‘Notification and admissibility of the claims

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Relevant articles of the Subcontract

197. The Subcontract contains several provisions which require the subcontractor to notify the contractor of certain events which may affect the works, their costs and/or the programme:

- Article 4.3 provides:

Without prejudice to the provisions of Art. 17.1.6, SUBCONTRACTOR shall without any delay, but in any event not later than 7 working days from its occurrence, notify CONTRACTOR of any delay in the WORK caused by any events entitling SUBCONTRACTOR to an extension of time according to the provision of the CONTRACT. Failure of SUBCONTRACTOR to notify CONTRACTOR of the occurrence of any such delay and of the expected impact on the WORK SCHEDULE and/or other consequences arising therefrom within the above mentioned period shall debar SUBCONTRACTOR from the right to any claim.

- Article 12.3 provides:

If, in the course of preparing for or carrying out the WORK, the SUBCONTRACTOR discovers anything which might materially alter the timing, nature, scope or safety of investigation in the CONTRACTOR’s interests, it shall forthwith report that discovery to the CONTRACTOR, but its obligations under this CONTRACT shall not be reduced or affected thereby.

- Article 17.1.6 provides:

The SUBCONTRACTOR shall at all times keep the CONTRACTOR fully and promptly advised on becoming aware of the occurrence of any event or circumstances which may have an adverse effect on this [sic] performance of the WORK. If any such circumstances is [sic] not brought to the attention of the CONSTRUCTION MANAGEMENT, then the SUBCONTRACTOR will be deemed to have waived all of its rights in such respect.

- Article 25.3 provides in relation to Force Majeure:

Should the SUBCONTRACTOR be delayed in performance of WORK by an occurrence which he considers to be Force Majeure, he shall so inform the CONTRACTOR and/or the CONSTRUCTION MANAGEMENT by registered letter, of the commencement of such Force Majeure within 24 hours of its commencement.

A statement, by the competent Chamber of Commerce, or other competent authority, confirming the facts and dates as per Art. 25.1, shall be sent to CONSTRUCTION MANAGEMENT for confirmation of the facts and dates.

If such notification is not sent within the specified time and with the procedure prescribed above in this point, the SUBCONTRACTOR will not be entitled to obtain the relative changes in the construction schedule resulting from Force Majeure inasmuch as he shall be deemed to have accepted all the risks and consequences thereof.

198. All articles explicitly make the admissibility of any claim conditional upon such notification being made forthwith or promptly. Article 12.3 requires a notification for the pure purpose of fully informing the contractor of a possible material alteration of the timing of the works and confirms that such notification in itself is not sufficient to entitle the subcontractor to an extension of time because “its obligation under this contract shall not be reduced or affected thereby”, in other words: the contractor continues to have the same obligations as regards, i.a.,timing.

199. On several occasions, [Respondent] relies on the above-mentioned articles to deny [Claimant] any right to additional payment or to an extension of time. Although their general meaning is pretty clear, their exact scope has to be examined more closely in order to determine their proper interpretation.

What must be notified

Art. 4.3: Delay event for which the Subcontract entitles the subcontractor to an extension of time.

Art. 12.3: Anything which may materially alter the timing of the WORK.

Art. 17.1.16: Any event that can have an adverse effect on the performance of the works.

Art. 25.3: Delay by Force Majeure.

Time of notification

Art. 4.3: Without any delay, not more than 7 days from occurrence.

Art. 12.3: Forthwith or after discovery.

Art. 17.1.16: Promptly.

Art. 25.3: Within 24 hours of commencement of Force Majeure.

Content of notification

Art. 4.3: Identification of delay event, and of the expected consequences of the said event (in

particular on the schedule).

Art. 12.3: The discovery.

Art. 17.1.6: Not defined: (“fully”). Presumably both the event or circumstances and their adverse effect.

Art. 25.3: Force Majeure (to be confirmed by local CC or authority).

Consequence of a failure to notify

Art. 4.3: Inadmissibility of claim.

Art. 12.3: -

Art. 17.1.6: Waiver of all rights related to event.

Art. 25.3: Inadmissibility of claim for change of construction schedule.

200. This comparison shows various differences between the … provisions.

201. The most prescriptive one is Article 4.3 which is limited to events leading to a possible extension of time. Such events are difficult to identify as the Subcontract contains neither examples nor any definition of “events entitling SUBCONTRACTOR to an extension of time”. Article 4.4 contains a negative rule as it states:

No claim shall be allowed to SUBCONTRACTOR for any period of delay attributable to CONTRACTOR, overlapping with delays due to any cause for which SUBCONTRACTOR is not entitled to a time extension.

202. Thus, it follows that when the delay is due exclusively to the contractor, without being due also to the subcontractor, the subcontractor is entitled to a time extension. The clause does in practice require determining precisely the delays for which the subcontractor is entitled to a time extension and those delays for which he has no such entitlement. At first sight, it is not clear, however, who has the burden of proof: is the subcontractor entitled to an extension of time

- for delay attributable to the contractor unless the contractor proves that the delay (or part thereof) concurs with delay attributable to the subcontractor

or

- provided the subcontractor proves that it has not in any other way also caused a delay in the same period?

