<i>Dispute resolution clause</i>

'Any differences arising out of the execution of the Contract shall be settled friendly and according to mutual goodwill between the two parties; if not, it shall be settled in accordance with Clause 63 of the General Conditions of Contract.'

Article 63 of the General Conditions of Contract:

'If any dispute or difference of any kind whatsoever shall arise between the Employer or the Engineer and the Contractor in connection with, or arising out of the Contract, or the carrying out of the Works (whether during the progress of the Works or after their completion and whether before or after the termination, abandonment or breach of the Contract) it shall, in the first place be referred to and settled by the Engineer who, within a period of 90 days after being requested by either party to do so, shall give written notice of his decision to the Employer and Contractor. Save as hereafter provided, such decision in respect of every matter so referred shall be final and binding upon Employer and the Contractor until the completion of the Work and shall forthwith be given effect to by the Contractor, who shall proceed with all due diligence whether he or the Employer requires arbitration, as hereinafter provided, or not. If the Engineer has given written notice of his decision to the Employer and the Contractor and no claim to arbitration has been communicated to him by either the Employer or the Contractor within a period of 90 days from receipt of such notice, the said decision shall remain final and binding upon the employer and the Contractor. If the Engineer shall fail to give notice of his decision, as aforesaid, within a period of 90 days after being requested as aforesaid, or if either the Employer or the Contractor be dissatisfied with any such decision, then and in any such case either the Employer or the Contractor may within 90 days of receiving notice of such decision, or within 90 days after the expiration of the first named period of 90 days (as the case may be) require that the matter or matters in dispute be referred to arbitration as hereinafter provided. All disputes or differences in respect of which the decision (if any) of the Engineer has not become final and binding as aforesaid shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. . . .'

<i>Arbitral tribunal's decision</i>

'The Tribunal must ascertain that the claimant has duly satisfied the two preconditions for arbitration, namely first the resort to amicable settlement and secondly the submission of the dispute to the Engineer.

With regard to prior resort to amicable settlement, the Tribunal notes that there are no objective criteria making it possible to declare that the means of amicable settlement have been actually exhausted. These means cannot be identified in absolute terms and do not obey any pre-established and stereotyped rules. Everything depends on the circumstances and chiefly on the good faith of the parties. What matters is that they should have shown their good will by seizing every opportunity to try to settle their dispute in an amicable manner. They will only be discharged of this duty when they arrive in good faith at the conviction that they have reached a persistent deadlock.

On this subject, the Tribunal finds a number of indications in the dossier which warrant the conclusion that the claimant made genuine efforts with a view to an amicable settlement. This can be easily be deduced already from the lengthy waiting period of nearly three years after the completion of the work which the claimant observed before resorting to arbitration. This period was marked by a variety of contacts.

The Tribunal observes that a proposal was even formulated by the claimant to obtain payment of the sums due in the form of petroleum. The Tribunal likewise notes, among other signs of reciprocal good will, the request made in 1986 by the defendant . . . to the Court of Accounts of . . ., for authorization to pay to the claimant the sums due. All these attempts failed.

. . . . . . . . .

The defendant claims before the Tribunal that these various contacts or proposals made by the claimant with a view to an amicable settlement were not addressed to the party genuinely entitled to receive them from the legal standpoint. . . .

The Tribunal cannot accept this argument. The . . . legislation invoked concerns the legal personality of the [defendant], its power to submit to arbitration, its composition and its functions. It cannot concern operations (such as control or communication between the operator and the giver of the order) or phases independent of the arbitration and previous to it. All the contacts of the claimant with the various administrative, executive or control organs subordinated to the [defendant] . . . were valid; besides, that validity has never been disputed by the defendant throughout the performance of the contract. The defendant is in no position to dispute at present before the Tribunal the validity, which it has not disputed in the past, of the relations of the claimant with various municipal organs, which moreover contacted it themselves and gave it instructions.

Consequently, the Tribunal is of the view that the prerequisite of the search for an amicable settlement has been satisfied by the claimant in the present case.

With regard to the submission of the dispute to the Engineer prior to arbitration in conformity to article 63 of the "General conditions of contracts" the Tribunal considers that the procedure, which has been voluntarily made detailed, encased within precise time limits and requiring the Engineer to draft a report, is strictly binding upon the parties and governs their conduct before resorting to arbitration.

The Tribunal observes that while the first prerequisite, i.e. that relating to amicable settlement, is not subject to any pre-established and rigid rule, the second, i.e. that relating to resort to the Engineer, is governed by precise rules which may not be transgressed. Unlike other functions of the Engineer (control, sundry authorizations, modification of works, etc.) which have been performed by various individual or collective organs (varying according to the circumstances) with the express or tacit consent of the parties, a function of such decisive importance, which triggers the arbitration proceedings, has, for its part, never been exercised by any varying individual or collective organ. In other words, while the functions of the Engineer mentioned in the contract may, in the course of everyday routine and normal relations, have been exercised with the consent of the parties by different technical organs which have varied with the times, the particular function of disputes settlement has never been examined by any of the organs and remains governed by the contract and by the strict modalities of substance and form (time limits, report, etc.) which it sets forth.

The claimant claims that it has been dispensed from this contractual prerequisite by the defendant's failure to notify it in writing of the name of the engineer specially authorized to discharge that particular pre-arbitral function. The Tribunal considers that the claimant cannot thereby be dispensed from this substantive phase and that it was under a duty to put the defendant on notice to indicate to it the name of the engineer to whom the dispute could be submitted. It was only if it had met with a refusal or in the event of the failure to reply on the part of the defendant that the claimant could have been dispensed from complying with this pre-arbitral phase.

The claimant has maintained that because of the completion of the operations and the final receipt of the work it was too late to request the appointment of an engineer. Although this argument is obviously relevant for other technical functions of the Engineer such as the modification of operations and their technical execution or control, or the approval of invoices at their respective due dates, the specific function connected with disputes settlement, for its part, can be exercised according to the circumstances both during the work and after its completion so long as all the legal effects of the contract have not been fully exhausted.

The Tribunal has thus reached the conclusion that the claimant has not satisfied the prerequisite set forth in article 65 of the "General conditions of contracts". Consequently, the request for arbitration concerning the 1981 contract, which is certainly not impossible for the future, is at present premature. It therefore behoves the claimant formally to demand from the defendant the designation of an engineer to whom to submit the present dispute before it comes before the Tribunal.'