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In the Matter of an Adjudication under the Provisions of the FIDIC

Conditions of Contract for Construction, Multilateral Development Bank


Harmonised Edition 2006

and

in the Matter of a Contract subject to the Law of the Republic of


Moldova

between

IS Administratia de Stat a Drumurilor Employer

and

PA & CO International SRL Contractor

DISPUTE BOARDs DECISION

on

The second Dispute arising out of the Contract for the Rehabilitation of M3 Chisinau
Giurgiulesti Road (km 151+200 - km171+290 and km 179+650 - km190+750)
Contract RSPSP/W4/04

D J Loosemore
t/a David Loosemore Limited
25 Morford Way
Eastcote
Ruislip
Middlesex HA4 8SL
United Kingdom

DISPUTE BOARD MEMBER 25th May 2017


Introduction

1. .S. Administraia de Stat a Drumurilor (S.E. State Road Administration), whose


registered office is Street Bucuriei no. 12A, MD-2004, Chiinu, Republic of Moldova
(the Employer), entered into a contract with S.C Pa & Co International S.R.L whose
registered address is 557 Principala Street, 607365, Oituz, Bacau County, Romania (the
Contractor), for the Rehabilitation of M3 Chisinau Giurgiulesti Road (km 151+200 km
171+290 and km 179+650 km 190+750), in the Republic of Moldova.

2. The financing institution named in the Contract Data is the European Investment Bank (the
Bank).

3. The Contract Agreement (CA) was signed with the successful Tenderer, S.C Pa & Co
International S.R.L, on 24th March 2014.

4. The Commencement Date for the Contract was 28th August 2014, with an end date for the
completion of the Works of 28th August 2016 (24 months from the Commencement Date).

5. The Contract included, inter alia, the printed form of the FIDIC (Fdration Internationale des
Ingnieurs-Conseils) Conditions of Contract for Construction, Multilateral Development Bank
Harmonised Edition March 2006, amended and supplemented in accordance with Particular
Conditions.

6. The Engineer, appointed to supervise the works is Louis Berger SAS, of 86 Rue Henri
Farman, Issy Les Moulineaux, 92130, France.

7. The Engineers authority is, however, limited by Sub-Clause 3.1(b)(ii) of the General
Conditions of Contract (as specified in the Contract Data) wherein Variations resulting in an
increase of the Accepted Contract Amount in excess of 0.5% shall require approval of the
Employer.

Appointment of the DB

8. Pursuant to Sub-Clause 20.2 of the General Conditions of Contract, the Parties shall appoint
a DB by the date stated in the Contract Data. No date is stated in the Contract Data but it is
stated that the DAB (sic) shall be one sole member/adjudicator.

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9. As result of a dispute that had arisen the Contractor notified both the Engineer and the
Employer, by letter dated 30th March 2016, a wish to have the matter referred for a DB
decision in accordance with Sub-Clause 20.4 of the Conditions of Contract.

10. Further correspondence ensued but the matter could not be resolved and the Parties were
also unable to agree upon the appointment of the sole member of the DB.

11. By letter dated 16th May 2016, the Contractor notified both the Engineer and the Employer of
his intention to obtain the DB appointment through a request to the Official Named stipulated
in Sub-clause 20.3 Contract Data, Particular Conditions of the Contract.

12. Accordingly, as result of this, and other disputes that had arisen, and as required in
accordance with the provisions of the Contract Data at Sub-Clause 20.3, the Contractor
requested the President of the Institution of Civil Engineers, UK (ICE) to appoint the sole DB
member by an application made and dated 30th May 2016.

13. Following receipt of the application by the ICE on 31st May 2016, I, Mr. David Loosemore
CEng. FICE, MCIArb, FCinstCES, was appointed by the President of the ICE as the DB
member on 6th June 2016. As stipulated in Sub-Clause 20.3 of the General Conditions of
Contract This appointment shall be final and conclusive.

14. Accordingly, on 14th June 2016, a tripartite Dispute Board Agreement (DBA) was sent
initially to the Contractor for signature.

15. On the 20th June 2016, the Contractor forwarded the partially completed DBA in triplicate to
the Employer for his signature. At this time, the DBA in triplicate is still with the Employer
awaiting signature and return to the DB. Evidently, the DBA will not be completed as the
Employer has elected not to participate in the adjudication following various jurisdictional
challenges; these jurisdictional matters are dealt with below.

16. The DB issued its first Decision on 23rd August 2016. The dispute referred, pursuant to Sub-
Clause 20.4 of the Conditions of Contract, was in relation to the Engineer's
opinion/determination (allegedly following the Employer's guidance) regarding the
Contractor's entitlement to reduce the rate of the works and suspend the works according with
Sub-Clause 16.1 for non-payment of IPC 01/ Advance Payment. In the reasoned Decision, the
DB decided that the Contractor had acted reasonably in not taking the permitted action to
suspend work or to reduce the rate of work without first exhausting all other practicable
approaches. The DB decided that the Contractor had acted properly in accordance with his
obligations under the Contract in providing the necessary Advance Payment Guarantee and
that he was therefore entitled to reduce the rate of work and/or to suspend work in
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accordance with Sub-Clause 16.1, unless and until he received payment in the sum of
1,413,141.17.

