.

Origin of clause

Clause 20 of FIDIC 1999 had its origins in the World Bank’s Standard Bidding
Documents of 1995. FIDIC’s 1995 edition of the “Orange Book” included a clause that
was similar to Clause 20 of the 1999 Red Book. A Supplement issued in 1996 for the 4th
edn. Red and Yellow books then included a DAB provision.

Cross-references

Reference to Clause 20 is found in the following

clauses: Sub-Clause 1.1.2.9 Definitions “DAB”

Sub-Clause 1.9 Delayed Drawings or Instructions
Sub-Clause 2.1 Right of Access to the Site
Sub-Clause 4.7 Setting Out
Sub-Clause 4.12 Unforeseeable Physical Conditions
Sub-Clause 4.21 Progress Reports
Sub-Clause 4.24 Fossils
Sub-Clause 7.4 Testing
Sub-Clause 8.4 Extension of Time for Completion
Sub-Clause 8.9 Consequences of Suspension

2
Sub-Clause 10.2 Taking Over of Parts of the Works
Sub-Clause 10.3 Interference with Tests on Completion
Sub-Clause 13.7 Adjustments for Changes in Legislation
Sub-Clause 14.11 Application for Final Payment Certificate
Sub-Clause 16.1 Contractor’s Entitlement to Suspend Work
Sub-Clause 17.4 Consequences of Employer’s Risks
Sub-Clause 18.1 General Requirements for
Insurances Sub-Clause 19.4 Consequences of Force
Majeure

3
Sub-Clause 20.1
Contractor’s Claims

This Sub-Clause imposes an obligation on the Contractor to give notice of its entitlement
to a claim “as soon as practicable, and not later than 28 days after he became aware, or
should have become aware, of the event or circumstance” giving rise to the claim. If the
Contractor fails to maintain this time limit the text of the Contract is explicit that “the
Time for Completion shall not be extended, the Contractor shall not be entitled to
additional payment and the Employer shall be discharged from all liability in connection
with the claim.”

Despite this clarity it is common for Contractors to pursue claims of which no or late
notice has been given and the Sub-Clause regularly comes under close analysis.

“if the Contractor considers himself to be entitled to any extension of the Time for
Completion and/or any additional payment”

An event or circumstance may occur which might give the Contractor the right to an
extension of time or additional payment but, at the time the event occurs, the Contractor
is either unaware of the event or does not realise that there is or may be an entitlement.
Therefore, it may not always be clear when a Contractor would “consider himself to be
entitled”.

This failure may occur for a variety of reasons:

 The Contractor did not realise that the event or circumstance had occurred.
 Although the Contractor realised that it had occurred, it did not realise that it
could give rise to an entitlement (because it did not understand the Contract or the
underlying law or because it did not realise the true nature of the event or
circumstance).
 Although the Contractor realised it could give rise to an entitlement, it did not
realise that the particular circumstances would give rise to one.

4
If the Contractor has failed to “consider himself to be entitled” through negligence it is
unlikely that the Engineer, a DAB or an Arbitrator will have sympathy, however if the
failure is not the result of any negligence on its part the situation may be different.

In any event, the Sub-Clause is triggered when the Contractor considers itself to be
entitled and is aware (or should be aware) of the event or circumstance. Arguably then,
only if the Contractor has become aware or should have become aware, should the time
bar be applied to prevent a Contractor from claiming.

“additional payment”

An entitlement for additional payment is clearly for money.1 However, the word
additional limits its scope. The question posed by some commentators is: what are these
payments additional to?2

Bunni reminds us that “a claim is generally taken in practice to be an assertion for

additional monies due to a party” (emphasis of the author).3Claims would therefore not
include the Contractors’ payment applications for the original scope of works.4

Jaeger & Hök have taken a more straightforward approach: additional payments comprise
those that are “over and above [payments] which are already included in the accepted
contract amount”.5 Accepted Contract Amount is a defined term in the Contract and
means the sum agreed by the Parties in the Letter of Acceptance. 6 Anything other than
that is additional. Therefore, payments made for works carried out under the Contract and
payable from the Accepted Contract Amount are not additional.

1
A version of this section titled “Additional payment” was originally published in Gabriel Mulero Clas,
‘Clause 20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 473–74.
2
Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers, FIDIC Contracts: Law and Practice
(Routledge 2009), para 6.189 at p 313.
3
Nael G Bunni, The FIDIC Forms of Contract (3rd edn, 2005), pp 294–95.
4
Ibid at p 294. See also Vivian Ramsey and Stephen Furst, Keating on Construction Contracts (10th edn,
Sweet & Maxwell 2016), para 19-050 at p 669 (“No exact meaning can be given to the term [claims]. It is
used here to describe an application for payment by the contractor arising other than under the ordinary
provisions for payment of the measured value of the work.”).
5
Axel-Volkmar Jaeger and Götz-Sebastian Hök, FIDIC – A guide for Practitioners (Springer 2010), p 365.
6
In the Silver Book 2019, the relevant term is “Contract Price” which, as defined in Sub-Clause 1.1.4.1,
does not change the analysis of additional payment in Clause 20 in any material way.
5
As Jaeger & Hök put it “claims are nothing more than the crystallisation of an
anticipated, not yet specified, part of the Contract Price”.7 This is consistent with the
definition in Sub- Clause 14.1 [The Contract Price]. The Contract Price is the Accepted
Contract Amount subject to additions and/or reductions. These additions include
entitlements to additional payment subject to Clause 20 that may become due pending or
resulting from a Sub-Clause
3.5 [Determinations] agreement or determination. In other words, additional payments
are not part of the Contract Price from the moment the Contract is signed, only from the
moment they become due which is, arguably, sometime during or after the event or
circumstance giving rise to a claim.

Therefore, additional payment is any payment that is additional to the sum that the Parties
originally agreed for the Works when the Contract was signed plus any sums that have
been added or reduced by the time the claim arises. In other words, the payment is
additional if it is not payable out of the Contract Price as adjusted by the time of the
claim.

The word should also be interpreted in the context of the entire clause. An extension of
time is an amount of time that is additional to the Time for Completion provided in the
Appendix to Tender. Also, Sub-Clause 20.1 entitles the Employer to either additional
payment or a reduction in the Contract Price. Therefore, the baseline for any change to
the sums that pass between the Parties is the Contract Price at the time the claim arises.

“under any Clause of these Conditions or otherwise in connection with the Contract”.

This is a very broad provision but not quite as broad as it appears at first glance.
“Conditions” is defined in Sub-Clause 1.1 [Definitions] as including the Particular
Conditions and the General Conditions. However, the provision also refers to
entitlements which arise “otherwise in connection with the Contract”. Sub-Clause 1.1.1.1
defines “Contract” to include “the Contract Agreement, the Letter of Acceptance, the
Letter of Tender, these Conditions, the Specification, the Drawings, the Schedules and the
further documents (if any) which are listed in the Contract Agreement or in the Letter of
Acceptance.” The words “out of”, are then taken to include claims arising out of the
relationship constituted by the contract, and not necessarily out the contract itself.

7
Axel-Volkmar Jaeger and Götz-Sebastian Hök, FIDIC – A guide for Practitioners (Springer 2010), p 365.
6
However, such words are usually interpreted broadly: Premium Nafta Products Ltd (20th
Defendant) & Ors v. Fili Shipping Company Ltd & Ors.8

Assuming the Contractor did consider itself entitled to any extension of time and/or
additional payment it is then obliged to “give notice to the Engineer describing the event
or circumstance giving rise to the claim” … “as soon as practicable, and not later than
28 days after he became aware or should have become aware of the event or
circumstance.”

The date when this notice is to be given is “as soon as practicable” and this is further
qualified by a time limit of 28 days. In other words, the notice must be given as soon as
practicable and within the time limit of 28 days even if this is not practicable.

The requirement to give the notice as soon as practicable is in fact unenforceable because
paragraph 2 of Sub-Clause 20.1 goes on to say:

“If the Contractor fails to give notice of a claim within such period of 28 days, the Time
for Completion shall not be extended, the Contractor shall not be entitled to additional
payment, and the Employer shall be discharged from all liability in connection with the
claim.”

The main purpose of a notice of claim is to alert the Engineer and the Employer that a
claim exists that may result in an additional payment or an extension of time.9 One
arbitral tribunal interpreting the FIDIC 4th 1992 edition stated that the purpose of a notice
“is to put the Engineer (and the Respondent) on alert insofar as circumstances occurring
on site could result in additional costs to the Respondent.”10 One English case held that
the notice of claim must therefore allow the responding party to address the situation
while the problem is still live by investigating it or withdrawing “instructions when the
financial consequences become apparent”.11 This allows the Employer or the
Engineer to stop

8
[2007] UKHL 40.
9
Christopher R Seppälä, ‘Contractor’s Claims Under the FIDIC Contracts for Major Works’, (2005) 21(4)
Construction Law Journal 278, p 287.
10
ICC Interim Award 10847 [2003] (seat England) at [3.1.9].
11
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No. 2) [2007] EWHC 447 (TCC) at
[103].
7
claims from stockpiling.12 A Falkland Islands Supreme Court Judge observed that the
“whole [FIDIC 4th] contractual system is aimed at the early resolution of any queries at
the time the claim arises” when it is most likely that “plant, manpower, experts and
witnesses are still on site” and that it “is designed to avoid prolonged disputes.”13 Jaeger
& Hök add that the purpose of the time bar provisions is to gather the necessary evidence
and allow the Employer to make financial arrangements for claims. 14 The aim is therefore
to warn of the possibility of a claim that may have time and money implications in order
to give the Employer or the Engineer the opportunity (while the problem is still live) to
find a solution or mitigate its effects (if possible), make financial arrangements and/or
gather relevant contemporary information.15

However, the question still remains as to when the 28-day period commences and
expires. The first sentence of Sub-Clause 20.1 establishes the date on which the 28 days
starts to run. This is the date when the Contractor “became aware or should have become
aware of the event or circumstance.” There is both a subjective and an objective test.

The starting point for the time to run is the awareness of an “event or circumstance
giving rise to the claim” which the Contractor considers leads to an entitlement. In
Obrascon Huarte Lain SA v Her Majesty's Attorney General for Gibraltar 16 Mr Justice
Akenhead, stated:

“…there must have been either awareness by the Contractor or the means of
knowledge or awareness of that event or circumstance before the condition
precedent bites. I see no reason why this clause should be construed strictly
against the Contractor and can see reason why it should be construed reasonably
broadly, given its serious effect on what could otherwise be good claims for
instance for breach of contract by the Employer.”

12
Hamish Lal, ‘The Rise and Rise of Time-Bar Clauses for Contractors’ Claims: Issues for Construction
Arbitrators’, Society of Construction Law Paper 142 (September 2007), p 4.
13
Attorney General Falkland Islands v. Gordon Forbes Construction (Falklands) Ltd (No2) [2003]
F.I.S.Ct. at [11].
14
Axel-Volkmar Jaeger and Götz-Sebastian Hök, FIDIC – A guide for Practitioners (Springer 2010), p
365-366.
15
A version of this paragraph was originally published in Gabriel Mulero Clas, ‘Clause 20 Employer’s and
Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 489–90.
16
[2014] EWHC 1028 (TCC) at [312].
8
The word “describing” suggests that the notice requires something more than just a mere
mention or reference to a fact.17 The description should be a “statement or account giving
the characteristics”18 of the event or circumstance. An event is simply an “occurrence”,
i.e., “something that happens”.19 Circumstance is defined in many ways all suggesting
that it refers to the conditions surrounding an event. 20 Simply put, an event is a main story
and a circumstance is a series of details that may either constitute or surround the main
story. The terms are not interchangeable, but they each trigger the Sub-Clause 20.1
procedure.

