In order to build a sport's stadium, a Caribbean State engaged the services of the Respondent/Employer, a Caribbean company, which, in turn, entered into a construction contract with the Claimant/Contractor, also a Caribbean company, which the Respondent/Employer terminated on account of the Claimant/Contractor's alleged default. The Claimant/Contractor initiated arbitration proceedings, claiming the termination of the contract was wrongful, and sought damages for, among other things, sums allegedly due and owing under the contract and the value of alleged variations.

FIDIC Red Book, Fourth Edition (1987). Clauses 1, 39 and 63.

Identity and designation of Engineer

'157. At the outset, the parties disagree over the fundamental issue of the identity of the Engineer required by the FIDIC Conditions and over the requirements of the FIDIC Conditions for the appointment and conduct of the Engineer.

158. The Employer and the Contractor never explicitly agreed on the identity of the Engineer as contemplated by the FIDIC Conditions. The Employer never filled in the name of the Engineer under Clause 1.1 of Part II of the FIDIC Conditions, thereby leading to the dispute over the Engineer's identity.

159. At the first site meeting of August 14, 1997, [Employer] is expressly reported as appointing itself as Engineer. . . . [Employer] delegated [Primary Consultant] as its representative to act on its behalf. . . . In the first Quarterly Progress Report submitted in October 1997, however, [Primary Consultant] reported that [A senior] was the Engineer. . . . [A senior], the Project Manager, was apparently delegated the responsibility of signing the Engineer's certifications for payment, which he did on all but one occasion before August 1998. As the last witness in the case-long after the fact-[A junior] testified that [A senior] was empowered at times to sign payment certificates as the Engineer, but otherwise, he was never the Engineer. Before August 7, 1998, apparently because [A senior] signed payment certificates as Engineer, [Contractor] appeared to think of him as the Engineer.

160. Apparently in response to letters from [Contractor] complaining about the lack of a clear designation of the Engineer, and wishing to remove [A senior] from the project, by letter of August 7, 1998, [Employer] purported to expressly designate [B], the Project Manager of [Primary Consultant], as Engineer for certain important (but limited) purposes: (1) certifying payments to the contractor, (2) determining the value of variations, (3) determining the cost of construction, and (4) determining the Contractor's rates. . . . But the same letter purports to designate [C] to replace [A senior] as Project Manager with the authority to vary the decisions of the "consultants", except for certifying payments. According to the letter, the Employer . . . also maintained the authority to instruct the Contractor. This ultimate authority of [Employer] should be noted.

161. Thereafter, [B] signed certificates of valuation of the works "For and on behalf of the Engineer", which was identified at times as [A] Construction Group Limited and at other times as [Employer]. [D], [Employer]'s expert on the FIDIC Conditions, testified that the [Employer] letter of August 7, 1998, was ambiguous in its appointment of the Engineer. It was apparently ambiguous also in its reference to [C]'s authority since [A junior] testified [C] was given authority to vary decisions of the "consultants", but not the Engineer, while [E], the site engineer for [Primary Consultant], testified she understood [C] could vary the Engineer's decisions. It should be noted that the letter says [C] could vary decisions of the consultants, but not payment certifications. Of course, only the Engineer could certify payments. The implication is that [C] could vary the Engineer's decisions except for payment certifications. On certain occasions, [C]'s decisions appeared to vary decisions of [Primary Consultant].

162. In these circumstances, which are wholly the responsibility of the Employer, it is not surprising that there was considerable confusion as to the identity of the Engineer. In various letters, [Contractor] brought this matter to the attention of [Employer] and sought a clear appointment of an engineer.

163. I find that the Engineer for the entire term of the project was [Employer], the Employer itself. This was true before August 7, 1998, because [Employer] was expressly designated as the Engineer at the first site meeting. Even thereafter, [B] signed all payments certificates "For and on Behalf of the Engineer", designated usually as [Employer]. Also, although [B] was purportedly designated as Engineer by [Employer]'s letter of August 7, 1998, he was designated Engineer only for certain limited purposes. For all other purposes, it must be assumed that [Employer] retained the position of Engineer as stated at the first site meeting and as indicated by [Employer]'s express retention in the letter of August 7, 1998, of the power to instruct the Contractor. I find that the letter of August 7, 1998, referred to by [Employer]'s own expert as ambiguous in its appointment of the Engineer, was intended to delegate certain functions of the Engineer to [B], but with [Employer] retaining the role of Engineer.

164. [Contractor] was entitled to a clear appointment of an engineer by [Employer]. Moreover, the FIDIC Conditions require an impartial engineer approved by both the Employer and the Contractor. FIDIC Conditions Clause 2.6. The decisions of an impartial engineer would be conclusive on the parties. Testimony of [E]. Although the decisions of the Engineer are always subject to review by a court or arbitrator, the decision of an impartial engineer should be entitled to some degree of deference and special weight by a court or arbitrator. [E].

165. The FIDIC Conditions require the Engineer to be impartial in making his decisions. While the FIDIC Conditions do not expressly say the engineer must be independent, an independent engineer is clearly preferable because impartiality is then more transparent. See Nael G. Bunni, The FIDIC Form of Contract: The Fourth Edition of the Red Book at 73, 80 (2d ed. Blackwell 1997). There are different levels of independence. At the lowest level, when a government, employer or owner appoints itself or its own employee as engineer, there is no independence, and impartiality is unlikely.