17. The dispute now referred to the DB results from the Contractor's alleged entitlement to
terminate the Contract pursuant to (i) Sub-Clause 16.2 (f) for prolonged suspension affecting
the whole of the Works as described in Sub-Clause 8.11 [Prolonged Suspension], (ii) payment
on termination to the Contractor pursuant to Sub-Clause 16.4 [Payment on Termination],
following notice of termination under Sub-Clause 16.2 [Termination by Contractor] and (iii) the
Contractor's alleged entitlement to terminate the Contract pursuant to Sub-Clause 16.2 (a), (c)
and (d).

Jurisdictional Matters

18. By letter dated 12th July 2016 sent from the Employer to the Contractor (but not copied to the
DB), the appointment of the DB was challenged.

19. The Employer alleged that as the Contract provides no time limit for the appointment of the
DB, and in this case there was no prior attempt by the Contractor to obtain the
Employer's agreement to the appointment of the DB before unilaterally referring the
issue to the Institution of Civil Engineers, the Employer cannot agree to the proposed
nomination of Mr. David Loosemore without first attempting to reach agreement on
the appointment of the DB with the Contractor.

20. Furthermore, the Employer argued that as it is governed by public procurement


regulations and the terms of the IFI Loan Agreement under which the project is
funded, it must receive no objection of the European Bank for Reconstruction and
Development (EBRD) before it can confirm agreement of the appointment of the DB.

21. The Contractor, in its response dated 14th July 2016, addressed the points raised by the
Employer.

22. The Contractor referred to its letters of 30th March 2016, 25th April 2016 and 16th May 2016
wherein it alleged it clearly indicated its intention to refer the unresolved matter to the DB, via
application to the President of the ICE, as no agreement between the Parties on a DB
appointment had been reached.

23. Furthermore, the Contractor maintained that the Contract does not require the Contractor to
obtain the Employer's agreement for a unilateral application to the Official named in the Contract
Data for appointing a DB and likewise the Contract does not require EBRD approval for signing a DB
Agreement.
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24. After due consideration of the available evidence I concluded that there had indeed been
sufficient time (approximately 3.5 months) for the Parties to agree upon the appointment of
the sole member of the DB, following the notice given by the Contractor on 30th March 2016
prior to receipt of the Employers letter dated 12th July 2016. Given that no such agreement
had been reached, either Party is then entitled to apply to the appointing entity or official
named in the Contract Data (in this case the President of the ICE).

25. Additionally, I have not been made aware of any contractual requirement for the receipt of a
confirmation of no objection from the EBRD before the appointment of the DB can be
confirmed. In this regard, the provisions of Sub-Clause 20.3 of the Conditions of Contract
are clear.

26. Accordingly, I concluded that the DB appointment had been properly made. The Parties were
notified of this conclusion on 18th July 2016.

27. Following the distribution of the DBs first Decision on 23rd August 2016, the DB understands
that the Employer subsequently challenged the jurisdiction of the appointing entity or official
named in the Contract Data (in this case the President of the ICE) by letter dated 28th
December 2016. In addition to the jurisdictional challenges already made, previously
addressed by the DB, the Employer alleged that the ICE had, without due consultation with
the Employer as required by Sub-Clause 20.3 of the General Conditions of Contract,
proceeded to nominate David Loosemore as the sole DB member by letter to both Parties
dated 6th June 2016. The Employer alleged that it rejected the nomination by letter to the
Contractor dated 12th July 2016, also copied to the ICE. However, as explained above, the
rejection in the Employers letter dated 12th July 2016 was not based upon the alleged lack of
due consultation by the ICE, but solely on the alleged lack of a prior attempt by the
Contractor to obtain the Employer's agreement to the appointment of the DB and the
alleged need to obtain no objection of the European Bank for Reconstruction and
Development (EBRD) before it can confirm agreement of the appointment of the DB .

28. The ICE confirmed that prior to the nomination of David Loosemore as DB member, it was
not made aware by either Party of the particular provision in Sub-Clause 20.3 requiring due
consultation with both Parties before appointing the member of the DB. The ICE was not
made aware of the contractual requirement for due consultation with both Parties until it
received the Employers letter dated 28.12.2016, some 6.5 months after the DB nomination
was made and 4 months after the DB had given its first Decision. Clearly, in such
circumstances when a jurisdictional challenge should and could have been made at the time
of nomination not 6.5 months afterwards, it is therefore entirely reasonable to assume the
applicable Party had waived its rights of a jurisdictional challenge on this specific argument.
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29. During this Adjudication, the Contractor represented itself whereas the Employer and
Engineer elected to take no part in the proceedings. Notwithstanding the jurisdictional
challenges served by the Employer, several times the DB invited the Employer to participate
in the adjudication proceedings on a without prejudice basis; disappointingly, the Employer
also declined these invitations.

