ICC Awards

Cet extrait traite de la possibilité, pour une partie ayant obtenu une décision favorable de l'ingénieur, de soumettre cette décision à l'arbitrage afin qu'elle soit, à des fins d'exécution, confirmée dans une sentence arbitrale. La réponse est claire dans la quatrième édition, mais moins dans la troisième, que le tribunal a appliquée en l'espèce à la lumière de la solution adoptée dans la quatrième édition.

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As already pointed out, the arbitration clause is worded in article 69 of the first Contract.

The wording of this article 69 of the Contract is identical to that of FIDIC clause 67 (3rd edition, 1977).

1. Defendant's plea

The Defendant argues that under the said article only the party dissatisfied with the Engineer's decision may, after receiving notice of such decision, require that the matter in dispute be referred to arbitration. Claimant having indisputably been satisfied with the Engineer's decision, its referral of the matter to arbitration, though taking place within the prescribed time period, is inadmissible under article 69 of the Contract.

The new clause 67.4 in the 4th edition of FIDIC conditions, as amended in 1987 reads as follows:

"67.4 Failure to comply with Engineer's decision

Where neither the Employer nor the Contractor has given notice of intention to concurrence arbitration of a dispute within the period stated in subclause 671 and the related decision has become final and binding, either party may, if the other party fails to comply with such decision, and without prejudice to any other rights it may have, refer the failure to arbitration in accordance with sub-clause 67-3."

The fourth FIDIC version introduced a basic modification by allowing the party satisfied with the Engineer's decision to refer to arbitration the inexecution of the said decision by the other party.

The Defendant infers that the Claimant cannot refer to arbitration Defendant's inexecution of the Engineer's decision without violating the General Conditions of Contract which are the law of the parties.

Therefore, the Defendant requests the Arbitral Tribunal to decide the inadmissibility of the claims arising out of the first Contract.

As regards the Partial Award of January 20, 1983, rendered in the ICC case No. 3790 and invoked by the Claimant as supporting its view, the Defendant considers the said award as disputed and isolated.

The Defendant concludes that the Claimant cannot submit a request for arbitration pursuant to article 69 of the Contract corresponding to FIDIC clause 67 (3rd edition) on the ground of Defendant's failure to comply with the Engineer's decision.

2. Claimant's response to the plea

The Claimant acknowledges that the Engineer's decision on the claims submitted to the latter by the Claimant became final and binding upon the parties. As a consequence, the Defendant was under the obligation to make the payments as stated in the Engineer's decision, all the more that [applicable Administrative contract Regulations] provide that the Contractor's entitlements shall be paid within 45 days from the date of the approval of the statements.

The Claimant considers that the refusal by the Employer to fulfil this contractual obligation entitles the Claimant to protect its rights through the only way provided for in the Contract, i.e., by initiating the arbitration proceedings as per article 69. Therefore, the partial award that the Claimant is requesting must be merely declaratory, since it must state that the obligation of the Employer became final and binding and that the same omitted to make the payments due, the same partial Award also having to enforce the obligation of the Employer, ordering the same to make the payments in the amounts due, plus interest, as per provisions of the Administrative contract Regulations.

In Claimant's argumentation, article 69 of the Contract, shaped in conformity with clause 67 of FIDIC conditions (3rd edition, 1977) is aimed at providing in general settlement of disputes (this being the heading of article 69). This article is providing for a unique remedy in case of any and all disputes arising from the Contract. It results therefrom that if the Contractor is not allowed to resort to arbitration, he would not be in a position to apply to any tribunal or authority and would not have any other means to obtain a decision for the enforceability of the order of payment against the Employer.

The Claimant acknowledges that clause 67 of the third edition of FIDIC conditions (issued in 1977) is not totally clear in explaining the consequences of a refusal by a party to comply with the final and binding Engineer's decisions. The Claimant considers that this is confirmed by the fact that the fourth edition of FIDIC contract conditions amended the previous obscurity and clarified it.

The Claimant contends that the new, better formulation of clause 67 in the fourth edition is perfectly in line with the interpretation that the Arbitral Tribunal must give to the previous wording of the clause. The Claimant adds that it could not find any comment by authors who examined the FIDIC conditions disagreeing with its interpretation of clause 67 of FIDIC conditions third edition, and that the authors who commented on both FIDIC conditions and ICC awards concerning cases in which clause 67 was involved never gave any indication in line with Defendant's assumptions.

The Claimant supported its arguments by filing an ICC partial award dated January 20th, 1983, in the ICC case No. 3970, in a dispute between a French Contractor and a Libyan Employer (published in the Collection of ICC Arbitral Awards, 1986-1990). The contract in reference incorporated clause 67 of the FIDIC conditions, 2nd edition, identical to article 69 of the Contract. In the said partial award of 1983, the Arbitral Tribunal, after having found that the decision of the Engineer became final and binding, awarded the Contractor the amount of money claimed.

Therefore, the Claimant availed itself of the above-mentioned partial award of 1983 in support of its view.

3. The findings of the Arbitral Tribunal

The Arbitral Tribunal's understanding of article 69 of the Contract is that it envisages recourse to arbitration in two specific cases exclusively.

The first is the case of failure by the Engineer to give notice of his decision ("if the Engineer shall fail to give notice of his decision").