203. The latter is in fact a negative proof and would imply e.g. proving that the subcontractor could have performed the work on time, but for the delay caused by the contractor. This would require, for example, that the subcontractor must prove that for every day where free deliverables from the contractor were missing, the subcontractor had the personnel available to do the work planned. This Tribunal is of the opinion that this negative proof cannot be requested from the subcontractor and that it is the contractor’s burden to prove that the same delay was also due to a cause for which the subcontractor is not entitled to a time extension. However, it notes – although it is not yet at this stage concerned with the quantum of the claim – that the subcontractor may nonetheless be obliged to give evidence about his personnel being available and idle, in order to satisfy his burden of proof in relation to the damage he suffers as a result of the contractor’s failure to provide free deliverables on time, and which the subcontractor may wish to claim over and above an extension of time.

204. Returning to the issue of which events entitle the subcontractor to an extension of time, one such issue is mentioned in Article 25.3 of the Subcontract: its third paragraph provides implicitly that the subcontractor is entitled to obtain “the relative changes in the constructive schedule resulting from Force Majeure”. Force Majeure is defined in Article 25.1 as an “occurrence beyond the control of the PARTIES including but not limited to

- Acts of God;

- expropriation […]

- […];

or other similar occurrences which are not within the control of the Party affected and which said Party is unable to prevent or provide against”. Leaving aside that this definition is inherently contradictory (“beyond control of the PARTIES” – “not within the control of the PARTY affected”), the last part of the definition would allow to qualify unforeseen acts of the contractor which the subcontractor cannot provide against, as “force majeure” for the subcontractor.

205. Whether or not Article 25.3 is applicable when an obstacle is created by the contractor, it is a fact that (i) Article 25.3 mentions a time period within which the “force majeure” must be notified, which is much shorter than the 7 days mentioned in Article 4.3, and (ii) Article 25 has in common with the above-mentioned articles the duty for the subcontractor to notify the contractor of delay events for which he is to claim an extension of time.

206. The Tribunal sees no coherence or hierarchy, though, between the above-mentioned articles except that they all require at least a notification of the delay event. Article 4.3 is the only one which precisely indicates the information the notification should contain.

207. Article 17.1.6 is more general. First it relates to “any event or circumstances which may have an adverse effect on the performance of the WORK”, which encompasses many more situations than Article 4.3. Secondly, it does not quantify the period within which the notification must take place. “Promptly” is a relative notion to be valued in accordance with the circumstances. For instance, if [Respondent] successively promises material deliveries for “next week”, a notification made after one month is unquestionably “promptly” made. On the other hand, if a planned operation of cable laying is impaired by unopened trenches or a blocked duct bank, “promptly” means within 1 or 2 days. Thirdly, the contractor must be “fully” informed which, according to the Tribunal, means that the subcontractor cannot retain any information in its possession. The term could be interpreted as meaning that the subcontractor must notify all information which the contractor needs to assess the rights of the subcontractor; thus not only the event itself, but also its consequences on timing and cost of the works for the subcontractor.

Notice as a pre-requisite for a claim for the increase of the purchase price due to variation orders (Resource Loading Claim)

208. The price owed by [Respondent] for the performance of the Work by [Claimant] is, conceptually, a fixed price, consisting of the multiplied fixed unit prices plus a lump sum for direct costs. Under the Subcontract, a price increase is only possible in case of variations in the extent of Work and of change orders (Art. 15).

209. In response to [Claimant]’s initial suggestion that [Respondent]’s requests for extra resources constituted a variation to the Subcontract, [Respondent] i.a. notes that [Claimant] never followed the Article 15.2 procedure for variations, which required [Claimant], within ten days to “notify by writing the Construction Management of the evaluation of any cost and/or schedule consequences due to the variation”. The Article does not state that the subcontractor shall lose its right to compensation for the extra work if it fails to give such notice.

210. As shown above, some of the Subcontract provisions requesting notice also provide explicitly for the loss of rights by the party failing to give notice, while others do not. Hence, it may be concluded that where a provision does not explicitly provide for a loss of rights, such as Article 15.2 of the Subcontract on variations, the Parties did not intend that lack of notice in case of a variation would be sanctioned by inadmissibility of the ensuing claim to that effect (a contrario conclusion).

211. However, in practice, the subcontractor does risk losing its rights, as a result of Articles 15.3 and 15.4: they provide that the parties must agree on the price consequences of the variations, absent which the contractor is entitled to impose the amount it calculated and the subcontractor is obliged to implement the variation, subject to its right to submit the disagreement on the valuation to arbitration. These clauses make it clear that the valuation and (dis-)agreement thereon must occur before the variation is implemented. If the subcontractor performs a task without notifying and pricing it as a variation it becomes even debatable whether it was actually a variation. Thus, even if “notice” of the variation and its price is not explicitly sanctioned by inadmissibility of the claim, not pricing the “variation” when it is ordered by the contractor, creates a risk for the subcontractor that if he claims much later, he may even have to prove that the cause of the claim is actually a variation.

212. The consequence of a lack of notice in the event of variations thus rather lies on the evidentiary level. If there is no contemporaneous evaluation of the costs and/or schedule consequences caused by the variation, it may later on be difficult for the subcontractor to prove the actual costs or consequences if the contractor and the subcontractor fail to agree on the value of the variation. Lack of convincing evidence works to the disadvantage of the subcontractor since it bears the burden of proof for the costs of which it claims the reimbursement.

