'7. General considerations

7.1 Issues and structure of this Final Award

103. Before assessing Claimant's allegations in detail, Claimant's timing and notification in accordance with Art. 67 is disputed by Respondent. The first decision to be made is whether Claimant's claim for [amount] for remuneration for the costs incurred in relation with the design works has been time-barred. This will be addressed in section 8 of this Final Award.

104. Further, the Arbitral Tribunal must decide the question of whether Claimant's additional design work, ordered by the Engineer and performed by Claimant, in the amount of ... is also time-barred according to the timing procedure stated in Article 52. The decision must be made whether the Arbitral Tribunal might grant the Claimant some amount for the additional design. This will be addressed in section 9 of this Final Award.

105. Subsequently, the final claim brought by Claimant for additional remuneration for the costs of the installation of more sophisticated valves will be assessed to determine whether the [replacement] valves were technically superior and were a required technical solution. If this should be the case, a decision must be made by the Arbitral Tribunal to establish whether any cost increase will be granted. This will be addressed in section 10 of this Final Award.

.........

8. Claimant's timing and notification of Claim 1

8.1 Position of the Claimant

107. Claimant, in its respective Submissions, denies Respondent's allegations and in essence argues that Claimant was not authorized to give notification before 23 March 2007 due to the Engineer's questions raised in his letter of 22 January 2007.

108. On 29 October 2006, Claimant submitted a variation proposal to the Engineer and in a return letter on 30 October 2006, the Engineer refused to accept Claimant's proposal. In response to the Engineer's letter and in accordance with Art. 67 of the FIDIC General Conditions of Contract, Claimant notified the Engineer that Claimant was in dispute with the Engineer and called for the Engineer to issue a decision with respect to the existing dispute by letter dated 31 October 2006.

109. By a letter dated 22 January 2007,1 the Engineer objected to the calculation method applied by Claimant in its Variation Proposal claiming the information currently presented by Claimant was insufficient and requested that Claimant should present the Engineer with detailed principles and methods of calculation.

110. Claimant complied and in a letter dated 29 January 2007, Claimant sent to the Engineer an electronic version of the cost estimate which included an increase of items that was submitted together with the Variation Proposal. A calculation error was corrected and Claimant put forward that an item should be subject to change, proportionally increasing or decreasing depending on the amount of work actually measured and accepted by the Engineer.

111. In his letter of 22 March 2007, the Engineer noted that in the new revision of the evaluation of the Variation Proposal, Claimant failed to follow the Engineer's instructions and upheld its position regarding the calculation of the "item" value pro rata to the change of the value of the "item" relevant to the specific work.

112. Claimant interpreted the Engineer's submission as a negative decision regarding the dispute and on 4 April 2007, before the lapse of the 70-day time period from the day of the Engineer's decision, sent a notification of intent to commence arbitration to Respondent.

113. According to Claimant, it was not authorized to give notification before 23 March 2007 since Claimant was expecting the Engineer's decision after resubmitting its Variation Proposal and the Engineer's questions raised it its submission of 22 January 2007. If the Engineer had issued a decision in favor of Claimant's claims, the arbitration proceedings would not have been required and the notification of the intent to commence the arbitration would have been unnecessary. …

114. Claimant argues that the Engineer gave notice regarding the decision, stating that additional information was required and that after receipt of such information the decision would be issued. According to Claimant, the Engineer's letter dated 22 January 2007 should be treated as the Engineer's notification regarding the decision … and no notification to commence the arbitration could be given before 23 March 2007. The beginning of the 70-day time period for giving Notification of Intent to commence arbitration should be considered to start on 23 March 2007 when the Engineer issued his negative decision.

115. Claimant notes that, in accordance with paragraph 3 of Sub-Clause 67.1 of the FIDIC General Conditions of Contract, the Claimant is authorized to give the notification of intent to commence the arbitration only in the situation when the Engineer issued a decision and the Claimant is dissatisfied with it or the Engineer failed to give any notice regarding the decision during the 84-day period. Therefore, the Engineer's submission of 22 January 2007 should be treated as Engineer's notification regarding the decision and no notification of intent to commence the arbitration could be given before the Engineer made a decision …

116. Therefore, when the Engineer in his letter of 22 March 2007 finally refused to issue a decision on the dispute pursuant to Sub-Clause 67.1 of the FIDIC General Conditions of Contract, which should be deemed in essence as a negative decision within the meaning of the Sub-Clause, the time period for notification to commence arbitration of 70 days began. As a result, the notification of the intent to commence arbitration of 4 April 2007 should be deemed as given within the procedural time period.

8.2 Position of the Respondent

117. The Respondent objects to Claimant's assertions and its conclusions.

118. Accordingly, Respondent argues that Claimant failed to submit the notice of intent to arbitrate within the 70-day time period following the expiration of the initial 84-day time period and challenges Claimant's right to have Claim 1 heard in arbitration proceedings on the basis that Claimant did not observe the procedure of notifying its intention to commence arbitration proceedings according to Sub-Clause 67.1 of the FIDIC General Conditions of Contract …

119. In its letter dated 31 October 2006, Claimant invoked Sub-Clause 67.1 of the FIDIC General Conditions of Contract and notified the Engineer about the dispute concerning remuneration due for costs incurred related to the an [sic] increase of Bill of Quantities "item" resulting from an increase of works and materials in the scope of mechanical systems in the amount of ... and petitioned the Engineer for settling the dispute and to issue a decision. The Engineer received the letter on 31 October 2006 …

120. In response, in the letter dated 22 January 2007, the Engineer observed that the Variation Proposal did not contain any information by Claimant as to the calculation method applied by Claimant to confirm the amounts Claimant requested and petitioned for. Due to the calculation deficit and lack of detailed figures, the Engineer requested Claimant to present detailed principles and methods of calculation applicable to each of the quoted "items", taking into account information relevant to the work as contained in technical specification, drawings, and measurement reports, etc.

