An Italian Claimant/Contractor entered into contracts with a public authority in an African State (the Respondent/Employer) for the construction of roads in that State. A German engineer was appointed for the work. The Claimant/Contractor brought an arbitration for damages for matters for which it alleged the Respondent/Employer was responsible.

FIDIC Red Book, Fourth Edition (1987). Clauses 11 and 67.

Interim Award

In an initial interim award, the arbitral tribunal ruled on the Claimant/Contractor's request for immediate enforcement of certain decisions of the Engineer under Clause 67, which had been the subject of a timely notice of intention to commence arbitration under that same Clause by the Claimant/Contractor.

'4. On 11 August 1999, pursuant to Article 67 of the FIDIC Conditions, the Claimant filed a Request for Arbitration with the International Court of Arbitration of the International Chamber of Commerce in which it raised a number of complaints based upon alleged

a) Delay and disruption arising from the design and other associated causes,

b) Respondent's failure to grant the Claimant with possession of site,

c) Exceptionally adverse weather conditions,

d) Other delaying and disruptive events,

e) Respondent's failure to give effect to Engineer's decision pursuant to sub-clause 67.1 of the contracts,

f) Respondent's failure to provide funding for the contracts,

g) Breaches of contract and of law.

On that basis, the Claimant requested the Arbitral Tribunal to condemn the Respondent to indemnify it in the total amount of . . . as damages plus interest and arbitration costs.

. . . . . . . . .

6. By letter of 11 February 2000, the Claimant declared its "intention to request the Arbitral Tribunal to render an interim Award . . . to the effect of: (i) declaring that the Respondent must give effect to the Engineer's Decision pursuant to sub-clause 67.1 [of the FIDIC Conditions] regardless of the pending arbitration, and (ii) ordering the Respondent to immediately pay the amounts determined by the Engineer as an advance payment in respect of any further payment which would result [sic] due by the Respondent pursuant to the final award".

The Engineer's decisions are those described at para. 5.5 of the Request for Arbitration and 1.3 of the Terms of Reference. The decisions at stake amount to, in respect of money, . . . for Contract No. 1 and . . . for Contract No. 2; in respect of time extension, the Engineer is also said to have granted the Claimant 315.5 days for Contract No. 1 and 132 days for Contract No. 2.

7. The parties and the Arbitral Tribunal in the minutes of their meeting in Paris on 17 May 2000 agreed upon a provisional calendar of the procedure, which was later amended by agreement of the parties and/or Procedural Order No. 1 which although not expressly dated was made on 11 October 2000.

The Claimant filed its Statement of Claim on 28 July 2000. As directed by the Arbitral Tribunal, the Claimant dealt with the issue of its Request for Interim Award in specific chapters of this statement . . .

On 14 November 2000, the Respondent filed Respondent's Memorial concerning Claimant's Application for an Interim Award. On 24 November 2000, it filed its memorial against the merits of the Claimant's claim as a whole.

. . . . . . . . .

B. Parties' contentions

The Claimant

14. In essence, the Claimant's claim is grounded on the provisions of Article 67.1 of the FIDIC conditions relating to the powers of the Engineer to decide on a provisional basis on applications made to him by one party. Such decisions are binding, the Claimant argues, on both parties and shall have effect as soon as they are made notwithstanding any notice of dissatisfaction and/or application or Request for Arbitration, and they must remain effective for as long as that they are not reviewed or cancelled by an out of court settlement or by an arbitral award. They may even be final and not subject to any further revision or setting aside if they have not been challenged by any of the parties within the time limit prescribed therefor by Art 67.1.

15. The relevant decisions of the Engineer in this case were four in number. In the first two, dated 17 November I998, the Engineer dealt with two applications of the Claimant for time extension and additional payment for the period of the works up to 31 May 1997, after the Claimant had formally requested decisions under the provisions of Article 67.1 by letters of 18 October 1998. According to these decisions, the Contractor was specifically granted the sums of . . .

