FIDIC Update

FIDIC update 2022

Sean Sullivan Gibbs BSc LLB(Hon) PGDipArb PGDipBar LLM FCInstCES FRICS FCIOB FICE AFIChemE Chief Executive Officer, Hanscomb Intercontinental

A roundup of the latest developments and case law around FIDIC contracts

THE International Federation of Consulting Engineers (FIDIC) has been busy since last year’s update in the Construction Law Review.

The second Kings College FIDIC course took place at the end of June 2022. Students from across the globe attended the five-day course, an initiative aiming at building capacity in the international construction industry. 2022 is the second year in which FIDIC have been accrediting adjudicators for dispute boards and there are now 105 accredited adjudicators as of 15 May 2022¹. The FIDIC contract manager certification commenced in 2022 and as of the 20 May 2022 there are now 36 certified contract managers².

The work to have multilateral development banks and other lending institutions use unamended FIDIC forms of contract has continued. FIDIC has secured agreements with most of the main banks to use FIDIC contracts and this includes:

World Bank
European Investment Bank (EIB)
Islamic Development Bank (IsDB)
Asian Development Bank (ADB)
European Bank for Reconstruction and Development (EBRD)
CAF – Development Bank of Latin America (CAF)
Inter-American Development Bank Group (IDB, IADB)
African Development Bank (AfDB)
New Development Bank (NDB)
Asian Infrastructure Investment Bank (AIIB;
Caribbean Development Bank (CDB)
Central American Bank for Economic Integration (CABEI)
East African Development Bank (EADB)
West African Development Bank (BOAD)
Black Sea Trade and Development Bank (BSTDB)
Economic Cooperation Organization Trade and Development Bank (ETDB)
Eurasian Development Bank (EDB).

Tenders are now coming out to the market using the 2017 and later forms of the FIDIC suite of contracts. This means that dispute boards are now dispute adjudication/avoidance boards (DAAB) replacing the older version, the dispute adjudication board (DAB). As a result, the newly accredited adjudicators will have to play a greater role in assisting the parties avoid disputes. This also means that some older board members may need to learn a wider range of skills.

The flagship FIDIC annual Global Infrastructure Conference returns to take place from 12-13 September in Geneva³.

FIDIC ambassadors

The first phase of the new FIDIC ambassadors programme has been launched, with the appointment of a number of key individuals from around the world confirmed as FIDIC ambassadors. The FIDIC ambassadors programme has been created to expand FIDIC’s footprint across the globe and to achieve the organisation’s objectives more efficiently. The programme will provide FIDIC member associations with a list of dedicated professionals working within the engineering, construction and infrastructure industry. These professionals will advocate for FIDIC principles and objectives and facilitate the development of additional high added-value services to members. In consultation with the FIDIC president and CEO, the ambassadors will specifically seek to influence decision-makers in governments, the construction industry, multilateral development banks and contracting authorities. This is with the aim of highlighting, promoting and adopting FIDIC best business practices.

The FIDIC ambassadors are as follows:

Kiran Kapila, India
Kaj Möller, Sweden
Moncef Ziani, Morocco
Reyes Juárez, Mexico
Bernd Kordes, Germany
Aisha Nadar, Sweden
Exaud Mushi, Tanzania
Fatma Colasan, Turkey
Bayo Adeola, Nigeria
Andrew Read, New Zealand
Zoltan Zahonyi, Hungary.

FIDIC board member Sarwono Hardjomuljadi from Indonesia was awarded the Dispute Resolution Board Foundation’s prestigious Al Mathews Award for Dispute Board Excellence at the DRBF International Conference held in London in May 2022.

Digital transformation committee

The committee will advise and assist FIDIC in the exploration of digitising and developing the FIDIC contract suite to aid productivity and user friendliness.

FIDIC has launched a new digital transformation committee as part of its ongoing strengthening and upgrading of its committee structure, international external affairs and stakeholder relations capability. The new committee will monitor and identify changes in digital technology and techniques to help futureproof FIDIC’s products and services delivery, such as for FIDIC contracts. The committee will also identify issues or trends in the digital space that could be potential disruptors to FIDIC and or its members and the wider industry.