121. By a letter dated 22 March 2007, the Engineer concluded that he did not receive sufficient information to be able to properly evaluate the claim for the total value of the 226 items of the Bill of Quantities, each of which should have been calculated and presented individually. Nowhere in his letter did the Engineer state, and could not state, that his request for additional information would in any way delay issuance of the decision in the case ...

122. According to Respondent, this should not be interpreted as the issuance of a negative decision by the Engineer, as Claimant has wrongly assumed it to be.

123. Respondent argues that according to the procedure of pre-arbitral proceedings, the 84-day time limit for issuance of a decision by the Engineer, which should be counted from Engineer's receipt of the notice of dispute, expired on 22 January 2007. The Engineer did not issue a decision within this time period ...

124. Therefore, pursuant to Sub-Clause 67.1 of the FIDIC General Conditions of Contract, the 70-day time limit for notifying the Employer of the intention to commence arbitration began from the day when the time limit prescribed for the issuance of the decision by the Engineer expired. Here, the time period began on 22 January 2007 and expired on 3 April 2007.

125. Moreover, not only was the notice of intention to commence arbitration delivered to the Employer after 3 April 2007, but was sent by mail on 5 April 2007 without an alternate method of delivery. Notice was received on 11 April 2007.

126. In Respondent's view, the circumstances presented prove that Claimant did not comply with the procedure of notice of intent to commence arbitration and the claim should be time-barred.

127. Lastly, Respondent notes that Claimant never submitted Claim 1 under Clause 53 of the FIDIC General Conditions of Contract for the payment of [amount] deriving from additional mechanical works aggregated in the "item". The dispute concerns, in fact, the Engineer not taking into consideration the Variation Proposal of 29 October 2006 submitted by Claimant.

128. According to Clause 51 of the FIDIC General Conditions of Contract, the Engineer may introduce the variations he considers appropriate, however, he has no obligation to take into account the variation proposal made by Claimant. Therefore, the Respondent argues that Claimant's claim is premature and ill-founded ...

8.3 Decision on the merits of the issue

8.3.1 The facts

129. On 29 October 2006, Claimant submitted a Variation Proposal to the Engineer for costs incurred related to an increase of Bill of Quantities "item" in the amount of ... In a return letter, on 30 October 2006, the Engineer refused to accept Claimant's proposal.

130. In a letter dated 31 October 2006, Claimant notified the Engineer that it was in dispute with the Engineer concerning the remuneration due. Following the FIDIC General Conditions of Contract, Claimant petitioned the Engineer requesting that he settle the dispute and to issue a decision. The Engineer received the letter on 31 October 2006.

131. In response to the dispute notification, the Engineer informed Claimant, via a letter dated 22 January 2007, thus 83 days after receiving Claimant's notice of dispute, that the Claimant's Variation Proposal did not contain sufficient information as to the calculation method applied by Claimant to confirm the amounts Claimant requested and petitioned for. The Engineer requested Claimant to present detailed methods of calculation applicable to each of the quoted "items".

132. Claimant complied and, in a letter dated 29 January, Claimant provided the Engineer with an electronic version of a corrected calculation of the cost estimate along with the Variation Proposal.

133. By a letter dated 22 March 2007, the Engineer concluded that he did not receive sufficient information to be able to properly evaluate the claim for the total value of the "items" listed in the Variation Proposal.

134. On 4 April 2007, Claimant sent the notification of its intent to commence arbitration to the Respondent. The Respondent received the notification on 11 April 2007.

135. The facts set out in paras. 129 through 134 are not disputed between the Parties.

8.3.2 The issue of timeliness

136. According to Art. 67.1, first sub-paragraph of the FIDIC General Conditions of Contract,

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 …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. No later than the eighty-fourth day after the day on which it received such reference 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.

137. The referral of the dispute to the Engineer was made on 31 October 2006. It stated that it was made pursuant to Clause 67.1 of the FIDIC General Conditions of Contract (see Claimant's submission of 31 October 2006). Calculating from this date, the 84th day was 23 January 2007.

138. Furthermore, Article 67.1, third sub-paragraph states,

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 on which he received the reference then either the Employer or Contractor may, on or before the seventieth day after the day on which he received the 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 the matter in dispute.

139. The structure and meaning of Art. 67.1, third sub-paragraph of FIDIC General Conditions of Contract is very clear:

(i) either the Engineer issues a decision, in which case the dissatisfied Party has for 70 days a right to give notice of his intention to commence arbitration, or

(ii) the Engineer issues no decision during such 84-day period, in which case the 70-day period for filing a notice of intention to commence arbitration begins at the end of the previous 84-day period, in total therefore amounting to 22 weeks after the notice of the dispute has been given.

140. In this case, pursuant to Sub-Clause 67.1 of the FIDIC General Conditions of Contract, the 70-day time limit for notifying the Employer of the intention to commence arbitration began from the day when the time limit prescribed for the issuance of the decision by the Engineer expired. Here, the time period began on 23 January 2007 and expired on 3 April 2007.

141. Articles written by Mr Christopher Seppälä analyze the procedural considerations of Art. 67 of the FIDIC General Conditions of Contract and, more importantly, the effects of the time limits on the Parties.

142. Mr Seppälä notes that according to the procedure prescribed by Clause 67, the Engineer must, within 84 days of a reference, give his written decision to the Employer and the Contractor. If he does so, then the decision is final and binding on the Employer and Contractor, subject only to arbitration. However, if within that time period the Engineer fails to give his decision, then either party may elect to arbitrate the matter by, during the next 70 days beginning on the day after the period of 84 days has expired, "requiring arbitration". If neither Party does so, the right to have the matter arbitrated may be lost.2

143. This view is shared also by other authors. Nael G. Bunni in his commentary to The FIDIC Forms of Contract3 notes that

the dispute must, in the first place, be referred in writing to the engineer for his decision. The words "in the first place" in sub-clause 67.1 show that the contract envisages a number of steps towards resolution of the dispute but dictates that a referral to the engineer is the first step. (…) If the engineer fails to give his decision within the specified time, either party may proceed to the next step in the dispute resolution process, namely by serving of notice of intention to commence arbitration.

