20-21 September 2018, Tbilisi, Georgia

Day 1

By Yasemin Çetinel, Founder of Çetinel Law Firm, Istanbul

The first day of the conference opened with an extremely distinguished panel comprising of Thea Tsulukiani (Minister of Justice of Georgia), Nino Bakakuri (Georgian Supreme Court Judge), Fady Asly (Chair, ICC Georgia) and Lasha Nodia (Deputy Chair,Georgian Association of Arbitrators). The introductions were kindly carried out by the conference co-chairs Christopher Seppälä (Partner of Counsel, White & Case LLP, France; FIDIC’s Observer, ICC International Court of Arbitration; Member, ICC Institute of World Business Law; Legal Advisor, Contracts Committee, FIDIC) and Ziva Filipic (Managing Counsel, ICC International Court of Arbitration, Paris). The emphasis was made on the rising trend of arbitration as alternative dispute resolution method in Georgia as well as the construction sector’s rapid development also in light of the neighboring regions infrastructure projects, including Road and Belt Initiative.

An introduction to FIDIC and its forms of contract, including the new 2017 Suite of Contracts

Members of panel: Aisha Nadar (Senior Consultant, Procurement Management and Dispute Resolution, Advokatfirman Runeland, Sweden; Member, FIDIC Executive Committee and Chair of Procurement Policy Sub-Committee) and Ellis Baker (Head of Construction & Engineering Practice Group, White & Case, United Kingdom).

Ms Nadar firstly addressed structure and history of FIDIC organization which was founded in Brussels in 1913 as national association of independent consulting engineers of three founder states (Belgium, France and Switzerland), also referring to member associations, executive committee, secretariat in Switzerland and standing committees of FIDIC.1 She then in turn explained the FIDIC Procurement Procedures Guide (First edition, 2011) with specific emphasis on the use of the correct standard form of FIDIC conditions of contract within the context of procurements. Ms Nadar then discussed a number of the sources for the revision of FIDIC Rainbow Suite published in December 2017, such as contract users’ and reviewers’ feedbacks as well as the international state of the market.

Ellis Baker’s presentation provided a snapshot of the new FIDIC Contracts Suite and discussed the differences with the previous editions of contracts. Mr Baker explained some of the salient features of the FIDIC 2017 series, such as the more descriptive terms, a collaborative approach for the parties, and the specific and enhanced proactive role of the Engineer. He noted that much study and work has to be done in order to establish a proper implementation of the new series as they bring a far more detailed FIDIC standard rather than simplifying the content.

Dispute boards in action: A mock dispute avoidance and adjudication board (DAAB)

Members of panel: Murray Armes (Founder and Managing Director, Sense Studio, United Kingdom), David Brown (Partner, Clyde & Co., France; Council Member, ICC Institute of World Business Law; FIDIC President’s List of Adjudicators), Alina Leoveanu (Manager, ICC International Centre for ADR, Paris), Frederic Gillion (Partner, Pinsent Masons LLP, France), Yasemin Çetinel (Founding Partner, Çetinel Law firm, Turkey) and Aisha Nadar (Senior Consultant, Procurement Management and Dispute Resolution, Advokatfirman Runeland, Sweden; Member, FIDIC Executive Committee and Chair of Procurement Policy Sub-Committee).

The panel consisted of a briefing section and mock-play section. In the briefing section Ms Nadar and Ms Leoveanu summarized the FIDIC 2017 Suite dispute resolution provisions which include a DAAB, amicable settlement and arbitration, also referring to pre-dispute phase comprising of procedural claim stages through Contractor’s request and subsequently engineer’s determination. Emphasis was made to the general obligations of DAAB members, such as being and remaining impartial and independent, being knowledgeable in the specific part of the work and being available for informal assistance, among others.