Key strategic priorities of the committee are to advocate for and give guidance on the use of new and existing technologies across the consulting engineering industry and complete and publish guidance on digital platforms that would be of use to FIDIC members. Further, the committee will advise and assist FIDIC in the exploration of digitising and developing the FIDIC contract suite to aid productivity and user friendliness.

The full membership of the committee is:

Mark Enzer OBE FREng (chair) Advisor, Mott MacDonald (UK).
Yoshihiro Katsuhama (vice chair) Acting General Manager, Nippon Koei Co (Japan).
Stacy Sinclair (vice chair) Partner and Head of Technology & Innovation, Fenwick Elliott (UK).
Bram Mommers, Global Technology Officer, Arcadis (Netherlands).
Antoine Labrosse, Chief Digital Officer, Artelia Group (France).
Marcial Rivera, Head, Process Engineering Department, Federated College of Engineers and Architects of Costa Rica (Costa Rica).
Gianluca Genova, Head of IDALab, Basler & Hofmann (Switzerland).
Fabian Sommer, Project Manager, Head of Section, Lombardi (Switzerland).
Tony Scott, CEO and CIO, NeuralRays AI (UK).
Andrew Maher, Group Managing Principal, Aurecon Group (Australia).
Jiangbo Dong, Senior Expert of Design Institute, China Mobile Group Design Institute Co (China).
Christophe Chambet-Falquet, Data Strategist, Role9 (France).

The FIDIC contracts committee’s Task Group 17 (TG 17) is working on a new collaborative form of contract(s) to add to the FIDIC suite by 2023. New contracts, guides and subcontracts still being drafted and reviewed include the:

Guide to the 2017 Suite of Services Agreements.
Guide to the 2017 Red, Yellow and Silver Books.
Guide to the Emerald Book.
Bronze Book (ODBO form).
Offshore Windfarm Contract.
Golden Principles for Services Agreements.
Collaborative Contracting.
PPP Contract Documentation.
EPCM Form of Contract.
Handbook for Practitioners, both for 2017 and 1999 suites.
Subcontracts for the 2017 Red, Yellow and Silver Books and 1999 Silver Book.
JV Agreement for Contractors 1999 and 2017 Suite.
Update of the 2011 FIDIC Procurement Guide.

The Green Book 2nd nd edition has been released and serves as alternative to the 2017 FIDIC Red Yellow Book contracts for projects where the perceived level of risk is low and/or the parties wish to use a form which is simple of use and does not require significant contract administration management resources.

The following FIDIC publications are now available in Portuguese and further translations are due to be released later in 2022:

Plant and Design-Build Contract 2nd nd Ed (2017 Yellow Book).
Construction Contract 2nd nd Ed (2017 Red Book).
DBO Contract 1st st Ed (2008 Gold Book).

FIDIC case law

The case involved a dispute as to the correct interpretation of the contract to perform works in relation to the conversion of four of the six generating units at that power station.

FIDIC contract disputes rarely make the courts in the United Kingdom primarily as the dispute board process and usual ICC arbitration clause lead to a final conclusion of the dispute, the last case being Shepherd Construction Ltd v Drax Power Ltd (2021) EWHC 1478 (TCC) where an amended FIDIC Yellow Book 1999 was used.

The defendant operated Drax Power Station at Selby in North Yorkshire. The case involved a dispute as to the correct interpretation of the contract under which the defendant engaged the claimant to perform works in relation to the conversion of four of the six generating units at that power station to operate on biomass fuel. That project comprised two elements. The first, ‘the ecostore works’, involved the design, engineering, installation, and commissioning of an ecostore facility for the unloading of the biomass fuel from rail wagons and the subsequent handling and storage of that fuel together with a conveyor system for transporting it to the boiler distribution system. The second element, ‘the BDS works’, involved the design, engineering, installation, and commissioning of the boiler distribution system which was to convey the biomass fuel from the ecostore to silos for intermediate storage and thence to the mills from which the boilers were to be fed.