144. In the view of Mr. Bunni

there is a strict timescale laid down in sub-clause 67.1 within which the dissatisfied party must notify to the other party (copied to engineer) of his intention to refer the dispute to arbitration. If this deadline is missed, then the engineer's decision becomes final and binding. This means that neither party has recourse to arbitration in respect of the matter decided.4

145. Further, if an Engineer's decision is made more than 84 days after a claimant had requested it pursuant to Sub-Clause 67.1 then, consequently, the parties are not bound by the Engineer's decision.5

146. Furthermore, when the Engineer has failed to give a decision within the required time period, the Employer or the Contractor must take the necessary steps within the next succeeding period if the party wishes to arbitrate. The effect of Clause 67 is that once a dispute has been referred to the Engineer, then, irrespective of whether or not the Engineer gives a decision within the 84 days, if neither party ''requires arbitration'' within the next relevant 70-day period, further legal options with respect to the dispute are foreclosed. In short, the matter will be time-barred.6

147. If neither party calls for arbitration within the requisite time period, then neither party can submit the dispute to arbitration; moreover, neither can submit it to the courts because each is bound by the provisions of a clause which gave it a right to arbitrate the dispute, exercisable within a reasonable time period, which it did not exercise. Thus, Article 67 has rather severe consequences for the party who omits for any reason to act within the specified time limits to secure their rights.7

148. Ultimately, time clauses are considered as part of freedom of contract and there is little basis to criticize tribunals for strictly enforcing time clauses.8

149. During the Evidentiary Hearing ..., [a FIDIC adjudicator and lecturer] was called as an expert on FIDIC General Conditions of Contract by Claimant. He was questioned by the Arbitral Tribunal and testified that the Engineer cannot change the contractual agreement in any way; the contractual agreement is what it is, regardless of what the Engineer does or does not do. ...

150. In the present case, it is clear that the Engineer has not issued a decision within the 84-day period. Instead, he has merely asked questions and required clarifications from the Claimant; there was no statement in the Engineer's response that indicated that there was a decision made pursuant to Art. 67.1. This means that the second case of Sub-Clause 3 applies, namely, non-issuance of a decision by the Engineer during the 84-day period.

151. According to Art. 67 of the FIDIC General Conditions of Contract, since there was no decision by the Engineer within this period, Claimant now would have 70 days to file the notice of intent to commence arbitration before the end of the 70-day period or allow the claim to become time-barred.

152. Here, after the Engineer gave notice to Claimant on 31 October 2006 that the Variation Proposal was rejected with requests for further information, Claimant had another 10 weeks after the initial 84-day period to clarify any questions the Engineer raised. It also means that before 3 April 2007, the Claimant was required to file the notice of the intention to commence arbitration, or else it would be time-barred by expiration of the 70-day period, as set forth in item (ii) above.

153. It is very clear that the deadline for submitting a notice of arbitration has been missed and therefore the arbitration is time-barred.

154. Claimant argues essentially that the Engineer by raising his questions, extended the time period of 84 days.

155. Moreover, Claimant argues that the Engineer's request for addition[al] information could result in an extension of the time period to allow for the Engineer to take a decision. In order to support this position, the Arbitral Tribunal would have to make a finding that the Engineer, by doing or omitting to do something, was in a position to change the terms of the FIDIC General Conditions of Contract.

156. Thus, Claimant's own witness testified that the Engineer cannot modify the contract. The Arbitral Tribunal shares this view.

157. In view of the inability of the Engineer to modify the contract, the time period of 84 days could not be extended as argued by Claimant. From this, it follows that no decision has been rendered by the Engineer within the 84 days provided, and therefore the additional period of 70 days started to run immediately upon the expiration of the 84-day period.

158. This 70-day period expired on 3 April 2007, and Claimant gave notice on 4 April 2007, which was received by Respondent on 11 April 2007, i.e. after the required time limit. Therefore, Claimant's Claim number 1 is time-barred and is hereby denied.

9. Remuneration for additional design

9.1 Position of the Claimant

159. In the scope of its obligation to modernize and enlarge the . . . [institute] in [city], amongst its other obligations, Claimant was obligated to perform works covering the development of new ... buildings interior arrangement design, including equipment and furniture delivery, assembling of mechanical installations necessary for proper arrangement operation in accordance with the project documentation ...

160. On 24 May 2005, Claimant, the . . . [institute] and Respondent held a working meeting to discuss necessary changes, including the internal arrangement of the laboratory buildings. ... Representatives of all three parties attended the meeting, and Claimant notes that the meeting minutes will show that the Parties agreed to:

(i) coordinated meetings of working groups every Tuesday or every other Tuesday;

(ii) adoption of the principle that all works related to the preparation of the Engineer's design lay completely outside the extent of the Contractor's obligations under the contract, and that those works shall be deemed additional works and the Claimant shall obtain the remuneration for those works after evaluation ...

161. In its submission of 28 July 2005, Claimant presented the Engineer with the working hour wages of its employees which were necessary for the evaluation of additional and interchangeable works ... Claimant asserts these were accepted, adopted, and later used.

162. Claimant commenced the work on the amendments of the engineering design. In particular, the works consisted of adjustments, correction of design documentation, and the creation of completely new designs. Furthermore, Claimant held several coordination meetings in order to agree on the extent and afterwards, the details of the planned amendments.

163. Claimant submitted to the Beneficiary and Engineer a series of drawings and listings of equipment that outlined the extent of changes and design works. Attached to the submission was a detailed list of design drawings relating to the internal arrangement of the [facilities] ... According to Claimant, the Engineer should be deemed to have accepted these changes when he instructed Claimant to perform the construction works based on the altered design documentation submitted ...

