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FIDIC Claim Management

By Rechtsanwalt Dr. Gtz-Sebastian Hk

As has been confirmed by Judge Sanders in Attorney General for the Falkland Islands v. Gordon Forbes
Construction (Falklands) Limited, Falkland Islands Supreme Court 14 March 2003, FIDIC contracts are
aimed at the early resolution of any queries at the time when the claim arises, with the likelihood that
plant, manpower and witnesses are still on site (for a further construction of the relevant Sub-Clauses
of the FIDIC 1999 edition see also High Court of Trinidad and Tobago, judgment from 21 October 2009
(Claim No CV2008-04881) in National Insurance Property Development Co Ltd v. NH International
(Carribean) Ltd). Thus claims have to be pursued in a detailed procedure provided by the FIDIC
contracts. In a summary this means:

to give notice (in time)

to give particulars of the claim (in time)

to wait for Engineers approval or disapproval

to negotiate and settle the claim

to wait for Engineers determination (in case of failure to reach settlement)

to refer a dispute to the DAB (in case of dissatisfaction)

Under FIDIC forms of Contract a claim is nothing more than a dream unless and until a Claim notice
was given in accordance with the Contract. If either Party considers to be entitled it shall become
active. As the term "claim" means nothing else than the assertion of a right, either arising out of or in
connection with the contract, it is strongly recommended to assess the whole Contract and to identify
all of the claims stipulated therein as well as all relevant legal claims as provided for by the governing
law (proper law of the contract). Both, Contractors and Employers, should have a clear view of the risk
compensation features which can be found in the Contract and the governing law. A claim will only
become an entitlement if the Contract parties strictly follow the procedures under the FIDIC Contract,
which means in most cases:

to give a notice of a claim

to keep contemporary records

to submit particulars of claim

FIDIC forms of contract provide for Cost claims, Cost and profit claims and extension of Time for
Completion (EOT) claims. Cost is a defined term meaning all expenditure reasonably incurred (SubClause 1.1.4.3) including overheads and similar charges but no profit. The meaning of the terms
"expenditure" and "overheads" is not explained. This may lead to debate. It is submitted that
"expenditure" should be read and understood in the sense of the English authorities (see Hadley v.

Baxendale (1854) 9 Ex. 341). However, civil law practitioners may prefer to rely on the theory that if
payment of the contratcor is not exactly defined in the Contract the Contractor should be entitled to a
reasonable remuneration (see Compagnie Interafricaine de Travaux v. South African Transport Services
and Others (680/89) [1991] ZASCA 16; 1991 (4) SA 217 (AD); (21 March 1991). In that case the
contract included the following Sub-Clause:
No claim by the Contractor will be considered on account of the materials, methods of construction
and/or site conditions being different from those assumed by him in tendering for the contract, except
in the case of adverse sub surface conditions which in the opinion of the engineer could not reasonably
have been foreseen.
The governing law may also provide for claims. A contractor may for example prefer to rely on a
Common Law misrepresentation claim instead of one under Sub-Clause 4.12. The Civil Law principle of
good faith may also constitute a good basis for a claim. Under German law the site (which according to
the courts has the nature of a free issue material) shall be "fit for the works" meaning that the
contractor may be entitled to additional payment when the site is not "fit for the Works". In some
countries where a contract for public works has the nature of an administrative contract (for example in
France and purportedly in Egypt, Qatar and the UAE) the "imprvision" principle may give raise to
claims. US courts have confirmed "constructive acceleration claims" and "loss of bonding capacity
claims".
Anyway, if -under a FIDIC Contract- the Contractor considers himself to be entitled to a claim (whether
under a clause of the Contract or in connection with the Contract), the first step is for him to give
notice. This Notice is important because:

everyone involved becomes aware that there is an event or circumstance where extra time or
payment may be owed to the Contractor

proper contemporary records must then be kept and agreed, to avoid future argument

alternative measures may also be possible to reduce the effects

the matter may possibly be resolved at an early date

if the event or circumstance turns out to be of insignificant effect, then it is not necessary to
follow up the notice with a formal claim.

