2017 changes to the fidic white book - how will the new...

2017 changes to the

FIDIC White Book -

How will the new edition affect you?

Paul Prescott (Legal Director)

Daniel Goodwin (Senior Associate)

Pinsent Masons LLP

21 November 2017

Doha, State of Qatar

New FIDIC 2017 White Book

Conditions of Contracts

for the new Client / Consultant

Model Services Agreement 5th Edition

(2017 White Book)

Agenda

1. What to expect in the new 2017 White Book

2. Good Faith

3. “Duty of Care” Obligations and “Function and Purpose ” of the

Services

4. Intellectual Property

5. Construction Administration

6. Insurance

7. Liabilities

8. Disputes (Adjudication and Arbitration)

What to expect

• Structure

– 4th Edition 2006:

• 12 pages of General Conditions

• Clauses 1 (General Provisions) – 8 (Disputes and

Arbitration)

– 5th Edition 2017:

• 24 pages of General Conditions

• Clauses 1 (General Provisions) – 10 (Disputes and

Arbitration)

• Terminology – use of new definitions

Good Faith

“In all dealings under the Agreement the Client

and the Consultant shall act in good faith and

in a spirit of mutual trust.”

Duty of Care Obligations

• 4th Edition 2006:

– “…the Consultant shall have no other responsibility

than to exercise reasonable skill, care and diligence in

the performance of his obligations under the

Agreement.”


– “…in the performance of the Services the Consultant

shall have no other responsibility than to exercise the

reasonable skill, care and diligence to be expected

from a consultant experienced in the provision of such

services for projects of similar size, nature and

complexity.”

Duty of Care Obligations (2)

• Function and Purpose of the Services:

– “Where appropriate, the Client shall describe the function

and purpose of the Services and

state the same explicitly in

Appendix 1 [Scope of Services]”

– “…without extending the obligation of the

Consultant beyond that required under Sub-Clause 3.3.1

[this being the duty of care obligation above], the

Consultant shall perform the Services with a view to

satisfying any function and purpose that may be

described in Appendix 1 [Scope of Services].”

Intellectual Property


– “The Consultant retains the design rights and other

intellectual property rights and copyright of all documents

prepared by him. The Client shall be entitled to use them

or copy them only for the Project ...”


– Background Intellectual Property:

property of the owner/party introducing it;

licensed

– Foreground Intellectual Property:

licensed by Consultant

– Revocable licence for non-payment on 7 days’ notice

Construction Administration

• New subclause specifically dealing with ‘Contract Administration’ -

selected in the Particular Conditions

• Consultant is required:

− to perform the role of the Engineer (RB, YB, BB), Employer’s

Representative (SB, GB), Project Manager or similar under a

Works Contract

− to act fairly as go-between the Client and

the Contractor exercising independent professional

judgement and using reasonable skill

care, and diligence

• Consultant has no liability for the performance of the Contractor; nor

liability for the techniques, methods or sequencing of the Works

Contract, or safety or adequacy of the Contractor’s operations

Insurance

• Consultant is to take out and maintain professional indemnity insurance

and public liability insurance in amounts sufficient to cover its liabilities

• The level of PI insurance and public liability insurance to be not less

than the amount specified in the Particular Conditions

• The insurance is available at commercially reasonable

rates and on terms commonly included

• In assessing a commercially reasonable rate, the Consultant’s own

claims record is disregarded

• Consultant to take out workers’ compensation and EL ins

Interpretation

Gender-neutral intention of FIDIC maintained.

• As with White Book 2006, Cl 1.2.2 of White Book 2017 also says,

"Words indicating one gender include all genders."

• However now, White Book 2017 generally uses "its" instead of

"he/his" as is used in Yellow Book 2017.

• New definitions:

– “ "shall" means that the Party or person referred to has the

obligation under the Agreement to perform the duty referred

to.” (Cl 1.2.4)

Interpretation (2)

– “ "may" means that the Party or person referred to has the

choice of whether to act or not in the matter referred to.”

(Cl 1.2.5)

• Those definitions are required due to past arguments on the

meanings of those words.

