'VI. Admissibility of claims

38. The Arbitral Tribunal has been asked by Respondent to determine whether the dispute resolution mechanism in the Contract, which contemplates the intervention of an Engineer and Dispute Resolution Board ("DAB") in claims and disputes about the Contract has been complied with and, if not, whether the Claimants' claims are inadmissible.

39. The Arbitral Tribunal has carefully considered the positions of the Parties on the relevant issues as set forth in their written memorials and in exhibits. Based on these submissions, the Arbitral Tribunal has provided the following analysis and decision:

A. Notice of claim to Engineer

40. It is common ground between the Parties that the Contract includes the FIDIC General Conditions and that in order to have the right to bring a dispute before a DAB a claim must first be notified to the Engineer.

41. Sub-Clause 20.1 of the FIDIC General Conditions provides:

If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment … the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.

42. Sub-Clause 20.1 also provides:

Within 42 days after the Contractor became aware (or should have become aware) of the event or circumstance giving rise to the claim … the Contractor shall send to the Engineer a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed.

43. On May 21, 2008, Claimants gave the appointed Engineer written notice claiming the right to a price increase, time extension for performance and evidence of financial arrangements ... Claimants did not provide the details of its claim but referred to a previous discussion on this issue with the Engineer.

44. The Engineer responded by acknowledging a familiarity with the claims based on previous discussions and correspondence, but he refused to address the issues without substantiating materials.

45. In two additional letters transmitted on July 22, 2008 and August 21, 2008, Claimants renewed their request for a full accounting of financial arrangements ... They did not answer the Engineer's request for substantiating materials or provide these materials to the Engineer.

46. In its memorial ... Respondent considers that the Engineer's failure to respond to Claimants' claims prevented it from moving forward with their claims. According to the Respondent, the Engineer's decision constitutes a necessary step in the dispute resolution mechanism, and Claimants could not proceed until a decision was notified.

47. In support of its argument, Respondent references "The Arbitration Clause in the FIDIC Contracts for Major Works" by Christopher Seppälä ... In particular, Respondent relies on Mr Seppälä's opinion that while the 1999 edition of the FIDIC General Conditions replaced the Engineer with the DAB as adjudicator of disputes, the Engineer still retains a role in the evolution of a dispute.

48. The Tribunal agrees with this understanding but only to the extent that the Engineer must be involved at an early stage in the dispute resolution process. In the first instance, the requesting party must have filed a claim with the Engineer. On the other hand, the Tribunal does not consider that a decision must actually have been issued by an Engineer before the requesting party can move forward to the next step in the dispute resolution process. The Tribunal needs to determine whether Claimants duly presented a claim to the Engineer in accordance with the Contract.

49. While it is established that Claimants brought a claim to the Engineer on May 21, 2008, Claimants failed to provide the information and evidence requested by the Engineer. This raises the question whether the submission of claims to the Engineer was valid in accordance with Sub-Clause 20.1 of the FIDIC General Conditions.

50. The Tribunal observes that there is nothing in the FIDIC General Conditions to the effect that if a party fails to provide information or evidence requested to support its claim to an Engineer, the claim will be null and void or treated as though it never existed. The fact that Claimants failed to substantiate their claim does not mean that they failed to start the mechanism for obtaining the Engineer's decision.

51. The Tribunal also notes that Sub-Clause 20.1 of the FIDIC General Conditions provides that unless alternate arrangements are made an Engineer shall respond to claims within 42 days of receipt of claims or supporting materials:

Within 42 days after receiving a claim or any further particulars supporting a previous claim, or within such other period as may be proposed by the Engineer and approved by the Contractor, the Engineer shall respond with approval, or with disapproval and detailed comments. He may also request any necessary further particulars, but shall nevertheless give his response on the principles of the claim within such time.

52. Under this provision, the relevant 42-day time period will start to run after a claim is made or the last transfer of supporting evidence is received. This means that if after having filed its claim a claimant provides further information or evidence, the 42-day time period will start to run again. However, this does not necessarily entail that the time period in question must be suspended or extended in the event that a claimant should fail to provide supporting information or evidence. The text does not support that interpretation.

53. In this case, more than three-and-a-half months passed from the time Claimants provided notice of their claims and the time they asked Respondent to appoint a DAB. During this time the Engineer did not address the claims raised by Claimants. Therefore, the 42-day period for the Engineer to provide its decision had long expired by the time the disputes were referred to arbitration.