213. A reference must be made here to the general principle of good faith. [Respondent] contends that it made its various resource loading requests pursuant to Article 4.1.5 of the Subcontract. The article provides that: “If at any time, in Contractor’s opinion, Subcontractor’s working force, supervision, material and/or equipment are inadequate to achieve and maintain schedule progress or to maintain the required quality and quantity of work, Subcontractor, if so directed by Contractor, shall within 48 hours of receiving Contractor’s notice, at its own expense, take all necessary action, such as increasing or supplementing the working force, supervision, and/or equipment or working overtime, to assure compliance with any and all schedules and the required quality of the Work.” If [Claimant], upon receiving a request which [Respondent] said was based on Article 4.1.5., simply added the requested resources without clearly stating that it considered the request as a variation the costs of which were to be borne by [Respondent], it must be deemed to have waived its rights to compensation. This follows from the principle that each party to a contract has a duty to act in good faith which includes the obligation to properly object to requests of the other party which it considers unjustified (instead of simply complying with the request).

214. The Arbitral Tribunal has reviewed how the resource loading requests have actually been formulated. In [Claimant]’s Statement of Claim, the resource loading claim relies on the fact that [Respondent] “repeatedly and continuously requested to try to overcome the delay”. The analysis of the documents shows that there has never been a clear request of [Respondent] explicitly referring to Article 4.1.5 of the Subcontract: none of the “requests for resource loading” produced … refer to Article 4.1.5 or to Article 4.2 (directed rate of progress). … the Parties have repeatedly discussed the means to be deployed in order to respect the contract schedule and, all along [Claimant] has continued to announce its claim … The only document which [Respondent] produced containing a reference to Article 4.1.5 is [Claimant]’s own letter of … stating that “… in compliance with [Respondent]’s directives to increase of [sic] the workforce, [Claimant] believes that it has fully complied with your instruction in terms of the contract clause 4.1.5. – Time of Performance” … It is not clear why [Claimant] at once refers itself to this Article which states clearly that, “within 48 hours of receiving contractor’s notice, [subcontractor shall] at its own expense,1 take all necessary action”. Indeed, in the next paragraph of the same letter [Claimant] insists that it “is still unable to affect [sic] its timely performance of the WORK due to delays attributable to facts and events caused by [Respondent]”.

215. The Tribunal notes that [Respondent] refers to this letter … to conclude from it that Article 4.1.5 applies and renders [Claimant]’s claim on “resource loading” meritless. [Respondent] at that point had apparently forgotten what it wrote [earlier in] the same document, namely that “[Respondent] did not issue any unilateral instruction (falling within or without the scope of Art. 4.1.5). [Respondent] merely identified additional resources as a means, in its view, [Claimant] should take to improve its production”. Even so, there was no doubt that [Claimant] has understood the messages of [Respondent] as instructions which it could not deny. The Tribunal finds that this understanding was justified by the mere terminology used by [Respondent]: “must have a mandatory increase of manpower” …, “invite you wherever possible to increase the manpower” …, “between 80 to 100 workers have to be employed” …, “we request you again to increase direct manpower” ...

216. On the other hand, [Claimant] cannot seriously have considered that, because there was no explicit reference to Article 4.1.5 or 4.2 of the Subcontract, it would simply be paid by the man hour. Good faith required that if [Claimant] wanted to be paid, it clearly wrote so.

217. The Tribunal concludes that both [Claimant] and [Respondent] have avoided being direct and transparent about the responsibility for the costs of additional manpower and that they are now jointly responsible for the absence of clear notices, one way or another.

218. In summary, if the contractor explicitly requests a variation under Article 15 of the Subcontract and the subcontractor performs it, the latter does not lose its right to compensation simply because it failed to give notice pursuant to Article 15.2. If, on the other hand, the contractor requests additional resources explicitly relying on Article 4.1.5 of the Subcontract, the subcontractor has a duty to inform the contractor that it considers the conditions for application of Article 4.1.5 are not fulfilled and the request to be in reality a variation order. If the subcontractor does not immediately object against the application of Article 4.1.5 and challenge the contractor to first prove that the subcontractor’s working force, supervision, material and/or equipment is inadequate or if the contractor does not, in its requests, clearly refer to Article 4.1.5, each Party accepts the risk that it may not (dis)prove afterwards that the request of the contractor was (not) justified.

219. Since each of the Parties has shied away from the duty to clearly state that it considered the other party responsible for the costs of the resource loading or recovery programme, the Arbitral Tribunal comes to the conclusion that it has to review whether the evidence brought in this arbitration by [Claimant] shows that [Respondent] was not justified … to require [Claimant] to add, at [Claimant]’s own expense, more resources because the conditions of Article 4.1.5 of the Subcontract (see above) were not fulfilled.

220. Irrespective of the above, whether [Respondent]’s requests for resource loading are ultimately to be considered as variation orders or as legitimate Article 4.1.5 requests depends on the facts existing at the time of the requests. If [Claimant] was in delay due to its own fault, [Respondent] was entitled to an Article 4.1.5 request and [Claimant] must bear the resulting costs in any event. If, to the contrary, [Claimant] had been delayed for reasons within the responsibility of [Respondent], the request to increase the resources may appropriately be qualified as a variation order ...

