'J. Decision on jurisdiction and admissibility

254. The first central question to be determined in this Final Award is whether the Sole Arbitrator has jurisdiction over Claimant's claims and whether Claimant's claims are admissible.

255. The Sole Arbitrator rules that she has jurisdiction over Claimant's claims and that Claimant's claims are admissible. Before setting out the reasons for this decision, the Sole Arbitrator will make some preliminary remarks on the terminology used.

I. Preliminary remarks on the terminology used

256. The Sole Arbitrator makes a distinction between jurisdiction and admissibility. As explained during the Hearing …, the Sole Arbitrator endorses the explanation given by the arbitral tribunal in Abaclat and others v. Argentine Republic¹ where it was held:

Although a lack of jurisdiction or admissibility may both lead to the same result of a tribunal having to refuse to hear the case, such refusal is of a fundamentally different nature and therefore carries different consequences:

(i) While a lack of jurisdiction stricto sensu means that the claim cannot at all be brought in front of the body called upon, a lack of admissibility means that the claim was neither fit nor mature for judicial treatment.

(ii) While a decision refusing a case based on a lack of arbitral jurisdiction is usually subject to review by another body, a decision refusing a case based on a lack of admissibility can usually not be subject to review by another body.

(iii) Whereby a final refusal based on a lack of jurisdiction will prevent the parties from successfully re-submitting the same claim to the same body, a refusal based on admissibility will in principle not prevent the claimant from resubmitting its claim, provided it cures the previous flaw causing the inadmissibility.

257. While the award in Abaclat and others v. Argentine Republic was rendered in the context of an investment dispute, the above-mentioned explanation also gives guidance in commercial arbitration. The Sole Arbitrator has decided to follow this terminological distinction and has explained this during the Hearing ...

258. For the avoidance of doubt, the Sole Arbitrator has, however, considered all of the Parties' submissions irrespective of whether the Parties followed this terminological distinction.

II. The Sole Arbitrator has jurisdiction

259. The Sole Arbitrator derives her jurisdiction to decide upon Claimant's claims and Respondent's counterclaims from the Contract, Sub-Clause 20.6 GCC, Clause 20 PCC, and the Appendix to Tender … Read in conjunction, these provisions establish the arbitration agreement concluded between and signed by the Parties, pursuant to which the dispute shall be decided by a sole arbitrator under the Rules with the place of arbitration [the capital city of an East European country].

260. The Sole Arbitrator has noted that Sub-Clause 20.6 PCC refers to an "International Arbitration Court within the Chamber of Commerce and Industry of [the country of origin of the parties and place of performance]" that shall apply "the rules of arbitration of the International Chamber of Commerce". This provision must, however, not be interpreted as a reference to an administrating body other than the Court. Support for this can be found in Article 6(2) of the Rules, which provides:

By agreeing to arbitration under the Rules, the parties have accepted that the arbitration shall be administered by the Court.

261. In any event, neither Claimant nor Respondent has disputed the validity of the arbitration agreement, the governing force of the Rules, or that the arbitration is administered by the Court. The jurisdictional objections raised by Respondent rather pertain to issues of admissibility as will be set forth below (see below,

§ 264 et seq.).

III. Claimant's claims and Respondent's counterclaims are admissible

262. Claimant's claims and Respondent's counterclaims are admissible. They are fit and mature for judicial treatment in the sense of the definition given by the arbitral tribunal in Abaclat and others v. Argentine Republic (see above, § 256).

263. At the outset, the Sole Arbitrator notes that the Parties are in agreement as concerns the admissibility of Respondent's counterclaims.

264. As regards the admissibility of Claimant's claims, in contrast, Respondent has put forward three main objections:

- First, Respondent asserts that Claimant was required to give notice to the Engineer and to await the determination of the Engineer prior to initiating the arbitral proceedings (see 1).

- Second, Respondent asserts that Claimant was required to initiate a DAB procedure against Respondent prior to initiating the arbitral proceedings (see 2).