166. [Employer], as the Employer, certainly cannot be considered as independent or impartial. An Employer with an obligation to pay the Contractor upon reaching certain milestones-and the right not to pay if performance is not achieved-has a conflict of interest in also being the party in making payment and performance decisions if those decisions are required to be made impartially, which implies some independence, as provided by the FIDIC Conditions. In this case, the Engineer was clearly not independent or impartial. [A senior], who was the Engineer's delegate, at times, at least for the purpose of signing payment certificates, was the father of [A junior], a principal of [Employer], the Employer. [A junior] was very actively involved in the Project. Because of the father-son relationship, [A senior] cannot be considered "independent" of [Employer] or impartial. Although there were times when [B] attempted to act independently of the Employer, at other times he appears to have merely accepted the Employer's "suggestions" without critical analysis, as he did, for example, with the suggestion to provide [Employer] with a credit against scheduled payments to [Contractor]. . . . This inconsistent conduct by [B] is consistent with the confusion over the identity of the Engineer.

167. In this case, it was not the Engineer ([Employer]) who issued the certificate of failure by [Contractor] to carry out instructions, which led to termination, but its delegate, [B]. [B] issued payment certificates expressly "for and on behalf of the Engineer". The acts of [B], [Primary Consultant] or [A senior], as delegates of the Engineer, must be deemed to be acts of the Engineer, [Employer]. The Engineer's conflict of interest in also being the Employer prevents it from claiming it acted impartially by delegating its responsibility to a third party. The Employer who also acts as Engineer cannot hide behind its delegate to claim impartiality. This is especially true here since certain of [B]'s decisions appear to consist of a relatively uncritical acceptance of [Employer]'s "suggestions".

168. If this situation is accepted by the Contractor, as it was grudgingly and reluctantly here (despite its questioning of the situation) by the Contractor continuing to work, then the Employer is accepted as the Engineer. Testimony of [D]. A Contract governed by the FIDIC Conditions is unworkable without an Engineer, and it cannot be accepted that the parties moved forward with performance of the Contract without any way in which the Contractor could be terminated for cause, if necessary. [D]. The acceptance of the Employer as Engineer and its delegates is imperfect under the facts of this case, but necessary for the functioning of the Contract and project. [B] was entitled to issue a certificate of non-performance by [Contractor] upon which [Employer] could rely to terminate the Contractor because [Contractor] impliedly accepted [Employer] as the Engineer and [B] as the Engineer's delegate (however grudgingly and however ambiguous the appointment) by continuing to work.

169. This means that the mere issuance of the certificate by the Engineer's delegate and reliance upon it by the Employer in terminating the Contractor under these circumstances were not breaches of contract simply by virtue of who issued the certificate.

170. But this does not end the inquiry. The Arbitrator must undertake an independent, de novo review of the facts, without giving any deference to the Engineer's (or its delegates') decisions, to determine if the Engineer's decisions were substantively correct and if the decisions damaged [Contractor].'

Contract termination

'171. I find that [Employer]'s reasons for termination of the Contract were not substantively correct and the Contract was not properly terminated.

172. [Employer] purported to terminate [Contractor] for failure to comply with the instructions of [B], the Engineer's delegate, under Clause 39.1 of the FIDIC Conditions (1) to remove and relay the sewer lines between Manholes 5 and 10 and pass the [water authority]'s tests, and (2) to remove and reconstruct the athletic track and kerbs. According to [B]'s letters, both were to be done within 28 days at [Contractor]'s cost. . . .

173. On October 28, 1999, [Employer] wrote to [B] asking him if [Contractor] had complied with the instructions in [B]'s letters of September 27 and 30 and whether [Contractor] could complete the project on schedule. . . .

174. In reply to [Employer]'s letter, on October 28, 1999, [B] certified that [Contractor] failed to comply with both instructions. He also referred to the need for alternate arrangements to complete the Contract. . . .

175. To properly understand this letter, one must look to [B]'s testimony. [B] testified that in this letter he did not recommend termination of [Contractor]'s contract. . . . Further, [B] testified, "I didn't terminate the contract. I would not have felt that there was a reason for those two items to terminate the contract". . . .

176. On October 29, 1999, [Employer] gave notice of its intention to terminate the contract as of November 12, 1999. . . .

177. But also on October 29, 1999, [Employer] obtained an injunction from a court in [State X], and pursuant to that court order, ejected [Contractor]'s personnel from the site and seized its equipment and papers. . . .

178. By letter of November 15, 1999, [Employer] purported to terminate the Contract. . . .

179. Both [A junior] and [B] were concerned about meeting the completion date with the government in March 2000 so the [event] could be held at the Stadium as scheduled. This was a perfectly appropriate concern.

180. It must be remembered that [B] was the Engineer's delegate, not the Engineer. If [B] were the Engineer, as testified by [A junior], he would have been the Engineer for the limited purposes only expressly stated in [Employer]'s letter of August 7, 1998. The letter of August 7, 1998, does not purport to designate [B] as the Engineer for the purpose of giving instructions under Clause 39.1 or certifying noncompliance with such instructions under Clause 63.1 of the FIDIC Conditions. Thus, [B] was not empowered as Engineer to make such decisions or take such actions. As the supervisor on the project for [Primary Consultant], the delegate of the Engineer ([Employer]), as shown by the minutes of the first site meeting, however, he was so empowered.

181. Clause 63.1(e) of the FIDIC Conditions requires that "the Employer may, after giving 14 days' notice to the Contractor, enter upon the Site and the Works and terminate the employment of the Contractor . . ." [Employer] gave a 14-day notice of its intent to terminate the Contract (dated October 29, delivered on November 1, and terminated on November 15), but it did not wait 14 days to enter the premises. [Employer] obtained an injunction on the date of its notice, ejected [Contractor] from the site the same day, and seized [Contractor]'s equipment and records for its use.

182. I find that the failure to wait 14 days to take possession was a violation by [Employer] of Clause 63.1(e).

183. In determining whether the termination was substantively proper, it must be kept in mind that [B] did not recommend termination and did not believe that the two items that were the subject of his September 1999 instructions justified termination. . . . I do not find that the termination was proper.'