ICC Awards

Conditions FIDIC applicables aux marchés de construction d'ouvrages de génie civil (le « Livre rouge ») quatrième édition (1987). Clauses 20, 65 et 67.

L'existence d'un litige

'42. The starting point for what must be a long journey through the various arguments is Clause 67. . . . As far as is material, Clause 67 of the FIDIC Conditions provides:

67.1 If a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with, or arising out of, the Contract or the execution of the Works, whether during the execution of the Works or after their completion and whether before or after repudiation or other termination of the Contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer, the matter in dispute shall, in the first place be referred in writing to the Engineer, with a copy to the other party. No later than the eighty-fourth day after the day on which he received such references the Engineer shall give notice of his decision to the Employer and the Contractor. Such decision shall state that it is made pursuant to this Clause.

. . .

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 in which he received the reference, then either the Employer or the Contractor may, on or before the seventieth day after the day in 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 such dispute and, subject to 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 of such decision from the Engineer, the said decision shall become final and binding upon the Employer and the Contractor.

. . .

67.3 Any dispute in respect of which:

(a) the decision, if any, of the Engineer has not become final and binding pursuant to Sub-Clause 67.1,

. . .

shall be finally settled, unless otherwise specified in the Contract, under the Rules of Conciliation and Arbitration of the Industrial Chamber of Commerce by one or more arbitrators appointed under such Rules. The said arbitrator(s) shall have full power to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineers related to the dispute.

Neither party shall be limited in the proceedings before such arbitrator(s) to the evidence or argument put before the Engineer for the purpose of obtaining his said decision pursuant to Sub-Clause 67.1. No such decision shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute.

. . .

43. Unless the procedure under Clause 67.1 is followed, [Defendant's counsel] submits that there is no entitlement to start an arbitration and no jurisdiction in the arbitrator who might be appointed to determine the dispute. As a general proposition, I do not think that this submission either is or could be contested. . . .

44. [Defendant's counsel] further contends that there are, within the arbitration, disputes which have never been put to the Engineer at all. Two of these disputes are aspects of the claim to interest and the claim to retention. Since I have held, on the evidence, that a claim to interest is not enforceable under the law of [State X], it is not necessary to decide whether, had the position been otherwise, the Defendant would have had a defence to such a claim under Clause 67.

45. The claim to the unpaid and uncertified part of the contract retention fund does raise points of difficulty. There is no question over the amount of this claim nor that . . . the sum . . . ought to have been released to the Contractor in March 1993. But [Defendant's counsel] submits that, until this claim surfaced in the first version of the reply, everyone seemed to have forgotten about the unpaid retention fund. The release of these monies to the Contractor had never been the subject of any communication between the parties. Therefore, it is argued that there never was a crystallised dispute which could have been the subject of the Clause 67 procedures and, because there was no dispute and no reference to the Engineer, there is no jurisdiction to award the Claimants this sum.

46. [Claimants' counsel]'s answer to this is as follows. He says it is wrong to contend that the claim to retention is not now in dispute. He says that there is a dispute is clear from the amended counterclaim and from the fact that this claim is included within the Terms of Reference document. He submits that a failure to comply with the Clause 67 requirements to refer disputes to the Engineer affords the Defendant no defence. As a matter of fact, [Claimants' counsel] argues that, by the time the balance of the retention money fell due for release to the Contractor, there was no Engineer in place to discharge the duties of certifying imposed on such person by the Contract. He contends that this situation was a breach of contract on the part of the Defendant and that the Defendant should not be allowed to rely on the consequences of that breach, namely the absence of a Clause 67 reference, in answer to this claim. Alternatively, he says that it was impossible in the circumstances to refer a claim to this money to the Engineer and Clause 13.1 of the Conditions operates to "excuse" the absence of a Clause 67.1 reference.

47. The release of the second half of the retention money is governed by Clause 60.3(b) and by Clause 62.1: the latter provides in terms that the issue of the Defects Liability Certificate shall "not be a condition precedent to the payment to the Contractor of the second portion of the Retention money in accordance with the Conditions set out in Sub-Clause 60.3". I can see no reason why the submission of the draft formal statement under Clause 60.6 should be regarded as a condition precedent to the release of the second half of this fund. Accordingly, I am against the Defendant on the point pleaded at paragraph 17(a) of the amended answer and observe that this point was, rightly in my opinion, not pursued by [Defendant's counsel].