The description should be detailed enough to allow the Employer and the Engineer to
understand the basic elements of the problem and address it or prepare for any time
and/or financial repercussions.21 On some occasions, it may be clear to the Parties what
some of these elements are and, therefore, their omission may be forgiven. Seppälä states
that the requirement is for a bare notice of claim and that one or two sentences will
suffice; there is no need to specify the amount of time claimed or the basis of the claim
nor provide additional documentation.22

In the Obrascon case, an English Court held that there was no particular form called for
in the 1999 version of Sub-Clause 20.1 other than that it must be in writing, describe the
event or circumstance, and be intended to notify a claim for extension of time and/or
additional

17
A version of this paragraph was originally published in Gabriel Mulero Clas, ‘Clause 20 Employer’s and
Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), p 491.
18
“Description” (Merriam-Webster Online Dictionary, 28 February 2020), see www.merriam-
webster.com/dictionary/description (accessed 6 March 2020).
19
“Event” (Merriam-Webster Online Dictionary, 8 February 2020), see www.merriam-
webster.com/dictionary/event (accessed 6 March 2020).
20
“Circumstance” (Merriam-Webster Online Dictionary, 25 February 2020), see www.merriam-
webster.com/dictionary/circumstance (accessed 6 March 2020) (“a condition, fact, or event accompanying,
conditioning, or determining another: an essential or inevitable concomitant”; “a subordinate or
accessory… fact or detail”; “a piece of evidence that indicates the probability or improbability of an
event”; “the sum of essential and environmental factors (as of an event or situation)”; “state of affairs:
eventuality”; and/or “an event that constitutes a detail (as of a narrative or course of events)”).
21
A version of this paragraph was originally published in Gabriel Mulero Clas, ‘Clause 20 Employer’s and
Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 491–92.
22
Christopher R Seppälä, ‘Contractor’s Claims Under the FIDIC Contracts for Major Works’, (2005) 21(4)
Construction Law Journal 278, p 285.
9
payment under or in connection with the Contract. 23 The Court looked at two letters and
one progress report on which a Contractor relied for its claims and held that:24
 a letter advising that rock was encountered on Site on a specific day at a precise
point of excavation on a length of tunnel that stated that “…the excavation of all
rock will entitle [the Contractor] to an extension of time…” was compliant despite
the judge’s finding that it was “widely drawn”;
 a progress report that stated “[t]he adverse weather condition (rain) have [sic]
affected the works” was clearly not a notice of claim; and
 a letter stating that rainfall in a particular month has flooded the site and thus
“come into contact with the contaminated ground…and we are unable to
discharge this rainfall from site… In our opinion the foregoing will entitle us to
an extension of time… […] is not a notice of claim about being delayed by
weather actually whilst working” in that particular month but would be “good
notice for any critical delay caused or to be caused by the contaminated ponded
water”.

The Obrascon case also stated that a notice of claim must be recognisable as a “claim”.25
In other words, the notice should expressly request or assert an entitlement or relief that
arises from the event or circumstance described. Seppälä also noted that “the conclusion
of the FIDIC drafting committee was that there must be a notice of claim within 28 days
for there to be a valid claim so that all involved are aware that there is an event or
circumstance where extra payment or time may be due to the Contractor.” [emphasis of
the author]26 Akenhead J., gave useful guidance by way of the examples above. 27 The
notice should first describe the specific event or circumstances that caused the problem
and then state that it will entitle the Contractor to one or both of the claimable
entitlements.28

“as soon as practicable, and no later than 28 days after the claiming Party became
aware, or should have become aware, of the event or circumstance”
23
[2014] EWHC 1028 (TCC) at [313]. A version of this paragraph was originally published in Gabriel
Mulero Clas, ‘Clause 20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide
(2020), pp 492–93.
24
[2014] EWHC 1028 (TCC) at [315 (a)].
25
Ibid at [313].
26
Christopher R Seppälä, ‘Contractor’s Claims Under the FIDIC Contracts for Major Works’, (2005) 21(4)
Construction Law Journal 278, p 287.
27
[2014] EWHC 1028 (TCC) at [315 (a)].
28
A version of this paragraph was originally published in Gabriel Mulero Clas, ‘Clause 20 Employer’s and
Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 493–94.
10
An arbitral tribunal29 dismissed claims for an extension of time and additional payment
for failure to submit a notice of claim in time. The tribunal held that the 28-day time limit
of Sub-Clause 20.1 does not start to run “from the day the Contractor ‘considers itself
entitled to an extension of time and additional payment’, but rather from the day the
Claimant became or should have become aware of the event or circumstance giving rise
to the claim.” The Arbitral Tribunal found that Sub-Clause 20.1 does not allow for a
subjective intention. In this regard the Arbitral Tribunal differed from the DAB member
who had found that the Claimant should not be denied its rights to claim under a contract
by reason of a limitation clause which was arguably ambiguous. 30 The Arbitral Tribunal
found that there was no ambiguity in Sub-Clause 20.131 and therefore the question of how
the Sub- Clause should be interpreted having regard to cannons of construction did not
arise.

Akenhead J. in the Obrascon case held that an “extension of time can be claimed either
when it is clear that there will be delay (a prospective delay) or when the delay has been
at least started to be incurred (a retrospective delay).”32 This conclusion was based on a
Yellow Book 1999 Sub-Clause 8.4 [Extension of Time for Completion] which states that
the Contractor shall be entitled to an extension of time if completion of the Works “is or
will be delayed” by the events or circumstances.33 Akenhead J. explained that the wording
of the provision did not include “whichever is the earliest”.34 As a result, in England and
Wales, a notice of claim for an extension of time can be served as early as when the
Contractor first becomes aware that the Works will be delayed in the future or as late as
28 days from the first day of the incurred delay.35

A Condition Precedent

The wording of the first 28-day notice is significantly different from the other periods in
which the Contractor must carry out obligations; for example, the obligation to give a
fully

29
ICC Final Award 16765 ICC Dispute Resolution Bulletin 2015 No 1, p.101. at [167].
30
Ibid at [157].
31
Ibid at [163].
32
[2014] EWHC 1028 (TCC) at [312].
33
Ibid at [312].
34
Ibid at [312].
35
A version of this paragraph was originally published in Gabriel Mulero Clas, ‘Clause 20 Employer’s and
Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), p 494.
11
detailed claim in 42 days. In National Insurance Property Development v NH
International (Caribbean) Limited36 the Court agreed with the arbitrator’s conclusion
that: “…the 28 day notice requirement to bring the claim was a condition precedent to
recovery. He was of the further opinion that the other requirements under the clause were
not conditions precedent to recovery and therefore a failure to satisfy those requirements
did not inevitably mean that the claim should fail.” Likewise, in ICC Interim Award
1615537 the arbitral tribunal agreed that the 42-day time period for providing further
particulars was not a condition precedent. The tribunal stated that: “there is nothing in
the FIDIC General Conditions to the effect that if a party fails to provide information
or evidence requested to support its claim to an Engineer, the claim will be null
and void or treated as though it never existed.” Therefore, whereas the 28 days is
generally considered to be a condition precedent, non-compliance with which may bar a
Contractor from claiming time or money, the failure to meet the other claim procedure
requirements may not necessarily be fatal.

It has sometimes been argued that where an Employer causes a delay it should not be
relieved of its obligation to award an extension of time or pay costs, simply because the
Contractor has failed to issue a timely notice. Equally the Employer should not be entitled
to claim delay damages. In some civil law countries, there are overarching principles of
good faith that may intervene to affect the contractual relationship between the parties
and may override the time-bar clause, with the effect that the time bar clause may be
struck down. In common law countries it has been argued that a party should not be able
to take advantage of its own wrong to avoid a contractual obligation; this is referred to as
the “prevention principle”. 38

However, a somewhat recent Court of Appeal decision appears to have now settled the
position that the prevention principle is not a general rule of law and cannot be used to

36
Claim Number CV2008-04881 in the High Court of Justice of Trinidad and Tobago (unreported) at [28],
see http://webopac.ttlawcourts.org/LibraryJud/Judgments/HC/j_jones/2008/cv_08_04998DD21oct2009.pdf
(accessed 15 March 2021).
37
(2015) (seat Paris).
38
Rede v Farr [1817] 6 M & S 121 at [124]-[125], 105 ER 1188 at [1189]-[1190]; Alghussein
Establishment v Eton College [1991] 1 All ER 267; Holme v Guppy [1838] 3 M. & W. 548.
12
override clear contractual provisions. In North Midland Building Ltd v Cyden Homes Ltd39
Coulson LJ set out five reasons why the prevention principle would not apply.40

“The first is that the prevention principle is not an overriding rule of public or
legal policy. There is no authority for such a proposition: it is not expressed in
those terms in Multiplex or any of the other authorities noted above. …

The second is that the prevention principle is not engaged here because there is
no contravention of either principle (i) or (ii) identified in Multiplex (paragraph
15 above). As I have said, pursuant to clause 2.25.5, "any impediment, prevention
or default, whether by act or omission, by the Employer" gave rise to a prima
facie entitlement on the part of the appellant to an extension of time. Those could
be acts or omissions which were permitted by the contract but still gave rise to an
entitlement to an extension of time (principle (i)). In this way, time was not set at
large because the contract provided for an extension of time on the occurrence of
those events (principle (ii)).
…
The final reason for my rejection of Ground 1 is perhaps the most important of all
…. There is no suggestion in the authorities noted above that the parties cannot
contract out of some or all of the effects of the prevention principle indeed, the
contrary is plain. Salmon LJ's judgment in Peak v McKinney, set out at paragraph
33 above (and in particular the passage in bold), expressly envisaged that,
although it had not happened in that case, the parties could have drafted an
extension of time provision which would operate in the employer's favour,
notwithstanding that the employer was to blame for the delay.”

“the Time for Completion shall not be extended, the Contractor shall not be entitled to
additional payment, and the Employer shall be discharged from all liability in connection
with the claim.”

39
[2018] EWCA Civ 1744.
40
The North Midland v Cyden Homes case dealt with concurrent causes of delay. However, some of the
principles set out by Coulson LJ appear to apply equally to the situation where the parties stipulated that a
notice was required.
13
Much has been discussed on whether this provision has the teeth it intends to have. This
depends on two issues: (1) whether the provision is in fact a condition precedent; and (2)
whether the condition precedent is enforceable.41 Commentators have argued that the
wording of Sub-Clause 20.1 is a condition precedent that bars claims if not complied with
within the 28-day period.42 In England and Wales, for a notice to be considered a
condition precedent, the Bremer test requires that: (1) the clause specify a time limit for
service of the notice; and (2) the clause or contract as a whole state that non-compliance
with such time limit will result in a loss of rights. 43 Sub-Clause 20.1 seems to pass this
test.44 Even though the question was not in dispute, Akenhead J., stated that “[i]t is clear
and indeed was unequivocally and properly accepted by [counsel] for [the contractor] in
closing that Clause 20.1 imposes a condition precedent”.45 In any case, whether the
provision is a condition precedent will depend on the applicable law.

On the question of whether the provision is enforceable, each jurisdiction has its own set
of issues to consider.46 As a result, there is no consensus as to whether the time bar has
teeth.

An arbitral tribunal of the Bulgarian Chamber of Commerce and Industry held in 2012 47
that the FIDIC time bar did not constitute a waiver of rights. Such a waiver would have

41
A version of this paragraph was originally published in Gabriel Mulero Clas, ‘Clause 20 Employer’s and
Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 495–96.
42
Hamish Lal, ‘The Rise and Rise of Time-Bar Clauses for Contractors’ Claims: Issues for Construction
Arbitrators’, Society of Construction Law Paper 142 (September 2007), p 7; Ellis Baker, Ben Mellors,
Scott Chalmers and Anthony Lavers, FIDIC Contracts: Law and Practice (Routledge 2009), para 6.224 at
p 321.
43
Bremer Handels GmBH v Vanden Avenne Izegem PVBA [1978] 2 Lloyd’s Rep 109 (HL).
44
Hamish Lal, ‘The Rise and Rise of Time-Bar Clauses for Contractors’ Claims: Issues for Construction
Arbitrators’, Society of Construction Law Paper 142 (September 2007), p 7; Ellis Baker, Ben Mellors,
Scott Chalmers and Anthony Lavers, FIDIC Contracts: Law and Practice (Routledge 2009), para 6.224 at
p 321.
45
Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 (TCC) at
[311].
46
A version of this and the subsequent three paragraphs was originally published in Gabriel Mulero Clas,
‘Clause 20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 496–97.
47
See Martin Zahariev and Boyana Milcheva, “FIDIC Multi-Tier Dispute Resolution Clauses in the Light
of Bulgarian Law” (Kluwer Arbitration Blog, 22 March 2017),
http://arbitrationblog.kluwerarbitration.com/2017/03/22/fidic-multi-tier-dispute-resolution-clauses-in-the-
light-of-bulgarian-law (accessed 6 March 2020).
14
voided the provision under Bulgarian law. Likewise, the Appellate Court of Sofia48
rejected the argument that the Red Book 1992 notice provision was void on the basis that
it contradicted Bulgarian mandatory procedural rules and public order. The decision was
confirmed on appeal.49

In Northern Territory, Australia, where the Contractor failed to serve the notice on time,
the Supreme Court held that the prevention principle precluded the Employer’s right to
claim liquidated damages if the delay was caused by it. 50 An England and Wales Court
held that this Australian judgement did not align with English law because notice time
bars “serve a valuable purpose”, that is, notices allow contemporaneous investigation of
matters and provide an opportunity to retract instructions that result in unintended costs.51
Another England and Wales Court stated in obiter dictum, in the context of a standard
FIDIC form, that “contractors on building projects generally know when a contractor is
in delay or whether the work has been disrupted and so giving notice of the relevant
event within 28 days should not be unduly onerous”.52

In Germany, some courts have found that notices may be conditions precedent to a
claim.53 However, commentators have argued that the unequal treatment of the parties in
respect of the time bar provision in FIDIC 1999 puts into question its applicability under
German law.54 In France, a time bar provision must be “reasonable under the
circumstances” for it

