'5.1. The binding force of the DAB's decisions

5.1.1. Claimant's position

45. According to the Claimant, the provisions of the General Conditions of the Contract set out the method that the Parties are required to follow in order to resolve their disputes, a multi-tiered method of resolving disputes based on three stages: DAB, amicable settlement and arbitration.

46. In the Claimant's opinion, this multi-tiered procedure contained in Sub-Clause 20.4 to 20.6 of the General Conditions entails mandatory provisions. Sub-Clause 20.6 provides that "[u]nless settled amicably, any dispute in respect of which the DAB's decision (if any) has not become final and binding shall be finally settled by international arbitration".

47. The DAB represents a pre-arbitration procedure, allowing parties to solve their disputes operatively, in order to save time and costs. According to the Claimant, for a DAB to operate successfully, it is essential that any decision by the DAB is implemented immediately.

48. The fundamental basis of the Claimant's position in relation to the binding force of the DAB's decisions is Sub-Clause 20.4 of the General Conditions, fourth paragraph, which states that "[t]he DAB decision shall be binding on both Parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award ...". When entering into the Contract, the Claimant could not doubt that the will of the Parties was that the DAB's decisions would be binding with immediate effects.

49. According to the Claimant, when a timely notice of dissatisfaction is given, the DAB's decision does not become final but does remain binding and must be complied with. The DAB's decision is therefore, according to the Contract, binding ab initio and will be final only if a notice of dissatisfaction is not issued in 28 days (Sub-Clause 20.4 of the General Conditions).

50. Since the DAB's decisions are binding ab initio, the Parties are required to act in compliance thereof as an expression of the principle of pacta sunt servanda, regardless of whether or not any notice of dissatisfaction has been submitted.

51. According to the Claimant, the Respondent would have recognized this binding force when stating in its letter … that "[a]lso, a DAB Decision is binding for the parties, so after obtaining a DAB Decision, the parties should execute it" …

52. The legal basis of the Claimant's claims is found in [the relevant provisions of the applicable law], which encompass the pacta sunt servanda and good faith principle, respectively.

53. In the present case, according to the Claimant, the Contract contains mandatory provisions regarding the manner in which either or both Parties can pursue their claims in arbitration by way of a multi-tiered dispute resolution mechanism. The Respondent's failure to pay the sums ordered by the DAB in the DAB's decisions constitutes a breach of contract.

54. Moreover, acting in "good faith" implies an obligation of cooperation between the contracting Parties, which means that they have the duty to facilitate the contract's performance by always seeking to protect the balance of the contract.

55. Taking into account these [applicable] legal principles, it would be in accordance with [the applicable] law for the DAB's decision to have effect.

5.1.2. Respondent's position

56. According to the Respondent, the Contract provides a clear enforcement mechanism in Sub-Clause 20.7 to enforce a DAB's decision in circumstances in which no notice of dissatisfaction is given. On the contrary, there is no enforcement procedure set out in the Contract that provides for a party to enforce a DAB decision in circumstances in which a notice of dissatisfaction has been issued.

57. The Respondent alleges that the final paragraph of Sub-Clause 20.4 makes it clear that a DAB's decision is only final and binding if neither party issues a notice of dissatisfaction in time regarding that decision. Conversely, if a notice of dissatisfaction is given, the DAB's decision will not be final and binding on the Parties. In this case, both Parties issued notices of dissatisfaction in relation to the DAB's decisions.

58. The whole purpose of a notice of dissatisfaction is to enable a party who is dissatisfied with the DAB's decision to refer that issue to arbitration.

59. According to the Respondent, that purpose would be undermined if the Sole Arbitrator was to enforce the DAB's decision without taking into account the underlying merits of the dispute.

60. The Respondent submits that the wording in the second sentence of the fourth paragraph of Sub-Clause 20.4 ["The DAB decision shall be binding on both Parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award as described below"], only applies to DAB's decisions that are "final and binding" (i.e. decisions in which no notice of dissatisfaction is issued).