Suspension & Termination

• New Clause 6 provides a much more detailed process

• Additional clause for suspension of Services by Consultant – failure by

Client to satisfy requirements of Employer's financial arrangements (Cl

6.1.2(c))

• Services to resume once a cause for suspension ceases (Cl 6.2)

• Effects of suspension detailed, with possible entitlements to extension of

Time for Completion and compensation for Exceptional Costs incurred (Cl

6.3.3)

• Clear grounds for termination by Client or by Consultant are set out (Cl

6.4 and Cl 6.5)

Liabilities

Parties are liable for their breaches of the Agreement (Cl 8.1.1) –

FIDIC says this was expressly stated to stress the difference with the

2006 White Book and the difficulty with establishing breach under

2006 White Book.

Previously, under WB 2006

• Consultant was only liable "…if a breach of Cl 3.3.1 could be

established against [it]". And Cl 3.3.1 required only "to exercise

reasonable skill, care and diligence…"

• If a Consultant was in breach of the agreement that did not mean it

was necessarily liable for its breach.

Liabilities (2)

Clients did not like this limitation as it was considered too one-

sided. Could possibly lead to unjust results for Clients.

But now, under WB 2017

A more consistent / equal approach to both Consultant and

Client:

• "The Consultant shall be liable to the Client for any breach by

the Consultant of any provision of the Agreement." (Cl 8.1.1)

• "The Client shall be liable to the Consultant for any breach by

the Client of any provision of this Agreement." (Cl 8.1.2)

Loss and Damages

Damages for breach – No liquidated damages

• Damages are assessed as general damages under the law

governing the agreement.

• There is no provision for liquidated damages in the General

Conditions of WB 2017. No reference to LDs in the Part A

schedule to the Form of Agreement

• Parties (Clients?) may include LDs in any Particular

Conditions if they wish. But it is not included in the General

Conditions by default – Same as WB 2006

Limitations on Liabilities

Loss and damages for breach

• Liability of one Party to the other is limited to "… the

amount of reasonably foreseeable loss and damage

suffered as a direct result of such breach."

• It will depend on the governing law as precisely to what

that will comprise

• If joint liability, liability is to be apportioned between the

jointly liable parties

Limitations on Liabilities (2)

Limitation on Amount of Liability

• Liability is limited to the amount set out in the Part A

schedule to the Form of Agreement. There is no default

percentage – Parties need to insert the limit amount.

Duration of Liability

• Under the Agreement, liability is intended to be limited to

the period inserted in the Part A schedule to the Form of

Agreement.

• "Notwithstanding any term or condition to the contrary in

the Agreement or any legal requirement of the Country

or any other relevant jurisdiction..."


Does that override local laws?

• In Qatar, the Civil Code will still permit one party to bring a

claim against the other party so long as it is within the

relevant prescription period which could be up to

(usually) 10 years.

• This cannot be contracted out of, though the court will

have strong regard for the limitation provisions in the

Agreement.


Exceptions to the Limitations

• The limitations on damages do not apply in cases of:

"…deliberate manifest and reckless default, fraud,

fraudulent misrepresentation or reckless misconduct

by the defaulting Party."

Disputes (Adjudication and Arbitration)

Escalation of disputes - three tiered.

Following a notice of a dispute:

1. Executives meeting

2. Adjudication

3. Arbitration

Adjudication and Arbitration (2)

Dispute Notice & Executives Meeting

Under WB 2006, the process was:

• A party gave a notice requesting a meeting of

Representatives to resolve a dispute

• Representatives were required to meet within 14 days

• If not resolved, then dispute to be settled by Mediation

• If Parties did not agree to Mediator –

President of FIDIC appoints

• Mediation to be resolved in 90 days

• If not resolved by Mediation in 90 days, then either party may

commence arbitration under ICC rules


Under the New WB 2017:

• Mediation has been removed. It was not widely used by

parties

• Adjudication has now been introduced

Adjudication

• Clause 10 of the Agreement deals with Disputes &

Arbitration. Refers to the Rules of Adjudication

(Appendix 5 of the Form of Agreement)


The new process for dispute resolution is:

1. A party gives notice of a dispute and

requests a meeting of "senior representatives“

to resolve the dispute.

