ICC Awards

'The subject matter of this arbitration is a dispute on the payment for civil works performed by the Claimant under a Subcontract.

By a Main Contract, dated Apr. 18, 1977, the Respondent as Main Contractor agreed with the Government of X as Owner to carry out and complete certain construction works (offshore pipe work) for the abovementioned project . . . The main Contract incorporated the FIDIC Conditions of Contract (International) for Electrical and Mechanical Works (1st ed. May 1963; reprint 1975) and, for particular matters of civil works not covered therein, the FIDIC Conditions of Contract (International) for Works of Civil Engineering Constructions (2d ed. July 1969; reprint 1973).

The Owner nominated E to act as Engineer under the Main Contract.

Following acceptance of a tender submitted by the Claimant on May 2, 1977, the Claimant and the Respondent entered into a Subcontract Agreement . . . This Subcontract comprised the following documents:

the Subcontract agreement;

- . . .

- the FIDIC Conditions of Contract, Parts I and II (Civil Works), concluded between the Respondent and the Government of X, as far as applicable to the scope of the supply; . . .

With respect to the Subcontract, no additional Engineer was nominated by the Respondent.

. . .

REASONS FOR THE AWARD:

The Arbitral Tribunal has full jurisdiction over the Arbitral Complaint, including the matters covering the Claimant's claim for compensation for the preparation of drawings . . .

In this regard the Respondent may not rely on the fact that the Claimant failed to resort to the Engineer pursuant to Clause 67 of the FIDIC. Specifically, this result is reached from the following considerations:

It is not disputed that the Respondent did not nominate an Engineer for the Claimant with regard to the subcontractor relationship existing between them. According to No. 1(c) of Part 1 of the FIDIC General Conditions, it could have done so either by designating the Engineer in Part 2 or by informing the Claimant of an Engineer in some other manner with separate writing. Neither transpired in the relationship between the parties.

Clause 67 of the FIDIC is thus to be applied to the relationship between the parties in such a way as if the Respondent had not elected an Engineer for contractual dealings in the subcontractor relationship. In this context, it is also to be noted that pursuant to No. 2(c) of the Subcontract, it was agreed that Clause 67 of the FIDIC was not to be applied literally but rather by analogy to the parties subcontractor relationship ("as far as applicable to this scope of supply"). Despite the Respondent's assertion to this effect, it also may not be assumed that E-the Engineer nominated for the relationship between the Owner X and the Respondent-tacitly, automatically fulfilled the functions of an Engineer in the subcontractor relationship. This would not only have created a conflict of interest for E in its contractual relationship with the Owner X; it is also not compatible with the undisputed, practical treatment of rendering invoices and issuing certificates in the parties' subcontractor relationship. The constructions works performed by the Claimant were indeed directly certified (following approval by the Resident Engineer) not by E but rather by the Respondent's local site management. In addition, the correspondence between July 20, 1977 and Dec. 21, 1978 regarding the Claimant's claims for compensation was not conducted via E but rather directly between the parties themselves.

Thus, E (as Engineer in the main Contract relationship between X and the Respondent) was at no time an Engineer in the sense of Clause 67 of the FIDIC for the parties' subcontractor relationship.

The riskshifting provision in No.9 of the Subcontract as well did not make E an Engineer in the parties' subcontractor relationship: No. 9 refers only to those risks and obligations of the Respondent entered into by it as Contractor visàvis the Owner. These risks of the Respondent are to be viewed as having been assumed by the Subcontractor (Claimant). But in view of the actual practice of rendering invoices by the Claimant and the abovementioned certification procedure, No. 9 is not to be regarded as an "extension of the functions of the Engineer under the Main Contract relationship". On the contrary, No. 9 must be interpreted in such a way that a contractual risk (in particular, with regard to outstanding payments) was to be passed on to the Subcontractor but not that the Engineer's contract between the Owner X and the Engineer E, which is to be viewed separately from the Main construction Contract, was to be extended to cover the Claimant.

The arbitral tribunal thus considers Clause 67 of the FIDIC Conditions as having become part of the parties' contractual relationship only with the limitation that the Respondent failed to nominate an engineer visàvis the Claimant. For this reason, the procedure for resorting to the Engineer prior to instituting arbitral proceedings, along with the deadlines accompanying this, is of no significance for the relationship between the parties.

The Respondent is therefore unable to rely upon the non-resort to the Engineer E as a basis for asserting the Arbitral Tribunal's lack of jurisdiction with regard to the deduction of the compensation claim . . .'