Notice in the context of [Claimant]’s claim for breach of contract (Prolongation Claim)

221. [Claimant] claims that the prolongation of the Work by almost twelve months “was caused partly by variations but mostly by breaches of contract by [Respondent]”. The prolongation costs allegedly attributable to [Respondent]’s breaches of contract are claimed as damages. [Respondent]’s alleged breaches of contract include (i) failure to provide scheduling and engineering information, (ii) failure to provide materials and equipment, (iii) failure to provide access and (iv) excessive and late revision of drawings ...

222. Where there is a breach of contract, there is no general requirement in Swiss law obliging the party against which the breach was committed to give notice of the breach to the other party as a prerequisite for a claim for damages. The question is whether this also applies to construction contracts and specifically to this Subcontract.

223. [Respondent]’s defence of lacking notice firstly relies on Article 12.3 of the Subcontract. That provision indeed obliges the subcontractor to forthwith report to the contractor the discovery of anything which might materially alter the timing of the Work. This is in line with Article 365 para. 3 SCO referred to above. However, the question is whether the discovery under these provisions extends to actions or omissions by the contractor in breach of its contractual obligations. The Tribunal has some sympathy for [Claimant]’s argument that [Claimant] cannot reasonably be required to inform [Respondent] of the latter’s own acts in breach and that notice under such circumstances is redundant. This view is confirmed in Swiss legal writing (Gauch, Der Werkvertrag, 4th Edition, N 832).

224. The second contract provision invoked by [Respondent] is Article 17.1.6 of the Subcontract. The clause, by contrast to Article 12.3, does not only impose a broad obligation on the subcontractor to “fully and promptly advise of the occurrence of any event or circumstances which may have an adverse effect on the performance of the Work” but in addition also provides that “If any such circumstance is not brought to the attention of the Construction Management, then the Subcontractor will be deemed to have waived all of its rights in such respect”. [Respondent]’s breaches of contractual obligations and incumbencies, as alleged by [Claimant], i.e. the failure to provide scheduling and engineering information, materials and equipment as well as access and excessive and late revision of drawing, all fall plainly under the description of the events of which [Claimant] had to give notice to [Respondent]. The sanction provided for failing to give notice is the loss of rights in respect of the events to be notified. Given that sanction, the subcontractor cannot under Article 17.1.6 resort to the argument that notice was unnecessary or redundant on the basis that the contractor must always be aware of its own acts. According to Article 17.1.6 notice is a contractual prerequisite for [Claimant]’s breach of contract claims against [Respondent]. The purpose of the notice requirement obviously was to provide the contractor with an opportunity to rectify the situation, to verify the alleged consequences of its breach and to avoid having the subcontractor raising untimely claims long after the events. This notice requirement also applies to events which did not necessarily cause a delay but merely a disruption of the works. If the event occurred at a time where [Claimant] still had float on its programme or in circumstances where it was still possible for [Claimant] to avoid delay (e.g. by rescheduling certain activities or accelerating) there would be no delay, but only extra costs. Thus, depending on whether an event only caused costs or also delay, it would be either a disruption or a delay.

225. [Claimant]’s objection that [Respondent] cannot rely on the notice requirements because “it did not consistently insist on notice” does not hold much water. This is so for the simple reason that [Claimant] has in this arbitration produced a great number of contemporaneous complaint letters. From that it may be concluded that where in fact there were adverse events, [Claimant] did complain about them. Given the evidence adduced by [Claimant] in this arbitration, it is difficult to assume that [Respondent] waived any contractual notice requirements.

226. As mentioned in section 2.1 above, there is a further notice provision in Article 4.3 of the Subcontract under the general heading of “Work Schedule”. [Respondent] has not relied on this clause for its defence of lack of notice, except for a cursory reference in its Defence and Counterclaim and in its Post Hearing Brief when listing the contract provisions under the heading “Extension of Time” … Arguably, Article 4.3 reinforces the notice requirement of Art. 17.1.6 specifically with regard to events causing a delay in the Work. Under Article 4.3, the subcontractor is not only required to notify the contractor of the occurrence of an adverse event but also of the “expected impact on the Work Schedule and/or other consequences arising therefrom”. The term “other consequences” must reasonably be interpreted to include both the length and the costs of a delay. To the extent [Claimant]’s claims are specifically for the costs of delays, evidence of a contemporaneous notice of the adverse event as well as of its cost impact is required as prerequisite for admission of the claim.

227. It can be argued that the application of the sanction of inadmissibility of a claim for failure to notify both the event and its consequence is too harsh in certain circumstances and that insistence on such “formality” is excessive. For example, when the contractor fails to deliver on time the free deliverables (drawings and materials) he cannot ignore this event. Yet, what he does not necessarily know, is whether and to which extent this delay disrupts the subcontractor’s programme and makes the respect of the deadlines impossible. It is a fact that the contractor’s breach does cause damage and hence will, or at least may, result in a claim which must be notified. Moreover, in order to allow verification, the results of the breach, in terms of time and costs, must also be notified. Even in a case such as this, where [Respondent], as main contractor, was responsible for the general programming and for the coordination of the work on site and where the consequences of the late deliveries of materials on the construction schedule could not be ignored by [Respondent] who was itself obliged to adapt the level II schedule to such events …, the subcontractor still had the duty to notify what delay was caused in his own detailed construction programme or, if none, whether the event caused a mere disruption and if so, the costs of the respective delay or disruption. However, given [Respondent]’s own role in the general programming, there may be good faith restrictions to its use of the sanction of inadmissibility. The impact on the programme was something to be determined at least as much by [Respondent] as by [Claimant] ...