The meeting must happen within 28 days

2. If dispute is not resolved within 56 days either party may refer

dispute to Adjudication

3. If the Parties do not agree on appointment of the Adjudicator

within 14 days, either Party may apply to the President of FIDIC

to make the appointment

4. The Parties sign an agreement with the Adjudicator


5. The Adjudicator can decide on the way it want to adjudicate

the matter. It may:

a) hold a hearing; and / or

b) require written submissions (before or after a hearing, if

any)

The Parties must promptly provide the Adjudicator with sufficient

copies of any documents and information relevant to the

Agreement that it may request.

Adjudication and Arbitration (6) -

Adjudicator’s Powers

The Adjudicator has the power to:

• decide on its own jurisdiction

• make use of its specialist knowledge

• adopt an inquisitorial procedure

• decide upon the payment of interest

• open up, review and revise any opinion, instruction,

determination, certificate or valuation, related to the dispute

• determine which Party pays the adjudicators fees and in what

proportion (Subclause10.2.2)


• But - the Adjudicator does not have the power to award costs

(Cl 10.2.2)

Dissatisfaction with Adjudication Decision

• If a Party is dissatisfied with the Adjudication Decision it must

give a "Notice of Dissatisfaction with the Adjudicator's

Decision" (NOD) under Cl 10.2.3.

• In that case the Adjudication Decision becomes "binding on

both Parties upon its release." It can be overturned in

subsequent arbitration but it must be complied with

immediately until any arbitration decision is finally given.


Notice of Dissatisfaction

• If no NOD has been given within 28 days, then the

Adjudication Decision becomes "final and binding".

No right to arbitration.

• But where a NOD has been given:

a) the Parties are required to attempt to settle the dispute

amicably with 28 days before arbitration may be

commenced (Cl 10.3)

b) if no amicable settlement (or even if no attempt at

settlement at all) arbitration may be commenced only after

28 days has elapsed

c) arbitration must be commenced within 182 days or the

right to do so is lost.

ArbitrationArbitration – Key points

• Is under ICC rules

• Arbitration panel has full power to open up

and review any decision of the Adjudicator

• In any award dealing with costs of the arbitration, the arbitrators

may take account of the extent to which a Party failed to

cooperate with the other Party in appointing the adjudicator

(Cl 10.4.3)

• Neither Party is limited to any arguments or evidence that it put

before the Adjudicator

• Any decision of the Adjudicator may be put before the arbitration

tribunal as evidence

Arbitration (2)

Arbitration awards & Interim awards

• If a Party fails to comply with an Adjudication decision (whether

"binding" but not final or whether "final and binding") the other

Party may apply directly for arbitration of that failure

• The arbitration panel may award interim/urgent relief

• The arbitration panel may award costs against the non-complying

party in those urgent proceedings

• Any urgent interlocutory / interim decision will be without

prejudice to the merits of the adjudication decision where it is

"binding" but not final

Adjudication & Arbitration timeline

10.1.1

Dispute Notice

28 d

10.1.1

Senior Reps

meet to

resolve

amicably

56 d

After 56 days,

then refer to

Adjudication

If no NOD

given, decision

becomes Final

and Binding

14 days to

agree on

Adjudicator

14 d

If Adjudicator not

agreed, Appointing

Authority/ President of

FIDIC appoints

Adjudicator

56 d 28 d

28 days for a Party to give a Notice

of Dissatisfaction (“NOD”) if:

(a) no decision given; or

(b) dissatisfied with decision

182 d

If NOD was given,

182 days to

commence arbitration

When

decision is

given it is

Binding

Adjudication decision

within 56 days

Authority

appoint

Adjudicator

Stays Binding until arbitration decision

Questions ?

Pinsent Masons has advised on FIDIC contracts in common law, Civil

Code and Sharia jurisdictions in the Middle East, Asia, Africa, Europe and

the Americas - including mining and transport facilities, retail and

commercial development and energy projects

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the Solicitors Regulation Authority and the appropriate jurisdictions in which it operates. The word 'partner', used in relation to the LLP,

refers to a member or an employee or consultant of the LLP, or any firm of equivalent standing. A list of the members of the LLP, and of

those non-members who are designated as partners, is available for inspection at our registered office: 30 Crown Place, London, EC2A

4ES, United Kingdom. © Pinsent Masons 2017.

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