- Third, Respondent asserts that Claimant was required to settle the dispute amicably before the commencement of arbitration or to wait for a period of 56 days after the notice of dissatisfaction (see 3).

The Sole Arbitrator has come to the conclusion that none of these objections affect the admissibility of Claimant's claims.

1. Claimant was not required to give notice to the Engineer and to await the determination of the Engineer prior to initiating the arbitral proceedings

265. Having carefully assessed the Parties' submissions, the Sole Arbitrator has come to the conclusion that Claimant was not required to give notice to the Engineer and to await the determination of the Engineer prior to initiating the present arbitral proceedings.

<underline>a) Sub-Clause 3.5 GCC does not apply</underline>

266. The Sole Arbitrator finds that Sub-Clause 3.5 GCC does not apply in the case at hand. This follows from the plain wording of Sub-Clause 3.5 GCC which reads:

Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause to agree or determine any matter, the Engineer shall consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances. (Emphasis added)

267. This wording does not support Respondent's assertion that all disputes out of or in connection with the Contract must be referred to the Engineer. Instead, disputes only have to be referred to the Engineer where this is explicitly provided for in the GCC.

268. In the case at hand, there is no explicit provision which would have required Claimant to refer the dispute to the Engineer. Claimant bases its claims including its New Claim on Sub-Clauses 4.2, 11.9 and 14.9 GCC and/or principles of [the applicable] law. None of these legal bases provides that the Engineer shall proceed in accordance with Sub-Clause 3.5 GCC.

269. Although explicitly invited to do so in the Hearing by the Sole Arbitrator, Respondent has failed to adduce any authority which would support Respondent's view that all disputes have to be referred to the Engineer under Sub-Clause 3.5 GCC. Respondent has only made a broad and general reference to the FIDIC General Conditions of Contract, which does not support its position ...

<underline>b) Article 20.1 GCC does not apply</underline>

270. Respondent also relies on Sub-Clause 20.1 GCC. This provision reads:

If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment, under any Clause of these Conditions or otherwise in connection with the Contract, the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. […]

The Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) the extension (if any) of the Time for Completion (before or after its expiry) in accordance with Sub-Clause 8.4 [Extension of Time for Completion], and/or (ii) the additional payment (if any) to which the Contractor is entitled under the Contract.

271. While Sub-Clause 20.1 GCC contains an explicit reference to Sub-Clause 3.5 GCC, the Sole Arbitrator has come to the conclusion that Sub-Clause 20.1 GCC does not apply in the case at hand, either. This is because Claimant neither seeks an extension of time nor an additional payment in the sense of Sub-Clause 20.1 GCC.

272. The fact that Claimant seeks the release of the Retention Money Guarantee does not suffice to trigger the application of Sub-Clause 20.1 GCC. The Retention Money Guarantee constitutes a mere security which had to be returned to Claimant under the terms of the Contract. In contrast, it does not constitute a consideration given in exchange for works performed by Claimant or another form of "additional payment".

273. The fact that Claimant seeks compensation for damages as well as reimbursement of expenses does not suffice to trigger the application of Sub-Clause 20.1 GCC, either. Damages and expenses do not constitute a consideration given in exchange for works performed by Claimant. Given that the damages and expenses may only be determined at the end of the arbitral proceedings, it would also be meaningless to submit these claims to the Engineer prior to initiating arbitral proceedings.

