FIDIC Contracts: Law and Practice

624 Pages·2009·2.45 MB·English

by  Ellis Baker

FIDIC CONTRACTS:
LAW AND PRACTICE
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FIDIC CONTRACTS:
LAW AND PRACTICE
By
ELLIS BAKER
BEN MELLORS
SCOTT CHALMERS
ANTHONY LAVERS
WHITE KCASE
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© Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers 2009
British Library Cataloguing
in Publication Data
A catalogue record for this
book is available from
the British Library
ISBN 978–1–84311–628–8
All rights reserved. No part of this publication may be reproduced, stored in a
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mechnical, photocopying, recording or otherwise, without the
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publication is correct, neither the authors nor Informa Law can accept any responsibility
for any errors or omissions or for any consequences arising therefrom.
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FOREWORD
In 1999, three new conditions of contract were published by FIDIC, with their basic
structure and wording harmonised around the previous FIDIC Design-Build and Turnkey
Contract (the 1995 “Orange Book”) format. These conditions were the Conditions of
Contract for Construction, for Plant and Design-Build, and for EPC/Turnkey Projects.
The first one is intended for construction works where the Employer is responsible for the
design, similar to the old Red Book, and with an important role for the Engineer. The two
latter ones are intended for cases when the Contractor supplies the design. The Plant and
Design-Build Contract has the traditional Engineer while the EPC/Turnkey Projects
Contract has a two-party arrangement.
The 1999 Conditions of Contract for Plant and Design/Build retained the essential
elements of the earlier Orange Book. It had been noted, however, that new trends in project
financing and management, especially related to PFI and BOT, required a different set of
conditions, and the Conditions of Contract for EPC/Turnkey Projects were drafted to cater
for this. They complement but do not replace the Conditions of Contract for Plant and
Design/Build, in that they are intended to be used in a rather specific context, for
example:
u when greater certainty is sought that price and time will not be exceeded;
u when the Contractor is required to take total responsibility for the design and
construction of the infrastructure or other facility;
u when the Employer is willing to pay more in return for the Contractor bearing the
extra risks associated with this; and
u when uncertain or difficult ground conditions or other largely unforeseeable risks are
unlikely to be encountered.
The EPC/Turnkey Contract should not be used for design-build work in other circum-
stances. The decision about which form of contract to use should, therefore, always be taken
in full consideration of the particular characteristics of the project at hand.
While several guides to the 1999 editions have been published, only a few deal with the
whole suite of contracts, most notably the Contracts Guide published by FIDIC. For
FIDIC, this guide, with detailed guidance to the new contracts, remains the main reference
work, especially since it was written by the principal drafter of the three 1999 conditions
of contract. However, it aims mainly to explain the basis for interpreting the clauses. This
new guide—FIDIC Contracts: Law and Practice—is sure to become a leading industry
guide as it also covers the full suite of contracts but does so in a more detailed manner by
providing legal commentary and detailed analysis of the clauses for each of the different
forms, with relevant case law. Moreover, the guide examines the FIDIC suite of contracts
in relation to other organisations, such as the World Bank and the ICC, who are closely
involved in their use. This is especially important now that the Multilateral Development
Banks (MDBs) and an increasing number of bilateral development agencies have adopted
the MDB Harmonised Edition of the Construction Contract for their projects.
v
FOREWORD
The authors have considerable experience in project procurement and international
dispute resolution, so they are able to explain and interpret the significance of the contract
clauses in the light of extensive use by a large user community that takes in engineers,
project managers, quantity surveyors, architects, contractors, and professional staff from
public authorities and procurement agencies. The new guide will certainly receive much
positive attention from all interested parties.
Philip Jenkinson,
Chairman of the FIDIC Contracts Committee
vi
PREFACE
