'59. … the Tribunal concludes for the purposes of this summary application that [Respondent] may be entitled to set off amounts which it claims from [the First Claimant] against the amounts of unpaid certified sums due to [the First Claimant]. As detailed above, the latter amount of unpaid certified sums is equal to approximately $ 1.26 million. Against this, [Respondent] has asserted claims for delay damages in a principal amount of $ 1,460,000.

60. The Claimant asserts that the Respondent has no right to set-off as a matter of law. Reliance is placed on a number of provisions of the Contract which, it is argued, determine that the agreement between the parties is a "pay and then fight" contract and that any rights of set-off are effectively excluded. The relevance of these contentions is that, if they are valid, [Respondent] cannot now (or possibly ever1) set off its asserted claim of US$ 1,460,000 for liquidated damages for delay.

61. It is accepted by both parties that English law is the proper or substantive law of the Contract. It is a well-established principle of English law that rights of common law and equitable set-off are not excluded in the absence of a clear contractual intention otherwise. This principle was confirmed in the case of Gilbert-Ash (Northern) Ltd v. Modern Engineering (Bristol) Ltd [1974] AC 689, in particular in the judgments of Lords Diplock and Salmon and Viscount Dilhorne. For instance, Lord Diplock stated at page 718D:

So when one is concerned with a building contract one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by operation of law, including the remedy of setting up a breach of warranty in diminution or extinction of the price of material supplied or work executed under the contract. To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of breaches of that particular contract.

62. Although the Claimant submitted orally that this enunciated principle did not form part of the ratio of the Gilbert-Ash decision, it certainly formed part of the reasoning of at least three of the five judges' decisions. The Tribunal, on any count, considers and accepts that this is and remains a principle of English law relating to the construction of contracts.

63. The Tribunal also concludes that the principles enunciated in Gilbert-Ash are particularly appropriate for application in an international construction contract of the present sort, where parties from different nationalities operate under a contract in a foreign language. In such circumstances, the Tribunal would be most reluctant to conclude that a party accepts the exclusion or extinction of rights of set-off - which could involve very substantial sums - based on anything other than obvious and precise language, putting the parties on clear notice that such an extinction would occur.

64. The Claimant relies on a number of different provisions of the Contract as assertedly excluding any right of set-off by the Respondent. These are found in particular in Article 2.5, 14.6, 14.7, 20.4 and 20.6 of the General Conditions. For the reasons detailed below, the Tribunal concludes that for purposes of this summary application none of these provisions has been shown to satisfy the Gilbert-Ash standard.

65. The relevant parts of Article 2.5 of the General Conditions state:

If the Employer considers himself to be entitled to any extension of the Defects Notification Period and/or any payment under any Clause of these Conditions or otherwise in connection with the Contract, the Employer or the Engineer shall give notice and particulars to the Contractor…

The notice shall be given as soon as practicable. A notice relating to any extension shall be given before the expiry of the relevant Defects Notification Period. Other notices and particulars may be given before or after the Performance Certificate has been issued.

If the Clause or other basis of the claim is stated in these particulars and they include substantiation of the extension and/or amount to which the Employer considers himself to be entitled in connection with the Contract, then the Engineer shall proceed in accordance with sub-clause 3.5.

[Determinations] to agree or determine (i) the extension of the Defects Notification Period in accordance with Sub-Clause 11.3 [Extension of Defects Notification Period], and/or (ii) the amount to which the Employer is entitled to be paid by the Contractor; if any.

This amount may be included as a deduction in the Contract Price and Payment Certificates. The Employer shall indemnify and hold the Contractor harmless from and against all consequences of the deduction of an amount to which the Employer was not entitled.

66. There is nothing in Article 2.5 which clearly or obviously excludes the Employer's common law or equitable rights of set-off. Although the giving of the Employer's Engineer's "notice and particulars" is mandatory ("shall"), breach of that condition would attract damages (which may, conceivably, be more than nominal). If set­off rights were being excluded, one would expect to see some words of sanction such as: "unless the Employer complies with this clause, it shall have no right to deduct or set-off..." No such provision exists.

67. The Claimant also relies on Article 14.6 of the General Conditions, which deals with the issue by the Engineer of Interim Payment Certificates. It permits, but does not require, the Engineer to adjust what would otherwise be certified to reflect defects and other contractual failures to perform. Again, Article 14.6 does not, expressly or at all, purport to exclude the Employer's rights of set-off.