274. Although explicitly invited to do so in the Hearing by the Sole Arbitrator, Respondent has failed to adduce any authority which would support Respondent's view that Sub-Clause 20.1 applies in the case at hand. Instead, Respondent again only made a broad reference to the FIDIC General Conditions of Contract which does not support its position …

<underline>c) Article 20.7 GCC does not apply</underline>

275. The Sole Arbitrator has taken into account that Respondent also relies on Sub-Clause 20.7 GCC. This provision reads:

In the event that:

(a) neither Party has given notice of dissatisfaction within the period stated in Sub-Clause 20.4 [Obtaining Dispute Adjudication Board's Decision],

(b) the DAB's related decision (if any) has become final and binding, and

(c) a Party fails to comply with this decision,

then the other Party may, without prejudice to any other right it may have, refer the failure itself to arbitration under Sub-Clause 20.6 [Arbitration], Sub-Clause 20.4 [Obtaining Dispute Adjudication Board's Decision] and Sub-Clause 20.5 [Amicable Settlement] shall not apply to this reference.

276. The wording of Sub-Clause 20.7 GCC does not support Respondent's assertion that all disputes between the Employer and the Contractor must be referred to the Engineer before they may be referred to arbitration. It deals with questions regarding the DAB decision, not with the Parties' obligations to submit a dispute to the Engineer.

2. Claimant was not required to initiate a DAB procedure prior to initiating the arbitral proceedings

277. Having carefully assessed Respondent's and Claimant's submissions, the Sole Arbitrator has come to the conclusion that Claimant was not required to initiate a DAB procedure prior to initiating the present arbitral proceedings.

<underline>a) Preliminary remarks</underline>

278. The relevant provisions on the DAB procedure are set forth in Sub-Clause 20.4 GCC et seq.:

279. Sub-Clause 20.4 GCC reads:

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. Such reference shall state that it is given under this Sub-Clause.

For a DAB of three persons, the DAB shall be deemed to have received such reference on the date when it is received by the chairman of the DAB.

Both Parties shall promptly make available to the DAB all such additional information, further access to the Site, and appropriate facilities, as the DAB may require for the purposes of making a decision on such dispute. The DAB shall be deemed to be not acting as arbitrator(s).

Within 84 days after receiving such reference, or within such other period as may be proposed by the DAB and approved by both Parties, the DAB shall give its decision, which shall be reasoned and shall state that it is given under this Sub-Clause. The 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. Unless the Contract has already been abandoned, repudiated or terminated, the Contractor shall continue to proceed with the Works in accordance with the Contract.

If either Party is dissatisfied with the DAB's decision, then either Party may, within 28 days after receiving the decision, give notice to the other Party of its dissatisfaction. If the DAB fails to give its decision within the period of 84 days (or as otherwise approved) after receiving such reference, then either Party may, within 28 days after this period has expired, give notice to the other Party of its dissatisfaction.

In either event, this notice of dissatisfaction shall state that it is given under this Sub-Clause, and shall set out the matter in dispute and the reason(s) for dissatisfaction. Except as stated in Sub-Clause 20.7 [Failure to Comply with Dispute Adjudication Board's Decision] and Sub-Clause 20.8 [Expiry of Dispute Adjudication Board's Appointment], neither Party shall be entitled to commence arbitration of a dispute unless a notice of dissatisfaction has been given in accordance with this Sub-Clause.

If 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.

280. Sub-Clause 20.5 GCC reads:

Where notice of dissatisfaction has been given under Sub-Clause 20.4 above, both Parties shall attempt to settle the dispute amicably before the commencement of arbitration. However, unless both Parties agree otherwise, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of dissatisfaction was given, even if no attempt at amicable settlement has been made.

281. Sub-Clause 20.6 GCC reads:

Unless 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. Unless otherwise agreed by both Parties:

(a) the dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce

(b) the dispute shall be settled by three arbitrators appointed in accordance with these Rules, and

(c) the arbitration shall be conducted in the language for communications defined in Sub-Clause 1.4 [Law and Language]

The arbitrator(s) shall have full power to open up, review and revise any certificate, determination, instruction, opinion or valuation of the Engineer, and any decision of the DAB, relevant to the dispute. Nothing shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute.

Neither Party shall be limited in the proceedings before the arbitrator(s) to the evidence or arguments previously put before the DAB to obtain its decision, or to the reasons for dissatisfaction given in its notice of dissatisfaction. Any decision of the DAB shall be admissible in evidence in the arbitration.