30. The following documentation was provided by the Contractor:-


Electronic copies of the Contractors submission of its 335-page referral document
(including 3 No. Annexes) was received on 24th March 2017 under cover of a letter
dated 17th March 2017. Hard copies of the Contractors submission, including a CD
Rom, was delivered by DPD courier on 3rd April 2017.
An electronic copy of the Contractors reply to the DBs Questions and Observations
sent on 15th May 2017 was received on 22nd May 2017.
An electronic copy of the Contractors reply to the DBs Questions and Observations 2
on quantum sent on 17th May 2017 was received on 22nd May 2017.

31. Following receipt of the hard copies of the Referral, the DB issued Procedural Order No. 2 on
Monday, 3rd April 2017 inviting the Employer to serve by Wednesday 26th April 2017,
simultaneously upon the Contractor and the DB Member its statement of Response in
respect of the claims referred to above in paragraph 17.

32. Throughout this Decision the terms S.C Pa & Co International S.R.L and Contractor are
the same and interchangeable and the terms Employer and S.E. State Road
Administration are likewise the same and interchangeable.

33. In accordance with Sub-Clause 20.4 of the Conditions of Contract, and acknowledging the
date of receipt of the Contractors referral as Monday, 3rd April 2017, the DBs Decision was
due by Monday 26th June 2017 (i.e. within 84 days of receipt of the referral).

Dispute

34. As described in paragraph 17. above, a dispute has arisen concerning the alleged
entitlement of the Contractor to terminate the Contract and for the payment of monies that
followed from the Contractors termination.

35. Accordingly, the Contractor requests that the DB decides that:

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35.1 The Contractor was entitled to terminate the Contract according to the provisions of
Sub-Clause 16.2 (f) for prolonged suspension affecting the whole of the Works as
described in Sub-Clause 8.11 [Prolonged Suspension].
35.2 The Contractor is entitled to payment, pursuant to Sub-Clause 16.4 [Payment on
Termination], following notice of termination under Sub-Clause 16.2 [Termination by
Contractor], and
35.3 The Contractor was also entitled to terminate the Contract pursuant to Sub-Clause
16.2 (a), (c) and (d).

36. In accordance with Sub-Clause 20.4 of the Conditions of Contract, the DB is required to give
a reasoned Decision.

37. In the section below, the DB sets out, in general terms, the positions of each Party (as far as
possible, given that the Employer has elected not to participate in these proceedings). These
positions are necessarily abbreviated and Parties should not assume that an issue that is not
mentioned below has been overlooked by the DB. The DB has taken due account of all the
evidence placed before it.

38. The DB thanks all those who gave explanations and clarifications which the DB found
helpful.

Background to the Issues

39. The Contractor has set out its position in the written submission.

40. On the same day (i.e. 23rd August 2016) that the DB issued its reasoned Decision on the
first dispute referred, the Parties, the Engineer and the Ministry of Transport and
Infrastructure from the Republic of Moldova met. The Minutes of that meeting record the
Employers opinion that it was unrealistic for the Contract to continue. It was agreed that
the Parties should commence a negotiation regarding the terms of an amicable settlement by
15th September 2016.

41. On 24th August 2016, the Contractor notified the Employer in writing of the DBs Decision;
the DB had already sent the Decision to the Employer the day before.

42. On the same day (i.e. 24th August 2016), the Engineer sent the Contractor a Notice to
Correct pursuant to Sub-Clause 15.1 of the Conditions of Contract. The Notice instructed,
inter alia, the Contractor to immediately resume the Works to reduce delays; all of the actions
were instructed to be completed by 5th October 2016.. The Engineer advised the Contractor,

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that if he failed to comply with any provision of the Notice, the Engineer may recommend to
the Employer to immediately take the necessary and appropriate actions against the
Contractor, in accordance with the contractual provisions, and that the Employer will be
entitled to terminate your Contract at his convenience.

43. The following day, 25th August 2016, the Contractor issued a notification for termination of
the Contract pursuant to Sub-Clause 16.2(f), citing also Sub-Clauses 16.2(a), (c) & (d) as
valid reasons for his entitlement to terminate.

44. Following the notification for termination of the Contract on 25th August 2016, no further
documentary evidence has been put before the DB until the letter dated 13th September 2016
from the Employer. The letter, which referred back to the meeting on 23rd August 2016,
enclosed a draft Agenda for a further meeting on 15th September 2016; citing a negotiation
on the terms of amicable termination of Works.

45. The Contractor responded to the letter of 13th September 2016 and agreed to a meeting with
the Employer on 15th September 2016 to discuss an amicable settlement, pursuant to Sub-
Clause 20.5 of the Conditions of Contract, but did not agree to negotiate an amicable
termination, for which there is no provision in the Contract. The Contractor reminded the
Employer of its contractual entitlement to terminate the Contract, which had already been
notified to the Employer.