In the meantime, the Contractor had presented two further submissions on 9 September 1998, also for time extension and additional payment, in reality updating the preceding ones until 30 June 1998.This time, the Engineer specifically granted to the Contractor by decisions of 5 May 1999 the sums of . . ., which sums included the ones granted on 17 November 1998. The Contractor had formally requested a decision pursuant to Article 67.1 by letters of 29 January 1999.

16. Neither of the above decisions has been executed by the Employer which the Claimant contends is therefore in breach of the Contracts. Because the Engineer's decisions are said to be binding on both parties at least on a provisional basis, the Claimant considers that this Tribunal should give them immediate effect by the means of an interim award, without waiting until the time when after a complete review of the factual and legal evidence the Tribunal could adjudicate in full on the merits of the dispute.

The Claimant also relies on the provisions of Article 23 of the ICC Rules relating to the power of an Arbitral Tribunal to order conservatory and interim measures and to the rules of French New Code of Civil Procedure on the subject of référé provision.

Accordingly, the Claimant's relief sought is for this Tribunal to order [Respondent] to provisionally pay the sums recognized due by the Engineer, plus accrued interest at the annual rate of 7%, pending the final judgement of the Tribunal on the merit [sic] of the respective arguments of the parties on the whole of the dispute.

In the Claimant's opinion, the sums due to it as expressed in [local currency] in the above decisions, after conversion into US$ at the contractual rate of . . ., amount to US$ . . ., and interest amount to US$ . . ., i.e. a total figure of US$ . . . as of 30 November 2000. The same interest rate should apply, it is submitted, from this date until the date of complete payment.

The Respondent

17. For the Respondent, the Claimant's request for interim relief is not justified under any of the conditions under which such decision may be legally taken; there is in effect, it submits, no evidence of urgency or of a risk of irreparable harm for the Claimant which should be a necessary condition for any interim or conservatory measure. In particular, if the Arbitral Tribunal were finally to adjudicate in favour of the Claimant, in any event the latter would be adequately compensated by an allocation of interest in addition to the principal amounts granted to it in a final award and in the meantime, there is no evidence that the Claimant would suffer from financial inconveniences arising out of any Employer's failure to pay at this stage.

Furthermore, the Respondent stresses that the Claimant has not prima facie established its case. On the first hand, the provisions of Article 67.1 of the FIDIC conditions relating to the binding character of the decisions of an Engineer aim only at preventing disruption of works pending the final resolution of disputes between the parties so that they cannot apply in the instant case because the relevant decisions were made after the completion of the works. Moreover, if any of the parties has expressed its disagreement with such decisions-and this has occurred from both parties, then the decisions are deprived of their binding character.

On the other hand, the decisions at stake are subject to criticism in several format aspects:

a) Those made on 5 May 1999 were late as taken after the expiration of the time prescribed by Article 67.1;

b) The sums granted by the Engineer were expressed in [local] currency, so that the Claimant may not rely thereupon for its claim in US$;

c) The decisions cannot be held self-executory because the Engineer wrote that they were subject to the Employer's prior approval, and no payment could be made in the absence of certificates of payment for which the prior approval of the Employer was also required.

Therefore, the Respondent requests the Arbitral Tribunal to dismiss the Claimant's application for an interim award.

C. The reasons for this interim award

18. It seems first worth recalling the system of Article 67.1 of the FIDIC Conditions.

First, in case of dispute "between the Employer and the Contractor, in connection with, or arising out of the Contract . . . whether during the execution of the works or after their completion . . . including any dispute as to any opinion, instruction, determination, certificate or evaluation 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. Such reference shall state that it is made pursuant to this Clause". Then the Engineer shall notify the parties its decision within 84 days after such application, also with express reference to this clause.

If for any reason the Engineer fails to notify its decision within the above time limit, then within a further period of 70 days either party may notify its intention to commence arbitration as to the matter in dispute.