164. On 18 April 2006, Claimant informed the Engineer about its intention to claim additional payment for introduction of changes to equipment and the development of a new interior arrangement pursuant to the provisions of Sub-Clause 53.1 of the FIDIC General Conditions of Contract ...

165. In reply to the detailed list submitted by Claimant, the Engineer indicated that the information submitted by Claimant was too general and was insufficient for the Engineer to evaluate the claim.

166. On 1 July 2006, Claimant presented the Engineer with a detailed calculation of cost that it incurred during the performance of its adjusted designs of internal arrangement and equipment ... Claimant attached documentation that detailed the amount of working hours spent by Claimant's employees, confirmation of the activities performed during the working hours, meetings, and trips which related to the design performance ...

167. On 19 October 2006, Claimant again submitted a detailed claim concerning additional costs incurred. In its petition, Claimant indicated that the information contained in its previous submission of 18 April 2006 was sufficient to valuate the claims ...

168. The Engineer replied to Claimant's Submission on 8 November 2006 and sustained his position that the claim and list contained in the submission did not accurately and directly describe the amount of the claim ... In the same response, the Engineer accepted the fact that between May and September 2005 Claimant had to employ persons to type and number furniture, equipment, devices, and documentation, in addition to the fact that lists and new drawings were made and revised ...

169. Due to a lack of agreement between Claimant and the Respondent, by a letter of 29 January 2007, Claimant informed the Respondent of its intention to start arbitration proceedings concerning the claim of additional payment of [amount] for the development of a new interior arrangement design ...

9.2 Position of the Respondent

170. Respondent argues that since the Engineer introduced variations to the lab equipment on 28 and 30 December 2005, Claimant's notice of claim dated 18 April 2006 was submitted after the 14-day time limit stated in Clause 52.2 of FIDIC General Conditions of Contract, and had therefore elapsed. Therefore, the claim is unsubstantiated and ill-founded ...

171. Because of the complicated and untypical equipment which was to be installed in the facility buildings, the standard Sub-Clause 7.2 of the FIDIC General Conditions of the Contract was amended in the Conditions of Particular Application, and the Contractor was obliged to perform design works in a much wider scope than just preparing workshop drawings ...

172. In the Tender Dossier, the equipment was described by indicating its specifications, and not specific types of devices produced by individual companies. Devices of individual companies may differ in their external dimensions, the location of connections to the installation, or the manner of assembly. Due to this fact, the Contractor was obliged to fully co-ordinate the design with the specifications of specific devices supplied under contract, which could imply a necessity to change the interior arrangement, or even re-design the installation ...

173. Respondent points out that Claimant has received additional remuneration only for the work that the Engineer has deemed as exceeding the obligations of Claimant.

174. According to Respondent, Claimant stated that its work consisted of creating a completely new design, whereas in reality only corrections in the drawings of the interior arrangement were actually made and submitted.

175. Respondent maintains that the statement made by Claimant asserting that at the stage of performance of the contract, the Beneficiary changed the concept of the interior arrangement and equipment is inaccurate. The changes concerned individual devices and pieces of equipment, and not the whole concept of the interior arrangement ...

176. Additional works connected with the interior arrangement were completed in December 2005 and are reflected in the orders of the Engineer as of 28 December and 30 December 2005 by which he accepted the interior arrangement drawings corrected by Claimant.

177. Furthermore, Claimant specifies alleged arrangements that were to be performed at a meeting dated 25 May 2005, supported by the minutes of the meeting ... Respondent emphasized that the minutes were prepared by Claimant and its contents were not agreed upon by either the Engineer or the Beneficiary. Respondent was not even present at the meeting.

178. Moreover, included in the minutes of the meeting is the statement, "All works connected with verification of inconsistency of the design documentation concerning the equipment shall be treated as additional works, and after performing valuation, they shall be invoiced by [Claimant] to the Beneficiary" (translated by Respondent) ...

179. The Respondent argues that Claimant, requiring additional remuneration from the Respondent, cannot quote the wording of the minutes that indicate that the Beneficiary would pay potential additional remuneration. The Beneficiary is a legal entity separate from Respondent, and Respondent is not responsible for the obligations of the Beneficiary.

180. Therefore, due to the failure to submit the claim within the 14-day period and Claimant's failure to support its claim for additional remuneration of funds for the development of a new interior arrangement design, Respondent hold[s] the position that the claim should be considered unsubstantiated and time-barred.

9.3 Decision on the merits of the issue

9.3.1 The facts

181. It is generally agreed that on 28 and 30 December 2005, the Engineer issued instructions to Claimant for certain changes to be made concerning the ... equipment.

182. On 18 April 2006, the Claimant informed the Engineer of its intention to claim remuneration for the costs incurred in relation with the design works ...

183. The date Claimant sent notice of its intent to claim remuneration was over the 14-day limit for the submission of claims in Clause 52.2. There was a delay of approximately four months between the time the instructions for change made by the Engineer and the request for additional payment made by Claimant.

9.3.2 Relevant provisions

184. The second sub-paragraph of Sub-Clause 52.2 of the FIDIC General Conditions of Contract provides:

Provided also that no varied work instructed to be done by the Engineer pursuant to Clause 51 shall be valued under Sub-Clause 52.1 or under this Sub-Clause unless, within 14 days of the date of such instruction and, other than in the case of omitted work, notice shall have been given either: (a) by the Contractor to the Engineer of his intention to claim extra payment or a varied rate or price, or (b) by the Engineer to the Contractor of his intention to vary a rate or price.

185. Furthermore, under Article 53 of the FIDIC General Conditions of Contract, Notice of Claims,

Notwithstanding any other provision of the Contract, if the Contractor intends to claim any additional payment pursuant to any Clause of these Conditions or otherwise, he shall give notice of his intention to the Engineer, with a copy to the Employer, within 28 days after the event giving rise to the claim has first arisen.

186. Both the 14-day deadline of Article 52 of the FIDIC General Conditions of Contract and the 28-day deadline of Article 53 of the FIDIC General Conditions of Contract have been missed.