228. The Tribunal also may take into account the fact that the works were so heavily disrupted (see hereafter) that notifying in a formal way and in detail every event likely to affect the schedule was an almost impossible task.

229. Furthermore, the impact on the costs may often not have been clear from the moment the event arose, all the more so since the file indicates that in many cases, [Claimant] had no clue as to how long the disruptive or delaying event would last. In many cases, [Claimant] could only inquire with [Respondent] when it would receive the plans and engineering details, when it would receive access to a certain area, when materials and equipment would be delivered, etc. In many cases, it received no answer and when it received one, reality still proved to be different later.

230. The Arbitral Tribunal is therefore inclined not to sanction [Claimant]’s failure to notify or to notify fully or to notify each and every single event, as well as its consequences, by the inadmissibility of the relevant claim. This decision is in particular justified by the fact that [Respondent] has admitted that [Claimant] is entitled to compensation … Furthermore, [Respondent] never invoked the lack of formal notice as a defence against the claim ….

231. The Arbitral Tribunal notes, however, that the formal requirement serves also a substantive purpose which is the creation and preservation of evidence of the facts on which the eventual claim may be based.

232. The claim for an extension of time and indemnification of extra costs based on delay (or disruption) caused by [Respondent] is therefore admissible but may be found unjustified if [Claimant] cannot convince the Tribunal, through the evidence it brings on these delays or disruptions (if not the contemporaneous notifications of their occurrence and their impact), that [Respondent] indeed caused delay or disruption and what the consequences were.

233. The Arbitral Tribunal acknowledges that [Claimant]’s failure to notify [Respondent] of the consequences of the alleged defaults of [Respondent] and in particular to detail its claim, has also made it impossible for [Respondent] to react positively to [Claimant]’s claim when it was first formulated …

234. It is the same failure of [Claimant] to create, in illo tempore, proper evidence of the consequences of the disruptions and delays allegedly caused by [Respondent], which now puts this Tribunal before the difficult task of determining the just measure of the compensation the principle of which [Respondent] has in illo tempore not contested, but for which the Tribunal cannot take for granted the global figures advanced by [Claimant].

235. [Claimant]’s way of calculating its damages by simply subtracting the contract price from the costs actually incurred for the performance is unacceptable as it assumes (i) that the contract price was a correct price (and not a low price offered in order to secure the contract) and (ii) that the costs have not been increased at all as a result of any error, negligence or inefficiency of [Claimant].

236. [Respondent] has argued, i.a., that [Claimant]’s storage procedures were defective, that its personnel and its supervisors were ineffective, etc., and the Tribunal shall review hereafter the corresponding evidence.

237. This being said, the Tribunal will not declare [Claimant]’s claims or some of them inadmissible for lack of notice or incomplete notice of the events from which they follow. It will examine in the following chapters whether [Claimant] proves the restraints it was allegedly facing as well as the precise consequences of those restraints.

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Causation in [Claimant]’s claim

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673. The Tribunal recalls [Respondent]’s first reaction to the Statement of Claim which required the Tribunal to reject the claim forthwith because it was presented as a global claim, or to order the Claimant to produce evidence on the details and causes of the costs, i.e. on the quantified causal link. The Tribunal consciously did neither because it was of the opinion that it should at that stage allow the Claimant – as well as the Respondent – to choose how it brought its case, and because the mere fact that the case is a “global” one is no sufficient ground to reject it right away.

674. [Claimant] has itself confirmed that it had to “demonstrate which additional costs were incurred by these breaches” and adds that “We have seen in this regard that the proof of causation was reduced in the sense that only proof of high plausibility was required. This means that [Claimant] is not required to proof [sic] the precise causation between every single fact and the eventual damage incurred as a result, which is for all real purposes, in a case as complex as this, impossible as a matter of practicality to do” ...

675. [Claimant] has furthermore stated, in relation to the standard of proof, that “In certain cases, the federal legislation has provided that the judge may be content with the proof of plausibility of the fact (“Wahrscheinlichkeit”)” and that “This is the case notably with regard to Art. 42 par. 2 SCO concerning the calculation of the damage if the exact amount of the damage cannot be established” ...

676. This Article states:

1. The claimant has to prove his damage.

2. When the exact amount of the damage cannot be established, the judge fixes it equitably taking into account the ordinary course of things and the measures adopted by the victim.

677. [Respondent] denies that this provision applies to anything else than the amount itself of the damage, and in particular that it applies to the causal link between the facts alleged and the damage claimed ...

678. [Respondent] has referred to the Anglo-Saxon literature on global claims, which, as summarized by [Respondent], requires for their admissibility that: “(i) it is impossible or impractical to plead and prove the causal nexus, and (ii) there is no material causative factor for which the defendant is liable”.