The session then proceeded with the mock-play session with speakers acting as DAAB members, employer representative and contractor representative. A DAAB hearing was set with a background dispute story and information provided to the audience. The hearing was opened by the chair and both parties made presentations on the dispute. The structure was designed so as to demonstrate that, even in a DAAB hearing, the DAAB may have a facilitator role and even a preventative role for escalation of the dispute. Indeed, the parties reached a procedural agreement on the dispute during the mock hearing. Panellists stressed that dispute board (DB) proceedings are not to be turned into mini-arbitrations as DBs are designed for effectiveness at real time.

The dispute avoidance provisions of the 2017 FIDIC Contracts

Members of panel: Murray Armes (Founder and Managing Director, Sense Studio, United Kingdom), David Brown (Partner, Clyde & Co., France; Council Member, ICC Institute of World Business Law; FIDIC President’s List of Adjudicators), and Aisha Nadar (Senior Consultant, Procurement Management and Dispute Resolution, Advokatfirman Runeland, Sweden; Member, FIDIC Executive Committee and Chair of Procurement Policy Sub-Committee).

This panel examined the role and practice of dispute avoidance in detail, particularly in construction projects.

Mr Armes speech focused on the role of the parties in the new FIDIC Suite of Contracts whereby a more active involvement is established for all parties (including early warning mechanism) and the power of the engineer is increased rather than weakened. A fairer risk allocation is contemplated in the new FIDIC Suite of Contracts between the employer and the contractor. It was also highlighted that the 2017 Contracts clarified the differentiation between a ‘claim’ and a ‘dispute’ (Clause 21); while a claim is for making a request for entitlement, a dispute arises when a claim is rejected in whole or in part.

Mr Brown firstly stated that the new FIDIC Contracts adopted the standing DB as a norm which is indeed in line with the spirit of the DB mechanism; they should be used as real time project players rather than mandatory pre-arbitration tools that parties only consider as an obligation to exhaust. Mr Brown also touched upon one criticised provision of the new FIDIC; the reference to arbitration after the notice of dissatisfaction to a DB decision and if the parties are obliged to continue with arbitration following the notice of dissatisfaction.

The ICC Emergency Arbitrator in construction disputes

Members of panel: Philippe Cavalieros (Partner, Simmons & Simmons LLP, Paris), Eva Kalnina (Counsel, Lévy Kaufmann-Kohler, Geneva) and moderated by Ziva Filipic (Managing Counsel, ICC International Court of Arbitration, Paris).

The last session of the day discussed a hot topic in construction projects such as injunction requests such as freezing orders for bank guarantees are heavily debated core issues in any given construction dispute. Ms Filipic provided a detailed overview of the ICC emergency arbitrator mechanism which entered into force as of 2012. With over 80 emergency orders rendered in an average of 16 days and a majority of users from the construction and energy sector, the presentation enabled the audience to spot the mechanism in action as well as its future potentials.

Panellists also had the opportunity to discuss drawbacks or at least obstacles of the mechanism as well. Enforceability of any emergency arbitrator decision is the major problem for the practice to be established and reach its real potential. The panellists described the different approaches of different jurisdictions on the enforceability issue, and provided an insight of any developments, which was a unique opportunity for the audience to reflect on the status in their own jurisdiction. Day 1 closed with a reference to the ICC Commission Task Force and its forthcoming report on Emergency Arbitration Proceedings.

Day 2

By Nina Tsaturova, Associate at Law Firm Nodia, Urumashvili and Partners, Tbilisi

Contract and claims administration in FIDIC Contracts

Members of the panel: Levent Irmak (Founder and Managing Partner, MC2 Modern Construction Consulting, Turkey; Member, Dispute Resolution Board Foundation ‘DRBF’) and Simon Worley (Managing Director, Environmental Infrastructure Associates Ltd.; Member, FIDIC Sub-Contract Task Group, United Kingdom).

The panellists discussed claim avoidance under the FIDIC Conditions, with a focus on the enhanced claim provisions in the 2017 Suite of FIDIC Contracts, the role of the Engineer, requirements for notices of claim, time bar provisions, and the best ways of preventing claims from becoming disputes.