187. Pursuant to Article 53.4 of the FIDIC General Conditions of Contract, the Arbitral Tribunal, in its discretion, might grant the Claimant some amount for the additional design.

188. Article 53.4 of the FIDIC General Conditions of Contract states,

If the Contractor fails to comply with any of the provisions of this Clause in respect of any claim which he seeks to make, his entitlement to payment in respect thereof shall not exceed such amount as the Engineer or any arbitrator or arbitrators appointed pursuant to Sub-Clause 67.3 assessing the claim considers to be verified by contemporary records (whether or not such records were brought to the Engineer's notice as required under Sub-Clauses 53.2 and 53.3).

189. However, the Arbitral Tribunal refuses to grant the Claimant any additional amount for the additional design as requested as Claim number 2.

9.3.3 Justification of costs for additional design

190. In its Exhibit ... Claimant submits a table containing "detailed calculation of costs incurred during development of design covering new arrangement and equipment" ... This exhibit is effectively a summary of the time sheets which was first submitted in Claimant's Request for Arbitration and then again on the second day of the Evidentiary Hearing.

191. The columns of the table contain information on number of hours (works related to variations introduced by Engineer/Beneficiary), confirmation documents (minutes of meeting, tables, letters, approvals, estimates, emails), business trips/meetings (dates, participation, aim) and comments.

192. No additional documentation has been presented by Claimant to prove to what extent the additional design work was necessary because of faulty preparation.

193. Moreover, Clause 53.4 of the FIDIC General Conditions for Contract limits the claim a Contractor can make to those matters verified by contemporary records.

194. In the case of A.G. Falkland Islands v. Gordon Forbes Construction (Falklands) Ltd (No2) [2003] F.I.S.Ct, the Court held that

on the true construction of Clause 53,

(1) "Contemporary records" in Clause 53 of the FIDIC Conditions, 4th Edition, means original or primary documents, or copies thereof, produced or prepared at or about the time giving rise to the claim, whether by or for the Contractor or Employer.

(2) "Contemporary records" does not mean witness statements produced after the time giving rise to the claim where such statements cannot be considered to be original or primary documents prepared at or about the time giving rise to the claim.

(3) Where there is no contemporary record to support a claim, that claim fails.

(5) In drawing such inferences the Engineer or arbitrator may rely on witness statements only to identify or to clarify extant contemporary records. A witness statement cannot supplement, or be a substitute for, incomplete contemporary records ...

195. In the view of the Arbitral Tribunal, this list of names and hours is tantamount to a witness statement and not a contemporary record.

196. In this context, the Arbitral Tribunal refers to further oral testimony of the Representative of the Engineer, Mr [S], who during the Evidentiary Hearing . . . stated the following ...:

[Counsel for Respondent]:

Mr [S], this additional purchase of these [installations] was instructed by variation orders or what was the primary Contractor obligation in the contract?

Mr [S]:

It was an instruction for variation.

[Counsel for Respondent]:

Has the Contractor received additional money for these variations?

Mr [S]:

Yes.

[Counsel for Respondent]:

Why didn't you take into account the Contractor's calculation estimating additional works in relation to the ... facilities? The Contractor claimed additional money for interior arrangement - what was the Engineer's position to this claim?

Mr [S]:

In letters submitted to the Engineer the Contractor in Engineer's opinion has not documented according to the contract that he is entitled to a specific amount of remuneration.

First, in the letters to the Engineer the Contractor has never specified the amounts of remuneration he was entitled to. The Contractor sent only the list of man-hours that his employees had spent on different works related to the arrangement of interior. In spite of the Engineer's call to include in a claim the amount claimed by the Contractor, the Contractor has never followed the call. The claim amount appeared only in the notification about the intention to commence arbitration.

Second, a part of the activities shown in the list sent by Contractor to the Engineer referred to the activities under sub-clause 7.2 and the activities in Engineer's opinion as those to which the Contractor was obliged under the contract were not taken into account by the Engineer.

[Counsel for Respondent]:

But the Engineer made some estimation of additional remuneration as some additional money was paid to the Contractor - could you explain this situation?

Mr [S]:

The Engineer believed that the Contractor was entitled to some additional remuneration due to variations in equipment, affected during the works. For example, the [installations]. And in relation to the fact that the Engineer is obliged to act objectively he tried to agree with the Contractor the amount due on that…in that case. Therefore the Engineer asked the Contractor to make precise requirements so the Engineer's request to provide detailed data that would allow the Engineer to make his opinion. As I mentioned, in spite of the Engineer's call, the Contractor didn't follow the call. So finally the Engineer decided to estimate the amounts by himself based on a tiny information or small information that he possessed on that.

197. The burden of proof is upon Claimant to produce conclusive evidence to support its allegations, i.e. that the additional design work was necessary and that the documentation submitted by Claimant justifies Claimant being awarded additional costs.

198. However, the documentation submitted by the Claimant only gives the Arbitral Tribunal numbers of hours worked and no information to describe the works performed, in which field, or why the work was necessary to do the additional design work.

199. There is no clear basis for the Arbitral Tribunal to decide that the number of hours might somehow justify a general task. The only other point of explanation refers to business trips or meetings, but only clarifies that minutes of the meeting were taken, the date, and persons who participated. It does not describe the precise work performed.

200. Claimant could have submitted time sheets, but has not done so. Even then, in the view of the Arbitral Tribunal, it is in retrospect completely impossible to ascertain the necessity of the additional work done due to the fact that any number of reasons could have caused Claimant to spend a large amount of additional time without warranting additional claims.

201. Furthermore, it is precisely the reason why the FIDIC General Conditions for Contracts require the submissions to be given within a short period of time, here within a fourteen day time period, to make it possible to verify the requests for additional costs.

202. In the view of the Arbitral Tribunal, Claimant has failed to meet its burden of proof to show:

(a) to what extent the additional design work was necessary because of faulty preparation;

(b) that the alleged amount of hours was actually spent. The list summarizing the hours in groups that has been submitted is not sufficient evidence to justify the claim.

