FIDIC. Conditions Third Edition / Dispute between Contractor and Employer / Clause 67 / Conditions for the Communication of a claim to arbitrate to the architect / Clause 68.

'ISSUE 1.1. JURISDICTION OF THE ARBITRAL TRIBUNAL IN RESPECT OF CLAIM 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 Condition 67 of the Conditions of Contract? If so, which of these claims are outside the jurisdiction of the Arbitral Tribunal?"

The question in this Issue is: Does the Arbitral Tribunal have jurisdiction to hear and determine the disputes and differences arising out of the Claimant's Claim Volume 7 on its merits. By Claim Volume 7, the Claimant seeks financial relief and/or extensions of time arising out of events and their consequences which were alleged to have occurred between the beginning of August and 31st December, 1984.

CHRONOLOGY OF EVENTS:

This Volume was first submitted by the Claimant to the Architect on 18th April, 1986. By letter dated the 27th of August, 1986, the Architect granted an extension of time of 14 days for the delays alleged in Volume 7. He did not deal in that letter with the other matters raised. On 23rd September, 1986, the Claimant referred a dispute over the Volume No. 7 matter to the Architect under Clause 67. On 26th September, 1986, the Architect wrote to the Claimant

"Dear Sirs,

Claim Volume 7.

I confirm receipt of your letter of 23rd September, 1986, recording that you dispute my determination of an extension of time related to your Claim Volume 7. I now confirm this decision under Clause 67 of the Contract."

By the time of these exchanges, this reference was already well under way. The Claimant had given a notice of arbitration and the Request for Arbitration was filed on 9th May, 1986. The Defence and Counterclaim was submitted on 16th July, 1986 and by 26th September, the Chairman of this Arbitral Tribunal had been appointed. It is thus obvious that the dispute over the Volume 7 claims arose after the reference to arbitration and the appointment of the Tribunal. Accordingly, the Tribunal would not in any event have had jurisdiction over the "Volume 7 disputes" in the absence of the consent of both parties. Without such consent, the Claimant would have had to make a further reference to arbitration and file a further Request for Arbitration. That course of action had very little appeal since it certainly risked delay and could have lead to the unsatisfactory position where the Tribunal deciding the "Volume 7 dispute" was differently constituted from that appointed to decide the claims referred to arbitration earlier.

At the Hearing leading to the drawing up of the Terms of Reference, the Defendant very sensibly agreed to submit "the Volume 7 dispute" to the jurisdiction of the Arbitrators provided that they were not thereby deprived of an accrued Clause 67 defence. The Tribunal accepted jurisdiction subject to that proviso.

SUBMISSIONS OF THE PARTIES:

The Claimant contends that a claim to arbitration against the Architects Clause 67 decision of 26th September 1986 was communicated to the Architect within the 90 day period limited by that clause and particularly by virtue of a letter dated 3rd November, 1986. Alternatively they say that the Defendant had by its Solicitors, before the Terms of Reference Hearing, agreed to submit the "Volume 7 dispute" to the jurisdiction of the Arbitral Tribunal without qualification. In support of the latter contention, the Claimant relied on a telephone conversation between Solicitors on 12th December, 1986 and a telex from the Defendants Solicitors dated 23rd December, 1986.

The Defendant answers those arguments in this way. The Defendant accepts that the letter of 3rd November, 1986, found its way to the Architect within the 90 day period but say that since that letter was not sent on behalf of the Claimant to the Architect there is no communication of a claim to arbitration to the Architect within Clause 67. As Mr. X on behalf of the Defendant very clearly put it, a "windfall communication" is not good enough. On the second point, objection is taken to the admissibility of a contemporary note of the telephone conversation of 12th December, 1986, on the ground that the conversation was expected by the Defendant's Solicitors to be a "without prejudice" conversation. But whether or not that conversation and the note which is a record of it are admissible, Mr. X argued that the sole subjectmatter of any agreement was to extend time for a challenge to the Clause 67 decision by 21 days.

