FIDIC Conditions, 3rd ed./ Dispute between Employer and Contractor/ Dispute settlement clause similar in relevant respects to FIDIC Clause 67/ Engineer not specified/ Failure of Claimant to refer claim to Engineer/ Precondition for resort to arbitration not met/ Claim premature.

'1. This Arbitral Tribunal has been set up in the cases No. 6276/CI and No. 6277/CI between a Swedish Company (the Contractor and the Claimant in this arbitration) and the Secretary of the People's Committee for a municipality of an Arab State and the Secretary of the People's Committee of Health of that municipality (Defendant) and consists of three arbitrators.

2. During the phase devoted to the question of arbitrability of requests No. 1 and 2 of the Claimant and the counterclaim of the Defendant, the Claimant agreed that the Secretary of the People's Committee for the Municipality should be deemed to be the sole Defendant in the two cases. The Arbitral Tribunal takes due note of this and renders hereinbelow its partial award relating to the question of arbitrability of the Claimant's requests No 1 and 2 and the Defendant's counterclaim.

ON THE QUESTION OF THE ARBITRABILITY OF REQUEST NO. 1

3. On 19 August 1981, the Claimant and the Defendant concluded a contract for the alteration and extension of a Hospital.

4. The Claimant maintains that it has fulfilled its obligation under the contract but that the Defendant has failed to pay to it most of the amounts due. Its request is based on articles 17 and 63 reproduced below.

5. Article 17 of the contract reads as follow:

"Settlement of Disputes

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. The place of arbitration shall be Geneva, Switzerland."

6. Article 63 on "General Conditions of Contract" which form an integral part of the contract of 19 August 1981, reads as follows:

"SETTLEMENT OF DISPUTES

63. 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 hereinafter 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 or 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. The said arbitrator/s shall have full power to open up, review and revise any decision, opinion, direction, certificate or valuation of the Engineer and neither party shall be limited in the proceedings before such arbitrator/s to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision. No decision given by the Engineer in accordance with the foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitrator/s as aforesaid. [sic] The arbitrator/s on any matter whatsoever relevant to the dispute or difference referred to the arbitrator/s as aforesaid. The arbitrator/s shall not enter on the reference until after the completion or alleged completion of the works unless with the written consent of the Employer and the Contractor provided always:

(i) that such reference may be opened before such completion or alleged completion in respect of the withholding by the Engineer of any certificate or withholding of any portion of the retention money to which the Contractor claims in accordance with the conditions set out in the Contract Agreement to be entitled or in respect of the exercise of the Engineer's power to give a certificate under the Contract Agreement.

(ii) that the giving of a certificate of Completion under clause 47 hereof shall not be a condition precedent to the opening of any such reference.

7. 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.

8-13. With regard to prior resort to amicable settlement […t]he 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. The Tribunal has thus reached the conclusion that the Claimant has not satisfied the prerequisite set forth in 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.

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IV. GENERAL CONCLUSIONS

For these reasons,

The Tribunal

decides that it cannot consider request for arbitration No. 1 (case original No. 6276/CI) unless the Claimant complies with the prior formality relative to the submission of the dispute to the Engineer.

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