46. The Contractor sent a further letter, dated 15th September 2016, to the Employer. This
letter notified the Employer of the Contractors financial claims arising from Sub-Clause
16.4 [Payment on Termination] and enclosed various documents as supporting evidence of
the claim. The headings and amounts of the several parts of the Financial Claims are
shown in Table 1.

47. The Contractor sent another letter to the Employer, dated 15th September 2016, following
the meeting on the same day, noting the failure of the amicable settlement because of the
Employers refusal to take into account the Contractors Notification of Termination letter of
25th August 2016. Accordingly, the Contractor required the Employer to proceed and
comply with the obligations set down in Sub-Clauses 16.3 [Cessation of Work and Removal
of Contractors Equipment] and 16.4 [Payment on Termination]. Furthermore, the
Contractor confirmed that it would seek to refer the matter of Termination to the DB for a
decision unless the Employer agreed in writing to ask the DB to mediate the issue, should
the Engineer fail to act in accordance with Sub-Clause 3.5 [Determinations].

48. On 19th September 2016, the Employer issued its notice of dissatisfaction with the DBs
Decision dated 23rd August 2016, all in accordance with Sub-Clause 20.4. The notice of
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dissatisfaction was given without prejudice to the Employers position in relation to the
appointment of the DB as confirmed by letter dated 12 th July 2016.

49. The Contractor sent another letter to the Employer, dated 22nd September 2016 headed
Notification for Termination of the Contract according with Sub-Clause 16.2. This letter was
sent solely to amend an incorrect reference to Sub-Clause 14.2(d) contained in paragraph 6
of the Contractors letter of 25th August 2016 (paragraph 43 above refers), which should
instead be a reference to Sub-Clause 16.2(d).

50. No further evidence has been placed before the DB in evidence until a letter dated 3rd
October 2016 from the Employer to the Contractor, on the subject of Negotiations of
amicable settlement for termination of the Contract. The letter reiterated the Employers
wish to reach an agreement with the Contractor on the terms of an agreed termination of the
Contract, without undue emphasis on contractual provisions of termination by either Party.
However, the Employer repeated its position, as set out in its letter of 19th September 2016,
stating that the Contractor had no entitlement to suspend or terminate work pursuant to Sub-
Clauses 16.1 and 16.2 given that the Employer did not recognise there had been a valid
appointment of a DB. The Employer further confirmed that similarly its letter of 19th
September 2016 should not be construed as a notice of dissatisfaction pursuant to Sub-
Clause 20.4 given that there was no DB in place.

51. The Employer sent another letter to the Contractor dated 11th October 2016 again rejecting
the Contractors proposal for the Advance Payment Security.

52. On 8th November 2016, the Contractor then wrote to the Employer, copied to the Engineer,
notifying them that it now wished to seek the DBs Decision on the termination issue in
accordance with Sub-Clause 20.4. The Contractor referred to its previous letter of 16th
September 2016 wherein it notified the Employer of its financial claims, pursuant to Sub-
Clause 16.4, arising from the decision to terminate. Given that no response to the claim had
been received 42 days following that submission, the Contractor now considered the claim to
be rejected in accordance with the provisions of Sub-Clause 20.1.

53. On the same, 8th November 2016, the Contractor sent another letter to the Employer, also
copied to the Engineer, reiterating its request for the return of the Performance Security
pursuant to Sub-Clause 16.4(a).

54. The last item of correspondence on this matter, submitted in this adjudication, is a letter from
the Engineer to the Contractor dated 25th November 2016 from the Engineer to the
Contractor, copied to the Employer, reiterating the position of the Employer in rejecting both
the jurisdiction of David Loosemore as DB member and the notice of termination as invalid.

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The Engineer proposed that the Parties should restart and repeat the whole DB process, with
participation of both sides, by engaging Mr John Papworth, the DB member for the adjacent
works contracts RSPSP/W3/02 and RSPSP/W3/03 where S.C Pa & Co International S.R.L
are also the contractor. There is no further evidence available to the DB to indicate how both
Parties reacted to this suggestion other than it is apparent that it was not acceptable to the
Contractor, given that the matter has now been referred to me, David Loosemore, the
present DB member, for my reasoned Decision.

55. Following the sending of the DBs Questions and Observations to the Parties on 15th and
17th May 2017, I received answers from the Contractor to the Questions posed on 22nd May
2017; disappointingly no acknowledgement or response was received from either the
Employer or the Engineer. Accordingly, it has to be assumed that they continued to elect not
to participate in the adjudication proceedings, albeit even on a without prejudice basis.

The reasoned Decision on the Issue

56. The DB is disappointed that the Employer chose not to participate in the adjudication
proceedings, in spite of its notice of dissatisfaction served on a without prejudice basis.
However, it is further noted that the DBs Decision has not been promptly given effect by the
Employer notwithstanding the fact that the DBs Decision has not been revised in an
amicable settlement or an arbitral award as required by Sub-Clause 20.4.

57. It is also noted that Employer continues to rely on the accuracy and admissibility of its
jurisdictional challenges despite the contrary view expressed by the DB, and without
apparently having its views on jurisdiction reviewed independently.