By a contract largely following the standard form of the FIDIC Plant and Design-Build Contract 1st st Edition 1999 the claimant was engaged in March 2012 to undertake the ecostore works for the sum of £149,970,559. In October 2012, the contract was varied to provide for the engagement of the claimant to undertake the BDS works in addition and as a consequence the contract price was increased to £240m. It is common ground that the ecostore works and the BDS works are separate construction exercises, and that the defendant could have engaged different contractors to undertake the different works or that the claimant and the defendant could have entered into a separate contract in relation to them. However, it is also common ground that the ecostore works and the BDS works are interrelated and form part of the same project.

The key element of the current dispute relates to the withholding of those sums.The BDS works enable the biomass fuel stored in the ecostore to be transported to the boilers. It follows that the works cannot be operated separately. In addition, the claimant does not challenge the defendant’s contention that it was only after the BDS works had been completed and the boiler distribution system was operational that it was possible fully to test the operation of the ecostore. Taking over certificates were issued for the ecostore works in September 2014. In relation to those works the final milestone payment (which was the last part of the retention money relating to the ecostore works) was made on 31 December 2014. The taking over certificate for the last part of the BDS works was issued in July 2017 and the defects notification period in relation to those works expired in July 2018.

In February 2019 the claimant made interim payment application 35A seeking payment of £1,283,765 being the balance of the retention money in respect of the BDS works. The defendant sought to make twelve deductions from that sum by reference to clause 14.9.6 of the contract. Of those deductions four in sums totalling £1,002,737 net of VAT relate to amounts said to be due as the cost of remedying defects in the ecostore works.

It was further argued that a standard FIDIC contract made provision for the issue of variation orders where there may be a delay in the completion of the works or if the scope of the works was to be increased.The key element of the current dispute relates to the withholding of those sums. The claimant says that on its correct interpretation the contract does not entitle the defendant to deduct from the retention money due in respect of the BDS works sums relating to the remedying of defects in the ecostore works. The defendant’s case is that its right under clause 14.9.6 to withhold sums from the BDS works retention money is not so limited and that it is entitled to withhold the cost of any unexecuted works arising under the contract’s defects liability provisions whether those works relate to the ecostore works or the BDS works.

The dispute had been referred to adjudication. The adjudicator was Mr Christopher Hough and he had concluded the contract provided for a right of set off between the ecostore works and the BDS works. For the defendant Mr Winser, Queen’s Counsel (QC) not only contended that Mr Hough had reached the correct conclusion but also made reference to Mr Hough’s considerable experience in construction disputes.

His Honour Judge Eyre QC in the Technology and Construction Court (TCC) considered whether the employer could make deductions from a final milestone payment for one package of works if those deductions related to a separate package that had been taken over some time earlier and decided that the employer was entitled to withhold sums from the final milestone payment for a project that consisted of two distinct packages of work, even though the amounts withheld related to the first package, which had been completed sometime earlier. It must be noted that amendments had been made to the Yellow Book and in particular the inclusion of the following clause is of great significance:

“14.9.6 However, if any work remains to be executed under clause 11 (defects liability) or clause 12 (tests after completion) the employer shall be entitled to withhold the estimated cost of this work until it has been executed and to deduct the same from amounts otherwise due to the contractor until such time as the work is completed.”

Interesting cases on FIDIC forms heard in South Africa now follow.

ICT-Works Proprietary Limited v City of Cape Town (6582/2020) (2021) ZAWCHC 119 (18 June 2021)

In the High Court of South Africa Western Cape Division, a dispute under a 1999 FIDIC Yellow Book was decided. In the first application, ICT sought declaratory and interdictory relief to enforce the contract until its expiration in August 2025 (the main application). Whilst it was accepted that the contract in its (then) current form was to expire in August 2025, the main application was opposed on the basis that the contract was unenforceable due to a mistake relating to the duration of the contract and the person who signed the contract on behalf of the city lacked the requisite authority to sign a contract which expires in August 2025.