48
Decision No. 1966 of 13.10.2015 in the commercial case No. 4069/2014, Appellate Court – Sofia,
Commercial Division; see Martin Zahariev and Boyana Milcheva, “FIDIC Multi-Tier Dispute Resolution
Clauses in the Light of Bulgarian Law” (Kluwer Arbitration Blog, 22 March 2017),
http://arbitrationblog.kluwerarbitration.com/2017/03/22/fidic-multi-tier-dispute-resolution-clauses-in-the-
light-of-bulgarian-law (accessed 6 March 2020).
49
Court Ruling No. 59 of 03.02.2017 under case No. 788/2016 of the Supreme Court of Cassation, I
Commercial Division; see Martin Zahariev and Boyana Milcheva, “FIDIC Multi-Tier Dispute Resolution
Clauses in the Light of Bulgarian Law” (Kluwer Arbitration Blog, 22 March 2017), see
http://arbitrationblog.kluwerarbitration.com/2017/03/22/fidic-multi-tier-dispute-resolution-clauses-in-the-
light-of-bulgarian-law (accessed 6 March 2020).
50
Gaymark Investments Pty Ltd v Walter Construction Group Ltd [1999] NTSC 143.
51
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No. 2) [2007] EWHC 447 (TCC) at
[103].
52
Commercial Management (Investments) Ltd v Mitchell Design and Construct Ltd & Another [2016]
EWHC 76 (TCC) at [83].
53
Axel-Volkmar Jaeger and Götz-Sebastian Hök, FIDIC – A guide for Practitioners (Springer 2010), p
359.
54
Dr Alexander Kus, Dr Jochen Markus and Dr Ralph Steding, ‘FIDIC’s New “Silver Book” under the
German Standard Form Contracts Act’ [1999] ICLR 533, 547–49.
15
to be valid55 and in Peru56 and some Arab jurisdictions such as Saudi Arabia and Egypt,
the FIDIC notice of claim time bar may be considered unenforceable on the basis that
statutory limitation provisions of those states may not be modified.57

“The Contractor shall keep such contemporary records as may be necessary to

substantiate any claim…”

The Contractor has an obligation to maintain contemporary records that are “necessary to
substantiate any claim.”58 These include documents and other records on which the
Contractor will seek to rely in order to prove the elements of its claim. A record could be
made in physical or electronic form and could be anything that may be permanent such as
a document, a photograph, a sound or video recording, etc. Records must be kept either
on Site or somewhere else acceptable to the Engineer.59 Contemporaneous records are
important because they have a higher evidentiary weight because they were generated
when the memory of the recorder was fresh.

Definition of “contemporary records”

In H v Schering Chemicals60 Justice Bingham referred to records, under the Civil

Evidence Act 1968, as: “records which a historian would regard as original or primary
sources, that is documents which either give effect to a transaction itself or which contain
a contemporaneous register of information supplied by those with direct knowledge of the
facts.” In Attorney General Falkland Islands v. Gordon Forbes Construction (Falklands)

55
Marc Frilet, “France”, in Robert Knutson (ed), FIDIC: An Analysis of International Construction
Contracts (Kluwer Law International 2005), p 84.
56
Jaime Gray Chicchón and Jonnathan Bravo Venegas, “La Fatalidad de los Reclamos en los Contratos de
Construcción FIDIC: A propósito de los Dispute Boards” in Roberto Hernández García (ed), Dispute
Boards en Latinoamérica: Experiencias y Retos (2014), pp 41-48 (the question appears to be still in debate
in Peru; however, one argument is that the 28-day period in Sub-Clause 20.1 may be considered an attempt
to amend the limitation provision for expiry of rights (“caducidad”) by way of agreement, which Article
2004 of the Civil Code prohibits).
57
Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers, FIDIC Contracts: Law and Practice
(Routledge 2009), para 6.223 at p 321.
58
A version of this and the subsequent two paragraphs was originally published in Gabriel Mulero Clas,
‘Clause 20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 499-500
& 502.
59
“Employer” in the Silver Book 1999.
60
[1983] 1 WLR 143 at [146].
16
Ltd (No2), Judge Sanders applied this definition to conclude that a witness statement
produced for the purpose of litigation would rarely be considered a record for the
purposes of proving a fact in the absence of other records.

In A.G. Falkland Islands, Judge Sanders described contemporary records as:61 “original
or primary documents, or copies thereof, produced or prepared at or about the time
giving rise to the claim, whether by or for the Contractor or Employer”. Judge Sanders
also provided a very useful guide of what contemporary should mean in the context of
FIDIC 4th Edition, in summary, it “does not have to be instant” and it may even be
months later but it “would depend on the facts surrounding the making of that record”,
that is, “the custom and practice of the industry and […] the circumstances in which the
record came into being in making that finding”.62

“as may be necessary”

Each claim will require its own collection of records each aimed at proving its different
elements.63 For example, correspondence, minutes of meetings and monthly reports
recording that the Contractor is unable to enter the Site due to delays of the Employer in
acquiring land or interference by other Contractors on Site may be useful in a Sub-Clause
2.1 claim to prove cause of lack of access.

Records may also be useful in demonstrating effects on time and money. Records such as
properly kept daily work sheets may be useful to show that a Contractor has not had
access to Site or has worked on an activity for a particular amount of time. For an
extension of time claim the Contractor would also have to show that Time for
Completion was delayed, i.e., that there was critical delay and records may be useful to
determine criticality. Such records may include programmes, daily record sheets and
progress reports. For claims for additional payment, information about costs incurred
may be necessary such as equipment purchase or rental invoices, labour time sheets and
salary records, accounting schedules, etc.

61
Attorney General Falkland Islands v Gordon Forbes Construction (Falklands) Ltd (No 2) [2003] FISCt
at [11].
62
Ibid at [24].
63
A version of this and the subsequent two paragraphs was originally published in Gabriel Mulero Clas,
‘Clause 20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 504–05.
17

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The Engineer64 may monitor the record keeping, instruct the Contractor to keep further
contemporary records, inspect the records or instruct the submission of copies by the
Contractor. However, this does not necessarily imply accuracy or completeness of the
records. It remains the obligation of the Contractor to prove its claim and therefore it
must keep sufficient records to prove entitlement once a claim arises.

“Within 42 days … the Contractor shall send to the Engineer a fully detailed claim …”

The Contractor must submit to the Engineer 65 a fully detailed claim within 42 days after
the Contractor becomes aware (or should have become aware) of the event or
circumstance giving rise to the claim.66 Alternatively, the time period may be amended by
agreement between the Contractor and the Engineer.67

The notice of claim should have already described the event or circumstance giving rise
to the claim. The fully detailed claim that follows is the main submission where the
Contractor sets out its case in detail. It includes “full supporting particulars of the basis
of the claim and of the extension of time and/or additional payment claimed.”

Not only must the Contractor prove an entitlement to its claim, but it must also prove the
loss and/or extension of time. Particulars, therefore, need to be provided which include
calculations sufficiently detailed to justify the amounts of the relief(s) claimed. If
attaching the records physically or electronically would be too onerous, making express
reference to the records and inviting the Engineer to inspect them should suffice unless
the Engineer instructs copies to be made.

“continuing effect”

If the event or circumstance has continuing effect, the first and subsequent fully detailed
claims up to the penultimate one shall be considered interim and the last one final. Each
interim one shall be sent at monthly intervals and give the accumulated delay and/or
amount claimed in addition to any other particulars as may be reasonably required by the
64
“Employer” in the Silver Book 1999.
65
Ibid.
66
A version of this and the subsequent two paragraphs was originally published in Gabriel Mulero Clas,
‘Clause 20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), pp 505–07.
67
By proposal of the Contractor.
18

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Engineer. The final fully detailed claim shall be sent within 28 days after the end of the
continuing effects that result from the event or circumstance.

“the Engineer shall respond with approval, or with disapproval and detailed comments
… The Engineer shall proceed in accordance with Sub-Clause 3.5 …”

At paragraph 6 of Sub-Clause 20.1, The Engineer is then required to consider the

evidence and within a further 42 days give its approval or disapproval of the claim with
detailed comments. Then, at paragraph 8 of Sub-Clause 20.1, the Engineer is also
required to proceed in accordance with Sub-Clause 3.5 to attempt to achieve agreement
or otherwise determine the claim. Therefore, the FIDIC 1999 forms appear to provide a
two-step claim examination process.68 The Engineer69 has to respond to the fully detailed
claim within 42 days of its receipt, either approving or disapproving the claim even if
further particulars have been requested (in which case the response would cover the
“principles of the claim”). In addition, the Engineer70 has to proceed with the Sub-Clause
3.5 procedure in order to agree or determine the extension of time and/or additional
payment.

The two-step process creates unnecessary procedural confusion on the nature of each
step, the effects they have on the rights and obligations of the Parties and the Engineer
and the relationship between them.71 For example, it is unclear whether both steps may
occur concurrently or sequentially and, it is suggested, any preliminary decision made by
the Engineer runs the risk of vitiating and derailing the agreement part of the Sub-Clause
3.5 procedure. Further, the FIDIC 1999 forms appear to allow flexibility in complying
with the 42-day period and the Sub-Clause 3.5 agreement or determination procedure
while expressly affording none whatsoever in respect of the notice of claim time bar.

Burden and Standard of Proof

The Contractor has the burden of proof in making and substantiating its claim. However,
Engineers often ask to what standard of proof the Contractor is required to prove its
claim.

68
A version of this and the subsequent paragraph was originally published in Gabriel Mulero Clas, ‘Clause
20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), p 511.
69
“Employer” in the Silver Book 1999.
70
Ibid.
71
Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers, FIDIC Contracts: Law and Practice
(Routledge 2009), paras 6.258–6.275 at pp 328–32.
19
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There is no single answer because it will depend on the substantive law. For example, the
following statement by Baroness Hale is often cited as indicative of what is required to be
proved in England and Wales:

“In our legal system, if a judge finds it more likely than not that something did
take place, then it is treated as having taken place. If he finds it more likely than
not that it did not take place, then it is treated as not having taken place. He is not
allowed to sit on the fence. He has to find for one side or the other. Sometimes the
burden of proof will come to his rescue: the party with the burden of showing that
something took place will not have satisfied him that it did. But generally
speaking a judge is able to make up his mind where the truth lies without needing
to rely upon the burden of proof.”72

Certain civil law jurisdictions such as Germany and France apply a different standard called
intime conviction.73 In the words of Christoph Engel:74

“In the leading case, the German Supreme Court has made it clear that the judge
may not content herself with a mere assessment of probabilities. Even a very high
probability would not be enough. Initial doubt is acceptable, but the judge must
have overcome this doubt. This is not meant to defer to judicial discretion, but to
judicial intuition. The standard is an empirical one. The crucial feature is ‘the
psychological state of taking a fact for true.’ The test is predominantly built on
‘ethos, experience and intuition.’”

72
B (Children), Re [2008] UKHL 35 at [32].
73
See Section 286(1) of the German Code of Civil Procedure (“(1) The court is to decide, at its discretion
and conviction, and taking account of the entire content of the hearings and the results obtained by
evidence being taken, if any, whether an allegation as to fact is to be deemed true or untrue. The judgment
is to set out the reasons informing the conviction of the judges.”), translated in https://www.gesetze-im-
internet.de/englisch_zpo/englisch_zpo.html (accessed 23 February 2021); see also Article 353 of the
French Code of Criminal Procedure.
74
Christoph Engel, ‘Preponderance of the Evidence Versus Intime Conviction: A Behavioral Perspective on
a Conflict between American and Continental European Law’, (2009) 33 Vermont Law Review 435, p 441.
20

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General Provisions

The Engineer has an obligation to include in each Payment Certificate75 “such amounts
for any claim as have been reasonably substantiated as due under the relevant provision
of the Contract.” In other words, the Engineer must certify for payment those claim
amounts that the Contractor has reasonably substantiated as due in its claim. It is notable
that this provision does not expressly specify the period to which it applies but that it sits
between the provision about the Engineer’s initial response and the provision about the
Engineer proceeding with Sub-Clause 3.5. Therefore, it may be arguable that it should at
least apply to the period of time that starts with the Engineer’s initial response. However,
this is not clearly stated in the forms. It is suggested that an interpretation that allows the
provision to apply to the period of time between the Engineer’s initial response and the
conclusion of an agreement in a Sub-Clause 3.5 procedure, runs the risk of vitiating and
derailing the agreement process.

According to paragraphs 3 and 9 of Sub-Clause 20.1, the requirements in this Sub-Clause

may be complemented by specific requirements under other provisions of the Contract,
such as other required notices.76 For example, in a Sub-Clause 4.12 [Unforeseeable
Physical Conditions] claim, the Contractor is required to serve a notice describing the
Unforeseeable physical conditions it has encountered. This notice is in addition to a
notice of claim, it must be served as soon as practicable and it is intended to allow the
Engineer to inspect the physical conditions in question. Paragraphs 3 and 9 of Sub-Clause
20.1 provide that both notices need to be complied with.