If, however, as is ordinarily the case, the Engineer notifies its decision within 84 days, then either party may, also within a time limit of 70 days, address a notice of its intention to challenge the decision by way of arbitration, to the Engineer and the other party, failing which the decision shall become final and binding on both parties and cannot be revoked in arbitration; but, according to Article 67.4 failure by any party to comply therewith would result in a breach of contract and a claim filed in this circumstance would become admissible.

If, however, either party places a notice of dissatisfaction within the 70 day period, then the Engineer's decision is not final; nevertheless, it is binding on both parties which shall forthwith comply with it, as stated in the second paragraph of Article 67.1 whereby "the Contractor and the Employer shall give effect forthwith to every such decision of the Engineer unless and until the same shall be revised, as hereinafter provided, in an amicable settlement or an arbitral award".

19. On the face of the above provisions, it is of primary importance to determine whether the Engineer's decisions in dispute were made timeously, and notices of dissatisfaction properly given. Thereafter, the Arbitral Tribunal shall determine whether and to what extent there is room for an interim award on the merits of the Claimant's application and finally it shall give its opinion as to the content and effects of the relevant decisions of the Engineer.

20. According to the Respondent, the Engineer's decisions of 5 May 1999 were made more than 84 days after the Claimant's request for decisions pursuant to Article 67.1 and therefore they cannot bind the parties.

This argument is accepted for the purposes of the present decision. In effect, since the relevant Claimant's request was dated 29 January 1999, the Engineer should have decided thereupon not later than 23 April 1999 and the Claimant urged it precisely to comply with this requisite by letter of 21 April 1999.

It is true, however, that by letter of 29 April 1999 the Engineer took the position that because the parties were at that time in negotiation for a tentative settlement of their difference, it could defer its decisions until 5 May 1999. But in the absence of any evidence at this stage that both parties had, whether in express terms or impliedly, agreed for the Engineer not to stick to the time condition of Article 67.1, it is this Tribunal's opinion that the Engineer had no authority to depart from a rule which remained binding on the parties.

Accordingly, the Claimant's request for an interim award must fail in this respect.

21. Since, however, the 5 May decisions are held ineffective for the purposes of the present decision, those of 17 November 1998 survive. They were in fact timely made, i.e. before the expiration of the 84 days period after the Claimant's application pursuant to Article 67.1 on 18 October 1998.

The Claimant filed its notice of dissatisfaction within the next 70 days (25 January 1999) and the Employer even if not in the formal terms prescribed by Article 67.1 expressed its disagreement by its so called "Stand" of January 1999.

Therefore, the decisions of 17 November 1998 must be considered as capable of producing immediate legal effect on the parties for as long they are not revised or set aside by the parties in an out of court settlement or by an arbitral award. It does not matter whether they were notified after or before the completion of the works: in both cases, Article 67.1 states that its provision shall apply.

22. The question now arises as to whether and on what legal basis this Tribunal may adjudicate the present dispute by an interim award.

This point can be easily exhausted. If the above Engineer's decisions have an immediate binding effect on the parties so that the mere fact that any party does not comply with them forthwith is deemed a breach of contract, notwithstanding the possibility that at the end they may be revised or set aside in arbitration or by a further agreement to the contrary, there is no reason why in the face of such a breach the Arbitral Tribunal should refrain from an immediate judgment giving the Engineer's decisions their full force and effect. This simply is the law of the contract.

In this respect, this Tribunal wishes to emphasize that neither the provisions of Article 23 of the ICC Rules, nor the rules of the French NCPC relating to the référé provision are relevant. For one thing, the judgement to be hereby made is not one of a conservatory or interim measure, stricto sensu, but rather one giving full immediate effect to a right that a party enjoys without discussion on the basis of the Contract and which the parties have agreed shall extend at least until the end of the arbitration. For the second thing, the will of the parties shall prevail over any consideration of urgency or irreparable harm or fumus boni juris which are among the basics of the French référé provision.