The letter of 3rd November, 1986, was signed by ..., Solicitor for the Claimant, and addressed to ..., Solicitors for the Defendant. The text reads:

"As you are no doubt aware, a dispute has arisen on this project regarding the extension of time to which the Claimants are entitled in respect of the matter set out in their Claim Volume N° 7; of the eleven weeks' extension of time requested in respect of the period from 1st August, 1984 to 31st December 1984, the Architect granted my clients a 14 day extension of time. My clients were dissatisfied with that extension and accordingly requested a formal decision under Clause 67 of the Contract. On 26th September, the Architect confirmed his decision under Clause 67.

My clients' wish to pursue this dispute in arbitration and it would seem both acceptable and economic if that dispute were dealt with in the existing arbitration proceedings between our respective clients. I would therefore ask you to take instructions on whether your clients are prepared to consent to the dispute in respect of volume 7 being heard in the current proceedings without the necessity of my commencing separate arbitration proceedings with the I.C.C.

You will appreciate that if your consent is not forthcoming, an application would have to be made through the I.C.C. within ninety days of the Architect's decision. I would be grateful therefore if you would let me have your clients' views on my proposal within the next 21 days."

THE TRIBUNAL'S FINDINGS

In the First Partial Award, the Arbitral Tribunal held that it was not necessary for a party to file a Request for Arbitration with the I.C.C. to stop the limit bar in Clause 67 from running; what mattered was the communication of a claim to arbitration to the Architect. In the Arbitrator's judgment, the letter of 3rd November, 1986 is clear enough to amount to a claim to arbitrate the decision of 26th September, 1986. Indeed, the contrary was not argued.

The letter addressed to Solicitors for the Defendant, appeared to have been, as one would expect, sent by that firm to their clients, the Defendant. The evidence showed that ..., the Resident Architect to whom all the powers of the Architect had been delegated, received a copy of the letter, at the address stipulated by Clause 68 of the Conditions of Contract, within the 90 day period from the Defendant. The Arbitrators have already set out, both in the First Partial Award and again in this Award, the principles which they hold should be applied to the construction of Clause 67. Although in practice, the communication of the claim to arbitration to the Architect will almost invariably be made by the party challenging a Clause 67 decision, it is not an express requirement of the clause that it should be so and, consistently with such principles, the Arbitrators would not (unless constrained by authority to do so) imply any such requirement.

Mr. X cited the decision of the Court of Appeal in Getreide Import Gesellschaft G.m.b.H. v Contimar S.A. (1953) 1 Lloyds Rep. 572. He did so by way of example and not as authority for a proposition of substantive law that in a situation like the present a "windfall communication" is never enough. The contract before the Court in that case provided for an appeal from an award in the following terms:

"Appeal In case any party to an award shall be dissatisfied with the award a right of appeal shall lie to the Committee of Appeal…provided the following conditions are complied with:

(…)

(b) Notice claiming appeal is given to the Secretary of the Association within fourteen consecutive days from date of the award...

(c) Within the said fourteen consecutive days, notice that the appeal has been claimed is given by appellant direct to his seller or buyer, as the case may be."

The award published on 30th July, 1952, found that the sellers, Contimar, were in default. On 11th August, the London agents for Contimar wrote to the Secretary of the Association claiming an appeal. Next day, Contimar wrote, as they thought, to the buyers. By mistake, this letter was sent to the wrong address and, by the time the error was discovered, time had run out. Contimar were driven back to arguing that a letter written by the Secretary of the Association of the buyers on the 12th August, indicating or passing on information about the seller's appeal was written by him as agent for the buyers so that paragraph (c) above was satisfied. This argument was rejected on the grounds that there was no such agency: see per Singleton L.J. at p. 579. Jenkins L.J. p. 583, Morris L.J. at 585.

In the Arbitrators' opinion, the point of distinction between the present case and the decision in Contimar lies in the requirement in that case that notice of appeal be given direct. There is no similar requirement in the instant contract and, for reasons given, it would be wrong to imply one. The Arbitrators are therefore satisfied that the Architect was aware of and had communicated to him a claim to arbitrate his decision of the 26th of September, 1986, in time.

For these reasons, the Arbitral Tribunal holds that it has jurisdiction to entertain the "Volume 7 disputes" and decides this issue in favour of the Claimant. It is therefore unnecessary to decide the second point raised by the Claimant and the Arbitrators do not do so.'