ICC Awards

'Facts

Whatever the state of agreement between the parties immediately prior to the events with which we have to deal, it is accepted by both parties that their relationship was governed by a contract which incorporated Clause 67 of the General Conditions of Contract (International) for the Works of Civil Engineering Construction published by the Federation Internationale des Ingénieurs Conseils (FIDIC), 3rd Edition, March 1977.

. . .

On 19 February 1988 the Claimant, being dissatisfied with not having received payments which they claimed to have been due to them, gave notice under Clause 69 of the Contract.

On 7 March 1988 the Claimant wrote to Defendant terminating the Contract.

On 9 March 1988 both the Claimant and the Defendant requested the decision of the Engineer under Clause 67 of the Contract Conditions on the dispute which had arisen regarding the validity of the Claimant's action under Clause 69 of the Contract Conditions.

. . .

On 18 April 1988 X submitted a request for arbitration on behalf of the Claimant to the ICC Court of Arbitration, a copy of which was sent to the Defendant and received on 29 April 1988.

On 10 May 1988 the Engineer wrote to the Defendant (but not to the Claimant) expressing the opinion that the termination of the Contract was invalid.

On 11 May 1988 the Defendant wrote to the Secretariat of the ICC Court of Arbitration pointing out that the reference to arbitration by the Claimant was "well before the deadline for the Engineer's decision, which has not yet been given, is premature and contrary to the procedure agreed by the parties to the settlement of disputes with reference to arbitration".

On 4 June 1988 the Engineer wrote to the Claimant and sent a copy of the letter to the Defendant stating

"VALIDITY OF TERMINATION BY CONTRACTOR

Further to your request, we have reviewed the documentation available to us and have reached the opinion that your termination of the contract under Clause 69(1)(a) is not acceptable in the letter and intent of the Clause."

According to the Claimant this letter was not received until about 15 June 1988. (There is a dispute as to whether the Claimant obstructed its delivery by hand so that it had to be sent by post: we are not concerned to decide this dispute, for reasons which will appear.)

The Defendant delivered its Answer to the request for arbitration dated 21 July 1988 in which it did not take any further objection to the jurisdiction of the arbitrator.

The Parties' Arguments

As may be seen from the Terms of Reference the claims and counterclaims in these proceedings arise out of events leading up to the departure (to use a neutral term) of the Claimant from the site in March 1988 and subsequently. The parties have presented many arguments to us on the issues relating to jurisdiction but essentially they concern the interpretation of Clause 67 of the Conditions and its application to the facts of this case.

The Claimant contends that the requirements of Clause 67 have been met or have been varied either by agreement of the parties, or by estoppel or by waiver or that bias, impracticability or renunciation excuse them from complete compliance with the requirements of the Clause. In particular the Claimant has argued that the time limits in Clause 67 do not necessarily apply to the commencement of the arbitration which might be properly commenced before the expiry of the time limits without prejudicing the position of the party seeking arbitration; and the Engineer's letter of 4 June 1988 was not a decision, merely an expression of opinion.

The Defendant contends that the reference to arbitration was premature and its invalidity cannot be overcome by the subsequent actions of the Claimant; that the requirements of Clause 67 had not been varied; that there has been not estoppel or waiver, that there was no bias or impracticability or renunciation and that even if there was any one of these they would not affect the invalidity of the Claimant's actions. The arguments of both parties were extensive and referred to many documents and prior authorities. For reasons which will shortly become apparent it is not necessary for us to do more than summarise the position of each of the parties since their submissions make it clear that the primary question which we have to answer is whether the requirements of Clause 67 of the Contract Conditions were met so as to enable us to have jurisdiction in this case.

At this stage in the arbitration we express no opinion about the substance of the parties' claims and counterclaims and in particular about the actions of the parties prior to 9 March 1988 when the dispute was referred to the Engineer for his decision.