For a practising lawyer, a book is a daunting undertaking. In the course of producing this
one, I came to understand better why there was so little published assistance in use of the
FIDIC contracts. This is not to denigrate the work of other authors on FIDIC subjects:
grateful reference to their contributions has been made and recorded in many places within
this one. But it was not hard to see the incentive to limit the scope of coverage, for example,
to one form of contract.
And this was the gap which I, and colleagues, and indeed clients and others in the
industry, remarked over many years; the absence of a comprehensive legal text on the entire
FIDIC suite, reflecting the full range of options offered by the respective forms.
It is, of course, not possible to practise in construction law internationally without being
fully aware of the massive presence of the FIDIC contracts in the global construction and
engineering industries.
Apart from the numerous projects where one or other of the FIDIC contracts is selected
for use, there are indirect, often ‘unofficial’ influences, as in the adaptation of older FIDIC
editions for use as standard forms (e.g., in Eastern Europe or by State entities in the Middle
East) or in reference of terms of bespoke contracts to the FIDIC equivalent for comparison
with an international benchmark.
For me, at White & Case, this awareness was greatly enhanced by Christopher Seppälä,
in the Paris office. His work as Legal Adviser to the FIDIC Contracts Committee and as
author and presenter of papers was a constant reminder of the paramountcy of the FIDIC
contracts in international construction procurement and disputes practice and was one of
the inspirations for this book. Reference should also be made to FIDIC itself. This is in no
sense an ‘official’ publication. Indeed, individual aspects of the FIDIC contracts are
criticised where that is felt to be justified, but this does not reduce the gratitude felt for
encouragement received from Peter Boswell, as General Manager, and Philip Jenkinson, as
Chairman of the Contracts Committee. I have always taken the view that FIDIC is ‘big’
enough in attitude to accept differences of opinion and valid criticism and do not regard
these as being inconsistent with sincere respect for FIDIC’s many achievements. That the
opportunity ever arose to try to fill the perceived gap was due to the enterprise of Informa
in making the initial approach to us and the tenacity of Jessica Westwood and her colleagues
in seeing the project through. It is even more of a pleasure to record how much is owed to
them now that the debt no longer includes an undelivered manuscript.
While I have taken responsibility for all editorial judgements, including any errors in the
text, final delivery would never have been achieved without the sustained efforts of my
co-authors, all White & Case lawyers in the London Construction & Engineering Practice
Group. Ben Mellors has, in less than a year, project-managed the team effort from a part-
finished draft to an end product. Scott Chalmers combined preparation of draft chapters
with lengthy overseas business trips and a young family. Anthony Lavers brought experi-
ence of authorship as well as his substantive contribution to the collective effort.
vii
PREFACE
Formal acknowledgement is made throughout to the sources referred to, but more
general gratitude is also appropriate to the colleagues, senior and junior, in the Firm and
in the wider legal profession, clients and other FIDIC users. Their insights and comments
have often enriched my understanding of the forms in practice.
As I have indicated, the intention behind this book is to respond to a need which was
obvious to me and to many others. How completely it meets that need is for readers to say;
the team intends to listen to all constructive comment to factor into the preparation of any
future editions, which the publishers have been kind enough to anticipate.
What can be stated with certainty is that FIDIC Contracts: Law and Practice is offered
to FIDIC users and their advisers in the same spirit of sharing of knowledge and experience
from which I and my co-authors have benefited over the years. We hope it will make a
difference.
Ellis Baker
White & Case, London
viii
OUTLINE CONTENTS
Foreword v
Preface vii
Author Biographies xxvii
Introductory Notes for Readers xxix
Table of Cases xxxiii
Table of Legislation xxxvii
List of Tables xxxix
CHAPTER 1. FIDIC 1
CHAPTER 2. THE FIDIC CONTRACT 17
CHAPTER 3. PRODUCT 57
CHAPTER 4. PRICE 157
CHAPTER 5. TIME 217
CHAPTER 6. CONTRACT ADMINISTRATION AND CLAIMS 267
CHAPTER 7. RISK, INSURANCE AND SECURITIES 343
CHAPTER 8. REMEDIES 401
CHAPTER 9. DISPUTE RESOLUTION 505
Index 555
ix