ICC Awards

This extract concerns the question of the action a party must take, under the 3rd Edition, to secure its right to arbitration following a decision of the Engineer or a failure of the Engineer to issue a decision, i.e.: is a mere notice of the intention to arbitrate sufficient, or must the party file a Request for Arbitration? The answer is clear under the 4th Edition, but less so under the 3rd Edition, which the Arbitral Tribunal was applying in this case with the hindsight provided by the 4th Edition.

The Claimant, as Contractor (a European Company), and the Defendant, as Employer (a government body of an African country), entered into a contract for the performance of dredging and associated works to improve access to a port for larger ships. Although the substantial and final completion certificates had been issued, certain disputes arose between the parties during the performance of the works, which the Claimant referred to the Engineer pursuant to clause 67 of the contract. The Claimant notified the Defendant that the disputes submitted to the Engineer would be referred to arbitration. The Request for Arbitration was filed after the expiry of the 90-day time period specified in Clause 67 for reserving the right to arbitration.

'[...]

Has the Claimant timely "required that the matter or matters in dispute be referred to arbitration (as provided under Clause 67(1) CC)?"

The Claimant had 90 days, after the expiration of the first 90-day period, to "require that the matter or matters in dispute be referred to arbitration":

"If the Engineer shall fail to give notice of his decision, as aforesaid, within a period of ninety 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 after 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" (Clause 67 (1), emphasis added).

The Defendant's contentions

According to the Defendant, the Claimant did not commence arbitration within the required time period. A mere expression of intent to commence arbitration is not sufficient to prevent an Engineer's Clause 67 (1) decision from becoming final and binding. The objecting party must actually commence the arbitration.

The 90-day period is a time-bar whose purpose is to provide parties with certainty that after the expiration of the period, no claims may be brought against them with respect to matters covered by the relevant Clause 67 (1) CC decision.

This very concern has prompted prominent commentators like Mr Seppala and Mr Jarvin to take the position that the 90-day time bar is met only when a party actually commences arbitration (Christopher Seppala, "The Pre-Arbitral Procedure for the Settlement of Disputes in the FIDIC (Civil Engineering) Conditions of Contract", International Construction Law Review (1986), p. 315; Sigvard Jarvin, Yves Derains and Jean-Jacques Arnaldez, Collection of ICC Arbitral Awards 1986-1990, Case Note on No. 4862.

In ICC Award No. 4707 rendered in 1986 (International Construction Law Review (1986) pp. 470-73), the Arbitral Tribunal held that actual commencement of the Arbitration is required.

ICC Award No. 5277 rendered in 1987 (Collection of ICC Arbitral Awards, 1986-1990, pp. 112-122) held that after the Engineer gives written notice of a FIDIC Clause 67 decision, the party dissatisfied with the decision must file a request for arbitration with the ICC within 90 days thereof.

The modification to Clause 67 CC in FIDIC's fourth edition actually supports the Defendant's position that Clause 67 (1) of the Contract at issue here (which is based on FIDIC's third edition) required the Claimant to actually commence arbitration within 90 days of the Engineer's Decision. Such a modification would not have been necessary if the drafters of the FIDIC conditions believed that the previous version of clause 67 allowed for the same.

The Claimant's contentions

According to the Claimant, a plaintiff must only notify the Engineer of its intention to submit the matter to arbitration. It need not actually commence arbitration.

The majority of cases indeed hold that a claimant satisfies the requirement of Clause 67 CC by notifying the engineer of its "intention" to arbitrate:

- ICC Case 5029: "[A] claim to arbitration without need for particular formalities is to be explicit and clear and clearly show the plaintiff's intention to submit the dispute to arbitration";

- ICC Case 4862: "The plaintiff did not actually commence arbitration until over five years after it initially notified the Engineer that it intended to submit the matter to arbitration";

- ICC Case 5634: "The tribunal held that it was not necessary to submit a request to the arbitrators but simply to notify the Engineer of the decision within 90 days".