Discussion

Although a contract may incorporate a standard form it is always necessary to consider the whole of each contract and not simply to interpret a standard clause in the manner in which it may have been interpreted in other contracts. That said, however, we see no reason in this case to give to Clause 67 of the General Conditions of Contracts a meaning other than that which it usually bears. Clause 67 requires certain steps to be taken or conditions to be satisfied before an arbitral tribunal has jurisdiction:

(i) There must be dispute or difference.

(ii) It must be referred to the Engineer for settlement.

(iii) The Engineer is obliged, within 90 days after being requested to do so, to give written notice of his decision to both the employer and the contractor.

(iv) If the Engineer gives a decision within that period then a party dissatisfied with the decision must require that the matter or matters in dispute be referred to arbitration and the Rules of Conciliation and Arbitration of the International Chamber of Commerce.

(v) If the Engineer shall have failed to have given a decision within the 90-day period then a party dissatisfied with that failure must similarly require arbitration in accordance with the ICC Rules within the period of 90 days from the latest stage when the Engineer ought to have given his decision.

If arbitration is not requested then the decision of the Engineer becomes final and binding. (It is not clear what the position would be if the Engineer had merely failed to give a decision in respect of a dispute about some matter which was not in itself final and binding on either party-but that does not require to be decided in this case.)

Both parties accept that there was a dispute or difference and that it was referred to the Engineer for decision. We do not therefore have to consider whether points (i) and (ii) above were met.

We conclude that, having regard to the clear reference to the Engineer for a decision, the letters of 9 March 1988 requested the Engineer to reach a decision within ninety days.

We equally conclude that the Engineer did reach a decision by his letter of 4 June 1988 even though it was expressed in terms of an "opinion". The letter was written to answer the letters of 9 March 1988 and, in those circumstances, we consider that it should only be read as a decision. The prior letter of 10 May 1988 was not notified to the Claimant and could not therefore have been a decision. (It is not necessary for us to reach a conclusion about the propriety of the Engineer communicating only with one party at a time when his decision was being sought under Clause 67.)

However that decision was not notified to both parties before the expiry of the 90day period so that there was in effect a "failure to decide".

If we were wrong in our conclusion that the letter of 4 June 1988 was a decision, there would still have been a failure to decide by the Engineer within the 90 days from 9 March 1988 since there was no other letter which was a decision.

The Claimant's request for arbitration of 18 April 1988 was clearly premature and was ineffective to comply with the requirements of Clause 67. That Clause is intended to lead to the settlement of disputes (in echoing the words of the title and sidenote we do so as a matter of convenience as we bear fully in mind that Clause 1(3) states that the headings and marginal notes "shall not . . . be taken into consideration in the interpretation or construction (of the Conditions of Contract) or of the Contract"). It is quite clear from the structure and intent of Clause 67 that if Engineer reached a decision with which neither party was dissatisfied or with which no dissatisfaction was expressed within the requisite period that decision would then settle the dispute finally and be binding on both parties. That is an object which is a desirable one and which should not be preempted by a premature request for arbitration.

Nevertheless we conclude that Claimant's Counsel observations of 13 June 1988, read with the earlier request for arbitration, were intended to overcome and meet the objection which had been raised by the Defendant to the earlier request for arbitration being premature. At that stage the Defendant had not delivered its Answer to the request for arbitration.

In the circumstances of this case, we have no doubt that the two documents constitute the request for arbitration since the Claimant was, by 13 June 1988, quite clearly dissatisfied with what appeared to have been a failure to decide the dispute.

It is not therefore necessary to consider any of other arguments advanced by either party as these are now irrelevant. However we add that if the Claimant had prevented delivery of the Engineer's letter of 4 June 1988 within the 90day period that action, although culpable, would clearly not have led to the decision being accepted as satisfactory within the next 90day period.

We are therefore firmly of the opinion that the requirements of Clause 67 have been complied with by the Claimant; that the dispute, which on the subject of the letters of 9 March 1988, was both referred to the Engineer for decision and was effectively referred to arbitration on 13 June 1988 and that we have therefore jurisdiction to hear and determine both the Claimant's claims in this arbitration and the Defendant's claims by way of defence and counterclaim.'