Also, paragraph 9 of Sub-Clause 20.1 contains a catch-all provision that incentivises the
Contractor’s proper compliance with any of the claims procedure requirements in Sub-
Clause 20.1 and elsewhere in the Contract. This is additional to the time bar for the notice
of claim, i.e., if the claim is time barred, this provision would not need to come into play.
Paragraph 9 of Sub-Clause 20.1 provides that determinations, DAB decisions and awards
shall take into account the extent to which failure to comply “prevented or prejudiced
proper investigation of the claim”. This may include, for example, failure to serve
monthly interim fully detailed claims or failure to serve the notice of Unforeseeable
physical

75
In the Silver Book 1999 it is the Employer who has the obligation “in each interim payment”.
76
A version of this and the subsequent paragraph was originally published in Gabriel Mulero Clas, ‘Clause
20 Employer’s and Contractor’s Claims’, FIDIC 2017 A Practical Legal Guide (2020), p 523.
21

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conditions pursuant to Sub-Clause 4.12. However, this provision does not specify how
non- compliance shall be considered nor what measures may be implemented. It is
suggested that they should follow considerations of reasonableness and proportionality.

Sub-Clause 20.2
Appointment of the Dispute Adjudication Board

“Disputes shall be adjudicated by a DAB in accordance with Sub-Clause 20.4

[Obtaining Dispute Adjudication Board’s Decision]”

The word “shall” is intended to make this a mandatory obligation. In many countries the
parties will be required to carry out any pre-arbitration/litigation procedures prior to
commencing arbitral proceedings (or litigation). The case of Midroc Water Drilling Co
Ltd v Cabinet Secretary, Ministry of Environment, Water & Natural Resources & 2
others (Civil Suit No 267 of 2013) was a Kenyan case which concerned the FIDC 4th
edition. The Defendant argued that a lawsuit was premature. The Court made an order to
stay the proceedings so that the Parties could comply with the settlement procedure in the
Contract. Judge J Kamu stated:

“The issue between the parties is not a legal issue that should be decided by this
court but rather by the Engineer in the first instance as parties are bound by the
terms of their contract. The dispute is technical in nature as the same deals with
issuance of certificates by the Engineer. The court therefore agrees with the 2nd
and 3rd Defendants’ submissions that the suit herein is premature …”.

However, the parties may vary or waive the requirement for a DAB. In Interim Award in
ICC Case 16083 (2010), an arbitral tribunal found that the Parties’ conduct confirmed
that neither Party considered a DAB to be an essential step prior to referring disputes to
arbitration and the arbitral tribunal's jurisdiction in the arbitration was affirmed. This was
a case under FIDIC’s Silver Book 1999.

22

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“The Parties shall jointly appoint a DAB”.

The DAB agreement foresees a standing DAB of one or three members. 77 It is of course
possible for the Parties to agree only an ad-hoc DAB who shall only act as and when
disputes arise. It goes without saying that extreme caution must be exercised when
amending the Contract to allow for an ad-hoc dispute board. Poor drafting will lead to
disputes. In the Final Award in ICC Case 18096 (2012)78, concerning an amended Red
Book 1999, poor drafting of the Dispute Adjudication Agreement led to questions as to
whether the DAB was standing (as usual in FIDIC Red Book 1999) or ad-hoc. This led to
a dispute in relation to the termination of the Dispute Adjudication Agreement. The
Claimant argued that as the sole DAB member was appointed on an ad-hoc basis, its
mandate was terminated with the issuance of the first DAB decision. By contrast, the
Respondent argued that the DAB was standing and, therefore, its mandate could be
terminated only by the mutual consent of the Claimant and the Respondent pursuant to
Clause 7 of the General Conditions of Dispute Adjudication Agreement. The Respondent
further asserted that even if the sole arbitrator had been appointed on an ad-hoc basis, the
rule on termination under Clause 7 would still apply. The sole arbitrator found that as the
Parties did not modify the pertinent provisions of the FIDIC Red Book 1999, the Dispute
Adjudication Agreement could only be terminated by mutual consent of Claimant and
Respondent pursuant to Clause 7. As such consent was not reached, the Dispute
Adjudication Agreement was not terminated by issuance of the first DAB decision.

In the Swiss Supreme Court Decision 4A 124/2014 concerning the FIDIC Red Book 1999
the Court stated:

“It must be noted finally that paragraph 5 of Sub-Clause 20.2 of the General
Conditions requires the parties to enter into a DAA incorporating by reference
the General Conditions of Dispute Adjudication Agreement contained in the
annex to the aforesaid General Conditions with the three members of the DAB
individually. According to clause 2, paragraph 1 of the General Conditions, the
DAA comes into force when the principal, the contractor, and all members of the
DAB have signed it. Failing this, legal writing considers that there is no validly
constituted DAB and that the only remedy a party has when faced with the others
refusal to sign the DAA
77
This is different to Yellow and Silver Books
78
ICC Dispute Resolution Bulletin 2015 No 1, at p 126.
23

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 is to go to arbitration directly pursuant to Sub-Clause 20.8 (Baker, Mellors,
Chalmers and Lavers, op. cit., p. 520, n. 9.71). This means that, in the case at
hand, the majority arbitrators were right to find that the DAB was not “in place”
when the arbitration request was filed, due to the parties having failed to sign a
DAA with all of its appointed members.”.

The Court found that there was no clause to compel the Respondent to sign the DAA and
no evidence that the Respondent had been acting in bad faith. The Court said: “Pursuant
to these rules and considering the process of constitution of the DAB, it is indeed
impossible to blame the Respondent for losing patience and finally skipping the DAB
phase despite its mandatory nature in order to submit the matter to arbitration.”
However, it will not always be the case that a party can simply skip the DAB phase and
go directly to arbitration. In Divine Inspiration Trading 130 (Pty) Ltd v Aveng Greenaker
& Ors79 an arbitral tribunal held that it did not have jurisdiction to hear a dispute where
the DAB process had not been put into operation. Similarly, the High Court in
Peterborough City Council v Enterprise Managed Services Ltd80 stayed litigation for the
parties to adjudicate under a FIDIC Silver Book 1999 contract.81

In countries where the Courts will not enforce DAB decisions, for example Romania, it
may be asked whether any DAB is sensible. Of course, the dispute avoidance provisions
may still have some value and there are contractual sanctions for non-compliance with
DAB decisions.

“The agreement between the Parties …. shall incorporate by reference the General
Conditions of Dispute Adjudication Agreement.”

The Dispute Adjudication Agreement is bound into the Red Book at pages 63 to 66. This
contains the details and obligations of the DAB Member. It also sets out the obligations
of the Employer and Contractor to the DAB Member. The Dispute Adjudication
Agreement has its own disputes procedure.

79
[2016] ZAGPJHC 99.
80
[2014] EWHC 3193.
81
See also Partial Award in Case 16262 ICC Dispute Resolution Bulletin 2015, No 1 at p 75.
24

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Each party is responsible for paying one-half of the DAB’s remuneration. The payment
of the DAB Member is dealt with in more detail at Clause 6 of the General Conditions of
Dispute Adjudication Agreement in the currency named in the Dispute Adjudication
Agreement. This comprises:

a. a monthly fee/retainer;
b. a daily fee;
c. all reasonable expenses; and
d. any taxes properly levied in the Country.

The monthly fee/retainer pays the DAB for:

a. being available on 28-days' notice for all meetings, site visits and hearings under
the DAB Procedural Rules;
b. becoming and remaining conversant about the progress of the Works and
maintaining a current working file of documents;
c. all office and overhead expenses including secretarial services, photocopying and
office supplies incurred in connection with its duties; and
d. all other services performed except for those covered by the daily fee and
reasonable expenses.

The daily fee, is payment in full for each day:

a. or part of a day, up to a maximum of two days’ travel time in each direction, for
the journey between the DAB Member’s home and the site, or another location of
a meeting with the other members (if any);
b. spent on attending site visits, hearings or preparing decisions; and
c. spent in preparation for a hearing and studying written documentation and
arguments from the Parties submitted.

All reasonable expenses include necessary travel expenses, hotel and subsistence and
other direct travel expenses, including visa charges incurred in connection with the DAB
Member’s duties, as well as the cost of telephone calls (and video conference calls, if
any, and internet access), courier charges and faxes. The DAB Member must provide the
Parties with a receipt for each item of expense in excess of 5% of the daily fee.

25

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The Contractor initially pays the invoices within 56 days and then applies for payment of
half of the costs in the next Statement to the Employer.

Under Clause 3 the General Conditions of the Dispute Adjudication Agreement each
DAB Member must warrant and agree to remain independent and impartial during the
term of the DAB, and Clause 4 of the General Conditions of the Dispute Adjudication
Agreement sets out the obligations of the DAB Member, including requirements of
independence and impartiality.

Sub-Clause 20.3
Failure to Agree Dispute Adjudication Board

The Sub-Clause provides the circumstances where the parties fail to agree on the DAB.
The circumstances include:

 where the Parties fail to agree on a sole member by the date specified in the first
paragraph of Sub-Clause 20.2;
 where either Party fails to nominate a member of a DAB of three persons;
 where the Parties fail to agree upon the appointment of a third member of the
DAB; or
 where the Parties fail to agree upon a replacement member within 42 days.

If one of these events occurs then the appointing entity named in the Appendix to Tender,
shall, upon a request by either or both parties, appoint this member of the DAB. The
appointment by the appointing entity shall be final and conclusive and each party is
responsible for paying one-half of the remuneration of the appointing entity.

The Partial Award in ICC Case 15956 (June 2010) illustrates the problems and delays
which can occur with the appointing process. This case concerned an amended FIDIC
Red Book 1999. The arbitration proceedings were held in a city in Eastern Europe. The
Parties failed to agree on a standing DAB within the prescribed time period of 42 days
after the Commencement Date. The Contractor requested on several occasions that the
Employer agree to the appointment of a DAB. The Employer considered the requests but
never responded to the Contractor despite the Engineer’s recommendation to do so.
Ultimately,

26

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the Contractor applied to the President of FIDIC and a sole DAB was appointed. Two
DAB decisions were issued. The Contractor sought the enforcement of the two DAB
decisions. The Employer argued that the DAB was not properly appointed. In this case,
the arbitral tribunal found that the DAB had been properly appointed and ordered the
Employer to comply with the DAB decisions, the merits of the case being reserved.

Partial Award in ICC Case 16570 (March 2012) concerned a FIDIC Yellow Book 1999.
The arbitration proceedings were held in a city in Eastern Europe. The Parties had agreed
on a standing DAB but failed to constitute it. The Contractor requested that the
Employer agree to the appointment of a DAB to decide upon the validity of the
termination of the Contract. The Employer did not respond. Therefore, the Contractor
applied to the President of FIDIC and a sole DAB was appointed. Two DAB decisions
were issued. The Employer did not participate in the DAB proceedings but did serve a
notice of dissatisfaction with the DAB decisions. The Contractor sought the enforcement
of the two DAB decisions. The Employer argued that the DAB had not been properly
constituted as the DAB agreement had not been entered into within the prescribed time
period and that once a Contract is terminated it is not possible to appoint a DAB. The
Employer also argued that the DAB decisions (which were binding but not final) could
not be summarily enforced. The Arbitral Tribunal found that once a Contract is
terminated with no DAB in place, Sub- Clause 20.8 requires the Parties to go directly to
arbitration to solve any dispute. The DAB constituted by the Contractor unilaterally after
the termination had no jurisdiction to solve the disputes referred to it and its decisions
were not binding on the Employer.

Sub-Clause 20.4
Obtaining Dispute Adjudication Board’s Decision

“If a dispute (of any kind whatsoever) arises between the Parties in connection with, or
arising out of, the Contract … either Party may refer the dispute in writing to the DAB
for its decision. ”.

In contradistinction to the use of the word “shall” in Sub-Clause 20.2, the word “may”, is
used in Sub-Clause 20.4. This ambiguity resulted in questions as to whether the
obligation to refer a dispute to a DAB was in fact mandatory, especially where an ad
hoc DAB had

27
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been constituted. In Interim Award in Case 1443182 the Arbitral Tribunal addressed this
issue and stated at paragraph 177 that the word “may” in Sub-Clause 20.4 was
contradictory to the word “shall” in Sub-Clause 20.2. The Arbitral Tribunal suggested
that the wording of Sub-Clause 20.4 describes the obligation as an option. However, the
Tribunal concluded that the intention was that there was a mandatory requirement to refer
disputes initially to the DAB. The Tribunal then went onto consider whether the
submission of a draft document complied with the requirement that the dispute is in
writing. The Tribunal concluded that it was not because the other Party had to clearly
know when the process had been commenced.

The reference to the DAB is deemed to be received on the date that it is received by the
chairperson (if a three-person DAB). The reference does not specify any requirements but
states that both Parties must make available to the DAB all such further information,
further access to Site, and appropriate facilities, to allow the DAB to make a decision on
the dispute.

“The DAB shall be deemed to be not acting as arbitrator(s).”