679. Swiss law is not basically different as it is accepted that:

There are cases in which by their very nature a direct proof may not be possible. The judge thus bases his convictions on the dominant plausibility (“überwiegende Wahrscheinlichkeit”) of the causation process. Other possibilities must not enter into serious consideration […]. This natural causation on the other hand is not established when other circumstances than those invoked by the victim appear dominant or seriously call into question the determining nature of the causation invoked.2

680. There are thus two main conditions for the admissibility of [Claimant]’s global claim:

1. It was impossible to keep track of the precise consequences of each and every disruptive/delaying event.

2. There were no other dominant or serious causes for the disruption/delay.

681. In relation to the first condition, the Tribunal, having reviewed the evidence, found innumerable notifications by [Claimant] of disruptions caused by [Respondent], following breaches of many different incumbencies of [Respondent] impacting on many different activities of [Claimant] in different phases and geographical parts of the Work. It finds that the number, frequency and overlapping of the disruptions caused by [Respondent] was such that it was impossible or at least unreasonable for [Claimant] to keep accurate records of the precise impact of each of the disruptive events on time and cost of the performance.

682. As regards the second condition, the Arbitral Tribunal will review hereafter the counterclaim of [Respondent] according to which [Claimant] itself caused disruption and delay of the Work. In particular, it will consider whether the failures of [Claimant] were material in order to determine whether [Claimant]’s global claim is admissible in principle and, if it is, what degree of co-responsibility is to be allocated to [Claimant].

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711. [Respondent] fails to induce the Tribunal to reconsider the position adopted after a thorough review of the Claim. The evidence leads to the conclusion that the low productivity of [Claimant] observed on this Project is mainly attributable to [Respondent] and only to a limited extent due to [Claimant] itself.

712. [Respondent] has indeed convinced the Tribunal that [Claimant]’s performance has not been faultless but has not proven that [Claimant]’s failures were material or dominant so as to seriously call into question the determining nature of the causation by [Respondent]’s failures of the extra costs incurred by [Claimant]. Hence, the counterclaim is not of such weight as to render the “global claim” of [Claimant] inadmissible.

713. The causal link between [Claimant]’s failures and [Respondent]’s damage is not specifically proven, and this global claim of [Respondent] must therefore fail as such. However, the Tribunal is willing to accept that some of the delay, albeit a relatively small share, was probably caused by these (minor3) failures of [Claimant]. The Tribunal has no option other than to make a global assessment in percentage terms of the respective responsibility of the Parties and to fix the amount that can offer, on the balance of probability, the nearest to what it considers to be a fair compensation to the Party whose global claim is admissible, because the other Party’s failures were found to be the preponderant cause of the delay and disruption.

Conclusion: allocation of responsibility

714. The Arbitral Tribunal concludes from the study of the file and the above analysis that the Parties have by implicit mutual consent amended the Subcontract by the way they have performed it.

715. The Work was to be performed

- within a specific period of time which [Respondent] knew was possibly too short (as it negotiated – unsuccessfully – about the extra price due to [Claimant] if it had to continue work …) and in respect of which [Claimant] was responsible unless it proved that the delay was due to [Respondent];

- according to a construction programme (Level III Schedule) which was to be built by [Claimant] on the Level II Schedule of [Respondent], which was to comply with a number of substantive criteria, and to be updated regularly and when required;

- with free deliverables to be provided by [Respondent], including drawings and engineering materials, equipment and access to the work sites;

- with intervening activities of other subcontractors whose activities were to be coordinated by [Respondent] in a general construction programme.

716. In reality, it appeared that neither Party created at its level a dynamic programme with a critical path, but that they have both mainly worked with C1/C2 forms stating how many work hours were needed for each task in each period and which were in fact intended to be used to measure progress. When delay occurred, the Parties did not try to agree on the causes thereof, let alone on the responsibility for it. [Respondent] imposed … a Recovery Programme in the form of new C1/C2 forms and also thereafter limited its action to require [Claimant] to make more manpower available. For lack of being frank on the causes of delay, the Parties necessarily failed to take adequate action to redress the situation. Adequate remedies could in any case not be determined in the absence of a proper dynamic programme both at Level II and Level III.

717. In other words, instead of allowing [Claimant] to work towards a binding goal for which it was given the necessary prerequisites by [Respondent] and to otherwise decide in which way it realized the goal, [Respondent] has pushed [Claimant] in a situation where [Claimant] had to perform what [Respondent] dictated: work with the materials and engineering drawings which [Respondent] issued, at the places to which [Respondent] gave it access, whenever these prerequisites were present, and provide workers on site as [Respondent] ordered. The way in which [Respondent] obliged [Claimant] to carry out the Work was more similar to the way in which a company would perform a contract for the hiring of workers. The mere irregularity and delay of the issue of the free deliveries by [Respondent] combined with the repeated instructions to work where and when it could, made it entirely impossible for [Claimant] to follow any rational efficient work programme and could not but lead to horrendous cost increases, without recovering the delay.

718. The Tribunal does not disregard the numerous clauses of the Subcontract which allowed [Respondent], without extra remuneration for [Claimant], to change the delivery dates of materials and equipment, to order a specific sequence of Work, to order an increase in workers or other measures to speed up the Work, and generally to require its subcontractors to be flexible. Such power is necessary for a main contractor to coordinate the Works of its different subcontractors and to adapt performance to certain events as may occur on all sites, and is normal up to a certain limit.

719. This power is not unlimited, however, and can be exercised only to a reasonable degree. It cannot have the effect of fundamentally changing the contract’s nature or of making one party entirely dependent on the whims of the other party. In particular, it may not be used for obliging one party to make good the consequences of the failures of the other party.