48. As will appear in the next Section, on the findings of fact made in paragraph 21 above [omitted from this extract], the remaining counterclaim is dismissed. I am, thus, left with a debt due to the Contractor which has not been discharged but about which there is, and can be, no dispute. It seems to me, with respect to [Claimants' counsel], wrong to infer from the fact that this claim has become disputed in the course of this reference that there was in March 1993 a dispute about it. I, therefore, accept [Defendant's counsel]'s argument that there was no "crystallized" dispute.

49. The question for me is whether or not, in all the circumstances, I have power to make an award in the Claimants' favour for this sum of . . . There is great force in [Defendant's counsel]'s argument that an ICC arbitrator is appointed to resolve disputes which are existing disputes at the time of the appointment and about which there is either an Engineer's Clause 67.1 decision or a failure to give a decision. However, it seems to me that [Defendant's counsel]'s quintessentially English law submission on this point is one which ought not to be slavishly accepted in the case of an international civil engineering contract. Not all countries, in which a contract incorporating the FIDIC Conditions falls to be performed, have a legal system as good as that in [State X], embryonic though that system may be. If a party cannot enforce a contract entitlement over which there is no or no real dispute through the arbitral process, there will be cases . . . in which there is no available remedy. For this reason, I have concluded that it would be right to award the Claimants the [aforementioned sum].'

L'interprétation du contrat

'51. Having concluded, upon the outcome of the Clause 67 issues that I do have jurisdiction to determine the Claimants' "war damage" claim, the next batch of issues concerns the application and construction of the relevant clauses of this contract to the facts as found. The findings of fact are set out in paragraph 21 [omitted from this extract]. With the exception of a few items of Contractor's Equipment, I have found that the invading . . . army looted or stole that equipment [from] the specially obtained preparation yard . . .

52. It is necessary to set out the material parts of the relevant conditions in this FIDIC Contract. Clause 20.3 provides:

In the event of any such loss or damage happening from any of the risks defined in Sub-Clause 20.4, or in combination with other risks, the Contractor shall, if and to the extent required by the Engineer, rectify the loss or damage and the Engineer shall determine an addition to the Contract Price in accordance with Clause 52 and shall notify the Contractor accordingly, with a copy to the Employer. In the case of a combination of risks causing loss or damage any such determination shall take into account the proportional responsibility of the Contractor and the Employer.

Clause 20.4 provides:

The Employer's risks are:

(a) war, hostilities (whether war be declared or not), invasion, act of foreign enemies;

(b) rebellion, revolution, insurrection, or military or usurped power, or civil war;

(c) ionising radiations, or contamination by radio-activity from any nuclear fuel, or from any nuclear waste from the combustion of nuclear fuel, radio-active toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof.

. . .

Clause 65.2 provides:

The special risks are:

(a) the risks defined under paragraphs (a), (c), (d) and (e) of Sub-Clause 20.4, and

(b) the risks defined under paragraph (b) of Sub-Clause 20.4 insofar as these relate to the country in which the Work [sic] are to be executed.

Clause 65.3 provides:

If the Works or any materials or Plant on or near or in transit to the Site, or any of the Contractor's Equipment, sustain destruction or damage by reason of any of the said special risks, the Contractor shall be entitled to payment in accordance with the Contract for any Permanent Works duly executed and for any materials or plant so destroyed or damaged and, so far as may be required by the Engineer or as may be necessary for the completion of the Works, to payment for:

(a) rectifying any such destruction or damage to the Works, and

(b) replacing or rectifying such materials or Contractor's Equipment,

and the Engineer shall determine an addition to the Contract Price in accordance with Clause 52 (which shall in the case of the cost of replacement of Contractor's Equipment include the fair market value thereof as determined by the Engineer) and shall notify the Contractor accordingly, with a copy to the Employer.

Clause 65.5 provides:

Save to the extent that the Contractor is entitled to payment under any other provision of the Contract, the Employer shall repay to the Contractor any costs of the execution of the Works . . . which are howsoever attributable or consequent on or the result of or in any way whatsoever connected with the said special risks, subject however to the provisions in this Clause hereinafter contained in regard to outbreak of war, but the Contractor shall, as soon as any such cost comes to his knowledge, forthwith notify the Engineer thereof. The Engineer shall after due consultation with the Employer and the Contractor, determine the amount of the Contractor's costs in respect thereof which shall be added to the Contract Price and shall notify the Contractor accordingly, with a copy to the Employer.