Most arbitration legislation, including the Arbitration Act 1996, does not attempt an
answer to the basic question of: “what is an arbitration?”. The editors of the 2001
Companion Volume to the 2nd edition of Mustill and Boyd, The Law and Practice of
Commercial Arbitration in England (1989) suggest at paragraph 30-52 that, “In the
absence of guidance, the question must in the end be answered intuitively.” In
O’Callaghan v Coral Racing83 Hirst LJ stated that:

“To my mind the hallmark of the arbitration process is that it is a procedure to

determine the legal rights and obligations of the parties judicially, with binding
effect, which is enforceable in law, thus reflecting in private proceedings the role
of the civil court of law.”

82
ICC Dispute Resolution Bulletin 2015 No 1 at p 35.
83
The Times 26 November 2008, CA.
28

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Tweeddale & Tweeddale84 list the fundamental characteristics of an arbitration. There are
several similarities between what constitutes an arbitration and what constitutes an
adjudication. There must be a dispute which is referred to a third party, there is then a
process by an independent and impartial third party and a decision. It is, however, the
finality of an arbitration award which makes it different to a DAB decision. While it is
possible for the DAB decision to be final and binding either party may, by issuing a
notice of dissatisfaction, make the decision have only interim binding effect.

The starting point, however, for identifying whether a form of dispute resolution is
arbitration or something different is the wording of the agreement. The language used by
the parties will provide an indication of the nature of the process that they intend. 85 In
Barclays Bank PLC v Nylon Capital LLP 86 the dispute resolver was required to “act as an
expert and not as an arbitrator.” This wording put the issue beyond doubt as to the
process which had been agreed. Without such wording there can be room for arguments
about the precise form of dispute resolution process required.87 FIDIC have therefore
made it quite clear that the DAB process is not an arbitration process.

“Within 84 days after receiving such reference… the DAB shall give its decision”

The DAB must give a decision within 84 days of the reference (or such other period as
proposed by the DAB and agreed by the Parties). The time period is the same in the
FIDIC Yellow Book 1999. If the DAB fails to give a decision within the 84 days, either
Party may give a notice of dissatisfaction, within 28 days after this period has expired.

The FIDIC suite of contracts gives no answer to the question of “What is the status of the
DAB’s decision if it is given after the 84-day period?” The question has been addressed
in the context of statutory adjudications in Australia and in the United Kingdom. In both
these countries there is a public policy position on supporting ADR clauses generally,
including statutory adjudication. The case law on statutory adjudications is considered
below, however, its relevance is questionable. In these cases the courts were primarily

84
Arbitration of Commercial Disputes, International and English Law and Practice (2007) para 2.01 to
2.13.
85
See Palacath Ltd v Flanagan [1985] 2 All ER 161 at 165f-g.
86
[2011] EWCA Civ 826.
87
See A. Cameron Ltd v John Mowlem & Co. Plc [1990] 52 BLR 24; and David Wilson Homes Ltd v
Survey Services Ltd [2001] 1 All ER (Comm) 449.
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concerned with interpreting the statute and regulations. However, a different test is
required when interpreting a contract to the interpretation of a statute.

The Australian Adjudication Cases

Each Australian state has drafted its own statute for adjudication, each differently drafted.
The decisions of the state courts, while appearing inconsistent with each other, must be
read having regard to the wording of the relevant statutes.

In Civil Contractors (Aust) Pty Ltd v Galaxy Developments Pty Ltd & Ors 88 the Supreme
Court of Queensland considered this issue and at first instance held that the mandatory or
imperative language used in s.85(1) of the statute, which provided for adjudication,
resulted in a decision being invalid if it was not issued within the relevant time period
prescribed by the statute. On appeal McMurdo JA agreed with the first instance decision.
The reasoning of McMurdo JA was based on an interpretation of the relevant statute.
McMurdo JA referred to the case of Project Blue Sky Inc v Australian Broadcasting
Authority89 where consideration was given to the issue of a breach of condition within a
statute:

“An act done in breach of a condition regulating the exercise of a statutory power
is not necessarily invalid and of no effect. Whether it is depends upon whether
there can be discerned a legislative purpose to invalidate any act that fails to
comply with the condition. The existence of the purpose is ascertained by
reference to the language of the statute, its subject matter and objects, and the
consequences for the parties of holding void every act done in breach of the
condition.”

While McMurdo JA found that the statute was silent on the question of whether a late
adjudicator's decision was invalid, there were provisions which indicated that it would be
invalid.

The Supreme Court of Victoria also considered the late provision of an adjudicator’s
decision in Ian Street Developer Pty Ltd v Arrow International Pty Ltd & Anor (“Ian
Street”).90 The facts were that an adjudicator’s decision on the payment of a sum was
given after the statutory period. The court also referred to the Project Blue Sky case (see
above)

88
[2021] QCA 10.
89
(1998) 194 CLR 355 at 388-9 [91].
90
[2018] VSCA 294.
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 30

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and looked at the purpose of the relevant legislation. At first instance the judge held that
on the proper construction of the Act, non-compliance with the time limit was not
intended to render the adjudication decision invalid. Maxwell P in the Court of Appeal
agreed with the first instance decision. The court referred to other judgements which had
held that an out of time determination was not invalid and such a decision would be
inconsistent with the legislative intent.91

English and Scottish Adjudication Cases

In Paice & Anor v Harding (t/a MJ Harding Contractors)92 the issue of a late decision
was considered. O’Farrell J. held that if the adjudicator had requested an extension of
time, then it was incumbent on the parties to respond to this and a failure to do so may
give rise to an estoppel precluding a party from subsequently disputing that the extension
of time was agreed.93 O’Farrell J., stated that in the absence of an estoppel:94

“If the adjudicator fails to reach his decision within the prescribed time, or as agreed by
the parties, it is invalid and unenforceable: Cubitt Building & Interiors Ltd v Fleetglade
Ltd [2006] EWHC 3413 (TCC) per Coulson J at para.76.”

The approach adopted by O’Farrell J follows a recent trend of cases. 95 In Barnes & Elliot
Ltd v Taylor Woodrow Holdings Ltd96 the adjudicator’s decision was made in time but
issued late. Judge Humphrey Lloyd QC thought that an error of a day or two in delivery
would be acceptable. He stated that this was within the tolerance in commercial practice
that one must afford to the Act and to the contract. 97 Judge Lloyd QC also stated that a
delay of a day or two could not be extended any longer unless the parties had agreed a
very long duration for the adjudication. Judge Lloyd QC also made it clear that a delay in
delivery of the decision does not entitle an adjudicator not to complete the decision
within the time allowed. In Lee v Chartered Properties (Building) Ltd98 the court
considered the

91
See MPM Constructions v Trepacha Constructions [2004] NSWSC 103; and Cranbrook School v JA
Bradshaw Civil Contracting [2013] NSWSC 430.
92
[2016] EWHC 2945 (TCC).
93
AC Yule & Son Ltd v Speedwell Roofing & Cladding Ltd [2007] EWHC 1360 (TCC) per Coulson J at
paras.15-20.
94
[2016] EWHC 2945 (TCC) at [16].
95
See for example Baldwin & Anor v Pickstock Ltd [2017] EWHC 2456 (TCC) at [26] where the court held
that “In short, the appointment lapsed or expired by effluxion of time.” See also Hart Investments Ltd v
Fidler & Anor [2006] EWHC 2857 at [43] to [46].
96
[2003] EWHC 3100 TCC.
97
Ibid at para 26.
98
[2010] EWHC 1540 (TCC).
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same issue as in Barnes & Elliott, where a decision was delivered 72 hours late. In this
case Akenhead J held that the provision would be strictly enforced, absent good cause
and explanation.99

However, one case has suggested that a short delay in making a decision might be
permissible. In Simons Construction Ltd v Aardvark Developments Ltd 100 Judge Seymour
held that a decision was not void if given late so long as one of the parties had not issued
a fresh notice of referral. This approach was criticized in the subsequent case of Cubitt
Building & Interiors Ltd v Fleetglade Ltd.101 In this case Coulson J. stated that in
interpreting the statutory regulations, it was difficult to see how Judge Seymour arrived at
his decision. Coulson J. stated:

“Adjudicators do not have the jurisdiction to grant themselves extensions of time

without the express consent of both parties. If their time management is so poor
that they fail to provide a decision in the relevant period and they have not sought
an extension, their decision may well be a nullity.”

In Epping Electrical Company Limited v Briggs and Forrester (Plumbing Services) 102the
High Court refused to enforce an adjudicator’s decision which was issued 7 days late. In
the Scottish case of Ritchie Brothers Ltd v David Philp (Commercials) Ltd 103 the Inner
House held that the language used in the statutory regulation: “shall reach his decision”
was mandatory and that the adjudicator’s jurisdiction ceased on the expiry of that period.
The court considered the English case of Simon Construction Ltd v Aardvark
Developments Ltd104 but found that the interpretation adopted by Judge Seymour was
“contrived”. There was one dissenting judgment from Abernethy L., who thought some
latitude was needed as it would seriously undermine the speedy resolution of disputes if
the parties had to recommence the adjudication procedure again.

99
See also Baldwin & Anor v Pickstock Ltd [2017] EWHC 2456 (TCC) at [10].
100
[2003] EWHC 2474 (TCC).
101
[2006] EWHC 3413 (TCC).
102
[2007] EWHC 4 (TCC). See also AC Yule & Son Ltd v Speedwell Roofing & Cladding Ltd, [2007]
WL 2187002 (TCC).
103
[2005] ScotsCS CSIH 32.
104
[2004] BLR 117.
32

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The South African Cases on NEC

There is no statutory adjudication scheme in South Africa and therefore the requirement
for adjudication is a contractual mechanism.

In Freeman NO and Anor v Eskom Holdings Ltd 105 the respondent argued that it was
relieved from paying an adjudicator’s decision because the decision was delivered out of
the agreed time period. The contract was an NEC Engineering and Construction Contract.
It contained a time provision in which the adjudicator was to make its decision. This in
the NEC case was four weeks from the end of the period for providing information. The
respondent asserted that the adjudicator’s contract had lapsed by the time the decision
was issued and was therefore invalid and a nullity. The judge, however, held that
“nowhere in the contract is it stated that a late adjudicator’s decision would be
invalid.”106 The Court therefore found that the decision, albeit late, would be enforceable
until it was revised by an arbitral tribunal.

In Group Five Construction (Pty) Ltd v Transnet SOC Ltd 107 a contract was entered into
under the NEC terms of contract which contained an adjudication provision. The decision
was given late, and the respondent had refused consent to an extension of time. The
respondent therefore issued a notice to refer the dispute to arbitration, which in the
submission of the respondent’s counsel “put the adjudication process to a stop and
disempowered the adjudicator from continuing with the adjudication.” 108 Twala J in his
judgment deals with both a late decision and the notice to refer the lack of a decision to
arbitration. Twala J stated in regard to a late decision:

“I am therefore unable to disagree with counsel for the respondent that, from the
plain wording of these clauses, the adjudicator is not competent to proceed and act
beyond the time period set by the agreement if he is unable to secure the
necessary consent from both parties. No other meaning can be ascribed to these
provisions for they are not at all ambiguous.”

105
(43346/09) [2010] ZAGPJHC 29.
106
Freeman NO and Anor v Eskom Holdings Ltd (43346/09) [2010] ZAGPJHC 29 [22].
107
(45879/2018) [2019] ZAGPJHC 328 (28 June 2019).
108
(45879/2018) [2019] ZAGPJHC 328 at 14.
33

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However, Twala J then considered the provision which allowed a party, where the
adjudicator had not issued a decision in the relevant time period, to issue a notice of
intention to commence arbitration. He said that this was an escape provision for the
parties and that: “Once notice has been given to the other party within the specified
period, then there is compliance with the requirements of clause W1.4.3 and the
adjudicator cannot, in my view, be competent to continue with the adjudication.” 109
However, if the notice of intention to commence arbitration is intended by the parties to
be an escape provision, an argument can be advanced that the adjudicator’s mandate does
not come to an end until that notice is issued.

The case of Group Five Construction110 case was subsequently considered in Sasol SA
(Pty) Ltd v Murray & Roberts Ltd.111 The Supreme Court of Appeal in Sasol
distinguished the Group Five Case on the facts, as the adjudicator’s appointment
contained provisions which allowed it to ask for further information. The court stated:112
“The adjudicator’s contract allows an entitlement to more information and more time
than that provided for in the ‘contract between the parties’ and to the extent that there is a
conflict between the adjudicator’s contract and the construction contract, the
adjudicator’s contract must prevail.”

ICC Case Law

In Interim and Final Awards in ICC Case 10619 the arbitral tribunal had to consider the
enforcement of an Engineer’s Decision which was given late under the contract. The
contract was FIDIC 4th Red Book and therefore did not contain a DAB clause. The
Tribunal concluded that two of the Engineer’s decisions had not been given within 84
days and therefore they were not binding on the Employer. The Tribunal looked at the
fact that if a notice of dissatisfaction was not given timeously to the Engineer’s decision,
the decision would become binding and concluded that if this provision were to work, the
dates for both the Engineer’s decision and the notice of dissatisfaction had to be strictly
observed.