Arbitration may be commenced prior to or after completion of the Works. The obligations of the Parties, the Engineer and the DAB shall not be altered by reason of any arbitration being conducted during the progress of the Works.

282. Sub-Clause 20.7 GCC reads:

In the event that:

(a) neither Party has given notice of dissatisfaction within the period stated in Sub-Clause 20.4 [Obtaining Dispute Adjudication Board's Decision],

(b) the DAB's related decision (if any) has become final and binding, and

(c) a Party fails to comply with its decision,

then the other Party may, without prejudice to any other rights it may have, refer the failure itself to arbitration under Sub-Clause 20.6 [Arbitration]. Sub-Clause 20.4 [Obtaining Dispute Adjudication Board's Decision] and Sub-Clause 20.5 [Amicable Settlement] shall not apply to this reference.

283. Sub-Clause 20.8 GCC reads:

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:

(a) Sub-Clause 20.4 [Obtaining Dispute Adjudication Board's Decision] and Sub-Clause 20.5 [Amicable Settlement] shall not apply, and

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

284. Sub-Clause 20.4 para. 6 GCC requires disputes to be submitted to a DAB prior to initiating arbitral proceedings. However, this is, among others, subject to the exception set forth in Sub-Clause 20.8 GCC.

<underline>b) The dispute could directly be referred to arbitration under Sub-Clause 20.8 GCC since there was no DAB validly in place</underline>

285. The Sole Arbitrator has jurisdiction to decide whether or not the exception set forth in Sub-Clause 20.8 GCC is applicable. This includes the assessment of whether or not there was a DAB validly in place, whether by reason of the expiry of the DAB's appointment or otherwise, and what constitutes such otherwise circumstances. According to Sub-Clause 20.6 para. 2 GCC, the arbitrator(s) shall have full power to open up, review and revise any decision of the DAB relevant to the dispute. This "full power" includes the assessment of the preliminary question of whether or not there was a DAB validly in place.

286. The Sole Arbitrator has come to the conclusion that Sub-Clause 20.8 GCC applies in the case at hand and that the dispute could, therefore, directly be referred to arbitration by Claimant.

287. According to Sub-Clause 20.8 GCC, disputes may be directly referred to arbitration if there is no DAB in place.

288. Sub-Clause 20.8 GCC reads:

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:

(a) Sub-Clause 20.4 [Obtaining Dispute Adjudication Board's Decision] and Sub-Clause 20.5 [Amicable Settlement] shall not apply, and

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

289. The Sole Arbitrator finds that there was no DAB validly in place in the given circumstances. While Mr [X] was initially appointed as DAB member (see aa)), Mr [X] lacked the required independence and impartiality when the dispute arose (see bb)). As a consequence, no DAB was any longer validly in place (see cc)). Respondent's counterarguments do not lead to a different conclusion …

aa) Mr [X] was initially appointed as DAB member.

290. It is undisputed that Mr [X] was initially appointed as DAB member.

291. Claimant and Respondent have jointly appointed Mr [X] as DAB member in the Dispute Adjudication Agreement …

292. The Dispute Adjudication Agreement reads in relevant part:

Whereas the Employer and the Contractor have entered into a Contract and desire jointly to appoint [X] to act as the Dispute Adjudication Board (DAB) constituted by one member.

bb) Mr [X] lacked the required independence and impartiality when the dispute arose.

293. The Sole Arbitrator holds that Mr [X] lacked the required independence and impartiality when the dispute arose.

294. The Parties are in agreement that, in principle, a DAB member has an obligation of disclosure and needs to be independent and impartial.