Clause 65.6 deals with outbreak of war, wherever in the world it occurs, and gives the Employer a power to terminate if war occurs: subject to the exercise of that power, the Contractor is obliged to use his best endeavours to complete the Works. This Sub-Clause was not operated and does not affect the questions which now arise.

53. [Defendant's counsel] described these clauses as difficult and I agree with him on that. The starting point is Clause 20. The purpose of this Clause is to allocate the risk of damage or destruction to the Works and to material and Plant intended to be incorporated into the Works during the period for which the Contractor is to be responsible, namely from the Commencement Date to the Taking-Over Certificate. Having, however imperfectly, allocated in Clause 20 the risks between the parties, the succeeding Clause imposes obligations as to insurance, but loss or damage caused by war or invasion, for example, is excluded from the general contractual obligation to insure: see Clause 21.4. Given that this is an international contract where various parts of the performance of the core obligation may take place in several different countries, one would, I think, expect that the Clause 20 risks were stateless in the sense of it being immaterial where in the world the particular risk occurred. This construction gains support from Clause 65.2(b) which, for Clause 65 purposes, limits the risk of rebellion, revolution, insurrection and so on to the country in which the Works are to be executed. This is in contradistinction to the other special risks, which, in my opinion, are "worldwide" for both Clause 65 and Clause 20 purposes. If this were not so, the limitation introduced by Clause 65.2(b) is inexplicable. [Defendant's counsel] submits that the right to claim and recover for, say, materials lost by reason of hostilities under Clause 20.3 should be limited to the occurrence of the special risk and, hence, the loss of the materials on site since otherwise the rights under clause 65.3 to recover for materials, damaged or destroyed by the hostilities, on or near or in transit to the Site are redundant: in such a case, the Contractor is already protected by Clause 20.3. This is, undoubtedly, a strong argument and I am not fully convinced that it is met by the observation in the Claimants' closing submissions that the periods over which the two provisions operate are not co-terminous. Nevertheless, I conclude that [Claimants' counsel] is entitled to base his Clients' claim for materials or Plant on Clause 20.3 in the alternative and so hold. It is common ground that the claim for Contractor's Equipment does not fall within Clause 20.3. It should be recorded that the pleaded point that there was no Engineer's requirement within Clause 20.3 was not pursued. It is clear that the Engineer did require substitute materials and Plant to complete the Works.

54. The conclusion reached in paragraph 53 means that it is unnecessary, for the disposition of the issues in the reference, to decide whether the materials and Plant for which a claim is made were, at the time of their loss, in transit to the site under Clause 65.3. The relevant facts . . . are not in dispute. The 549 tons of sheet piling, which constitutes Plant, had been prepared in June and July 1990 and were ready for shipment at the . . . yard. The materials were wrapped and ready for shipment. But neither plant nor materials had been delivered to the carrier. Neither expert on the law of [State X] offered any opinion on what the expression "in transit" might be construed as meaning under that law. I am entitled to look at the authorities (which are English) cited by the Defendant on this question: the place of the arbitration is London and it is a rule of English procedural law that, absent evidence, a foreign law should be assumed to be the same as the domestic law. These authorities tend to support [Defendant's counsel]'s argument that, at the 2nd August 1990, the materials and plant were not in transit to the site. I accept his submission on this point, although, as I have said, it does not affect the overall outcome because of my conclusion that the Claimants are entitled to base this part of their claim on Clause 20.3.

55. [Claimant's counsel], while arguing that the materials and Plant were in transit to the Site, was never much troubled by the prospect of not carrying the day on this point because he argued that, whatever the outcome of that argument or the argument over Clause 20.3, the Claimants were entitled to succeed, subject to proof of quantum, under Clause 65.5 in any event. He described this Clause as a "catch-all" type of provision. He contends that this is clear from the opening words "Save to the extent that the Contractor is entitled to payment under any other provision of the Contract . . ." and to the very wide language used in the relative clause of the final sentence. The submission is supported by the observation that the rights under Clause 65.5 are limited to the recovery of costs, which, by virtue of the Contract definitions, exclude profit, although include overheads. [Claimants' counsel] maintains that Clause 65.5 does not subsume Clause 65.3 but complements it. [Defendant's counsel] argues that this is wrong and that Clause 65.5 is a clause providing for the recovery of consequential losses provided such losses are

(a) "costs", as defined, which have already been incurred and

(b) are costs related to the direct physical operation of carrying out the Works. [Defendant's counsel] contends, therefore, that Clause 65.5 does not cover the so-called indirect costs (with exceptions) in Section 3 of the claim.