109
(45879/2018) [2019] ZAGPJHC 328 at 22.
110
(45879/2018) [2019] ZAGPJHC 328 (28 June 2019).
111
(425/2020) [2021] ZASCA 94.
112
(425/2020) [2021] ZASCZ 94 at [39].
34

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Contractual Interpretation

The basis on which a court will interpret a contract will vary from country to country.
Under English law the starting point where there is an ambiguity or gap in the language is
to focus on commercial common-sense. Would parties, who have been in an adjudication
process for 84 days, want a DAB’s decision to be invalid if it is served a day, or an hour,
or a minute late? However, would the parties want ambiguity in a clause where a party
might lose its entitlement to refer the matter to arbitration. If commercial common-sense,
does not provide an answer, the English courts would focus on the factual matrix.

A contractual term should not be interpretated in isolation but by the company it keeps.
It is therefore important to look at the other terms of the contract in order to ascertain
whether there is an indication of what the parties intended. Other relevant terms form an
essential part of the factual matrix.

Sub-Clause 20.4 §5 contains an escape clause if the DAB fails to give a decision within
84 days. Either party may, within 28 days after the period when the decision should have
been given, give notice to the other Party of its dissatisfaction. It may be argued, as in
Simons Construction Ltd v Aardvark Developments Ltd,113 that until the notice of
dissatisfaction is given, the DAB retains jurisdiction to issue a decision.

Regard must also be had to the Dispute Adjudication Agreement under which the DAB is
appointed, and the procedural rules annexed to them. The Dispute Adjudication
Agreement in FIDIC’s Red Book requires a DAB to comply with the procedural rules
which are annexed to the Contract 114. These state that the DAB is to “make and give its
decision in accordance with Sub-Clause 20.4, or as otherwise agreed as between the
Employer and Contractor in writing.”115 If, however, the DAB has entered into a bespoke
agreement then the clauses of that agreement must be considered. In the Sasol case it
was stated that the adjudicator’s agreement would, if consistent with the terms of the
Contract between the parties, override those terms.

113
[2003] EWHC 2474 (TCC).
114
Dispute Adjudication Agreement, Clause 4(e).
115
Annex, Procedural Rules Clause 9.
35

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The Dispute Adjudication Agreement and Procedural Rules within the FIDIC contract
infer that the parties intend that the time scales are mandatory and that a variation to them
can only occur by an agreement in writing between the parties. In addition, the FIDIC
Guide uses the phrase “the DAB is required to give its decision.” This suggests to this
author that at the end of the 84-day period, the jurisdiction of the DAB to make a valid
decision regarding the dispute ceases. A decision issued after the 84-day period might
therefore be invalid. However, the point remains unsettled.

“which shall be reasoned and shall state that it is given under this Sub-Clause.”

The DAB is required to provide a reasoned decision. Similar to arbitration, this does not
require that the DAB give reasons for every part of its decision. 116 It should set out what
happened, having regard to the evidence, and should explain succinctly why, in the light
of what happened, the DAB reached its decision and what that decision is. 117

“the decision shall be binding on both Parties.”

The Contract describes the decision of the DAB as binding upon the Parties and this is
irrespective of whether a notice of dissatisfaction is given. Many parties who are
dissatisfied with the DAB’s decision and have issued a notice of dissatisfaction have
sought to argue that they are not bound by the decision once the notice of dissatisfaction
has been issued. The issue came before the Singapore courts in the case of CRW Joint
Operation (“CRW”) v PT Perusahaan Gas Negara (Persero) TBK (“PGN”).118

The facts were that a DAB in November 2008 made a decision ordering PGN to pay
CRW the adjudicated sum. PGN served a notice of dissatisfaction. In 2009, CRW sought
to enforce the decision without referring the merits to arbitration. The arbitral tribunal, by
a majority, issued a final award enforcing the decision. The High Court set aside the
award and the Court of Appeal upheld that judgement with an endorsement that it would
be permissible to enforce provided the merits were also referred in the same arbitration.
In 2011, pursuant to the Court of Appeal’s guidance in Persero 1, CRW started
arbitral

116
Smith v Molyneaux (British Virgin Islands) [2016] UKPC 35.
117
See further Tweeddale A., The need for reasons – o, reason not the need, Arbitration, Vol 85(2) at p
153.
118
[2015] SGCA 30; [2011] 4 SLR.
36

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proceedings again, this time seeking to enforce the DAB’s decision in an interim award
as well as referring the merits to arbitration. Again, there was a majority award enforcing
the DAB’s decision. This time, both the High Court and the Court of Appeal agreed with
the arbitrators.

The 64-page judgement of Chief Justice Sundaresh Menon (with whom Justice Quentin
Loh agreed) forms the majority judgement. Justice Chan Sek Keong delivered a 96-page
dissenting judgement. The Court of Appeal upheld: (1) the interim award ordering PGN
to pay CRW c.US$17m; and (2) the lower court’s order granting CRW leave to enforce
the interim award in the same manner as a court judgement.

The Court of Appeal emphasised that “it may be vital that parties promptly comply with a
DAB decision” and that “it is of general importance that contractors are paid promptly
where the contract so provides…” It summarised its interpretation of the effect of a notice
of dissatisfaction on a DAB decision by holding that:

a. a DAB decision is immediately binding once it is made;

b. the parties are obliged to give effect to it promptly until such time as it is
overtaken or revised by either an amicable settlement or a subsequent arbitral
award; and
c. a notice of dissatisfaction does not and cannot displace the binding nature of a
DAB decision or the parties’ concomitant obligation to promptly give effect to
and implement it.

These conclusions were also reached by the South Gauteng High Court in South Africa in
Esor Africa (Pty) Ltd/Franki Africa (Pty) Ltd JV and Bombela Civils JV (Pty) Ltd,119
which is discussed below.

In Persero 1, the Court of Appeal held that the 1999 Red Book:

“requires the parties to finally settle their differences in the same arbitration,
both in respect of the non-compliance with the DAB’s decision and in respect of
the merits of that decision…consistent with the plain phraseology of Sub-Clause
20.6 which requires the parties’ disputes in respect of any binding DAB decision
which

119
(12/7442) [2013] ZAGPJHC 407.
37
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 has yet to become final to be “finally settled by international arbitration”. Sub-
Clause 20.6 clearly does not provide for separate proceedings to be brought by
the parties before different arbitral panels even if each party is dissatisfied with
the same DAB decision for different reasons.”

The Court of Appeal in Persero 2, disagreeing with the Court of Appeal in Persero 1,
found that a paying party’s failure to comply with a binding but not final DAB decision is
itself capable of being directly referred to a separate arbitration under Sub-Clause 20.6.
The Court of Appeal reasoned that “[t]he dispute over the paying party’s failure to
promptly comply with its obligation to pay the sum that the DAB finds it is liable to pay is
a dispute in its own right which is capable of being ‘finally settled by international
arbitration’”. In order to resolve this issue, it is necessary in the first place to resolve the
issue of whether enforcement of a binding but non-final decision can be “finally settled”
by arbitration. In Taner Dedezade’s 2012 paper “Mind the Gap”120 it was argued that
following a notice of dissatisfaction, a DAB decision will amount only to interim relief
because the decision must be referred to arbitration to finally resolve the dispute. It was
further argued that it follows that an arbitral tribunal should not issue a final award in
relation to interim relief. Accordingly, Mr Dedezade disagreed with the judgement of the
Court of Appeal that it is appropriate for a final award to be given (for the purposes of
enforcement only) in a separate arbitration. In Partial Award in Case 16119121 an arbitral
tribunal agreed that the correct approach was to issue a provisional or temporary decision
and that it should not issue an award which would “definitively determine payment
issues”.

“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.”

This wording has received much academic analysis, especially within numerous articles
written by Taner Dedezade on the subject.122

120
[2012] Int ALR 4 153.
121
ICC Dispute Resolution Bulletin 2015 No 1 at p 67 and see also Final Award in Case 18320 ICC
Dispute Resolution Bulletin 2015 No 1 at p 132.
122
Mind The Gap: Analysis of Cases and Principles Concerning the Ability of ICC Arbitral Tribunals to
Enforce Binding DAB Decisions Under the 1999 FIDIC Conditions of Contract; Taner Dedezade
01/01/2014; Enforcement of DAB decisions – The legal justification for the ‘enforcement’ of a ‘binding’
DAB decision under the FIDIC 1999 Red Book; Taner Dedezade, 01/03/2012; Are ‘binding’ DAB
decisions enforceable? Taner Dedezade, 01/10/2011 – see Corbett & Co knowledge hub.
38

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In Tubular Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd123 the relevant disputes
turned on the interpretation of Sub-Clauses 20.4 and 20.6 of the FIDIC Red Book 1999.
In particular, the Court considered the above wording. Similar to the Court of Appeal in
CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK 124 the South African
Court found that a binding but not final decision of the DAB must be complied with and
ordered DBT Technologies to give effect to the DAB decision until such time when the
decision is revised in amicable settlement or an arbitral award. Du Plessis AJ said:

“8. The effect of these provisions is that the decision shall be binding unless and
until it has been revised as provided. There can be no doubt that the binding effect
of the decision endures, at least, until it has been so revised. It is clear from the
wording of clause 20.4 that the intention was that a decision is binding on the
parties and only loses its binding effect if and when it is revised. The moment the
decision is made the parties are required to “promptly” give effect to it. Given that
a dissatisfied party has 28 days within which to give his notice of dissatisfaction it
follows that the requirement to give prompt effect will precede any notice of
dissatisfaction.

9. The final sentence of clause 20.4 (4), requiring the contractor to continue to
proceed with the works, underscores the intention of the parties to the effect that
life goes on and is not interrupted by a notice of dissatisfaction.

10. A dissatisfied party may elect to wait 28 days before giving his notice of
dissatisfaction. However, this will have no effect on his obligation to give effect to
the decision which has to happen promptly on the giving of that decision. In the
event where no notice of dissatisfaction has been given within the prescribed time,
the decision becomes final and binding on both parties.

11. The distinction between the situation in clause 20.4 (4), where the decision
shall be binding on both parties and clause 20.4 (7), where it becomes final and
binding upon both parties is significant: in the first instance it is binding but of an
interim nature (but the obligation to perform in terms of this decision is final); in
the second it is binding but now finally so.
123
(06757/2013) [2013] ZAGPJHC 155 (3 May 2013).
124
[2015] SGCA 30; [2011] 4 SLR.
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 12. Where no notice of dissatisfaction had been given the decision becomes final
and binding. Clause 20.6 (1) is concerned only with a decision in respect of which
a notice of dissatisfaction has in fact been given. In other words, this is a situation
envisaged in clause 20.4 (4): the decision is binding on both parties who must
promptly give effect to it unless and until it has been revised in an arbitral award
as referred to in clause 20.6 (1). Clause 20.6(1) obviously only arises if there had
indeed been a notice of dissatisfaction.

13. Thus the notice of dissatisfaction does not in any way detract from the
obligation of the parties to give prompt effect to the decision until such time, if at
all, it is revised in arbitration. The notice of dissatisfaction does, for these reasons,
not suspend the obligation to give effect to the decision. The party must give
prompt effect to the decision once it is given.

14. The scheme of these provisions is as follows: the parties must give prompt
effect to a decision. If a party is dissatisfied he must nonetheless live with it but
must deliver his notice of dissatisfaction within 28 days failing which it will
become final and binding. If he has given his notice of dissatisfaction he can have
the decision reviewed in arbitration. If he is successful the decision will be set
aside. But until that has happened the decision stands and he has to comply with
it.”

Du Plessis AJ then made reference to the case of Esor Africa (Pty) Ltd/Franki Africa (Pty)
Ltd JV and Bombela Civils JV (Pty) Ltd,125 and continued:

“8. In the unreported decision of Esor Africa (Pty) Ltd/Franki Africa (Pty) Ltd JV
and Bombela Civils JV (Pty) Ltd, SGHC case no. 12/7442, the parties had referred
a dispute to the DAB in terms of clause 20.4 of the FIDIC Conditions of Contract.
The DAB gave its decision which was in favour of the contractor. The employer
refused to make payment in terms of the decision relying, inter alia, on the fact that
it had given a notice of dissatisfaction and the contractor approached the Court for
an order compelling compliance with the decision.