58. Furthermore, it is of note that the reasons given in the Employers notice of dissatisfaction do
not directly address or challenge the reasons given by the DB when determining his
Decision.

59. When considering this dispute, specific extracts from Sub-Clause 16.2 [Termination by
Contractor] of the General Conditions of Contract, which are quoted by the Contractor and
are therefore relevant to the issue, which state:

The Contractor shall be entitled to terminate the Contract if:


(a) the Contractor does not receive the reasonable evidence within 42 day s after
giving notice under Sub-Clause 16.1 [Contractors Entitlement to Suspend Work]
in respect of a failure to comply with Sub-Clause 2.4 [Employers Financial
Arrangements],
(b) (not relevant).
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(c) the Contractor does not receive the amount due under an Interim Payment
Certificate within 42 days after the expiry of the time stated in Sub-Clause 14.7
[Payment] within which payment is to be made (except for deductions in
accordance with Sub-Clause 2.5 [Employers Claims],
(d) the Employer substantially fails to perform his obligations under the Contract in
such manner as to materially and adversely affect the economic balance of the
Contract and/or the ability of the Contractor to perform the Contract,
(e) (not relevant).
(f) a prolonged suspension affects the whole of the Works as described in Sub-
Clause 8.11 [Prolonged Suspension],
(g) (not relevant).
(h) (not relevant).
(i) (not relevant).

In any of these events or circumstances, the Contractor may, upon giving 14 days notice to
the Employer, terminate the Contract. However, in the case of sub-paragraph (f) or (g), the
Contractor may by notice terminate the Contract immediately.

The Contractors election to terminate the Contract shall not prejudice any other rights of the
Contractor, under the Contract or otherwise.

60. In reality, for a valid termination by the Contractor, it is only necessary for the Contractor to
demonstrate one of the nine circumstances listed in Sub-Clause 16.2 (a) to (i) inclusive. In
this instance, the Contractor cited four of the circumstances all of which are now dealt with in
turn below.

61. The Contractor cited Sub-Clause 16.2 (a) as one of the circumstances giving rise to a valid
termination. However, this particular circumstance is only relevant when the Contractor
does not receive the reasonable evidence within 42 days after giving notice under Sub-
Clause 16.1 [Contractors Entitlement to Suspend Work] in respect of a failure to comply
with Sub-Clause 2.4 [Employers Financial Arrangements]. There was no failure to
comply, on the part of the Employer, as a request pursuant to Sub-Clause 2.4 was not
part of the reason for the Contractors alleged entitlement to terminate the Contract. This
point was questioned by the DB in its enquiry to the Parties on 15th May 2017 (DBs
Questions and Observations).

62. In the reply to the DBs specific Question, the Contractor explained his interpretation of Sub-
Clause 16.2 (a) as follows. Following the decision to suspend works, according to Sub-
Clause 16.1 (given that the Employer did not comply with Sub-Clause 14.7), the Employer
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was obliged to carry out one of two actions namely either to make the payment or to, at least,
respect Sub-Clause 2.4 and to present the financial arrangements within a period of 42 days.
The Employer failed to comply with either of the obligations.

63. The DB respects the Contractors explanation but does not agree that Sub-Clause 16.2 (a) is
relevant in this particular case. In order for the Contractor to validly terminate the Contract,
he need only satisfy one of the nine grounds/justifications [i.e. (a) to (i)] cited in Sub-Clause
16.2. In this instance, the Employer was not requested to provide reasonable evidence of its
financial arrangements pursuant to Sub-Clause 2.4 and therefore the Contractors
entitlement to firstly suspend work [Sub-Clause 16.1], on the grounds of a failure to provide
reasonable evidence, and subsequently to terminate the Contract [Sub-Clause 16.2 (a)], for
the same reason, does not apply here.

64. The Contractor also cited Sub-Clause 16.2 (c) as one of the circumstances giving rise to a
valid termination. The DB recognises the relevance of this reason, given the Decision
reached by the DB in the first Decision namely that the Contractor did not receive the
amount due under an Interim Payment Certificate within 42 days after the expiry of the
time stated in Sub-Clause 14.7 [Payment] within which payment is to be made (except for
deductions in accordance with Sub-Clause 2.5 [Employers Claims]. Specifically, the
Interim Payment Certificate (IPC) referred was IPC No. 01 issued by the Engineer on 3rd
October 2014 to replace the IPC issued previously on 13th August 2014.

65. The Contractor also cited Sub-Clause 16.2 (d) as another of the circumstances giving rise to
a valid termination. This circumstance arises when the Employer substantially fails to
perform his obligations under the Contract in such manner as to materially and adversely
affect the economic balance of the Contract and/or the ability of the Contractor to perform
the Contract. Clarification on how the Contractor considered this circumstance had been
met was questioned by the DB in its enquiry to the Parties on 15 th May 2017 (DBs
Questions and Observations).