68. The Claimant next relies on Article 14.7 of the General Conditions, which provides that the Employer is required to "pay to the Contractor ... (b) the amount certified in the Final Payment Certificate within 56 days after the Engineer receives the [Clause 14.3] Statement and Supporting documents..." Although there are no express words permitting any set-off, equally there are no words excluding any set-off. Absent such an exclusion, the test of Gilbert-Ash is not satisfied and there is no basis for concluding that the parties meant to exclude common law set-off rights.

69. The Claimant also argues that the Respondent cannot raise in defence to its request for an interim award (or apparently otherwise in this arbitration), as a set-off, counterclaims which have not been referred by the Employer to the Engineer pursuant to Article 2.5 and pursued through the DAB process set forth in Article 20. The Claimant has failed to show for purposes of this summary application that the language of Articles 20.4 and 20.6, or the other provisions of Article 20, exclude a right of set-off, either expressly or otherwise.

70. Article 20.4 contemplates a process by which disputes will be submitted to the DAB, although Article 20.4 does not put the burden of referring disputes on either one party or the other. Article 20.4 also does not provide that a party waives or forfeits claims or defences which are not submitted to the DAB or that set-off rights based upon such non-submitted claims or defences may not be asserted in arbitration.

71. Similarly, Article 20.6 also provides for the settlement of disputes by arbitration, without placing the burden for submitting disputes or claims on either party and without making any relevant reference to the substantive nature of the claims which may be asserted in arbitration.2 Again, like Article 20.4, nothing in Article 20.6 provides that a party forfeits its claims, defences or set-off rights by not first submitting them to the DAB nor that it is forbidden from asserting such claims as a set-off in an arbitration. On the contrary, Article 20.6 provides that "neither party shall be limited in the proceedings before the arbitrators to the evidence or [arguments] previously put before the [DAB] to obtain its decision".

72. As contemplated by Gilbert-Ash, clear and obvious language is required to exclude a right of set-off. Nothing in the Contract contains express language to this effect. The most that the Contract contains is a dispute resolution structure which might arguably impliedly provide for the extinction or forfeiture of set-off rights (and related claims or defences) as a sanction for failing to assert such rights or claims pursuant to the contractual dispute resolution structure. The Tribunal is not willing, for purposes of this summary application, to conclude that the Contract's dispute resolution structure satisfies the Gilbert-Ash standard.3

73. Thus, since set-off rights are not excluded by the terms of the Contract, since set-off is a defence and since there is nothing in the Contract which clearly or obviously prevents a defendant in arbitration from raising any arguably valid defence, the Tribunal concludes that [Respondent] is permitted to raise by way of set­off its alleged entitlement to liquidated damages for delay. As noted above, the principal amount of [Respondent]'s alleged entitlement pursuant to its set-off is approximately $ 1,460,000, which exceeds the principal amount of [the First Claimant]'s claim for unpaid certified payments (of approximately $ 1.27 million

………

76. For the foregoing reasons, the Tribunal concludes that the Claimant is not entitled to an interim or provisional award of any of the amounts it has claimed, including any amounts relating to the unpaid certified sums. As detailed above, the Claimant has not demonstrated in these summary proceedings that the Respondent would not be entitled to set off its claims for delay damages against claims by the Claimant, and such set-off would exceed the principal amount claimed by the Claimant. Further, the Claimant has not established for present purposes any right to particular interest payments, much less to interest payments which would exceed the amounts of interest which the Respondent might be entitled to on the principal amount of its set-off claim. Accordingly, despite the Respondent's acknowledgement that certain amounts (approximately $ 1.27 million) are owed to the Claimant, there is no basis for awarding such amounts, or any amounts, to the Claimant on a summary basis.'

1
The Claimant acknowledged at the … hearing that the logic of its position was that the Contract's provisions excluded any right of set-off at all - not merely a right of set-off against the Claimant's request for an interim award. …

2
Article 20.6 refers to the scope of arbitrable disputes as "any dispute in respect of which the DAB's decision (if any) has not become final and binding". This does not require that a claim asserted as a set-off first be submitted to the DAB. It merely indicates that if a DAB decision does become final and binding, then the dispute might not be subject to arbitration. By its express terms (i.e., the reference to a DAB decision "if any"), Article 20.6 encompasses "disputes" - and therefore claims - as to which no DAB decisions has [sic] been made.

3
The Claimant is free to argue in greater detail in subsequent phases of this arbitration, addressing the merits of the parties' claims, that the Contract satisfies the Gilbert-Ash standard. For purposes of this summary application, however, the Claimant has failed to demonstrate that the standard is satisfied.