61. For the respondent, it is relevant that the General Conditions do not contain express wording to enable enforcement in both scenarios ("binding" and "final and binding" DAB's decisions). In contrast, by way of example, the FIDIC Golden Book contains such wording: "20.9 Failure to comply with the Dispute Adjudication Board's Decision. In the event that a Party fails to comply with any decision of the DAB, whether binding or final and binding, then the other Party may, without prejudice to any other rights it may have, refer the failure itself to arbitration under Sub-Clause 20.8 [Arbitration] for summary or other expedited relief, as may be appropriate…"

62. Consequently, the Respondent states that there is no contractual basis for the arbitrator to enforce a DAB's decision in circumstances in which a notice of dissatisfaction has been issued and that therefore the Arbitrator should dismiss the claims and refuse to make the declarations sought.

5.1.3. Sole Arbitrator's decision

63. It is undisputed that DAB's decisions were issued on 11 February 2007, 29 March 2007 and 1 December 2008, related respectively to Claims 7, 11 and 14. It is also undisputed that that the Respondent issued notices of dissatisfaction in relation to all DAB's decisions on 7 March 2007 … 6 April 2007 … and 22 December 2008 … and that the Claimant issued a notice of dissatisfaction on 8 December 2008 … in relation to the 1 December 2008 DAB's decision.

64. The General Conditions of the Contract entered into by the Parties foresee a multi-tiered dispute resolution procedure which comprises five steps:

1) Any dispute between the Parties in connection with or arising out of the Contract may be referred to the DAB for its decision (Sub-Clause 20.4, first paragraph);

2) The DAB gives its decision within 84 days;

3) The Parties react to the decision of the DAB: either both Parties are satisfied with that decision, in which case the dispute is resolved and such decision becomes "final and binding", or at least one of the Parties notifies the other of its dissatisfaction with its content within 28 days (Sub-Clause 20.4, fifth paragraph);

4) If a notice of dissatisfaction is given, the Parties shall attempt to settle the dispute amicably (Sub-Clause 20.5);

5) If the Parties fail to reach an amicable solution, the dispute may be referred to international arbitration (Sub-Clause 20.6).

65. In relation to the DAB's decision, the fourth paragraph of Sub-Clause 20.4 of the General Conditions of the Contract stipulates that "[t]he DAB decision shall be binding on both Parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award as described below" (emphasis added).¹

66. Furthermore, it also stipulates that "[i]f the DAB has given its decision as to a matter in dispute to both Parties, and no notice of dissatisfaction has been given by either Party within 28 days after it received the DAB's decision, then the decision shall become final and binding upon both Parties".

67. Therefore, the General Conditions differentiate between a DAB's decision which is binding unless revised and a DAB's decision which is binding and final.

68. The General Conditions give immediate binding force to any decision rendered by the DAB, although the same would not be final until the time to submit a notice of dissatisfaction has lapsed, without the issuance of such notice.

69. If a notice of dissatisfaction is given, the DAB's decision is still binding and must be complied with, notwithstanding that such decision is not final and may be reversed in arbitration. The terms of the contract are very clear in this sense: the parties "shall promptly give effect to it [the DAB's decision]".

70. This effect is consistent with the practical purpose of such a multi-tiered mechanism: to provide means of resolving disputes, within a short period of time, in the first instance to enable the project to continue, even if, following arbitration, the result may be modified. The immediate binding force of the DAB's decision allows disputes to be settled at least on an interim basis, and allows work to continue until completion. Opportunity still remains, if a notice of dissatisfaction is given, for the dispute to be finally resolved by amicable settlement or arbitration proceedings.

71. In the present case, the DAB's decisions are therefore binding as a matter of contract, although they are not final, as notices of dissatisfaction have been submitted by both Parties. The DAB's decisions enjoy this binding character unless and until revised by the final award to be issued by the Sole Arbitrator.