The court held that section 33 of the Municipal Finance Management Act 56 of 2003 did not prohibit contracts with a variable termination date. It was further argued that a standard FIDIC contract made provision for the issue of variation orders where there may be a delay in the completion of the works or if the scope of the works was to be increased. This would invariably push forward the completion date of the project.

The court held that the contract entered into was clearly unlawful on the undisputed facts before it with regard to the section 33 process, and therefore, declared the contract invalid and set it aside. This case should serve as a warning to those contracting with municipal authorities in South Africa that they must confirm who they are contracting with, and the signatory has the requisite authority.

SA National Roads Agency SOC Limited v Fountain Civil Engineering (Pty) Ltd and Another (395/2020) (2021) ZASCA 118 (20 September 2021

The court held that the contract entered into was clearly unlawful on the undisputed facts before it with regard to the section 33 process, and therefore, declared the contract invalid and set it aside.The Supreme Court of Appeal South Africa heard a matter concerning a 1999 FIDIC Red Book. This was an appeal against an interdict restraining the beneficiary of an unconditional performance guarantee (following termination of the contract) from making a claim under it, pending an arbitration to resolve disputes arising from the execution of a building and engineering contract.

The court held the High Court had no power to compel the parties to submit to arbitration to resolve their disputes. The effect of the high court’s order referring the disputes between the parties to arbitration, was to amend the contract. It was held that clause 4.2 does not require SANRAL to prove an entitlement under the contract before it can make a demand on the guarantee, on the basis that the purpose of the performance guarantee ‘undoubtedly was to secure SANRAL’s position in the event of a dispute and pending resolution thereof’.

Any other construction would render meaningless the indemnity in clause 4.2. A claim on the guarantee was permissible, regardless of disputes under the contract the performance security was unconditional. The wording of 4.2 in relation to this matter does appear clear:

“The employer shall not make a claim under the performance security except for amounts to which the employer is entitled under the contract in the event of: (d) circumstances which entitle the employer to termination under sub-clause 15.2 [termination by employer] irrespective of whether the notice of termination has been given”.

Universal Coal Development (Pty) Ltd v Mineral Resources Development (Pty) Ltd (33182/2021) (2021) ZAGPPHC 839

The respondent was directed, pending final determination of arbitration proceedings, to hand over possession, operation and control of the plant within 24 hours from service of the court order, and to pay the applicant’s costs.

The High Court of South Africa (Gauteng Division, Pretoria) heard a dispute about a Gold Book contract. The Gold Book is the FIDIC Conditions of Contract for Design, Build and Operate Projects.

The dispute concerned whether a contract for the operation of a coal processing plant was for a fixed period of 96 months or whether its duration was only until coal reserves at a certain colliery became depleted, and in the meantime, whether the applicant should continue to pay the respondent the agreed fixed monthly contract price until the return of the plant.

The applicant argued that the anticipated period inserted in the agreement was calculated on the initial proposed rate at which the coal reserve could be mined and processed, rounded off to 8 years (96 months).

This was necessary because the standard wording of the FIDIC Gold contract required a time period, rather than a term until the coal reserve is depleted. The court found that there was a prima facie case that the contract included a tacit term or by way of interpretation that all the time clauses in the contract relating to operation of the plant should be read to mean until the depletion of the coal reserves or 96 months, whichever comes first.

Sean Sullivan Gibbs BSc LLB(Hon) PGDipArb PGDipBar LLM FCInstCES FRICS FCIOB FICE AFIChemE Chief Executive Officer, Hanscomb Intercontinental sean.gibbs@hanscombintercontinental.co.uk @SGibbs121

Sean Gibbs is vice chair the of the CICES Contracts and Dispute Resolution Panel and is a committee member of CICES South West and South Wales. The respondent was directed, pending final determination of arbitration proceedings, to hand over possession, operation and control of the plant within 24 hours from service of the court order, and to pay the applicant’s costs.

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1 A full listing of those accredited can be accessed via https://fcl.fidic.org/ourprogrammes/adjudicators/

2 Certified contract managers listed at https://fcl.fidic.org/our-programmes/contractmanagers/

3 Attendees can register now for this in-person event via the FIDIC events platform at https://events.fidic.org/GIC2022