As a rule claims related to extension of time and/ of additional payment under any clause of the
contract or otherwise in connection with the contract must be notified within a delay of 28 days after
having become aware of the Event or circumstance giving rise to the claim. Thus the Contractor must
provide to the Engineer a written notice of the claim for additional payment and time extension within
28 days after becoming aware of the occurrence of the event giving rise to claim (Sub-Clause 20.1). If
the Contractor fails to comply with this notice requirement, his entitlement to the claim shall lapse. It
should be emphasised that sometimes additional notices are required, such as under Sub-Clause 4.12
and 19.2. Beware that Sub-Clause 19.2 provides to give a notice within a short period of 14 days in the
event of Force Majeure circumstances.
The claim notice must indicate basic details, in order to inform the Engineer about the scope of the
claim and to enable him to give instructions, if necessary. The notice shall therefore meet the following

requirements:

describe the event or circumstance

the notice need not state time or amount claimed or contractual basis of claim

notice shall comply with Cl 1.3, i.e. in writing and properly delivered

progress reports - Cl 4.21(f) - must list notices given

There is no immediate response required from the Engineer (Employer) - but a simple
acknowledgement is normal.
To the extent that a third party to the contract, the Engineer, has been nominated and appointed to
determine claims, the parties to the contract shall notify him of any claims to which they consider
themselves to be entitled to though Sub-Clause 2.5 requires the Employer to give Claim notices to the
Contractor with copy to teh Engineer. In the event of Contratcors Claims the Engineer is then in
charge of firstly approving or disapproving any claim and to determine it, if necessary. If required, he
shall make the determination with regard to all relevant circumstances, which means that he will have
to take into consideration all facts

reported in the monthly reports

reported in contemporary records

reported in labour reports

stated in the claim notification

obtained at site visits and inspections

reported in early warning notifications concerning probable future events which may effect
progress of the works and the contract price

reported in the Programme

reported in its own records

In respect of Employers claims Sub-Clause 20.1 does not apply; thus no approval or disapproval will
be required before making a determination on the Employers claim in accordance with Sub-Clause
3.5.
In order to ensure that the parties and the Engineer may reach reasonable, informed, and skilful
decisions, FIDIC contracts provide a sophisticated system for communications and documentation of
relevant facts, events and circumstances (Sub-Clause 1.3). This system and the resulting duties as to
documentation and reporting have to be recognised and respected at all times, because Judge Sanders
also concluded in the Falkland case that it would be perverse if a contractor who had failed to comply
with the terms of the contract should then be allowed to produce non-contemporary records to support

a claim, particularly as these could not properly be investigated by the employer at a later date. The
rights of the employer to inspect the records at the time the claim arose were fundamental to the FIDIC
procedure. Failure to comply with the reporting duties leads to the foreclosure of claims. It should be
emphasised that contractual terms requiring a contractor to give prompt notice of delay serve a
valuable purpose; such notice enables matters to be investigated while they are still current.
Furthermore, such notice sometimes give the employer the opportunity to withdraw instructions when
the financial consequences become apparent (Steria v. Sigma per HHJ Davies, 2007] EWHC 3454
(TCC)). Thus civil law practitioners should be reluctant to rely on the principle of good faith in order to
evade the notice requirements and related delays.
By means of a notice of a claim the claim determination procedure becomes initiated, which is
described in Sub-Clause 3.5. According to Sub-Clause 3.5 and 20.1 the following shall happen:

contemporary records shall be kept which may be inspected by the Engineer

a fully detailed claim must be submitted within 42 days of the event (or other agreed time)

provision for continuing claims and submittal of their details

within 42 days of receiving the claim with details the Engineer shall respond with approval, or
with disapproval and detailed comments.

the Engineer shall determine under Clause 3.5 any time extension or additional payment to
which the Contractor is entitled under the Contract.

each payment certificate shall include such amounts for any claim as have been reasonably
substantiated.

any other specified requirements must also be satisfied (see Sub-Clause 19.2)