5.2. The enforceability of the amounts awarded by the DAB

………

5.2.3. Sole Arbitrator's decision

97. The binding force of the DAB's decisions having been established, we now address the Claimant's request for a partial award ordering the Respondent to pay the sums adjudicated by the DAB.

98. [The applicable law] stipulates that: "the parties may, by their arbitration agreement, or by a subsequently concluded written deed, either directly or with reference to a determined set of arbitration rules, establish norms with regard to (...) the content and form of the arbitral award and, generally, any other norms with regard to the orderly proceeding of the arbitration" …

99. The Parties have agreed, as reflected in the Terms of Reference, section 6, to a bifurcation of the proceedings. They have also agreed and therefore empowered the Sole Arbitrator to decide on certain issues in this preliminary phase of the proceedings.

100. This empowerment includes the issuance of this Partial Award.

101. However, it is necessary to briefly analyse the meaning and consequences of the partial award requested by the Claimant. The decision sought by the Claimant is an award that finally disposes of part of the dispute. Claimant has stated, and Defendant has not denied, that [local] courts would not enforce temporary or provisional measures. Consequently, the partial award should be final on the issue decided. The Claimant has insisted on this point. The application of Art. 23 of the ICC Rules of Arbitration was thus excluded by the Claimant …

102. Coming back to the DAB's decisions, if it is true that they are binding, it is also true and not denied by the Claimant that these decisions are not final. Indeed, the Sole Arbitrator is requested to revise the DAB's decisions. Consequently, any payment ordered by the Sole Arbitrator at this stage would not be definitive, but temporary or provisional, as both Parties are asking the Sole Arbitrator to open up, review and revise the DAB's decisions on which such payments are based.

103. I have already decided that the DAB's decisions are binding and, therefore, the sums recognized under those decisions are due and payable by the Respondent to the Claimant until the revision of the decisions in the Final Award. Sub-Clause 20.4 IV of the General Conditions reflects this principle: "The decision shall be binding on both Parties, who shall promptly give effect to it unless and until it shall be revised in (...) an arbitral award (...)". An award declaring them to be binding as a matter of contract is thus possible.

104. The Respondent has indeed recognized this in its letter … and has paid part of the sums awarded by the DAB's decision in relation to Claim 11, although it had served a notice of dissatisfaction …

105. The binding force of the DAB's decisions from the moment in which they are rendered until revised by an arbitral award is a conclusion that it is not subject to subsequent revision in the Final Award and, therefore, it can be declared in a final partial award.

106. On the other hand, the DAB's decisions are not final and any payment awarded by those decisions may be revised and reversed. Therefore, the Sole Arbitrator cannot issue any final award ordering the payment of the sums decided by the DAB. By necessity, the payment ordered should be provisional or temporary. The partial award requested cannot definitively determine the payment issues and, consequently, any order for payment at this stage must be provisional. It goes against the essence of a final award to make an order that could be revisited and reversed in a further award. The fact that the award only deals with part of the dispute, and is thus "partial", does not change this conclusion.

107. The Sole Arbitrator could render an interim award ordering payment subject to subsequent revision and, thus, only of temporary or provisional character. However, the Claimant expressly requests a partial award which is final on the matters decided and excludes an interim award.

108. In conclusion, the payments awarded under the DAB's decision will be revisited by the Sole Arbitrator and cannot be the subject of a final partial award and again the subject of the final award. As the Claimant has expressly stated that it is not applying for an interim award, this issue will only be dealt with in the Final Award.

………

Partial Award

For all the reasons set out above, the Sole Arbitrator decides to:

1) Declare that the DAB's decisions of 11 February 2007, 29 March 2007 and 1 December 2008 are binding unless and until they are revised by the Sole Arbitrator in its Final Award;

2) Declare that the amounts decided by the DAB on 29 March 2007 and 1 December 2008 … are due and payable by the Respondent to the Claimant unless and until they are revised by the Sole Arbitrator in its Final Award …'

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1
The words "as described below" simply refer to the procedure envisaged for steps 4 (amicable settlement) and 5 (arbitration).

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