23. That being so, the Arbitral Tribunal is inclined to stick to the Engineer's decisions of 17 November 1998, subject to the following considerations.

Each decision ends by the following terms: "The Engineer determines that the interim net quantum of financial relief due to be paid to the Contractor in addition to work valued at Contract rates is . . . By copy of this letter the Employer is requested to give his specific approval (in terms of Sub-Clause 2.1(b) of the Conditions of Contract, Part II) for the Engineer to certify such additional cost for payment." On the basis of this particular wording, the Respondent submits that the Engineer's decisions were conditional upon the Employer's approval and they are not binding since such approval was not obtained.

This argument must be rejected for at least two reasons. First, the Engineer wrongly believed that decisions of that sort were subject to the particular conditions of sub-clause 2.1(b) of Part II of the FIDIC Conditions of Contract. In reality decisions taken pursuant to Article 67.1 are not among those for which the Engineer must obtain specific prior approval of the Employer. Moreover, even if issuance of certificates of payment by the Engineer may require approval of the Employer, this condition affects only the validity of such certificates but certainly not that of the relevant decision itself; and, in the case where the Employer although bound to give immediate effect to that decision refrains to do so simply by refusing to approve a certificate of payment, this will obviously result in a breach of its contractual duties justifying a claim from the Contractor. Finally, one could not give any positive effect to a phrase which is inconsistent with the meaning of the decision which is clear and unequivocal.

24. This is not a reason, however, for granting the Claimant the amounts claimed as expressed in US$ plus interest. The Tribunal cannot do any more than to give legal force and effect to the relevant decisions as they are.

The total compensation owing to the Claimant according to the two decisions of 17 November 1998 amounts to [sum in local currency]. There is no reason here to depart from the parties' agreement concerning the currency of payment pursuant to Part B of each Contract, Appendix to Bid. Failing any other indication in the decisions, the payment of the above amount shall be ordered 17.6% in [local] currency and 82.4% in US$, at the contractual fixed rate of . . .

25. Nor is the Arbitral Tribunal prepared at this early stage of the arbitration to grant interest on the above sum. Not only the Engineer said nothing in this regard, but also the Tribunal thinks that more information would be needed in the context of this dispute before deciding this issue.

26. The Arbitral Tribunal considers it appropriate to state that no question was raised in this application for an interim award about the Engineer's decisions as to extension of time.

27. Finally, whereas according to Article 67.1 of the FIDIC Conditions, the Engineer's decisions shall have an immediate binding effect, the Arbitral Tribunal holds that provisional enforcement of this award must be ordered.

The Award

Therefore, on the basis of the foregoing, the Arbitral Tribunal decides as follows:

The Respondent . . . shall pay to the Claimant . . . immediately upon notification of the present award the sums of [local currency] . . . [US dollars] . . .

The issue of interest and that of a compensation for the parties' legal expenses as well as the decision on the costs and fees of this part of the arbitration are reserved.

Provisional enforcement of this award is ordered.

The rights of the parties as to the merits of their case, including but not limited to the final and binding effect of the Engineer's decisions are reserved until the final Award of this Tribunal.'

Final Award

In the final award in ICC Case No. 10619, the Arbitral Tribunal examined, among other things:

whether the Respondent/Employer could rely on a notice of intention to commence arbitration of the Claimant/Contractor in order to be entitled to request an arbitral tribunal to review and revise decisions of the Engineer under Clause 67; and

whether the Claimant/Contractor could justifiably rely on data as to the local resources for materials provided by the Respondent/Employer during the tender period, for purposes of Clause 11.

Entitlement to rely on other party's notice of intention to commence arbitration

'17. The Respondent does not dispute any more that [Claimant] was entitled to additional time as granted by the Engineer . . . Consistently therewith, he requests only that any decisions of the Engineer awarding sums to Claimant be reversed . . .