The second is the case of the Employer or the Contractor being dissatisfied with the decision of the Engineer ('or if either Employer or the Contractor be dissatisfied with any such decision').

In the present arbitration this Tribunal is not in the presence of the first case, since the Engineer has given notice of his decision.

Nor is the Tribunal in the presence of the second case, since both Employer and Contractor were satisfied with the decision of the Engineer.

Article 69 of the Contract does not provide for a third case in which recourse to arbitration is allowed.

On the contrary, the provisions of article 69 do not leave the slightest shadow of doubt that if the two parties are satisfied with the decision of the Engineer, this decision becomes final and binding upon the two parties, and the door of arbitration is then closed. It is only when one party is not satisfied with the decision that it may require that the matter or matters in dispute be referred to arbitration. This is the clear meaning of the provisions of article 69 of the Contract, and particularly the clear meaning of the following provision of the same article: "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 ICC." This means a contrario that the issues in respect of which the decision of the Engineer has become final and binding cannot be referred to arbitration. It results therefrom that article 69 does not envisage arbitration where, although the parties have accepted the Engineer's decision, one of them has not complied with the latter.

In the Arbitral Tribunal's views, no rule of interpretation or construction can allow extension of the field of arbitration beyond the limits defined in the wording of article 69 to cases and situations not envisaged therein, by way of interpretation or construction, without distorting the said wording. The Arbitral Tribunal considers that, in view of these clear terms, there is no room for interpretation or construction. […] Assuming there is room for seeking the intention of the parties, it cannot be contended, the wording of article 69 being as it is, that the parties had the intention to resort to arbitration in case one of them fails to comply with a decision of the Engineer which became final and binding, without a shred of evidence or the slightest indication that they had such intention in such case.

The Arbitral Tribunal does not share Claimant's view that there was only an obscurity in clause 67 of FIDIC conditions, third edition, as regards recourse to arbitration in the event of a party failing to comply with a decision of the Engineer which became final and binding, that such obscurity has been dissipated in the fourth edition, and that the new better formulation of clause 67 in the fourth edition is in line with the interpretation that the Arbitral Tribunal must give of the previous wording of clause 67 of FIDIC conditions corresponding to article 69 of the Contract.

In the previous edition of FIDIC conditions there was not only an obscurity in clause 67, but arbitration was clearly excluded a contrario in case the Engineer's decision becomes final and binding.

In any case, assuming that in the previous edition there was a silence in clause 67 as to whether arbitration is allowed or not for noncompliance by a party with an Engineer's decision which became final and binding, such silence can by no means be understood as allowing arbitration, especially where there is no indication at all of an intention of the parties to arbitrate in such a situation.

The Arbitral Tribunal views the amendment of clause 67 of FIDIC conditions in the 4th edition as the conclusive evidence that the said clause in its previous version did not allow referral to arbitration of a failure by one party to comply with an Engineer's decision which became final and binding and that a clear provision was needed to allow arbitration in such a case. This was the raison d'être of the amendment of the clause in the 4th edition.

Nor does the Arbitral Tribunal share Claimant's view that the only way to protect its rights is arbitration and that if arbitration is not allowed, it would not be in a position to apply to any tribunal or authority and would not have any other means to obtain decision for the enforceability of the final and binding Engineer's order of payment against the Defendant. Where, as in our case, there is no arbitration clause allowing the Claimant to resort to arbitration with a view to reaching enforcement of the Engineer's decision through an arbitral award, Claimant has obviously the right to institute proceedings before the competent State Court to seek the relief it needs for the protection of its right.

As far as the partial award of 20 January, 1983 in the ICC case 3790 is concerned, the Arbitral Tribunal cannot share the line of reasoning underlying it. In the view of the Arbitral Tribunal, under article 67 of the FIDIC conditions (3rd edition), the fact that the decision of the Engineer has become final and binding does not justify adjudication by the Arbitral Tribunal to the Claimant of the amounts approved by the Engineer in such a decision and claimed in the arbitration process. Quite to the contrary, the fact the said decision has become final and binding justifies inadmissibility of such claims for lack of jurisdiction of the Arbitral Tribunal, in view of the fact that the clause as it is worded does not provide for arbitration where the decision of the Engineer has become final and binding on the parties.

The present conclusion of the Arbitral Tribunal finds support in a commentary of FIDIC conditions, 3rd edition ('The pre-arbitral procedure for the settlement of disputes in the FIDIC conditions of Contract' by Christopher Seppala, in The International Construction Law Review, volume 3, Part 4, July 1986, pp. 315-337, especially at page 336). In the words of the commentator, "Clause 67 should be amended to make clear that a dispute which is the subject of a (definitive) 'final and binding"' decision of the Engineer may, nevertheless, be submitted to arbitration for certain purposes, such as to obtain an arbitral award confirming a party's entitlement to the amount of the 'final and binding' decision." Actually, such amendment came in the 4th edition.

Whereas the Claimant requests the Arbitral Tribunal to rule that because these claims have been already settled by the Engineer and consequently, the Defendant is obligated to pay the amounts of the said claims, the Arbitral Tribunal decides that these claims are inadmissible for lack of an arbitration clause giving jurisdiction to the Arbitral Tribunal.

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