54. As a procedural matter, assuming that Respondent would have the Tribunal refer the matter back to the Engineer, relief it does not expressly request, the Tribunal believes that an order to this effect would be inconsistent with the FIDIC General Conditions.

55. Although they disagree about the exact date of termination, the Parties agree that the Contract has terminated. There is therefore no contractual basis for re-establishing the mandate of the Engineer leaving no mechanism by which the Engineer could be consulted.1

56. In any event, it seems that the position taken by Respondent renders this course unnecessary. In its memorial ... Respondent writes, "(t)he failure of an amiable settlement and the fact that the Engineer requested detailed information regarding the claims aroused should have lead the Claimants to the conclusion that a dispute has appeared and consequently to proceed with the appointment of a DAB."

57. Respondent's view that this dispute was ripe for referral to a DAB seems to imply that a decision by the Engineer was not required.

58. In sum, the Tribunal considers that there is no contractual support for the position that Claimants' failure to provide substantiating materials to the Engineer should prevent Claimants from proceeding to the next step of the dispute resolution procedure.

B. Respondent's Admissibility Objection 2

59. As a preliminary matter, the Arbitral Tribunal notes that it rules by majority pursuant to Article 25(1) of the Rules.

60. Sub-Clause 20.4 of the FIDIC General Conditions provides:

If a dispute (of any kind whatsoever) arises between the Parties in connection with, or arising out of, the Contract or the execution of the Works, including any dispute as to any certificate, determination, instruction, opinion or valuation of the Engineer, either Party may refer the dispute in writing to the DAB for its decision, with copies to the other Party and the Engineer.

61. The Tribunal affirms that under normal circumstances referral of a dispute to a DAB is a condition precedent to arbitration.

62. Sub-Clause 20.8 of the FIDIC General Conditions, however, provides an exception to this principle:

If a dispute arises between the Parties in connection with, or arising out of, the Contract or the execution of the Works and there is no DAB in place, whether by reason of the expiry of the DAB's appointment or otherwise:

(b) the dispute may be referred directly to arbitration under Sub-Clause 20.6 [Arbitration]. (emphasis added)

63. In the event that there is no DAB in place, it is therefore proper for a claimant to refer a dispute to arbitration. The broad scope of the right of a party to resort to arbitration if no DAB is in place - noting, in particular, the qualifier "or otherwise" - strongly suggests that Claimants were under no obligation to submit their dispute to a DAB.

64. However, the Tribunal believes that the mere fact that a DAB has not yet been appointed may not always permit a party to bypass resort to a DAB. The Tribunal should account for the specific facts of this case, and examine, in particular, the circumstances or reasons for which the parties did not constitute a DAB.

65. On June 25, 2008, Claimants wrote to the Engineer and Respondent requesting the appointment an adjudicator in order to constitute a DAB ... Respondent gave no answer to the request, and no DAB was established.

66. The Tribunal acknowledges, as an initial matter, that Claimants could have appointed a DAB without the cooperation of Respondent by application of 20.3 of the FIDIC General Conditions. On the other hand, the Tribunal does not consider that Claimants had the sole responsibility to constitute a DAB. They shared this responsibility with the Respondent.

67. This conclusion is supported by the Contract. The Appendix to Tender, which calls for the appointment of a DAB within 28 days of a request for adjudication, does not specify which party is responsible for appointing the DAB. 2 In the absence of such a provision in the Appendix to Tender, reference should be made to Sub-Clause 20.2 of the FIDIC General Conditions. Sub-Clause 20.2 states that the parties "shall jointly" appoint a DAB. (emphasis added)

68. Claimants attempted to initiate the process of establishing a DAB with Respondent. In their letter of June 25, 2008, Claimants suggested three options for appointing the sole member of the DAB. This shows that Claimants were willing to constitute the DAB and proceed to engage it on their claims. It further shows that there was no deliberate attempt on the part of Claimants to hinder the process of constituting the DAB or to bypass this dispute resolution mechanism.

69. As it happened, Respondent did not respond to Claimants' letter, and the process of appointing the DAB was left unfinished. Respondent now claims that a DAB should have been established in the first place, and the failure to establish a DAB prevents the claims from being admitted in this arbitration. The Tribunal, however, considers that to support such a position, Respondent should have participated in the constitution process or should at least have expressed some interest in the constitution of the DAB at the time that the dispute was ready to be submitted to adjudication.