125
South Gauteng High Court, Johannesburg case no. 12/7442, [2013] ZAGPJHC 407.
40

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 9. The matter came before Spilg J who commented that he found the wording of the
relevant contractual provisions to be clear and that their effect is that whilst the
DAB decision is not final ‘the obligation to make payment or otherwise perform
under it is…’[126]

10. The court found the key to comprehending the intention and purpose of the
DAB process to be the fact that neither payment nor performance can be withheld
when the parties are in dispute:[127]

‘the DAB process ensures that the quid pro quo for continued performance
of the contractor’s obligations even if dissatisfied with the DAB decision
which it is required to give effect to is the employer’s obligation to make
payment in terms of a DAB decision and that there will be a final
reconciliation should either party be dissatisfied with the DAB decision…’

11. The court further held that the respondent was not entitled to withhold payment
of the amount determined by the adjudicator and that he

‘is precluded by the terms of the provisions of clause 20 (and in particular

clauses 20.4 and 20.6) from doing so pending the outcome of the
Arbitration.’ [128]”

In the Namibian case of Salz-Gossow (Pty) Ltd v. Zillion Investment Holdings (Pty)
Ltd129, concerning the FIDIC 1999 conditions of contract, Zillion Investment (the
Employer) refused to comply with a DAB decision. It argued that by giving a notice of
dissatisfaction it had suspended the enforcement of the DAB decision. The Court held
that the Parties should promptly give effect to the decision of the DAB. The Court found
that in exceptional circumstances it has a discretionary right not to order specific
performance but, in this case, Zillion Investment had failed to prove any such special
circumstances. Zillion Investment envisaged future undue hardship if the DAB decision
were reversed in

126
At paragraph 11 of the Esor Africa judgment.
127
At paragraph 12 of the Esor Africa judgment.
128
At paragraph 14 of the Esor Africa judgment.
129
(A44/2016) [2017] NAHCMD 72 (9 March 2017).
41

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arbitration on the basis that Salz-Gossow (the Contractor) would be unable to reimburse
Zillion Investments due to its “current negative liquidity position”. Angula, DJP stated:

“The court cannot make its decision based on speculation and accordingly
declines to be drawn into a morass of speculation and surmises”. He continued:
“This court cannot make a determination of the applicant’s inability to reimburse
the respondent based on negative cash flow. In my view negative liquidity does
not constitute an exceptional circumstance in the present matter. I think it is fair
to say that it is common knowledge that operating companies experience cash
flow problems from time to time but that is not a static financial position; it
fluctuates through the life span of most operating companies. Negative liquidity
can be cyclical depending on the industry in which the company operates. For
instance during in the slumped period in the construction industry most
companies in that industry will experience cash flow problems due to lack of
construction contracts on offer”.

Sub-Clause 20.5
Amicable Settlement

This Sub-Clause requires that the Parties attempt amicable settlement following the
giving of a notice of dissatisfaction. The use of the word “shall” appears to impose a
mandatory requirement but the Sub-Clause then proceeds to state that arbitration may be
commenced on or after 56 days of the notice of dissatisfaction even if no attempt at
amicable settlement has been made.

The Guidance Section of the FIDIC Red Book 1999 does not assist in dealing with the
apparent contradiction. It merely states:

“Sub-Clause 20.5 Amicable Settlement

The provisions of this Sub-Clause are intended to encourage the parties to settle a
dispute amicably, without the need for arbitration: for example, by direct
negotiation, conciliation, mediation, or other forms of alternative dispute

42

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 resolution.130 Amicable settlement procedures often depend, for their success, on
confidentiality and on both Parties’ acceptance of the procedure. Therefore
neither Party should seek to impose the procedure on the other Party.”

FIDIC, however, recognised that there was an apparent contradiction in the drafting of
this Sub-Clause. The FIDIC Guide states as follows:

“Although the first sentence of the Sub-Clause imposes an obligation to attempt

amicable settlement, the second sentence specifies that, if a Party fails to make
any attempt, the other Party cannot insist on it. This apparent contradiction is
unavoidable, because of the impossibility of providing any meaningful method of
imposing a requirement for the Parties to reach a consensual agreement of their
differences.”

The drafting of Sub-Clause 20.5 does not suggest that the need to go through amicable
settlement was intended to be a condition precedent to the commencement of the
arbitration. Sub-Clause 20.5 creates two distinct obligations; the first is to attempt to
settle the dispute amicably and the second is to wait 56 days from the date of the notice of
dissatisfaction before commencing the arbitration. The amicable settlement provision was
based on Sub-Clause 67.2 [Amicable Settlement] of the FIDIC 4th edition (1987). At the
time it was noted that the Sub-Clause could be criticised as it gave no guidance as to how
the 56 days should be spent and therefore it was thought that this provision will “often
merely represent an eight-week delay to the resolution of the dispute.”131 Edward Corbett
explains that a failure by a party to attempt to settle the dispute amicably would appear
not to be a breach of contract. However, as to the 56-day amicable settlement period, Mr.
Corbett states that the right to commence arbitration: “…must be subject to clause 67.2
and the 56-day amicable settlement period provided for there.” 132

Glover and Hughes state that Sub-Clause 20.5 is a condition precedent and that: “An
attempt to obtain an amiable settlement for a prescribed time of 56 days is also a
condition precedent to a referral to arbitration.”133 The authors thereafter note that a
party does not
130
For a thorough discourse of the various types of ADR procedure see The FIDIC Forms of Contract (3rd
edn) Bunni N., Blackwell publishing (2005) at pp 439–460.
131
FIDIC 4th A Practical Legal Guide, Corbett E., Sweet and Maxwell (1991) at p 450.
132
Ibid at p 449.
133
Understanding the New FIDIC Red Book: Glover J and Hughes S, Sweet and Maxwell (2006) at p 391.
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need to make an attempt at amicable settlement but do not explain how this is consistent
with a condition precedent that an attempt must take place. It is therefore assumed that
their reference to a condition precedent is to the need to wait for a 56-day period.

Baker, Mellors, Chalmers, Lavers134 expressly disagree with the above view of Glover
and Hughes135 and state that “depending on the governing law, the mandatory language
of the first sentence [of Sub-Clause 20.5] may mean that there is a legal obligation to
attempt to achieve a settlement before commencement of arbitration.”

In the case of Ohpen Operations v Invesco136 the Technology and Construction Court
stated that:137
“There is a clear and strong policy in favour of enforcing alternative dispute
resolution provisions and in encouraging parties to attempt to resolve disputes
prior to litigation. Where a contract contains valid machinery for resolving
potential disputes between the parties, it will usually be necessary for the parties
to follow that machinery, and the court will not permit an action to be brought in
breach of such agreement.”

O’Farrell J considered what was required for a valid dispute resolution clause. She
concluded that there was no need to use the words “condition precedent” as long as the
words used were clear that the right to commence arbitration or litigation is subject to the
failure of the dispute resolution procedure.138 The modern trend is therefore to enforce
clauses such as Sub-Clause 20.5 and require the claimant to go through the amicable
settlement process or, as a minimum, require them to wait 56 days before commencing
the arbitration.

In the Australian case of United Group Rail Services v Rail Corporation New South
Wales139 the Court considered a contract for the design and build of rolling stock which
contained a dispute resolution clause that provided that the parties should “meet and

134
FIDIC Contracts: Law and Practice, Baker, Mellors, Chalmers, Lavers, Informa (2009) at p 542.
135
Ibid.
136
[2019] EWHC 2246 (TCC)
137
Ibid at [58]
138
Ibid at [53]
139
(2009) 127 Con LR 202.
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undertake genuine and good faith negotiation with a view to resolving the dispute”. Alsopp
P. stated:140

“a promise to negotiate (that is to treat and discuss) genuinely and in good faith
with a view to resolving claims to entitlement by reference to a known body of
rights and obligations, in a manner that respects the respective contractual rights
of the parties, giving due allowance for honest and genuinely held views about
those pre- existing rights is not vague, illusory or uncertain.”

Alsopp P. further held that such an approach met with public policy requirements, which
promoted efficient dispute resolution and encouraged approaches by, and attitudes of,
parties conducive to the resolution of disputes without expensive litigation or
arbitration.141

In International Research Corp. PLC v Lufthansa Systems Asia Pacific Pte Ltd142 the
High Court of Singapore had to consider whether a clause which referred to arbitration
disputes “which cannot be settled by mediation” provided a condition precedent to
arbitration that was too uncertain to be enforceable. The Singapore High Court found the
agreement was not too uncertain and was binding on the parties.

In Emirates Trading Agency Llc v Prime Mineral Exports Private Ltd 143 the English
Technology and Construction Court had to consider the requirement in a contract of a 4-
week period in which the negotiations were to take place. The claimant’s counsel argued
that the 4-week period created a condition precedent to be satisfied before the arbitrators
would have jurisdiction to hear and determine the claim. The condition precedent was “a
requirement to engage in time limited negotiations” and that requirement was not
fulfilled because there had not been “a continuous period of 4 weeks of consultations to
resolve the claims” which were the subject of the notice of termination. 144 Teare J.
considered this provision important because the reference to a period of 4 continuous
weeks ensures that a defaulting party cannot postpone the commencement of arbitration
indefinitely. In conclusion Teare J. held:145 “There is, it seems to me, much to be said for
the view that a

140
Ibid at [74].
141
Ibid at [80].
142
[2012] SGHC 226.
143
[2014] EWHC 2104.
144
Ibid at [4].
145
Ibid at [52].
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time limited obligation to seek to resolve a dispute in good faith should be enforceable.
Such an agreement is not incomplete.”

In an unreported arbitration, the arbitral tribunal held that the amicable settlement
provisions at Sub-Clause 20.5 of a FIDIC contract were a condition precedent. The
tribunal therefore concluded that it did not have jurisdiction to proceed with the
arbitration in the absence of an attempt to settle the dispute.146 The IBA Arbitration Guide
for the Middle East similarly states that: “Where mandatory pre-conditions to arbitration
are not followed, a respondent may argue that the claim is inadmissible and that a
constituted tribunal does not have jurisdiction to hear the dispute. Awards made
notwithstanding a claimant’s failure to follow the pre-conditions may be annulled by the
courts.”147 Similarly, in an arbitration held in Dubai relating to a FIDIC form of contract
the arbitration was suspended until the amicable settlement procedure had taken place
and only then the arbitration proceeded.

Case law indicates that Sub-Clause 20.5 of the FIDIC contracts is often considered to be
a condition precedent to arbitration and that if a party commences an arbitration, without
waiting 56 days, the arbitral tribunal may find that the claim is inadmissible.148

Hindrance, Prevention and Refusal to Negotiate – A further question that arises is

whether a party is entitled to commence an arbitration where one party refuses to enter
into negotiations? The question of hindrance and prevention under a FIDIC 4th edn.
contract was considered by the courts in Al-Waddan Hotel Ltd v Man Enterprise SAL
(Offshore).149 In this case HHJ Raeside QC was asked to consider whether an arbitral
tribunal had jurisdiction where an Engineer had failed to issue a decision under Sub-
Clause 67.1 [Engineer’s Decision] of the contract. HHJ Raeside QC referred to the case
of Panamena Europea Navigacion v Leyland150 and stated that where a party intends:151

146
However, see contra Emirates Trading Agency Llc v Sociedade de Fomento Industrial Private Ltd.
147
For a further discussion on admissibility and jurisdiction see Andrew Tweeddale, Jurisdiction and
admissibility in dispute resolution clauses, Construction Law International Vol 16, Issue 1 page 13
148
Republic of Sierra Leone v SL Mining Ltd [2021] EWHC 286 (Comm)
149
[2015] EWHC 4796.
150
[1947] A.C. 428.
151
[2015] EWHC 4796 [53].
46

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 “to rely on the non-performance of a condition precedent he must do nothing to
prevent the condition from being performed, and if there is anything that must be
done by him to render possible the performance of the condition, a failure by him
to do what is required disentitles him from insisting on performance of the
condition.”

HHJ Raeside QC then rhetorically asked the question why one party could simply not
wait until the time for issuing a decision had elapsed and then commence arbitration. The
learned judge set out two situations where a condition precedent would no longer be
binding. First, referring to Shell UK Ltd v Lostock Garages Ltd,152 the learned judge
stated that if there was a “clear” and “absolute” refusal to perform a contractual function
then both parties can proceed with the certain knowledge that this contractual
requirement no longer binds them. However, the position of one party must be absolute
and unequivocal if a party sought to escape from a condition precedent. Second, a party
could be excused where there was hindrance and prevention by the other party (in this
case a failure to appoint a new Engineer). Applying these observations to a time limited
amicable settlement clause it would appear that if the clause is a condition precedent then
a party may avoid having to wait 56 days before commencing arbitration if the other
party shows an absolute and clear intention not to engage in amicable settlement
discussions.

Sub-Clause 20.6
Arbitration

Sub-Clause 20.6 provides that, unless settled amicably, “any dispute in respect of which
the DAB’s decision (if any) has not become final and binding shall be finally settled by
international arbitration.” The Parties may agree their own rules of arbitration but in the
absence of an agreement the ICC Arbitration Rules apply with three arbitrators and the
arbitration would be conducted in the language for communications. There is provision
within the Particular Conditions to specify alternative arbitration rules and (unless
prescribed in the rules) the entity which will nominate the arbitrator(s) and also
administer the arbitration.

152
[1976] 1 WLR 1187.
47

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The FIDIC Guide makes clear that “FIDIC will not nominate arbitrators, and does not
have the facilities to administer or support arbitration in any way.”