Therefore, Claim # 2 is rejected.

10. Additional remuneration for installation of [replacement] valves

10.1 Position of Claimant

203. Claimant maintains that due to errors in the Engineer's installation design, the installation of the [replacement] valves was a technically necessary solution, and that additional remunerations for the installation of the [replacement] valves should be granted.

204. As part of its contractual obligation to modernize and enlarge the [institute] in [city], Claimant was required to perform works involving technical gas and liquid nitrogen with the dosage points of liquid nitrogen ...

205. Claimant has pointed out that the Engineer's project did not contain any reference to hydrogen and oxygen installations which are commonly used and needed in the type of [facilities] such as the one Claimant were contracted to construct ...

206. In the requirements related to the materials and performance, Respondent indicated the installation of technical gases should be assembled using simple valves (standard stop-valves without manometers and with ball configuration, also known as "open-close" type valves).

207. In the contents of the technical specification, Respondent specified that the valves should be ball-type, without lubrication, single part, made of brass or stannum-zinc, with only autonomous parts in reaction with gas and with riffled goblet ending. Additionally, it should be possible for the lever of the valve to be blocked in one position and designed with a top entrance to allow for the possible removal and exchange of the ball mechanism without completely removing the entire valve.

208. In accordance with the above-mentioned requirements, Claimant proposed a price of ... for the simple valve ...

209. During the performance of the works, Claimant was obliged, according to the Contract, to perform workshop drawings to quantify and make the Engineer's design more detailed. While performing these drawings, Claimant found that there were errors and inaccuracies in the design ...

210. A detailed sketch of the Engineer's design for the workshop drawings led Claimant to the conclusion that the technical concept of the technical gas installation was wrong and that the requirement of only standard valve installation on the technical gases was also wrong.

211. The Claimant indicated the mistaken solutions concerning the valves to the Engineer and requested clarification. The Engineer did not clarify within the scope of the Claimant's request, but instead submitted [an engineering and construction management company]'s comments concerning the accuracy of the solutions contained in the Engineer's design ...

212. Moreover, the technical error of the implementation of the simple valves was also confirmed by the information presented by the Engineer relating to the designed equipment in the premises, along with the Beneficiary of the contract who submitted information regarding the designated equipment.

213. In response, Claimant contacted [supplier], a leading company on the European market which engaged in supplying equipment and assembling of technical gases installations. As a result of the meetings, Claimant obtained professional opinions stating that the solution used by the Designer with specified orifices was completely incorrect, and its implementation does not guarantee the accuracy of the action of such an important installation ...

214. Claimant further states that when it filed both the material for acceptance and workshop drawings in March and April of 2006, the Engineer approved both proposals ...

215. Claimant submitted to the Engineer the Variation Proposal of 20 July 2006 with the above-mentioned opinion from [supplier] along with a detailed calculation of assembling ... type valves in place of the simple valves defined in the Tender Dossier and Engineer's Design. In his reply of 10 August 2006, the Engineer rejected the Variation Proposal ...

216. In response to the Engineer's rejection of the Variation Proposal, Claimant informed the Engineer in its submission of 23 August 2006 that Claimant maintains its dispute over the Engineer's conclusion on the subject of claims for the cost of assembling of the valves type ... in place of simple valves and called for the Engineer to issue a decision in the matter in accordance with Article 67 of the FIDIC General Conditions of Contract ...

217. Because the Engineer did not issue a proper decision in the time period described in Article 67 of the FIDIC General Conditions of Contract, Claimant in its letter of 23 January 2007 informed Respondent of its intention to start arbitration proceedings concerning the subject of its request ...

218. Therefore, according to Sub-Clause 52.1 of the FIDIC General Conditions of Contract, Claimant requests remuneration for the performance of works accepted by the Engineer.

10.2 Position of Respondent

219. Respondent challenges Claimant's right to have this claim heard in arbitration proceedings on the basis that Claimant did not observe the procedure of notifying its intention to commence arbitration proceedings according to Sub-Clause 67.1 of the FIDIC General Conditions of Contract.

220. Respondent argues that when receiving the notice, the deadline for giving notice of intention to commence arbitration had already elapsed. Claimant presented the dispute to the Engineer in its letter of 23 August 2006 ... Therefore, Respondent should have received the notice of intention to commence arbitration proceedings by 24 January 2007 (the initial 84-day time limit under Art. 67 of the FIDIC General Conditions of Contract then the 70-day time limit for notifying the intent to commence arbitration).

221. Instead, the letter notifying Respondent of the intention to commence arbitration proceedings was written on 23 January 2007, sent by mail on 24 January 2007 and received by Respondent on 29 January 2007 ... Thus, the time limit had elapsed when the Claimant sent notice.

222. Furthermore, Respondent argues that since the Engineer rejected Claimant's Variation Proposals both on 12 July 2006 and 10 August 2006 ... Claimant installed [replacement] valves at its own expense.

223. The Beneficiary and the Designer did not confirm the necessity for the use of valves with pressure reduction function. Another two editions of [the construction management company's] Design, i.e. 2nd Edition of 5 October 2005 and 3rd Edition of 31 January 2006 sustained the solutions applied in the 1st Edition of 31 August 2003, which constituted a basis of the Claimant's bid and of the Contract price. The Beneficiary and the Designer considered such solutions to suffice for the needs of technology applied to the benefit of the Beneficiary ...

224. On 22 February 2006, Claimant submitted to the Engineer workshop drawings of technical gas installation and vacuum. Solutions presented therein were fully in compliance with [the engineering and construction management company's] Solutions. The Engineer issued a positive opinion and the drawings were sent back to Claimant on 22 March 2006 with A status ...

225. On 31 March 2006, the Claimant submitted to the Engineer a Material Proposal for approval, covering ... valves with withdrawal points, including pressure reducers. The Engineer approved the valves on 13 April 2006 as meeting the requirements set forth in the Technical Specifications ...