Simon Worley opened the discussion exploring the role of the Engineer. Mr Worley noted that even though the basics of construction have not really changed, the complexity surrounding the administration of contract has increased and such complexity is reflected in the new FIDIC Suite. The manner in which the forms require the Engineer to administer the Contract has become more prescriptive. The 2017 FIDIC Suite of Contracts emphasise the Engineer’s important role in resolving claims of all types without recourse to formal dispute proceedings. To highlight the key changes in the 2017 editions compared to the 1999 editions, he discussed the claims and determination clauses as two examples.

The next panellist, Levent Irmak thoroughly discussed the claims provisions under the 2017 FIDIC Conditions. He noted that the notice, claim process and time-bar provisions are also more prescriptive in the Second Editions of FIDIC Contracts. Emphasis was made on the fact that the 2017 FIDIC editions clarified the difference between a ‘claim’ and a ‘dispute’ by proposing definitions of both concepts. Mr Levent stated that, under the new FIDIC Suite, the Engineer should be well-equipped with sufficient knowledge and staff to administer the Contract.

Mr Worley wrapped up the session and advised on the best practices in order to prevent claims from becoming disputes. Recommendations included that parties should submit claims upon genuine entitlement, fully substantiate the claims, and strictly follow notices and other contractual requirements. The necessity to communicate clearly between the parties and the Engineer from the moment a claim notice has been issued was particularly stressed.

Liability issues during the life of the project in construction disputes

Members of the panel: Valéry Denoix de Saint Marc (Partner, August Debouzy, France), Karen Gough (Barrister and Arbitrator, Member of 39 Essex Chambers, United Kingdom), and Ana Kavtaradze (Director, Trade Finance Department, Bank of Georgia, Georgia; Member, ICC Banking Commission Executive Committee), moderated by Daduna Kokhreidze (President, Georgian Association of Consulting Engineers; Partner, Law Firm Nodia, Urumashvili and Partners, Georgia).

Ms Kokhreidze introduced the topic of the panel and explained that liability issues include ‘global claims’, liquidated damages, limitation periods, waivers of rights, force majeure, and the guarantor’s liability. Consisting of practitioners from different jurisdictions, the panel had an opportunity to discuss these matters from the common and civil law approach.

Explaining the concept of a ‘global claim’, Karen Gough stated that such claim can be defined as a claim where a global or composite sum is put forward as the assessment of damages or contractual compensation for each individual claims is said to be impractical or impossible. Ms Gough noted that this process generally avoids the requirements to plead and prove the causal nexus between the alleged breaches of contract, and the time or money claim. Ms Gough however stressed the fact that a global claim is extremely difficult to analyze and answer effectively.

Discussing the exceptional circumstances and force majeure concepts in construction contracts, Valéry Denoix de Saint Marc raised the question whether the replacement of the ‘force majeure’ by ‘exceptional event’ in the 2017 Editions may be considered as a new development. In his opinion, the most far- reaching change is that the effect of force majeure/exceptional event cease to be limited to the suspension of substantial obligation, and may now justify the release of performance of any obligation from the affected party.

Finally, Ana Kavtaradze elaborated on the demand guarantees matters. She welcomed the fact that the 2017 Editions are now aligned with the latest version of the Uniform Rules for Demand Guarantees ‘URDG’ No. 758, published by ICC in 2010. Ms Kavtaradze stated that lodging a demand under a guarantee may initially seem simple, but, in reality, more than thirty percent of claims are rejected due to discrepancies. She then stressed that a more thorough drafting of claims, and a diligent conduct (i.e. a word-by-word review) of beneficiaries when receiving a guarantee worldwide could avoid further problems.

Enforcement of DAB decisions and arbitral awards in CIS countries and Caucasus region

Members of the panel: Nick Gvinadze (Managing Partner, Gvinadze & Partners LLC, Georgia; Chair, ICC Georgia), Kirsten Odynski (Partner, White & Case LLP, France), and Luminita Popa (Managing Partner, Suciu Popa, Romania; Alternate Member, ICC Court), moderated by Mark Roe (Partner, Head of International Arbitration, Pinsent Masons LLP, United Kingdom).