The arbitrator(s) may “open up review and revise any certificate, determination,
instruction, opinion, or valuation of the Engineer, and any decision of the DAB, relevant
to the dispute.” Evidence and arguments are not limited to that previously put before the
DAB. As the Parties are expressly permitted to change their arguments, it is probable
that the Parties may change or add to the contractual and other legal basis of their claims;
although this may potentially give rise to challenges on admissibility. The Engineer may
be called as a witness and the DAB decision will be admissible in evidence.

The arbitration may be commenced prior to the completion of the Works (or, indeed,
thereafter) and the obligations of the Parties are not altered by reason of an arbitration
being conducted during the progress of the Works.

“any dispute is respect of which the DAB’s decision (if any) has not become final and
binding”

Sub-Clause 20.6 is concerned with disputes where a notice of dissatisfaction has been
served so that the decision (if any) has not become final and binding. This does not
require that a claim asserted as a set-off first be submitted to the DAB.153

“Neither Party shall be limited in the proceedings before the arbitrator(s) to the evidence
or arguments previously put before the DAB to obtain its decision…”

This sub-paragraph is similar to Sub-Clause 20.4. A Party will not forfeit its claims,
defences or rights of set-off by not submitting them first to the DAB. 154 However, this
provision cannot be used to advance a new dispute into an arbitration, which has not been
referred to the DAB.

“Any decision of the DAB shall be admissible in evidence in the arbitration.”

153
Interim Award in Case 11813 ICC International Court of Arbitration Bulletin, Vol 24 No 2 at p 59.
154
Ibid.
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The FIDIC Contract does not specifically address the status of the DAB decision in a
subsequent arbitration, save that it refers to it being admissible. Sub-Clause 20.4 states
that: “The decision shall be binding on both Parties…unless and until it shall be revised
by amicable settlement or an arbitral award as described below.” The FIDIC Guide
states that “The arbitrator(s) may regard a well-reasoned decision as very persuasive,
especially if it was given by a DAB with direct knowledge of how the Party was affected
by the relevant event or circumstance.”

Sub-Clause 20.7
Failure to Comply with Dispute Adjudication Board’s Decision

This Sub-Clause provides that if neither party gives a notice of dissatisfaction, the DAB’s
decision becomes final and binding and if a Party fails to comply with it then the other
Party may refer the failure to comply straight to arbitration.

What was referred to as the “gap” in the FIDIC 1999 contracts was the failure to refer a
binding but not final decision straight to arbitration (or litigation). This scenario is
different from the one covered in Sub-Clause 20.7 and it has been addressed in the 2017
FIDIC suite of contracts.

Sub-Clause 20.8
Expiry of the Dispute Adjudication Board’s Appointment

The Sub-Clause provides that if a dispute arises and there is no DAB in place then Sub-
Clauses 20.4 and 20.5 shall not apply and the dispute may be directly referred to
arbitration under Sub-Clause 20.6.155

“whether by reason of expiry of the DAB’s appointment or otherwise”

155
This issue was considered in Taner Dedezade’s article Can a party ignore FIDIC’s DAB process and
refer its dispute directly to arbitration? Corbett & Co Knowledge Hub 17/11/2014.
49

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The issue of when a Party may go straight to arbitration without appointing a DAB has
been the subject of much judicial debate. The word “otherwise” seems to suggest that if
a DAB is not appointed when the dispute arises then a party is entitled simply to ignore
the DAB and amicable settlement provisions and commence arbitration. However, the
case law which is set out hereafter seems to suggest that a party may have a duty to try
and operate the DAB provisions prior to commencing an arbitration.

The FIDIC Contracts Guide (First Edition, 2000) on Sub-Clause 20.8 states:

“There may be ‘no DAB in place’ because of a Party's intransigence (e.g., in

respect of the first paragraph of P&DB/EPCT 20.2), or because the DAB's
appointment had expired in accordance with the last paragraph of Sub-Clause
20.2. If a dispute arises thereafter, either Party can initiate arbitration
immediately (subject to the first paragraph of P&DB/EPCT 20.2), without having
to reconvene a DAB for a decision and without attempting amicable settlement.
However, the claimant should not disregard the possibility of settling the dispute
amicably.”

Interim Award in ICC Case 16155 (July 2010) concerned the FIDIC Red Book 1999. The
arbitration proceedings were held in Paris. The arbitral tribunal found that the Claimant
was entitled to refer the dispute to arbitration because the Respondent had “forgone its
rights to insist on the appointment of a DAB because it ignored the Claimant’s attempt to
appoint a DAB during performance of the Contract”. However, it stated:

“…the Tribunal believes that the mere fact that a DAB has not yet been appointed
may not always permit a party to bypass resort to a DAB. The Tribunal should
account for the specific facts of this case, and examine, in particular, the
circumstances or reasons for which the parties did not constitute a DAB”.

This issue has also been addressed by the English High Court in Doosan Babcock Limited
v Comercializadora de Equipos y Materiales Mabe Limitada. 156 The case concerned a
modified form of the FIDIC Red Book 1999. Mr Justice Edwards-Stuart was asked to
issue an interim injunction to restrain Mabe from making a demand under two
performance guarantees – which it did. As there was no DAB in place (the standing
DAB not having

156
[2013] EWHC 3010 (TCC).
50
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been appointed within the prescribed 42-day period) the Parties were entitled to refer the
dispute directly to arbitration. Consequently, Doosan undertook to issue a request for
arbitration under the ICC Rules as soon as reasonably practicable.

Final Award in ICC Case 18505157 (November 2013) was a case under the FIDIC Yellow
Book 1999. The Arbitral Tribunal found that a Claimant did not need to refer the dispute
to the DAB, before referring to arbitration, where the DAB had not been established. The
Arbitral Tribunal interpreted Sub-Clause 20.8 broadly and stated that it:

“did not see why the words ‘or otherwise’ in Sub-Clause 20.8 of the General
Conditions should not precisely mean what they say; i.e. that a Party to the
Contract is able to bring arbitration proceedings at any time if there is a dispute
in circumstances where a DAB is, as in the present case, not ‘in place’.”

The case of Swiss Supreme Court Decision 4A 124/2014 is similar to the above in that the
Swiss Supreme Court was asked to consider the issue of where one party prevented the
DAB from being established. The case involved a FIDIC Red Book 1999. The Contractor
referred a dispute to arbitration after trying to set up a DAB for 18 months. A partial
award was issued. The Employer applied to the Court to annul the partial award and order
that the Contractor pay the costs of the arbitral and Court proceedings. The Swiss
Supreme Court held that the arbitral tribunal did have jurisdiction to hear the dispute.
Whilst it confirmed that reference of a dispute to a DAB was mandatory before
commencing arbitration, it took into account the Employer’s passivity and found that it
would be a breach of good faith for the Employer to insist on referring the dispute to
DAB when it had interfered with the constitution of it.

The Court said that a broad interpretation of Sub-Clause 20.8 would mean that “…it
would be sufficient for a DAB not to be operational at the time arbitration proceedings
are initiated, no matter for what reason, for a decision of this body to become optional.
Such a conclusion would ultimately turn the alternate dispute resolution mechanism
devised by FIDIC into an empty shell.” It continued:

157
ICC Dispute Resolution Bulletin 2015 No 1 p 137.
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 “First, while it is true that pursuant to Art. 1.2 of the General Conditions the titles
do not have to be taken into consideration when interpreting the aforesaid
conditions, comparing their text with that of the Sub-Clause they are a title to is
still of some interest to understand it properly. As to Sub-Clause 20.8, it appears
that what is contemplated here is primarily the exceptional situation in which the
mission of a standing DAB expires at the end of the time limit it was given before
a dispute arises between the parties. As to the reason for this Sub-Clause, some
Red Book commentators emphasize that in its absence there would be uncertainty
as to whether the dispute could nonetheless be submitted to arbitration or instead
to the competent state court (Baker, Mellors, Chalmers and Lavers, op. cit., p.
552, n. 9.222), whilst other commentators even go as far as excluding any legal
recourse other than an amicable settlement in such a case (Glover and Hughes
QC, op. cit., p. 409, n. 20-080)”.

Regarding the words “or otherwise” the Court commentated:

“This very vague expression doubtlessly does not facilitate understanding the
Sub- Clause in question. Yet, interpreting it literally and extensively would short-
circuit the multi-tiered alternative dispute resolution system imagined by FIDIC
when it came to a DAB ad hoc procedure because, by definition, a dispute always
arises before the ad hoc DAB has been set up, in other words, at a time when
“there is no DAB in place,” however, such interpretation would clearly be
contrary to the goal the drafters of the system had in mind (Baker, Mellors,
Chalmers, and Lavers, op. cit., p. 553, n. 9.224). The expression “or otherwise”
must, in reality, permit taking into consideration other occurrences than the mere
expiry of the mission of the DAB without limiting them to any objective
circumstances independent of the will of the parties, as the Appellant would like –
without substantiating its opinion in this respect on the text of Sub-Clause 20.8.
According to the guide published by FIDIC and quoted in the award under
appeal, these other occurrences could include the inability to constitute a DAB
due to the intransigence of one of the parties (The FIDIC Contracts Guide, 2000,
p. 317 i.f.). The finality of the Sub- Clause in question is ultimately to preserve the
capacity of the parties in any circumstance to avail themselves of one of the
dispute resolution mechanisms they agreed upon and in particular of the most
important one, namely arbitration (Baker, Mellors, Chalmers, and Lavers, op.
cit., p. 553, n. 9.223)”.

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 “Finally, the same applies to the aforesaid passage of the FIDIC guide in which
the intransigence of a party is given as an example of a situation in which the
implementation of the DAB may be omitted. That the mandatory recourse to the
DAB may suffer certain exceptions does not suggest that resorting to this body
would allegedly be voluntary but rather confirms the general rule making the
recourse to this alternate dispute resolution mechanism compulsory before
introducing a request for arbitration.”

The English case of Peterborough City Council v Enterprise Managed Services Ltd 158,
concerned the FIDIC Silver Book 1999. Mr Justice Edwards-Stuart thought that there was
a significant distinction between FIDIC’s Red Book, which required a standing DAB, and
the Yellow and Silver Books, which provided for ad hoc DABs. He held that where a
dispute arises where there is only an ad hoc DAB then the Parties had to attempt
adjudication prior to commencing an arbitration. The point made was that as a dispute
would always arise prior to the appointment of the DAB (where it was ad hoc) then if
there was no obligation to use the DAB the whole process could be circumvented.
Edwards- Stuart J. held: “It seems to me that sub-clause 20.8, which is the same in all
three of the FIDIC Books, probably applies only in cases where the contract provides for
a standing DAB, rather than the procedure of appointing an ad hoc DAB after a dispute
has arisen”. He went on to reject the submissions that Sub-Clause 20.8 gives a Party a
unilateral right to opt out of the DAB process. He stated:159 “the contract requires that the
determination of the current dispute is to be by way of adjudication and amicable
settlement under sub- clauses 20.4. and 20.5 and, only failing that, by litigation.”

The South African case of Divine Inspiration Trading 130 (PTY) Limited v Aveng
Greenaker-LTA (Pty) Ltd and others160 highlights the problems caused by not appointing
a standing DAB. This was a dispute under a FIDIC Red Book 1999. The contract
provided for appointment of a standing DAB which was not complied with.
Subsequently, Divine Inspiration Trading referred a dispute directly to arbitration. It
relied on Sub-Clause 20.8. An arbitral tribunal was appointed by the Association of
Arbitrators of South Africa. The Respondent argued that the arbitral tribunal had no
jurisdiction to hear the dispute. After

158
[2014] EWHC 3193.
159
[2014] EWHC 3193 at [36].
160
(2015/10455) [2016] ZAGPJHC 99 (13 May 2016).
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hearing submissions from both Parties, the arbitral tribunal found (without giving
reasons) that it had no jurisdiction. Divine Inspiration Trading then requested that the
Court should order the Association of Arbitrators of South Africa to appoint another
Arbitral Tribunal. The Association of Arbitrators of South Africa argued that it could not
do so. The Court found that the relief sought by Divine Inspiration Trading was
misdirected. Further, the Court was not persuaded to grant the relief sought.

In ICC Final Award 19581,161 the Arbitral Tribunal gave a broad interpretation to the
word “otherwise”. This was a case where the Claimant elected to bypass the DAB
provisions and referred the dispute straight to arbitration. In this case a DAB had been
appointed but the Arbitral Tribunal found that there was no longer a valid DAB in place
because the DAB member lacked the necessary independence and impartiality at the time
the dispute arose.162 The facts related to a failure by the DAB member to update its notice
of disclosure about its relationship with an employee of one of the parties. The Arbitral
Tribunal held that this was a breach of Clauses 3 and 4 of the General Conditions of
Dispute Adjudication Agreement.

By: Andrew Tweeddale, Victoria Tyson, Taner Dedezade, and Gabriel Mulero Clas.

161
[2015] ICC Dispute Resolution Bulletin 2015 No 1 at p 147.
162
Ibid at [289].
54

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