Under Clause 67.1 of the Conditions of Contract any dispute arising between the Employer and the Contractor shall have first to be referred in writing to the Engineer, with a copy to the Employer.

This is what the Claimant had done by letters of 18 October 1998, leading to the Engineer's decisions of 17 November 1998, and by letters of 9 September 1998, leading to the Engineer's decisions of 5 May 1999.

The Claimant, being dissatisfied with both the time extensions and the amount of money granted to him by the Engineer has notified the Employer and the Engineer, within the prescribed time limit, of his intention to commence arbitration and filed on 11 August 1999 the Request for Arbitration initiating this proceedings.

The only question which deserves consideration at this stage is whether the Respondent, who has not objected within the prescribed time limit to the Engineer's decisions and has not stated his intention to commence arbitration to have the same reviewed and revised, may take advantage of the notice made by the Claimant to that effect and request the Arbitral Tribunal to reverse the Engineer's decisions.

18. The answer should be in the affirmative considering that the Claimant has declared his dissatisfaction with the entire content of the Engineer's decisions. Therefore, since notification of intention to commence arbitration has been given within the prescribed time limit by the Contractor, the Engineer's decisions have not become final and binding and "the arbitrator(s) shall have full power to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer related to the dispute" (Sub-clause 67.3). This conclusion is confirmed by Sub-clause 67.3 when the same provides that "neither party shall be limited in the proceeding before the arbitrator(s) to the evidence or arguments put before the Engineer . . .".

On the other hand, the Claimant has never disputed the Respondent's entitlement to challenge the Engineer's decisions.

However, as mentioned above [omitted from this extract], the Respondent has requested that the Engineer's decisions be reversed only insofar as sums have been awarded to the Contractor and not regarding extensions of time which have been granted.'

Contractor's reliance, for purposes of tender, on Material Reports provided by Employer

'73. A first issue to determine in connection with the [alleged design changes] is whether the Contractor justifiably relies on the Materials Reports as a legal basis for his contention.

There is no doubt that the Materials Reports were not contractual in nature. It was said in introduction thereto that they were "not definitive and should be used as a guideline only as to what can be encountered in the projected area. It is also expected that during the construction period additional and differing materials will be encountered from those described therein". In paragraph 2.2., "Pavement materials", it was also said that "the results of the preliminary tests undertaken on these materials indicate that all sites are potential sources for natural gravel wearing course material": "potential" undoubtedly leaves a margin of uncertainty. Furthermore, in the last lines of the minutes of the pre-bid meeting held on 31 March 1994, "the Bidders attention [was] drawn to the fact, that the Materials Report [sic] does not form part of the Contract Documents, and is provided for information only". Undoubtedly that statement should have been an incentive to the bidders to carefully verify by their own means the reliability of the relevant information.

For its part, Article 11 GCC [General Conditions of Contract] requires that "the Employer shall have made available to the Contractor, before the submission by the Contractor of the tender, such data from investigations undertaken relevant to the Works, but the Contractor shall be responsible for his own interpretation thereof". The Tribunal thinks, however, that one cannot expect from a bidder, within the short period of time left for him to prepare his bid, to investigate on matters of local resources of materials over the Employer's findings which are deemed to result from lengthy prior queries in subsoil and are supported by graphs, diagrams, samples and other probatory materials; a bidder is justifiably required to interpret the data made available to him; he is not required to expedite new thorough investigations which the Employer says in good faith to have carefully carried on presumably for months if not years, in the interest of the Works. Interpreting data is one thing; undertaking new investigations in a region plus or minus close to a road of about 180 kms to check whether the required materials exist or not as described in quantity and quality, at the locations identified by the Employer, is not a thing which can reasonably be said to pertain to a bidder.'

The Arbitral Tribunal found that the data provided by the Respondent/Employer was erroneous and misleading and confirmed the decisions of the Engineer granting a time extension and extra costs to the Claimant/Contractor.