The Claimant relies on Mr Duncan Wallace's comment to the effect that the relevant language of clause 67 FIDIC requires only "notification of a serious intent to arbitrate", not actual commencement of proceedings (Ian Duncan Wallace, Construction contracts: Principles and Policies in Tort and Contract, London, 1986, p. 276, §18-13).

FIDIC 4th ed. clarified FIDIC 3rd edition and brought it into line with the majority position. FIDIC 4th edition provides that a dissatisfied party must notify the other party and the engineer of its "intention to commence arbitration". Actual commencement is not required. This revision has removed any prior uncertainty.

The Tribunal's decision

The Tribunal notes that under Clause 67 (1) CC, the Contractor must, within the 90 days, "require that the matter in dispute be referred to arbitration".

The majority of ICC Awards rendered in cases where Clause 67 CC of FIDIC second and third editions was at issue held that an actual beginning of the arbitration procedure was not required.

In addition to the three ICC awards quoted by the Claimant, the award rendered in ICC case No. 5600 (1987) should be mentioned. In this case, an arbitral tribunal decided that the Contractor's letter stating: "Je vous prie de considérer le présent courrier comme une notification de notre désaccord sur votre décision et vous notifions par la présente que nous soumettons l'affaire à l'arbitrage, conformément à la Clause 67 des Conditions Contractuelles" was a "demande d'arbitrage" in conformity with Clause 67 CC's requirements "que la question ou les questions en litige soient soumises à l'arbitrage" (ICC International Court of Arbitration Bulletin, (1991) Vol 2/No 1, pp. 16-19).

The Tribunal further notes that Clause 67 of FIDIC's 4th edition (1989) now provides for the sole requirement of a notification to the other party of the "intention to commence arbitration":

[3rd ed.] "If the Engineer shall fail to give notice of his decision, as aforesaid, within a period of ninety 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 after 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." (emphasis added)

[4th ed.]"If either the Employer or the Contractor be dissatisfied with any decision of the Engineer, or if the Engineer fails to give notice of his decision on or before the eighty-fourth day after the day on which he received the reference, then either the Employer or the Contractor may, on or before the seventieth day after the day on which he received notice of such decision, or on or before the seventieth day after the day on which the said period of 84 days expired, as the case may be, give notice to the other party, with a copy for information to the Engineer, of his intention to commence arbitration, as hereinafter provided, as to the matter in dispute. Such notice shall establish the entitlement of the party giving the same to commence arbitration, as hereinafter provided, as to such dispute and, subject to Sub-Clause 67.4, no arbitration in respect thereof may be commenced unless such notice is given.

If the Engineer has given notice of his decision as to a matter in dispute to the Employer and the Contractor and no notice of intention to commence arbitration as to such dispute has been given by either the Employer or the Contractor on or before the seventieth day after the day on which the parties received notice as to such decision from the Engineer, the said decision shall become final and binding upon the Employer and the Contractor" (emphasis added).

The Commentary of this article in the 4th edition states:

"the action necessary to prevent a decision from becoming final and binding is a notification by one party (no longer to the Engineer) to the other party of his intention to commence arbitration as to the subject matter of the decision" (Guide to the use of FIDIC fourth edition 1989).

The Tribunal considers that the redrafting of Clause 67 in the fourth edition was a clarification rather than a reversal.

Consequently, the Tribunal is satisfied that the Claimant's letter dated December 12, 1990, in which it notified the Defendant that the claims would be referred to arbitration, complies with the requirements of Clause 67 (1) CC.

This solution is preferable as otherwise it would hamper attempts to settle the dispute amicably, which is contrary to the spirit of FIDIC rules. Indeed, FIDIC's 4th edition added a new clause 67 (2): "Where notice of intention to commence arbitration as to a dispute has been given in accordance with Sub-clause 67 (1), arbitration of such dispute shall not be commenced unless an attempt has first been made by the parties to settle such dispute amicably."

Accordingly, in view of the above reasons, the Tribunal decides it has jurisdiction [...].'