Revision of dispute resolution procedure in FIDIC construction contracts

By Helena Chen, CIETAC
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The construction contracts for many international projects use a FIDIC construction contract as the basis, with the provision of Particular Conditions as required by the parties in order to specify the specific demands of the project. In December 2017, FIDIC announced revised versions of the Conditions of Contract for Construction (Red Book), the Conditions of Contract for Plan and Design-Build (Yellow Book) and the Conditions of Contract for EPC/Turnkey Projects (Silver Book), a major event that drew the attention of the industry (the three documents are hereinafter collectively referred to as the “New Versions” and the previous versions of the FIDIC construction contracts are hereinafter referred to as the “Old Versions”).

With respect to the dispute resolution procedure, one of the major revisions made by the New Versions is the renaming of the original Dispute Adjudication Board (DAB) to the Dispute Avoidance/Adjudication Board (DAAB), accompanied with related revisions, and further clarifying the role and the effectiveness of the decisions of a DAAB, points well worth our attention.

Firstly, in practice, there was a debate as to whether DAAB was a prior mandatory procedure before arbitration. A Swiss court in the Colas SA v Compania Naţională de Autostrăzi şi Drumuri Naţionale din România SA (4A_124/2014) and UK courts in the Peterborough City Council v Enterprise Managed Services Ltd ([2014] EWHC 3193) case and the Al Waddan Hotel Ltd v Man Enterprise Sal (Offshore) ([2014] EWHC 4796) case held that, pursuant to the Old Versions, DAB should be construed as a prior mandatory procedure that parties were required to carry out before arbitration or litigation. The New Versions follow the spirit that, in principle, before referral to arbitration, all disputes should first be submitted to a DAAB for handling, and that DAAB is a prior mandatory procedure before arbitration.

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Helena Chen is an arbitrator at the China International Economic and Trade Arbitration Commission (CIETAC) and Pinsent Masons’ China joint head of office.

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