226. On 10 July 2006, Claimant submitted to the Engineer Variation Proposal No. ... with the calculation of the additional remuneration for pressure reducing valves. On 12 July 2006, the Engineer rejected the proposal since Claimant did not receive the Engineer's order concerning introduction of such variation ...

227. On 20 July 2006, Claimant submitted to the Engineer Variation Proposal No. ... The Engineer did not recognize Claimant's arguments and on 10 August 2006 Engineer again informed Claimant that he opposed the additional remunerations claimed by Claimant ...

228. Having consulted the Beneficiary and the Employer, the Engineer rejected the proposals in the context of the lack of Engineer's order and the Beneficiary's opinion that the valves were an irrelevant additional cost.

229. Despite negative responses to its Variation Proposal, Claimant decided to install the valves it recommended. It did so at its own expense. The Engineer did not question the installation of the valves since they ensured the technical solution was not worse than that assumed in [the engineering and construction management company's] Design.

230. Finally, Respondent also notes that Claimant failed to submit a claim under Clause 53 of the FIDIC General Conditions of Contract. The dispute in fact concerns the Engineer not taking into consideration the Variation Proposal of 19 July 2006 submitted by Claimant. According to Clause 51 of the FIDIC General Rules of Contract, the Engineer may introduce variations he considers appropriate, however, he has no obligation to take into account the variation proposals made by the Contractor ...

10.3 Decision on the merits of the issue

10.3.1 Facts

231. In the contents of the Technical Specifications, the original design called for the installation of distribution systems for technical gases and should be assembled using simple valves (standard stop-valves without manometers and with ball configuration, also known as "open-close" type valves).

232. Claimant contacted [supplier] and [another company] and, on 28 June 2006, obtained professional opinions on the usage of more technical valves with reduction and manometers.

233. On 30 March 2006, Claimant submitted to the Engineer the Material Proposals for acceptance and the Engineer approved the valves on 13 April 2006 as meeting the requirements set forth in the Technical Specifications ...

234. Considering the additional function (pressure reduction) of the valves proposed by Claimant, instead of groups of partitioning points, the Engineer considered the proposed solution as equivalent with solutions of the Detailed Design of [the engineering and construction management company].

235. After receiving the Engineer's approval, Claimant ordered the more technical [replacement] valves on 25 April 2006 ...

236. On 20 July 2006, Claimant submitted to the Engineer Variation Proposal with calculations of the additional remuneration for the pressure reducing valves and, on 10 August 2006, the Engineer rejected the proposal and opposed additional remuneration claimed by Claimant.

237. Following the Engineer's rejection of Claimant's Variation Proposal, the Claimant went ahead and installed the more expensive [replacement] valves.

10.3.2 Effect of mailing notice

238. With respect to the observance of the time periods set forth in the FIDIC General Conditions of Contract, the Parties have raised the question of the effect of mailing notice without fax or email on the last day of the time period.

239. The question is whether the notice of arbitration under Article 67.1 must only be sent by the other party with notice of receipt or whether in addition it is a requirement that the other party has physically received the information or document within the specified time frame set out by the FIDIC General Conditions of Contract.

240. The third paragraph of Article 67.1 states,

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 on which he received the reference, then either the Employer or the Contractor may, on or before the seventieth day after the day on which he received notice of such decision … give notice to the other party…

241. The wording used in Article 67.1 uses the terms received, not sent and under the FIDIC General Conditions of Contract, the wording used in the articles is relevant for the counting of time periods. However, it is unclear whether the notice must be received by the Party or if the notice must be sent by the Party before or on the final day of the time period. As the particular action required to be taken is not clearly specified by the parties or in Article 67, it is left open to interpretation.

242. Respondent does not state whether the FIDIC General Conditions of Contract are ambiguous on the subject, but rather argues that the Parties agreed on the ICC Rules of Arbitration as of 1 July 2003 and according to Art. 4(2) of the Rules the date on which the Request is received by the Secretariat shall, for all purposes, be deemed to be the date of the commencement of the arbitral proceedings ...

243. Moreover, Respondent notes that the running of the period of limitation can be interrupted by commencement of mediation. It quotes Art. 183 of the [State X] Code of Civil Procedure, pursuant to which, if parties concluded a mediation agreement, mediation is deemed commenced by a party when a request for mediation is served upon a mediator, together with an enclosed receipt of service of its copy served upon the other party.

244. In short, Respondent contends that in regards to arbitration and mediation, the running of the period of only limitation is interrupted when a letter is served upon its addressee and its posting date is irrelevant.

245. According to Claimant, the wording of the Sub-Clause 67.1 of the FIDIC General Conditions of Contract is unambiguous; the 70-day period for the dissatisfied Party commences on the day that the Party receives notice of the Engineer's decision, whereas in order to comply with the 70-day period to inform about the intent to commence arbitration, the Party is required to give notice of such intent ...

246. Claimant gave notice of the intent to commence arbitration in relation to Claim 3 in writing by its letter of 23 January 2007, sent by registered mail on 24 January 2007 which was the final day of the 70-day long period described in Sub-Clause 67.1 of the FIDIC General Conditions of Contract. Therefore, the Claimant argues that the requirements of the clause must be recognized as duly [ful]filled, as the notice was made in written form and sent on the last day of the specified period.

247. Finally, Claimant also points out that given the fact of the legal significance of the compliance with the time-limit of the periods specified in the Sub-Clause 67.1, it would be unreasonable to allow such an interpretation of that clause, according to which the issue of forfeiture of the Party's right to have the claim adjudicated would entirely depend upon the circumstances beyond control of that Party ... The delivery of notice may be delayed for several reasons not within the purview of the mailer.

248. Claimant made the argument that under this interpretation the actual time would be reduced from 70 days to approximately 50-60 days, as postal procedures usually take from 3 to 7 working days to be received and the addressee of the letter may refuse to accept the letter for a further 14 days without legal consequences.