The panel, moderated by Mark Roe, was highly informative as it included discussion of the relevant cases from different jurisdictions in the region and provided practical insight look on the issue of enforcement.

Nick Gvinadze first addressed the enforcement of a binding but non-final DAAB decision from a Georgian perspective. Mr Nick looked at the relevant clauses of the 2017 FIDIC Editions, the ICC rules and Georgian Arbitration Law. While discussing several court cases, he referred to a decision of the Supreme Court of Georgia in 2017, according to which the existence of a final decision on the merits is required for recognition.

Discussion on enforcement of a binding but not final DAAB decision was continued from the Romanian perspective by Luminita Popa who reported on a selection of rulings on the enforcement of DAB decisions. A High Court decision dated 2012 stated that the DAB decision was not a definitive and binding decision or an arbitral award.

Kirsten Odynski provided a theoretical framework regarding the enforceability of the DAB/DAAB decisions under the FIDIC contracts and cited several cases from different jurisdictions. Ms Odynski suggested several issues to consider, among these, form of the award and nature of review of the DAB/DAAB decision by the arbitral tribunal.

A particular focus on the ‘One Belt, One Road’ initiative and construction projects in CIS countries and Caucasus region

Members of the panel: Ziva Filipic (Managing Counsel, ICC International Court of Arbitration, Paris), Julia Lysakovskaya (Head of Legal Department, MFC Construction Office, Branch of the Gazprom transgaz, Belarus), Guillaume Sauvaget (Partner, PS Consulting, France), and Wei Sun (Partner, Beijing Zhong Lun Law Firm; Secreatry General, Permanent Forum of China Construction Law), moderated by Alexander Bolkvadze (Partner, BLC Law Office, Georgia).

The first panellist, Wei Sun, provided an overview of the ‘Belt and Road Initiative’ (‘BRI’) proposed by Chinese government in 2013 (estimated completion by 2049); Exploring the meaning of the BRI, Mr Sun noted that there is no official definition or list of the projects, though it may be characterized as a vision of China to increase connectivity between Asian, European and African continents.

Mr Sun also addressed the involvement of the CIS and Caucasus countries in the Belt and Road Initiative, mentioning different cooperation agreements concluded with China by countries in the region. Discussing the results of the survey conducted for the 13 projects, he stated that none of these projects in various industries, including housing construction, used FIDIC Forms of Contracts or provided for ICC Arbitration. Mr Sun concluded with the expectations of the Chinese contractors in relation to the ICC Belt and Road Commission, launched in 2018 by ICC Court President Alexis Mourre, including the promotion of the use of the FIDIC forms of contract and agreement on ICC Arbitration.

Živa Filipič further noted that the ICC Belt and Road Commission aims to promote and develop ICC dispute resolution services in the region, in support of Belt and Road disputes.

Panellists then turned to an equally interesting topic of the role of standard contracts in construction projects in CIS countries.

Guillaume Sauvaget shared his past experience in CIS countries in the beginning of the nineties revealing major obstacles that foreign companies were facing. He stressed that the use of a standard form contract like FIDIC is very useful, as it contributes to a balanced contract, in order to meet the needs of different projects, as well as speed up the negotiation process. Mr Sauvaget cautioned that standard contracts are not always completely in line with the legislation and need to be modified to fit specific circumstances, naming procedures for acceptance of the works as an example of such inconsistencies. He also advocated for involving competent lawyers to draft, negotiate and manage construction contracts.

Julia Lysakovskaya provided an overview of the implementation of standard FIDIC contracts in Belarus. Ms Lysakovskaya similarly elaborated on how FIDIC standard contracts are regulated by the national legislation. She noted that the national legislation recognizes FIDIC standard contracts and allows to use them. In relation to particular contractual clauses and matters, she stated that the standard FIDIC contracts cannot be used ‘as is’ in Belarus, as if signed so, may be considered as invalid according to national legislation. The panellist also talked about the dispute resolution mechanisms available in Belarus for construction disputes.