295. The existence of disclosure obligations and the requirement of independence and impartiality are reflected in the General Conditions of Dispute Adjudication Agreement … as referred to in Article 1 of the Dispute Adjudication Agreement …

296. According to Clause 4 lit. c of the General Conditions of Dispute Adjudication Agreement … the DAB member has the following obligation:

The Member shall […] have disclosed in writing to the Employer, the Contractor and the Other Members (if any), before entering into the Dispute Adjudication Agreement and to his/her best knowledge and recollection, any professional or personal relationships with any director, office or employee of the Employer, the Contractor or the Engineer, and any previous involvement in the overall project of which the contract forms part.

297. According to Clause 3 of the General Conditions of Dispute Adjudication Agreement … the DAB member expressly "warrants and agrees that he/she is and shall be impartial and independent" and "shall promptly disclose […] any fact or circumstance which might appear inconsistent with his/her warranty and agreement of impartiality and independence".

298. The Sole Arbitrator notes that such disclosure has to be done to the "best knowledge and recollection" of the DAB member. This implies that where professional or personal relationships exist, all relevant circumstances and details have to be disclosed. Vague or incorrect statements do not qualify for a proper disclosure. Furthermore, a notice of disclosure has to be updated when new facts come to light that would have required disclosure in the original disclosure statement, had they already been known at that time.

299. Having carefully examined all circumstances, the Sole Arbitrator finds that Mr [X] has failed to comply with these disclosure obligations and lacked the required independence and impartiality. The Sole Arbitrator bases its finding on the following facts:

300. On 16 June 2008, Mr [X] made a Declaration of Acceptance and Notice of Disclosure … which reads in relevant part:

I have a personal relationship (wife) with an employee of the Employer. My wife is not in a decision maker position in the Employer's organization.

301. In 2011, Claimant, however, found out that Mrs [X] was the Head of the Claims Disputes and Arbitration Unit of Respondent. The Sole Arbitrator finds that the position as Head of the Claims Disputes and Arbitration Unit is a decision-making position.

302. While it has not been established whether Mrs [X] already assumed this position on 16 June 2008, i.e. at the time when Mr [X] made his Declaration of Acceptance and Notice of Disclosure of 16 June 2008 … it is undisputed that Mr [X] did not update his notice of disclosure prior to the discovery by Claimant.

303. It was only upon Claimant's intervention that Mr [X] made a second disclosure 1½ years later on 17 June 2013 …, in which Mr [X] informed that he had gotten divorced from Mrs [X] and that Mrs [X] was no longer Head of the Claims Disputes and Arbitration Unit of Respondent. The Sole Arbitrator considers that this disclosure was not made timely.

304. Even apart from the violation of disclosure obligations, the Sole Arbitrator finds that Mr [X] lacked the required independence and impartiality at the time when the dispute arose.

305. A DAB member cannot be perceived as impartial and independent if - as in this case - there is a strong personal link to an individual with decision-making authority within one of the parties to a dispute.

306. Such strong personal link existed due to the marriage between Mr [X] and Mrs [X] who held a decision making-position with Respondent.

307. In the view of the Sole Arbitrator, it is immaterial that Mr [X] is no longer married to Mrs [X]. Above all, Respondent has failed to demonstrate that the divorce occurred at a time before the dispute arose. Since the date of the marriage concerned a circumstance within Respondent's sphere, the burden of demonstration and proof rested upon Respondent. Apart from this, a strong personal link may even exist despite a divorce.

308. In the view of the Sole Arbitrator, it is also immaterial that Mrs [X] changed her position within Respondent's organization and has not authority to represent Respondent externally. Above all, the Sole Arbitrator notes that Mrs [X]'s change of position became effective just two days after Claimant had become aware and notified Respondent of Mr [X]'s conflict of interest on 19 September 2011 ...

309. Moreover, Mrs [X] was still named as one of the party representatives of Respondent in Respondent's "Answer to the Request for Arbitration and Counterclaim" dated 16 October 2013 ...

310. Besides, Mrs [X] was mentioned as a party representative of Respondent in paragraph 6 of the Terms of Reference dated 10 January 2014. It was only in the further course of this arbitration that Mrs [X] requested not to send any further communications to her.