720. Thus, [Claimant] had to expect some disruption and delay, and to adapt its programme without extension of time or indemnity, but only within reasonable limits and provided certain conditions were fulfilled as stipulated in various contractual provisions. The Tribunal considers that these reasonable limits have been exceeded in this case.

721. Although both the price and the time of completion necessarily are influenced by such excessive changes, neither of the Parties took care to determine who was responsible for that situation, let alone notified to the other that it considered the other responsible for a specified delay. The innumerable communications between the Parties, in which either of them blames the other for a specific failure and the denying response of the other Party thereto, are not helpful to prove causation.

722. As from [date] [Claimant] started to state that it considered itself entitled to a claim, and strikingly, [Respondent] has not opposed the idea. It has repeatedly indicated that it was prepared to pay damages to [Claimant], but has declined to do so (other than, to a very limited extent, in the form of “advance payments”), as long as, and because [Claimant] only mentioned global figures without ever giving the details of its calculation. At various times during the performance of the Work, the Parties have discussed the (increasing) claims of [Claimant], clearly with the intention, also on [Respondent]’s side, to settle the claim. [Respondent] has agreed several times to increase the so-called “contract value” and to pay an extra advance on it (clearly calculated in a minimalist manner to be on the safe side).

723. It is clear that, throughout the Work, [Respondent] was aware that it owed additional payment to [Claimant], but the stumbling block was always the quantum. Since [Claimant] has submitted the dispute to arbitration, [Respondent] has not only denied all responsibility but argued strongly that [Claimant] has by its own managerial and workers’ incompetence caused the delay and extra costs. And it is a fact that [Respondent], whenever during the performance of the Work it acknowledged the need to consider [Claimant]’s claim, has insisted that the claim valuation would have to exclude the consequences of [Claimant]’s inefficiencies in its management of site organization and daily operation.

724. Thus, this Tribunal has been obliged to review the respective responsibilities of the Parties and has come to the conclusion that both Parties are at fault, although [Respondent] considerably more so than [Claimant].

725. Having found that both Parties bear responsibility for the delay and disruption, but that the responsibility of [Respondent] is very important and that [Claimant]’s responsibility is immaterial, the Arbitral Tribunal concluded that the global claim of [Claimant] must not be dismissed.

726. In which proportion each Party has to bear the consequences of its respective contribution to the delay and the cost increase cannot be determined in detail by the Tribunal for the following reasons:

1. the impact on the time for completion of the Parties’ respective failures has not been noted by either of them during the performance of the Work, and cannot be calculated today by the Tribunal because of the lack of a dynamic programme and appropriate contemporaneous records and documents. This conclusion is supported and confirmed by the fact that the Parties’ experts, who have been during several months under instruction to directly assist the Tribunal, have not succeeded in agreeing on the reconstruction of a dynamic programme which would be capable of accepting and properly analysing the many delays and disruptions that had occurred to determine their effect;

2. even if there was a proper dynamic programme, it would not tell the Tribunal what the cost consequences were of mere disruptions which did not impact on delay but which required adaptation, reorganization and rescheduling and thus generated extra costs; and

3. neither party, and particularly [Respondent], complied with or adhered to the “Guideline for detailed construction schedule preparation”, referred to in Article 4.1.3 of the Subcontract. Both Parties are experienced contractors and ought to have known that retrospective analysis in projects where the techniques required in the above-referenced Guideline have not actually been used during the construction process would result in enormous difficulties and insurmountable problems if and when delay and disruption events arose.

727. The Tribunal feels confident that it may dispense in this case with proof of causation between each and every disruption on the one hand, and the precise delay or costs caused thereby, because the number of disruptions has been so high and because they have been so intertwined.

728. However, since it has been shown by [Respondent] that [Claimant] has also been negligent (although the exact degree cannot be precisely determined), and since [Claimant] has itself admitted that it has loaded resources, be it on the insistence of [Respondent], to a degree where the additional manpower could not be efficient, the Tribunal cannot possibly grant to [Claimant] its full claim. If [Claimant] was under the impression that [Respondent] would compensate it for the resource loading and for the disruptions, this still did not give it a free ticket to put people on the site which would be superfluous under the circumstances because of physical restraints. [Claimant] had a duty to mitigate its damages and the Tribunal has not been shown that [Claimant] made any effort to do so. On the contrary, [Claimant] seems to have been only too happy to oblige to what it has accepted as “instructions” of [Respondent].

729. It is clear that any scientific assessment of the respective responsibility of each Party and its contribution to the total damage is utopian. The Tribunal has to find another assessment method which will necessarily be approximate. The Tribunal can, on the preponderance of the facts, determine the respective responsibility of the Parties for the delay and disruption roughly, on the basis of a percentage allocation. It considers that the respective responsibility of the Parties can, on basis of all the evidence which it has reviewed, be reasonably determined, as follows.

730. In the first place, it should be recalled that both Parties have, by their respective failures, contributed to the overall delay of the Work ([Respondent] in a considerably larger proportion than [Claimant]) and that [Respondent] has disrupted innumerable times and in many different ways [Claimant]’s activities without allowing [Claimant] to reduce its resources. On the basis of these “substantive” respective failures, the Tribunal determines that [Respondent]’s failures account for 85% of [Claimant]’s damage, and that [Claimant]’s failures account for 15%.