The Engineer may request any necessary further particulars, but shall nevertheless give his response
on the principles of the claim (approval or disapproval) within 42 days. Thus there is a time limit
imposed on the Engineer to reply to a Claim, albeit there is no particular requirement to make a
determination within a specific period of time. However, once having approved or disapproved a claim
the Engineer shall attempt to reach an amicable settlement. If he fails to reach an agreement he is
obliged and entitled to determine the claim. Sub-Clause 1.3 requires the Engineer not to unreasonably
delay or withhold any determination.
The question may arise whether a claim fails if the Contractor failed to keep contemporary records.
Following the aforementioned Falkland case this has been sometimes suggested. However the High
Court of Trinidad and Tobago recently held that the relevant clauses in the respective FIDIC 1987 and
FIDIC 1999 edition are different from each other. Hence, the High Court of Trinidad and Tobago held on
21 October 2009 (Claim No CV2008-04881) in National Insurance Property Development Co Ltd v. NH
International (Carribean) Ltd that with respect to contemporary records Sub-Clause 20.1 FIDIC 1999,
unlike clause 53.4 FIDIC 1987 in the Falklands case, does not specifically require a verification of the
claim by contemporary records. 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. As per the Court
the clause, 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. Hence the Court found that on a true construction of Sub-Clause 20.1

where there are no contemporary records the claim does not fail.
Any determination issued by the Engineer will be binding on the parties until revised by DAB or
arbitration. Any agreement or determination must be notified to the parties. It is suggested that any
settlement which failed to become notified according to Sub-clause 3.5 is not yet valid, even though the
settlement was signed. Otherwise the danger arises that the Engineer will have no knowledge about the
settlement. Moreover the notification requirement ensures that the day of validity of the settlement can
be clearly identified. Each party shall give effect to each agreement or determination unless and until
revised under Clause 20. Thus the date from which any agreement is binding must be clear.
The new FIDIC Gold Book has slightly changed the aforementioned claim management framework.
Under a Gold Book a Contractor will not only give notice of a claim within 28 days after becoming aware
of the relevant event or circumstance but also give particulars within 42 days in order to prevent the
claim from becoming lapsed. Employers claims are now covered by Sub-Clause 20.2 and no longer by
Sub-Clause 2.5. Also any dermination by the Employers Representative (who replaces the former
Engineer) shall be followed by a notice of dissatisfaction in order to safeguard the way to the Dispute
Adjudication Board.
Anyway, if the Contractor considers himself to be dissatisfied with any Engineers determination he
may refer a dispute to the Dispute Adjudication Board (DAB). The DAB has power to open up and
review any determination made by the Engineer. It has been held by the High Court of Dehli and New
Dehli that under a FIDIC Contract the dispute resolution procedure stipulated therein is binding on the
parties and the parties have to resort to that procedure. In other works, the Court may ask to do what
has not been done. A court must first ensure that the remedies provided for in the Contract itself are
exhausted (M/S SRI SAI EARTH WORKS PVT LTD v. ITALIAN THAI DEV. PUBLIC CO LTD, January 12,
2009 relying on a previous decision of the Supreme Court of India in the case of Northern Railway
Administration v. Patel Engineering Company Ltd., 2008 (11) Scale 500 ). This position seems to be in
line with published ICC awards (see below).
The further question which arises is, whether a party who obtained a "final and binding" decision from
the DAB, which the other party fails to comply with, can refer such failure to arbitration (ICC cases No.
7910 [1996] and No. 3970 [1983]) in order to enforce the DAB decision?
According to Sub-Clause 20.7 the failure to comply with a DAB decision may be referred to arbitration.
Thus where one party had obtained a favorable decision from the DAB which the other party had not
contested and which, therefore, became "final and binding, the failure itself may be referred to
arbitration. However, what does that mean? Could the aggrieved party refer such failure to arbitration
in order to obtain an arbitral award in respect of such decision which could be enforced under the New
York 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
The ICC award in case No. 7910 [1996] addressed this issue which became a dispute under FIDIC, 4th
edition 1987. The arbitral court concluded that, where the claimant had submitted disputes to the
Engineer under Clause 67 (FIDIC 4th edition 1987) and obtained decisions from the Engineer (who was
a that time a quasi arbitrator) which had become final and binding because they was no notice of
dissatisfaction by the defendant in due time, the arbitral court lacked jurisdiction with respect to such
matters. Therefore the claimant's only remaining right of recourse was to seek to enforce the DAB or
Engineer decision before the courts in the defendant's country.
This is not a satisfying result because the enforceability of a DAB decision is subject to the governing
law. Thus, as a matter of fact even final and binding DAB decisions will often be unenforceable, in
particular in countries where the feature of summary proceedings is not known. Hence the solution