56. I find myself in the invidious position of being unable to accept the full extent of either side's arguments. It seems to me that [Defendant's counsel] is, in general, correct that, if Clause 65.5 was a "catch-all provision", then Clause 65.3 would become largely redundant. To my mind, the opening words of Clause 65.5 do more than simply preclude the prospect of double recovery: those words show the intention that if the Contractor has a specific right elsewhere to recover, say, the loss of an item of Contractor's Equipment through the occurrence of a special risk, then the claim lies under the specific provision and not under Clause 65.5. On the other hand, I do not accept [Defendant's counsel]'s argument that Clause 65.5 could not cover the Contractor's fixed overheads or the cost of pre-construction administration. It seems to me that these are examples of the sort of costs which Clause 65.5 was, indeed, intended to cover and I am not deterred from this opinion by the use of the verb "to repay", which, at most, determines the time at which a valid claim under Clause 65.5 should be assessed and discharged. On the pleadings, but not in the final argument, there is an issue over the Contractor's compliance with the obligation in Clause 65.5 to notify the Engineer. I am satisfied that the Contractor did comply.

57. It is now necessary to consider one of the most difficult points in what is a far from generally easy case. I have found, as a matter of fact, that, with a few exceptions, such as the work boat, the items of Contractor's Equipment, and the Plant and materials at the . . . yard were looted by the invading . . . forces. The difficult point is whether a loss suffered by reason of looting by an invading army constitutes "destruction or damage" within Clause 65.3. It seems to me to be clear that the looting of materials or Plant amounts to the loss of materials or Plant for incorporation in the Works within Clauses 20.2 and 20.3. [Defendant's counsel] says that Clause 65.3 does not cover items which were, in effect, stolen: "damage" must connote items which are available still but which require repair: "destruction" means physically destroyed or demolished so that the item is beyond repair. So [Defendant's counsel] would argue that, on the findings above, the Claimants could recover for the work boat (assuming, for the sake of argument, that this was owned by the Contractor) and for the grout spears but for nothing else. This is a question of the interpretation or construction of the Contract and the points at sub-paragraphs (5) and (6) on page 7 of the Claimants' Closing Submissions seem to me to be immaterial.

At first sight, the juxtaposition of "destruction" with "damage" in Clause 65.3 strongly supports [Defendant's counsel's] argument, and I accept that damage must mean physical damage. But the general intention behind Clause 65.3 (and Clause 20.3) is to protect the Contractor from the occurrence of the special risks, which would otherwise certainly affect the Contractor's price and might result in international contractors being unwilling to tender. In interpreting the meaning of destruction, regard must be had to the scope of the Employer's risks as defined in Clause 20.4. In sub-paragraph (a) of that Clause, there are grouped together war, hostilities (whether war be declared or not), invasion and act of foreign enemies. Civil war falls within the risks in sub-paragraph (b). If "destruction" were limited to physical destruction, there would appear to be no point in including "invasion" and "act of foreign enemies" as special risks. Furthermore, an indication that "destruction" within Clause 65.3 may include a total loss caused otherwise than by physical destruction is provided by Clause 54.2, which provides:

The Employer shall not at any time be liable, save as mentioned in Clauses 20 and 65, for the loss of or damage to any of the said Contractor's Equipment Temporary Works or materials.

Since the only term of this contract which places Contractor's Equipment at the risk of the Employer in the event of war, hostilities invasion and so on is Clause 65.3, it seems to me that the language of Clause 54.2 is not consistent with [Defendant's counsel]'s construction of "destruction" in Clause 65.3. While I confess to having found this point most difficult, I have decided that [Claimant counsel]'s arguments prevail. Subject to the remaining issues going to liability and to quantum, I propose, therefore, to allow the Claimants' claim for the Loss of Contractor's Equipment under Clause 65.3.'