731. Secondly, as a result of their respective negligence with regard to programming ([Respondent]’s negligence being primary), the Parties have jointly deprived themselves of a proper tool to determine the consequences of the disruptions on the delay. However, the Tribunal cannot overlook the fact that [Claimant] created through an additional negligence an additional risk to itself: by agreeing to go forward on basis of a defective Level II Schedule, it renounced to have the tool of a proper dynamic programme which it needed badly to calculate and prove the impact of disruptions on the planning and the costs. Without such evidence, it was bound by the contractual deadlines and the contract price.

732. Thirdly, [Claimant] was contractually obliged to give proper notice of any event delaying the works (Art. 4.3 Subcontract) or having an adverse effect on the performance of the work (Art. 17.1.6). These notices had also to mention the expected consequences of the event and failure of notice was sanctioned by inadmissibility of the claim or waiver of all rights. [Claimant] was not justified in believing that the requirements of Articles 4.3 and 17.1.6 would not be applied strictly. Even if the Tribunal has decided … not to apply them strictly and not to declare [Claimant]’s claim inadmissible for this reason, the Tribunal considers it justified to require [Claimant] to bear a larger share in its own damages, as a sanction for its disregard of the contract clauses regarding notices.

733. Fourthly, the Tribunal finds that [Claimant] has the primary and grave responsibility for the fact that this Tribunal does not have more precise records showing the causation. Notwithstanding its contractual and procedural obligation to prove the consequences of [Respondent]’s alleged failures, [Claimant] failed not only to give notice to [Respondent] of its estimate of the possible consequences of the disruptions when they occurred (see preceding paragraph), but also to keep, during or immediately after the disruption, records of their impact on cost and time, and this notwithstanding [Respondent]’s warning … that it would not pay extra compensation unless [Claimant] proved causality in detail. The admissibility of a so-called global claim to which the Tribunal has concluded may not result in a windfall profit for the party who had the burden of proof. The risk that either Party is not treated properly as a result of the Tribunal’s forced use of an approximate allocation of responsibility must be borne by [Claimant] which has in this respect been considerably more negligent than [Respondent]. The fact that [Claimant] has from the beginning adopted a global claim approach has caused every settlement attempt between the Parties to fail and justifies that it may possibly recover less than the damage it might have recovered if it had taken the trouble – and incurred the costs necessary – to account for the consequences of [Respondent]’s failures.

734. Fifthly, the file shows that [Claimant] has not attempted to mitigate its damages but has increased its resources to a level where they were inefficient (see § 728 above). Even if it is accepted that it did so at the request of [Respondent], it could not go along with these requests without protesting against the inefficiency of the measure and explicitly reserving its rights to indemnification. Until very late in the contract, it has failed to do so. The fact that [Claimant] has so incurred useless costs is to be taken into account in the determination of the recoverable share of [Claimant]’s damages.

735. For the above reasons and on basis of its assessment of the evidence available to it, this Tribunal determines that while the share of the Respondent in the responsibility for the disruption and delay of the Work has been determined at 85%, the Claimant can nonetheless recover only 65% of the ensuing costs and shall bear itself 35% of these costs.

736. Consequently, the Claimant will be able to recover 65% of the extra costs4 which it incurred over and above the costs it had to make in any event for the performance of the Subcontract.’

1
Tribunal’s underlining

2
F. Hohl, “Le degré de la preuve”, in Festschrift für Oscar Vogel, Beiträge zum schweizerischen und internationalen Zivilprozessrecht, Fribourg 2001, as quoted by [Claimant]). See also Roland Hürlimann: “Case law in Great Britain generally takes the position that such a ‘total cost claim’ or a ‘global claim’ is generally admissible, but that the contractor will fail completely if the owner manages to demonstrate that other factors (for which the owner is not responsible) had a substantial impact on the amount of the loss. Such factors are, for example, errors in the tender calculation (e.g. prices that are too low) or additional costs that are the contractor’s responsibility (e.g. rectification of insufficient quality, defective equipment, low productivity level due to organizational errors). The same must also apply under Swiss law, as there is no natural causation where under the particular circumstances of the case other possibilities exist that are equally possible or even more likely than the alleged causal chain.” (“Ansprüche des Unternehmers aus Bauablaufstörungen des Bauherrn”, in Gauch’s Welt: Festschrift für Peter Gauch (eds. Pierre Tercier and others), Zürich, Schulthess, 2004, p. 815(840, at p. 837).

3
[Respondent] has not made any allowance for the fact that, in practice any subcontractor may have an organization which is far from perfect, but the failures of which will not have any impact on the completion date. In this case the failures of which [Respondent] complains are not considered of such proven importance that [Claimant] itself must be considered a major cause of delay.

4
Editor’s note: In an addendum to this partial award, in response Respondent’s application for interpretation of ‘extra costs’ as used in this paragraph, the arbitral tribunal ruled as follows: ‘The Arbitral Tribunal … clarifies that the term “extra costs” in paragraph 736 … does not imply a legal determination of the basis of the assessment of the amount to which [Claimant] might be entitled, but was used as a shorthand for “the monetary compensation for additional efforts to which [Claimant] is entitled under Swiss law as a result of [Respondent]’s failures identified by the Arbitral Tribunal in the Partial Award” …’