66. In the reply to the DBs specific Question, the Contractor explained his understanding of why
Sub-Clause 16.2 (d) was relevant as follows. At page 6 of the Referral, the Contractor
explained how in April 2015 it proposed a number of necessary supplementary tests in order
to ascertain appropriate solutions for repairing various sections of the road. Following the
tests, the Contractor offered the Employer a series of technical solutions none of which were
approved by the Employer.

67. After receiving possession of the Site, the Contractor observed that a few sections of the
road could not be reconstructed in accordance with the initial requirements. Over a length of
approximately 10.98 km of the road, the Contract specified a requirement to recycle the
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existing asphalt up to a total depth of 15 cm. However, over this length of 10.98 km road, the
existing depth of asphalt was found to be 5 to 10 cm and accordingly the solution specified
was clearly not applicable.

68. From the resulting tests, two possible solutions were put forward by the Contractor, neither of
which were approved by the Employer. Later on, the Employer indicated another third
solution for possible approval. The Contractor submitted the costs of adopting the
Employers preferred solution, using the same prices as those in the Contract (except for one
of the operations), but the Employer refused to accept the proposal because it was too
expensive. For the operation for which there was no price in the Contract, the Contractor
requested the Employer to propose a price himself, but he did not respond to the request.

69. Consequently, because the advance payment was not paid and because no solution was
approved, the Contractor was unable to complete even 33% of the Contract. At the same
time, on a further 33% of the Contract length new construction was specified, utilising fill from
borrow pits provided by the Employer. The Contractor used one of the specified borrow pits
until the source was exhausted, but the second borrow pit which was expected to contain
approximately 70% of the total necessary materials, was rejected by the Engineer on the
grounds that the material was unsuitable.

70. Accordingly, by letter dated 19th May 2016, the Engineer asked the Contractor to provide an
alternative source. Following investigations by the Contractor, and exchanges with the
Agency of Geology and Mineral Resources, it was found that, at the present time, (i.e. June
2016) there were no available deposits of suitable clay which could be exploited. The only
source of available material were deposits of sand which required specific procedures to be
adopted for exploitation, in accordance with the recognised Subsoil Codes. The Contractor
notified the Engineer of these findings by letter dated 17th June 2016, asking for an
instruction as to how the Contractor should now proceed. No further relevant
correspondence beyond this date has been provided in evidence, and it is understood that
no such instruction from the Engineer has been forthcoming. As a result, the Contractor
alleges that he was therefore put into a situation whereby he was unable to construct
approximately 69% of the Contract (i.e. 21.66 km out of 31.33 km).

71. Hence, the Contractor alleges that the above-cited reasons give rise to the Employer
substantially failing to perform his obligations under the Contract in such manner as to
materially and adversely affect the economic balance of the Contract and/or the ab ility of
the Contractor to perform the Contract. Accordingly, Sub-Clause 16.2 (d) is another of the
circumstances giving rise to a valid termination.

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72. The DB respects the Contractors explanation, and in the absence of any opposing evidence
contesting the Contractors allegations, the DB agrees that Sub-Clause 16.2 (d) is relevant in
this particular case. However, it is worth reiterating that in order for the Contractor to validly
terminate the Contract, he need only satisfy one of the nine grounds/justifications [i.e. (a) to
(i)] cited in Sub-Clause 16.2. The principal ground, which is incontestable, is Sub-Clause
16.2 (c), so even if the additional ground in Sub-Clause 16.2 (d) were not considered
applicable, the Contractors right to terminate would still prevail.

73. Lastly, the Contractor also cited Sub-Clause 16.2 (f) as another of the circumstances giving
rise to a valid termination. This circumstance arises when a prolonged suspension affects
the whole of the Works as described in Sub-Clause 8.11 [Prolonged Suspension].
Clarification on how the Contractor considered this circumstance had been met was
questioned by the DB in its enquiry to the Parties on 15 th May 2017 (DBs Questions and
Observations).

74. In the reply to the DBs specific Question, the Contractor explained his understanding of why
Sub-Clause 16.2 (f) was relevant as follows. The DB Decision, which is binding for the
Parties, was not given effect by the Employer, and furthermore he continued to fail to comply
with Sub-Clause 2.4. Accordingly, the suspension of works could not have been lifted and
the Works could not proceed. The period of suspension between 5th March 2016 and 25th
August 2016, (i.e. a total of 163 days) exceed the period of 84 days as cited in Sub-Clause
8.11 [Prolonged Suspension]. Furthermore, the Contractor has requested the approval of
multiple solutions by the Engineer and the extension of the Borrow Pit; requests that were
allegedly never satisfied, thus affecting the whole of the Works and giving rise to the
Contractors right to terminate the Contract based on Sub-Clause 16.2 (f).

75. The DB respects the Contractors explanation but the DB has not been provided with
evidence in support of the grounds cited in Sub-Clause 16.2 (f) and accordingly it is not
relevant here. The suspension cited in Sub-Clause 8.11 refers back to Sub-Clause 8.8
[Suspension of Work] which gives the Engineer the discretion to order suspension at any
time. In this instance, the dispute originally referred concerned the non-payment by the
Employer of an IPC, which in turn led to the Contractor validly suspending work. Sub-Clause
8.11 [Prolonged Suspension] is not relevant in this particular case given that the suspension
did not result from the Engineers instruction to suspend progress of part or all of the Works
in accordance with Sub-Clause 8.8.