311. In addition, Mrs [X] was also involved in two other major arbitration proceedings pending between Respondent and a company pertaining to [Claimant's] group ...

312. In the light of these circumstances, the Sole Arbitrator has come to the conclusion that Mr [X] failed to comply with his disclosure obligations and - from the perspective of a reasonable third party - lacked the required independence and impartiality.

cc) No DAB was any longer validly in place.

313. The Sole Arbitrator finds that due to the violation of disclosure obligations and the lack of independence and impartiality of Mr [X], there was no DAB validly in place when the current dispute arose.

314. The Sole Arbitrator recalls that Sub-Clause 20.8 GCC is drafted in broad terms. It acknowledges that a DAB may not be in place "whether by reason of the expiry of the DAB's appointment or otherwise" (emphasis added). The Sole Arbitrator finds that the term "otherwise" covers situations where a sole DAB member has violated his disclosure obligations and lacks the required independence and impartiality.

315. The Sole Arbitrator finds, first of all, that the violation of disclosure obligations constitutes a breach of Clause 4 of the General Conditions of Dispute Adjudication Agreement … which are referred to in the Dispute Adjudication Agreement ... This breach of contract was referred to arbitration as part of the dispute and can, hence, be decided by the Sole Arbitrator.

316. The Sole Arbitrator further finds that there is a breach of Clause 3 of the General Conditions of Dispute Adjudication Agreement … according to which the DAB member warrants his impartiality and independence and agreed that it shall promptly disclose any fact or circumstance which might appear inconsistent with his warranty.

317. The procedure in case of the DAB member's breach of disclosure obligations and lack of impartiality and independence, including the question of whether the DAB was validly in place, is part of the dispute referred to arbitration and can, hence, be decided by the Sole Arbitrator.

318. As Sub-Clause 20.8 GCC is phrased in broad terms ("or otherwise"), the Sole Arbitrator determines that Claimant was not required to declare a termination of the Dispute Adjudication Agreement … for the purposes of triggering the exception under Sub-Clause 20.8 GCC, which would have been "without prejudice" to the Contractor's other rights (Clause 7 para. 2 of the General Conditions of Dispute Adjudication Agreement). Rather, in a case where the DAB comprises only one single member, the warranty undertaken in Clause 3 of the General Conditions of Dispute Adjudication is of such a fundamental nature that its violation likewise may trigger the exception under Sub-Clause 20.8 GCC.

319. The Sole Arbitrator notes that Claimant repeatedly and even before the dispute arose communicated its view that there was no valid DAB in place, e.g. by letter of 19 September 2011 ... While this letter is phrased in courteous terms as a request for "voluntary withdrawal", it evidences Claimant's understanding that there was no valid DAB in place. Among others, this is reflected in the following statement:

While we hold Mr [X] in high esteem, we consider the apparent conflict of interest to be of such an important nature that it would be inappropriate for Mr [X] to serve as adjudicator in this matter.

320. Claimant repeated its position by letter of 14 June 2013 … and 5 August 2013 … The letter of 14 June 2013 reads in relevant part:

[W]e deem that it is unacceptable and against the principles of impartiality and independence applicable to any member of a dispute adjudication board, for Mr [X] to further act as sole DAB member in connection with any dispute deriving from the Contract.

321. These issues could not be solved among the Parties. Accordingly, Claimant was entitled to refer the dispute to arbitration under Sub-Clause 20.8 GCC.

………

Dispositif

481. Based on the above considerations the Sole Arbitrator issues the following Final Award:

1. The Sole Arbitrator has jurisdiction and Claimant's claims are admissible. …'

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1
Abaclat and others (Case formerly known as Giovanna A Beccara and Others) (Claimants) and The Argentine Republic (Respondent), Decision on Jurisdiction and Admissibility, ICSID Case No. ARB/07/5, 4 August 2011, ¶ 287.

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