which was submitted in the earlier ICC case No. 3790 of 1983 (110 Clunet (1983), 910 et seq.) was
welcomed. In that case the tribunal had to decide on a dispute between a Libyan and a French
contractor which arose out of contract for public works based on FIDIC 4th edition 1987. The Engineer
had issued certain payment certificates. However, the Employer did not pay on these certificates. He
purported that the work for which the Engineer had issued the certificates were defective and he
declared dissatisfaction with the Engineers certificates. However, he did not refer the dispute to the
Engineer (as provided for by the contract) but directly to arbitration. The contractor on the other hand
claimed for outstanding payments and submitted the dispute to ICC arbitration. The arbitral tribunal
made an award in favour of the contractor. It decided that the employer was bound to pay on the
certificate issued by the Engineer. Accordingly the ICC court awarded the contractor the amount of
money claimed based on the final and binding Engineers decision. The ICC award in the case No. 7910
[1996] is in line with this decision.
Anyway, the issue raised by cases No. 7910 and 3970 was resolved by the FIDIC Conditions, 1st edition
1999. Sub-Clause 20.7 therein expressly provides that, where a decision has become final and binding,
either party may, if the other party fails to comply with such decision, and without prejudice to any
other rights it may have, refer the failure itself to arbitration. Consequently, a party can obtain an
arbitral award in respect of such a decision, however subject to one qualification. According to SubClause 20.1 any amounts shall be included in Payment Certificates. Accordingly it is submitted that the
arbitral court should not award the amount of money claimed but impose the obligation on the Engineer
to include the amount in the next Payment Certificate. Only if evidence can be shown that the Engineer
is not willing to comply with Sub-Clause 20.1 the arbitral court may award the amount of money. The
reason for this is that the Engineer shall certify the amounts which he believes being due (Sub-Clause
14.6). According to Sub-Clause 14.3 deductions for retention, calculated by applying the percentage of
retention stated in Appendix to Tender to the Contract Price, shall be made.
On April 1, 2013 FIDIC has published the FIDIC Guidance Memorandum to Users of the 1999
Conditions of Contract suggesting revised Sub-Clauses with regard to the enforceability of DAB
decisions which adopt the approach as it is under the FIDIC Gold Book.
For more detailed information about claims and claim management the new FIDIC Guide for
Practitioners has been published. The authors are Axel-Volkmar Jaeger and Dr. Gtz-Sebastian Hk.

LAW OFFICE Dr. Hk, Stieglmeier & Kollegen


Contact: Advocate Dr.Gtz-Sebastian Hk
Eschenallee 22,
14050 Berlin
Tel.: 00 49 (0) 30 3000 760-0
Fax: 00 49 (0) 30 3000 760 33
e-mail: kanzlei@dr-hoek.de
The author is a fully accredited & licensed FIDIC trainer. Together with the former past Chairman of the
FIDIC Contract Committee, Mr. Axel Volkmar Jaeger he is responsible for the German FIDIC training.
Dr. Hk was also a friendly reviewer of the FIDIC Gold Book and the FIDIC Subcontract form. Dr. Hk is
finally also a listed and assessed FIDIC Adjudicator (FIDIC Presidents List). Since 2011 Dr. Hk
advises the FIDIC Task Group for the Design & Build Subcontract as well as the ODB Task Group. Since
2013 is involved in the FIDIC Joint Venture Agreement Task Group work. He is the current Chair of the
FIDIC Trainers Assessment Panel.

Dr. Hk is and was active as arbitrator, adjudicator and mediator in particular in road projects, irrigation
projects, wastewater treatment plant projects and windmill farm projects and regarding consultancy
agreements. He has specific experience as a member of Dispute Adjudication Boards in Armenia,
Bosnia, Germany, Palestine and Tanzania.
Dr. Hk has conducted FIDIC courses in Austria, Bosnia, Botswana, Cameroon, Denmark, France,
Germany, India, Indonesia, Kenya, Korea, Philippines, Oman, Qatar, Serbia, Tanzania, Uganda. He is a
fully accredited FIDIC Trainer providing all common FIDIC Modules and Advanced courses as well. He
is BOTA registered.
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