249. Claimant points out that it gave notice of the intent to commence arbitration sent by registered mail on the last day of the 70-day long period prescribed in the Sub-clause 67.1 and therefore notice was made in the written form and given on the last day of the specified period.

250. In this matter, the FIDIC General Conditions of Contract are not clear and therefore the Arbitral Tribunal follows the argument of the Respondent that the interpretation must be made using [State X] substantive law. In this regard, interpretation is required to clarify what is the legal nature of "giving notice to the other party" as used in the third paragraph of Sub-clause 67.1, the legal nature of the term herein established and the legal consequences of a failure to observe the term. The [State X Civil Code] does not provide for any specific provisions regulating this issue and the interpretation can only be made by reference to other provisions most close relating to the herein interpreted.

251. The legal nature of an act called "giving notice to the other party" is disputed among the Parties. Whereas Respondent qualifies it as a declaration of will (or manifestation of intent ...), Claimant is of an opposite view ... In very short summary, the declaration of will under [State X] law is understood as a manifestation of will of a person made to the other person in circumstances where such declaration of will creates or influences the legal situation of that other person. . . .

252. Notice under Sub-clause 67.1 causes the decision of the engineer to be non-binding and creating a potential state of dispute, therefore there can be no doubt that when such notice is given by one party it results in new situation or influences the situation of the other party. Consequently, the Arbitral Tribunal cannot agree with the opposite position of Claimant.

253. Under the assumption that notice in the meaning of Sub-clause 67.1 is a declaration of will, the next question to answer is when the moment of making the declaration of will occurs. In this respect, the [State X Civil Code] is clear. Article 61 of the [State X Civil Code] regulates this matter based on the theory of delivery ...

... [Receipt of a manifestation of intent]. A manifestation of intent, which is to be given to another person, has been issued at the moment in which it has been received by such person in a manner which enables such person to take notice of its content. A withdrawal of any such manifestation of intent shall be valid if it has been received at the same time or earlier than such manifestation.

254. Amongst other theories like the theory of statement, the theory of dispatching or the theory of acquainting, the theory on which [the above provision] is based is the theory of delivery. This means that the declaration of will is made at the moment at which the other person may get acquainted with its content. It is not necessary that the other person had actually received the declaration, but it was possible for it to get acquainted with it.

255. Therefore, the Arbitral Tribunal considers the position of Respondent that Claimant in order to keep the deadline should have used other means of communications like personal delivery or facsimile transmission to ensure the delivery of notice to the other party within the deadline so that the other party had the possibility to get acquainted with its content notwithstanding whether such other party had actually used such possibility or not as correct. Mailing the notice was in this case insufficient.

256. Also the view of Respondent as regards the rule expressed in ... the Code of Civil Procedure as expressed in paragraph 232 of the Post Hearing Brief ... is in the opinion of the Arbitral Tribunal correct. This provision is clearly restricted to the matters brought to the courts and is an exceptional provision of the law, which is not to be extended by analogy ...

... posting a submission at a public operator post office in [State X] is tantamount to submitting it to a court.

257. Proceedings under FIDIC rules are not a proceeding before the courts and therefore the provision ... of the Code of Civil Procedure cannot be applied in this case. The application of the other rule, i.e. that it is sufficient to dispatch a notice, must always be based on a specific provision of the law and must always be treated as an exception. An example of such provision is Article . . . of the [State X Civil Code] dealing with the notification of warranty defects, where it is clearly stated that in order to preserve the warranty right it is sufficient to mail the notice on the last day of the term:

258.

. . . [Time period for Notice of Defects] . . . For the observation of the time periods for notifying (a defect) the mailing of a registered letter prior to the expiration of the time period shall be sufficient.

259. In the interpretation of the "term" as used in Sub-clause 67.1, again the Arbitral Tribunal will share the view of the Respondent that this is the contractual final term ...

260. Parties enjoy the freedom of contract (a rule based on article ... of the [State X Civil Code]) and may regulate their rights and obligations in a manner they wish.

. . . [Freedom of Contract]. The contract partners may structure their legal relationship according to their own free will, to the extent its content and purpose do not contradict the particular nature of the legal relationship, the law and the principles of social life.

Once the Parties agreed on the final term and further agreed that the rights depend upon observing the final term, a failure to observe the term results in losing the rights.

261. Such a form of a final term is permissible and falls into the category of terms "foreseen to take an action required to preserve the right" ... The 70-days term provided for in Sub-clause 67.1 of FIDIC General Conditions of Contract has exactly that legal nature and failure to observe this term results in losing the right to arbitrate the dispute.

262. Therefore, the Arbitral Tribunal concludes that also Claim # 3 is time-barred and must therefore be denied.'

1
Therefore 83 days after the dispute notice.

2
Seppälä, Christopher, ''The Pre-Arbitral Procedure for the Settlement of Disputes in the F.I.D.I.C (Civil Engineering) Conditions of Contract'' (1986) 3 I.C.L.R. 320.

3
Bunni, Nael G., "The FIDIC Forms of Contract, Third Edition, The Fourth Edition of the Red Book, 1992" Blackwell Publishing 2005, pgs 403-404.

4
Bunni, ibid. page 407.

5
Seppälä, Christopher, "An Engineer's / Dispute Adjudication Board's Decision Is Enforceable By An Arbitral Award" (2009) 26 I.C.L.R 416.

6
Seppälä, Christopher, ''The Pre-Arbitral Procedure for the Settlement of Disputes in the F.I.D.I.C (Civil Engineering) Conditions of Contract'' (1986) 3 I.C.L.R. 330.

7
Seppälä, Christopher, ''The Pre-Arbitral Procedure for the Settlement of Disputes in the F.I.D.I.C (Civil Engineering) Conditions of Contract'' (1986) 3 I.C.L.R. 329.

8
Jaffee, Michael Evan and McHugh, Ronan J., "International Construction Disputes in Today's Economy" (2009) PLC Arbitration Handbook