Pursuing claims under FIDIC. Jeremy Glover
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1 Pursuing claims under FIDIC Jeremy Glover
2 Force Majeure: a common law definition An act of God or force majeure clause, generally operates to discharge a contracting party when a supervening, sometimes supernatural, event, beyond the control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill. Dickson J Atlantic Paper Stock Ltd v St Anne-Nackawic Pulp and Paper Co
3 Force Majeure: the Civil Law approach Egyptian Civil Code - Article 165: In the absence of a provision of the law of an agreement to the contrary, a person is not liable to make reparation, if he proves that the damage resulted from a cause beyond his control, such as unforeseen circumstances, Force Majeure, the fault of the victim of third party Egyptian Civil Code - Article 373: an obligation is extinguished if the debtor establishes that its performance has become impossible by reasons beyond his control.
4 FIDIC: Force Majeure/Exceptional Events FIDIC defines force majeure or an exceptional event as an event: which is beyond a Party s control, which such Party could not reasonably have provided against before entering into the Contract, which, having arisen, such Party could not reasonably have avoided or overcome, and which is not substantially attributable to the other Party. Sub-clause 19.1 (Red Book), Sub-Clause (Gold Book)
5 National Oil Corp (NOC) v Libyan Sun Oil "The oral and written testimonies of the experts on Libyan law submitted on this subject as well as a careful examination of the Latsis case leave no doubt as to the fact that, under Libyan Civil Law, the impossibility must not be determined subjectively, i.e., by reference to the capabilities and personal means available to the defaulting obligor but rather objectively. It is because of such meaning that the impossibility is said to be 'absolute'... First Award: 31 May 1985
6 Force Majeure: the common law The force majeure event has to have caused Total to be unable to carry out its obligations under the [agreement]. [ ] Total is unable to carry out that obligation if some event has occurred as a result of which it cannot do that. The fact that it is much more expensive, even greatly more expensive for it to do so, does not mean that it cannot do so. Clarke J Thames Valley Power Ltd v Total Gas & Power Ltd
7 An alternative to force majeure? Article 249 of the UAE Civil Code provides: If exceptional circumstances of a general nature which could not have been foreseen occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor so as to threaten him with grave loss, it shall be permissible for the judge, in accordance with the circumstances and after weighing up the interests of each party, to reduce the oppressive obligation to a reasonable level if justice so requires, and any agreement to the contrary shall be void.
8 Claims management Stage 1: Contract Review; Stage 2: Identify the claim; Stage 3: Notices and correspondence; Stage 4: Identification of relevant facts and supporting evidence; Stage 5: Early assessment of quantum and prospects; Stage 6: Resolving the claim
9 Notices and claims correspondence Identify the notice formalities: When is notice required? To whom should notice be given? In what form must the notice be given? What is the extent of the information required in the notice? What are the response times? Are there any ongoing notice obligations? Is there an agreement in place not to serve notices?
10 Sub-clause 18.2 Gold Book If a Party is or will be prevented from performing any of its obligations under the Contract due to an Exceptional Event, then it shall give Notice to the other Party of such event or circumstance and shall specify the obligations, the performance of which is or will be prevented. The Notice shall be given within 14 days after the Party become aware, or should have become aware, of the event or circumstance constituting an Exceptional Event.
11 The key to sub-clause 20.1 Ensure that applicable notices are served. Remember that Sub-Clause 20.1 provides: Claims for additional time or payment need to be made, not later than 28 days after the date on which the contractor became aware (or should have become aware) of the event or circumstance giving rise to the claim ; Any claim for time or money will be lost if it s not made within that time limit; Particulars supporting the claim must be provided; A fully detailed claim needs to be provided within 42 days of the date on which the contractor became aware (or should have become aware) note sub-clause 20.1(c) of the Gold Book; and The engineer must respond within 42 days. Any claims which are interim need to follow this procedure. A final claim must be submitted within 28 days of the end of the claim event. Payment certificates should reflect any accepted substantiated claims.
12 The Gold Book way forward? 8.4 [Advance Warning] : Each Party shall endeavour to advise the other Party in advance of any known or probable future events or circumstances which may adversely affect the work, increase the Contract Price or delay the execution of the Works or the Operation Service. The Employer s Representative may require the Contractor to submit an estimate of the anticipated effect of the future events or circumstances, and/or a proposal under Sub-Clause 13.3 [Variation Procedure] 20.1(a): However, if the Contractor considers there are circumstances which justify the late submission, he may submit the details to the DAB for a ruling. If the DAB considers the circumstances are such that the late submission was acceptable, the DAB shall have the authority under this sub-clause to override the given 28- day limit and advise both the parties accordingly.
13 Ways round the condition precedent Many jurisdictions (both civil law and common law) will generally uphold time bar provisions; Good faith: Article 246 of the UAE Civil Code; Waiver: the Scottish case of City Inn v Shepherd; Does the time bar comply with mandatory limitation or prescription periods which may preclude shorter notice periods? What are the consequences of non-compliance? Complete loss of the right to make claim or will it merely have an effect on the amount of damages that may be recoverable? What are the consequences of enforcing the time bar? Are they such as to amount to a penalty?
14 What are contemporary records? original or primary documents, or copies thereof, produced or prepared at or about the time giving rise to a claim, whether by or for the contractor or the employer. Sub-clause 53.4 of the Old FIDIC Red Book 4 th Edition Attorney General for the Falkland Islands v Gordon Forbes Construction (Falklands) Ltd With respect to contemporary records all clause 20.1 requires is that the contractor keep and have available for inspection by the Engineer these records. The clause, in my opinion, is clear, a failure by a contractor to keep such records does not prevent recovery on the claim but is to be taken into account in its assessment insofar as it may have prejudiced or prevented a proper investigation of the claim. Sub-clause 20.1 of the 1999 FIDIC Form Judge Jones National Insurance Property Development Co. Ltd v NH International (Caribbean) Ltd
15 Dispute escalation Many FIDIC contracts have the DAB provisions deleted or an alternative substituted; Pre-conditions to arbitration can deprive the Tribunal of jurisdiction; The need for certainty under English law: Sulamerica v Enesa Engenharia; What if a party cannot fulfil those contract requirements?
16 What if there is no DAB (or Engineer)? 1987 Red Book (as amended); Clause 67.3 deleted and replaced by: "Any dispute in respect of which amicable settlement has not been reached within 60 days after the date on which notice of intention to commence arbitration was given, shall be finally settled according to the applicable arbitration laws of England. Location of arbitration shall be England." But, apparently no longer an Engineer on the project Man Enterprise v Al-Waddan Hotel Ltd
17 The route to arbitration Remember the potential overlap between a sub-clause 3.5 determination and the dispute resolution provisions; Claims should be submitted to the Engineer who makes a determination under sub-clause 3.5; A clause 20 notice of dispute triggers referral to the DAB; The DAB decision; A Notice of Dispute might follow in respect of the DAB s decision; Amicable settlement; Arbitration note there are three routes to arbitration; clauses 20.6, 20.7 and 20.8.
18 Conclusions
Christophe Guibert de Bruet
Time Bars under the FIDIC Conditions of Contract Lausanne, 25 October 2013 Christophe Guibert de Bruet OVERVIEW I. Contractor s Claims: Sub-Cl. 20.1 II. III. IV. Time-Bar Limitation Overview Time-Bar Limitation:
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