70. At the time that the claim arose, Respondent could easily have avoided the application of Sub-Clause 20.8 which gave rise to this arbitration. It may have constituted a DAB itself to resolve the disputes between the Parties with or without the cooperation of Claimants. Respondent's failure to exercise diligence or even express interest in appointment of a DAB when asked to jointly proceed means that Respondent is now prevented from demanding enforcement of the DAB procedure.

71. The Tribunal notes that Claimants' letter seeking the joint establishment of a DAB was directly addressed to the Engineer and not to Respondent. However, Respondent was identified as an addressee in the correspondence, and the letter was transmitted to Respondent. Moreover, the Tribunal notes that Respondent has not endeavored to challenge this point. This seems to suggest that they considered themselves an addressee. Indeed, Respondent identifies the letter as "correspondence submitted to the Respondent" in its memorial ...

72. In these circumstances, there is no factual or legal basis for setting aside the rule set forth by Sub-Clause 20.8.

73. Furthermore, the Parties agree that the Contract has terminated and so the mandate of the DAB contemplated in the Contract has now lapsed.

74. In support of its claim, Respondent references the aforementioned article "Introduction of FIDIC Dispute Adjudication Provisions". Respondent quotes the article in its memorial:

There may be no DAB in place due to the expiry of its appointment or by any other reason such as non agreement of its constitution due to the intransigence of one of the parties. In some cases, although the DAB may have ceased to exist due to the termination of its appointment period, however its reconstitution on an ad hoc basis may be considered to be a reasonable forum within which any dispute may be resolved, avoiding unnecessary delay and expense. ...

75. Respondent draws the conclusion that the circumstances for bypassing the DAB procedure are narrow. Because Respondent, on the same page of the memorial, opines that arbitration is only possible after completion of the DAB phase, this quote might also be read to support the appointment of an ad hoc DAB to hear the claims now before this Tribunal.

76. The Tribunal notes that Mr Owen states that a DAB may not be in place because of the intransigence of a party. He does not, however, link this observation to his comment about the constitution of an ad hoc DAB. He contemplates the appointment of an ad hoc DAB in "some cases" in which a DAB that has already been constituted ceases to exist. No DAB was ever constituted between the Parties to this arbitration.

77. Mr Owen also identifies the avoidance of unnecessary delay and expense as reasons to constitute an ad hoc DAB. The Tribunal notes that the efficiencies Mr Owen contemplates would not naturally flow from a referral to an ad hoc DAB on our facts.

78. The arbitration is underway, and the Tribunal has already received three written submissions from each party. If the arbitration were derailed the Parties would have to start the dispute resolution process over. This process would be complicated by the facts that there is no DAB in place and no mechanism in the FIDIC General Conditions providing for the constitution of an ad hoc DAB after termination of a contract where no DAB was ever appointed during the performance period.

79. The process would not necessarily involve cost savings. The Parties would have to pay the DAB adjudicators. An unfavourable result to the Claimants would probably be referred back to arbitration, and Respondent might follow the same course were it unsatisfied with the decision. This is especially likely because the project has halted, the Contract has terminated and the positions of the parties have hardened. There would be no reason to follow the DAB's recommendation for the sake of getting past the disagreement and resuming performance, which is the recognized purpose of DAB's. Referral to an ad hoc DAB would therefore be likely to result in an increase, rather than a savings, in costs to the Parties.

80. For the same reasons, a retrogressive referral to an ad hoc DAB would likely lengthen the proceedings. This plainly militates against any potential efficiency envisaged by Mr Owen.

81. In sum, the Tribunal holds that Respondent has forgone its right to insist on the appointment of a DAB because it ignored Claimants' attempt to appoint a DAB during performance of the Contract. As a result, the Tribunal decides that Claimants are entitled to resort directly to arbitration pursuant to Sub-Clause 20.8 of the FIDIC General Conditions.

VII. Decision

For the foregoing reasons, the Arbitral Tribunal hereby concludes, as a majority, that Claimants' claims are admissible. All remaining issues, including costs arising from the present Award, are reserved for one or more further awards.'

1
This conclusion finds support in the article by Mr Owen provided by Respondent ... Mr Owen writes: "The DAB procedure was conceived as a method of primary dispute resolution. Thus the procedures should facilitate prompt reference of disputes to the board as soon as job level negotiations have reached an impasse. Referral to the board only after multiple levels of Employer and Contractor reviews is inconsistent with the process and counterproductive in terms of time and expense."

2
The Tribunal notes Article 1.5 of the Section 2 Particular Conditions of Contract which provides that the Appendix to Tender has priority over the General Conditions …