76. Even if Sub-Clause 8.11 had been relevant, the DB has not been provided with any evidence
to support a request from the Contractor for the Engineers permission to proceed [line 2] or
the Contractor giving notice to the Engineer, to treat the suspension as an omission under
Clause 13 [Variations and Adjustments] of the affected part of the Works [lines 4/5]. At this
13
point it is worth reiterating the point made by the DB earlier namely, that in order for the
Contractor to validly terminate the Contract, he need only satisfy one of the nine
grounds/justifications [i.e. (a) to (i)] cited in Sub-Clause 16.2.

77. Sub-Clause 16.3 [Cessation of Work and Removal of Contractors Equipment] states:

After a notice of termination under Sub-Clause 15.5 [Employers Entitlement to Termination


for Convenience], Sub-Clause 16.2 [Termination by Contractor] or Sub-Clause 19.6 [Optional
Termination, Payment and Release] has taken effect, the Contractor shall promptly:
(a) cease all further work, except for such work as may have been instructed by the Engineer
for the protection of life or property or for the safety of the Works,
(b) hand over Contractors Documents, Plant, Materials and other work, for which the
Contractor has received payment, and
(c) remove all other Goods form the Site, except as necessary for safety, and leave the Site.

The Contractor was asked by the DB to confirm that after termination had taken effect, the
Contractor had complied fully with the requirements of Sub-Clause 16.3. (DBs Questions
and Observations).

78. In the reply to the DBs specific Question, the Contractor cited and provided a letter dated
15.09.2016 reference RSPSP/W4/04-B-0026 sent to the Employer, and copied to the
Engineer. The letter referred Sub-Clause 16.3, asking for the nomination of a representative
to whom the Contractor should hand over the Contractors Documents, Plant, Materials and
other works for which the Contractor had received payment as per Sub-Clause 16.3 (b),
following the ceasing of all further works as per Sub-Clause 16.3 (a). The Employer replied
to this letter, and others, in its letter dated 03.10.2016 Nr. 08-10/2530 on the subject of
Negotiations of amicable settlement for termination of the Contract.

79. Sub-Clause 16.4 [Payment on Termination] states:


After a notice of termination under Sub-Clause 16.2 [Termination by Contractor] has taken
effect, the Employer shall promptly:
(a) return the Performance Certificate to the Contractor,
(b) pay the Contractor in accordance with Sub-Clause 19.6 [Optional Termination, Payment
and Release], and
(c) pay to the Contractor the amount of any loss or damage sustained by the Contractor as a
result of this termination.

80. Sub-Clause 19.6 [Optional Termination, Payment and Release] states:

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If the execution of substantially all the Works in progress is prevented for a continuous
period of 84 days by reason of Force Majeure of which notice has been given under Sub-
Clause 19.2 [Notice of Force Majeure], or for multiple periods which total more than 140 days
due to the same notified Force Majeure, then either Party may give to the other Party a
notice of termination of the Contract. In this event, the termination shall take effect 7 days
after the notice is given, and the Contractor shall proceed in accordance with Sub-Clause
16.3 [Cessation of Work and Removal of Contractors Equipment].

Upon such termination, the Engineer shall determine the value of the work done and issue a
Payment Certificate which shall include:
(a) the amounts payable for any work carried out for which a price is stated in the Contract;
(b) the Cost of Plant and Materials ordered for the Works which have been delivered to the
Contractor, or of which the Contractor is liable to accept delivery; this Plant and Materials
shall become the property of (and be at the risk of) the Employer when paid for by the
Employer, and the Contractor shall place the same at the Employers disposal;
(c) other Costs or liabilities which in the circumstances were reasonably and necessarily
incurred by the Contractor in the expectation of completing the Works;
(d) the Cost of removal of Temporary Works and Contractors Equipment from the Site and
the return of these items to the Contractors works in his country (or to any other
destination at no greater cost); and
(e) the Cost of repatriation of the Contractors staff and labour employed wholly in connection
with the Works at the date of termination.

81. In the absence of any representations or submissions from the Employer, the DB has
carefully interrogated the available evidence, including quantum calculations, submitted by
the Contractor and asked for some further clarification through a series of Questions and
Observations.

82. The Contractor has submitted detailed documentation in support of the quantum claim,
pursuant to Sub-Clauses 16.4 and 19.6, which the DB has thoroughly checked. As stated
previously, the sums claimed are set out in Table 1 below. The explanations of each of the
heads of claim are described on pages 8-10 inclusive of the Referral. The DB accepts as
accurate and admissible, and in accordance with Sub-Clauses 16.4 and 19.6, the
descriptions of the various heads of claim. The DBs quantum assessment, which concurs
exactly with the calculations provided by the Contractor, is shown in Table 2.

