ICC Awards

'[On November 4, 1982, First Claimant, as Contractor addressed the following letter to the Architect]:

"Dear Sirs

Requests that an Extension of Time be Granted

We refer to our requests that extensions of time be granted for the completion of (...)

We have advised you that we do not accept your award relative to either of our requests. (...)

As a result of the above, we hereby give you notice that we dispute your adjudication of our requests that extensions of time be granted to us and in consequence, refer this dispute to you for settlement in accordance with Clause 67 of the Conditions of Contract.

We will be pleased to forward to you any further information you may require and without prejudice, meet with you to discuss this mater as advised in our letter dated 29 October 1982."

It is common ground that the Architect ignored this letter and that the First Claimant did not take any step to refer these claims to extension of time to arbitration within 180 days of the dispatch of it. The First Claimant now argues:

(i) that there was in fact no dispute or differences within Clause 67 over these claims before the 4th of November 1982 and that the apparent reference to the Architect for a Clause 67 decision was premature;

(ü) since the Architect made no ruling on the matters referred to him, there was no decision under Clause 67 which became final and binding on the parties. On the proper construction of that clause, where the Architect gave no decision it remained open to the party seeking a ruling to refer the dispute a second (or even a third or a fourth) time to the Architect;

(…)

C.2. ISSUE 5.3. EXCEPT IN SO FAR AS IT RELATES TO FACTS AND MATTERS ALLEGED IN VOLUME 7

Is the Arbitral Tribunal without Jurisdiction to hear and determine any of the Claims to relief sought in the Request for Arbitration by reason of the alleged failure by the Claimants to comply with the requirements of Conditions 67 of the Conditions of Contract? If so, which of these claims are outside the jurisdiction of the Arbitral Tribunal?

Clause 67 of this Contract is basically a standard form condition for the settlement of disputes which has attracted a good deal of criticism. The only relevant authority cited to the Arbitrators was the decision of the Court of Appeal in Monmouthshire County Council v Costelloe & Kemple Limited (1965) 5 BLR 83, which concerned a similar condition in another form of contract. The Monmouthshire case does not, however, bear directly on any of the difficult points which have to be decided in this case. The ground on which that appeal succeeded was that there had not in fact been a reference to the Engineer for a decision under the dispute clause (Clause 66) at the material time. The Arbitrators, nevertheless, bear in mind the observations of Harman L.J. at p. 91

"This is a process by which the Defendants can be deprived of their general rights at law and therefore one must construe it with some strictness as having a forfeiting effect. It is not a penal clause, but it must be construed against the person putting it forward who is, after all, trying to shut out the ordinary citizen's right to go to the courts to have his grievances ventilated."

The Arbitrators hold that, where the Employer or the Quantity Surveyor or the Contractor (as the case may be) is dissatisfied with the decision of the Architect under Clause 67, it is not necessary for the dissatisfied party to file a Request for Arbitration with the International Chamber of Commerce in order to stop the time limits of Clause 67 running. What is necessary is the communication to the Architect of a "claim to arbitration" on the decision within 90 days of the Architect giving written notice of his decision. This appears from the third sentence of Clause 67(1). If the full panoply of a Request for Arbitration had been required, we think such a requirement would have been clearly stated. The Claimants have drawn attention to an article by I.N. Duncan Wallace Q.C., published in the International Construction Law Review in July 1985. To the extent that Mr. Wallace's arguments support the conclusion reached by the Arbitrators on this point, those arguments are respectfully adopted.

The next question arising on the proper construction of Clause 67 is more difficult. What is the intention of this Clause, where the Architect makes no decision on the disputes or differences referred to him? Is it open to the Contractor, the Quantity Surveyor or the Employer (as the case may be) to refer the matters in dispute back to the Architect on subsequent occasions or must the matters in dispute be the subject of a notice claiming arbitration, such notice being given within the second period of 90 days?

It was submitted that the purpose of the reference of disputes and differences to the Architect was to put a "brake on the headlong rush to arbitration" and to give the Architect power to "settle" the matters in dispute in the sense of putting forward a conciliation. The Arbitrators do not read the word "settled" in the first sentence in that sense: the word has to be construed in its ordinary meaning, the dictionary definition of the word "settle" does not include "conciliation". Furthermore, they think that the function of Clause 67(1) is to provide machinery for the resolution of disputes. It seems to them that a construction which leads to the conclusion that the Clause, when operated, could leave some disputes resolved and others unresolved is unlikely to represent the reasonable intention of the parties.

The fourth sentence of the Clause reads as follows:

"If the Architect shall fail to give notice of his decision as aforesaid, within a period of ninety days after being requested as aforesaid, or if the Employer or the Quantity Surveyor or the Contractor be dissatisfied with any such decision, then and in any such case the Employer or the Quantity Surveyor or the Contractor may within ninety days after receiving notice of such decision or within ninety days after the expiration of the first named period of ninety days, as the case may be, require that the matter or matters in dispute be referred to arbitration as hereinafter provided."

This part of the Clause treats the two possible situations that is (a) no decision or (b) a decision with which a party is dissatisfied alike. It was argued that the words "... may ... require .." were permissive in case (a).

The Arbitrators do not accept that is the proper construction of those words as used in that sentence. The words are permissive only in the sense that a party to a dispute may choose not to exercise the right to arbitrate. Clearly there will be cases where a party is dissatisfied but is, nevertheless, unwilling to incur the cost and run the risks of an arbitration. In the Arbitrators' opinion, in both situations (a) and (b), a party who wishes to take "matters in dispute" beyond the reference to the Architect must give notice of arbitration within the stipulated time limits. This opinion is reinforced by the appearance of the words "if any" in the opening phrase of the fifth sentence of Clause 67(1).

The language used by the First Claimant in his letter of 4th November 1982 is consistent only with there being a dispute within the meaning of Clause 67 prior to the date of the letter. To the extent (if any) that the door remained open in respect of the awards of extensions of time previously made by the Architect, the Arbitrators consider that the letter itself shut it. No notice of arbitration was given within 180 days of 4th November 1982 and, subject to the contention that the Defendant is "precluded" from relying on the First Claimant's failure to comply with Clause 67, the Arbitral Tribunal has no jurisdiction to consider the First Claimant's entitlement to extensions of time on the grounds put forward in the documents referred to in the letter of 4th November 1982.'