83. In summary, the DB finds the Contractors submissions and evidence compelling. This
Decision is necessary as a direct consequence of the Employers failure to give effect to the

15
DBs first Decision on the Contractors entitlement to suspend work until payment of IPC
No.1 is made, and as a result, the Contractor has now decided to enact the provisions of
Sub-Clause 16.2 and terminate the Contract.

84. I have carefully considered all the relevant submissions and representations made by, or on
behalf of, the Parties concerning the dispute referred to me. In accordance with Sub-Clause
20.4 of the Conditions of Contract, and taking account of the above reasons:-

My Decision is that the Contractor was entitled to terminate the Contract pursuant to Sub-
Clause 16.2 (c), given that the Contractor did not receive the amount due under an Interim
Payment Certificate within 42 days after the expiry of the time stated in Sub-Clause 14.7
[Payment] within which payment is to be made (except for deductions in accordance with
Sub-Clause 2.5 [Employers Claims].

My Further Decision is the Contractor was also entitled to terminate the Contract pursuant
to Sub-Clause 16.2 (d), given that the Employer substantially failed to perform his
obligations under the Contract in such manner as to materially and adversely affect the
economic balance of the Contract and/or the ability of the Contractor to perform the
Contract.

My Further Decision is the Contractor was not entitled to terminate the Contract pursuant
to Sub-Clause 16.2 (a), given that there was no requirement placed on the Employer to comply
with Sub-Clause 2.4 [Employers Financial Arrangements].

My Further Decision is the Contractor was also not entitled to terminate the Contract
pursuant to Sub-Clause 16.2 (f), given that the circumstances necessary for compliance with
Sub-Clauses 8.8 [Suspension of Work] and 8.11 [Prolonged Suspension], were not met.

My Further Decision is, after a valid notice of termination in accordance with Sub-Clause
16.2 had taken effect, pursuant to Sub-Clause 16.4 (and pursuant to Sub-Clause 19.6) the
Employer shall promptly pay the Contractor the sum of 6,580,485.47. (see Table 2).

Remuneration of the DAB Member

85. Following the procedure set down in Sub-Clause 20.2 of the Conditions of Contract, each
Party shall be responsible for paying one-half of my remuneration. Pursuant to Clause 6
Payment - of the General Conditions of Dispute Board Agreement (GCDBA), costs will be
separately invoiced to the Contractor, with a copy to the Employer. The Employer shall pay
the Contractor in accordance with the Contract for his half of the costs. These costs include
my fees [Clause 6(b) of the GCDBA refers], all reasonable expenses [Clause 6(c) of the
GCDBA refers] and any taxes properly levied [Clause 6(d) of the GCDBA refers].

16
Signed .. Date: 25th May 2017
David J. Loosemore CEng, FICE, FCInstCES, MCIArb, [DB sole Member]

17
No. Object Value Claimed
(Euro)
1 Executed Works 150,862.23
2A The indirect loss 748,529.65
2B The profit loss 471,573.68
3 Additional laboratory tests 64,229.22
4 Stationary Equipment Costs 4,131,882.26
5 Personnel Costs 177,798.63
6 Financing charges for IPC 01 non payment 84,778.76
7 Costs of Security Performance and Advance Payment 105,745.16
Security
8 Retention Money Guarantee from IPC 02 56,579.97
9 Penalties IPC 02 / Claim 007 21,000.00
10 Insurance Costs 25,344.80
11 The Invoice of discharging ballast during Claim 002 4,464.00
12 Rents 14,419.83
13 Difference profit / indirect as per VO 01 revised 127,055.18
14 Equipment demobilisation 286,205.00
15 Design Costs 95,638.97
16 DB Costs (50 % of Invoice Nos. 1 & 2) 14,378.13
Total 6,580,485.47

Table 1

18
No. Object DBs
Assessment
(Euro)
1 Executed Works 150,862.23
2A The indirect loss - (16,190,696.35/1.05 x 1.03) x 0.05 748,529.65
2B The profit loss - (16,190,696.35/1.03) x 0.03 471,573.68
3 Additional laboratory tests 64,229.22
4 Stationary Equipment Costs 4,131,882.26
5 Personnel Costs 177,798.63
6 Financing charges for IPC 01 non payment 84,778.76
7 Costs of Security Performance and Advance Payment 105,745.16
Security
8 Retention Money Guarantee from IPC 02 56,579.97
9 Penalties IPC 02 / Claim 007 21,000.00
10 Insurance Costs 25,344.80
11 The Invoice of discharging ballast during Claim 002 4,464.00
12 Rents 14,419.83
13 Difference profit / indirect as per VO 01 revised 127,055.18
(1,686,014.40/1.05 x 1.03) x 0.05 = 77,947.96
plus
(1,686,014.40/1.03) x 0.03 = 49,107.22
14 Equipment demobilisation 286,205.00
15 Design Costs 95,638.97
16 DB Costs (50 % of Invoice Nos. 1 & 2) 14,378.13
Total 6,580,485.47

Table 2

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