Conference - Day One

Katherine Spyrides
Associate, Boisséson Arbitration, Rio de Janeiro

Eduardo Damião Gonçalves (Partner, Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, Brazil; Vice President, ICC International Court of Arbitration) welcomed the participants and expressed the relevance of investments in infrastructure in the Brazilian current scenario as a consequence of privatization projects. He pointed out that those projects will inevitably involve the international construction industry and the FIDIC practices should be considered as an efficient tool for the relations and exchanges among players from different backgrounds. The keynote was addressed by Hamid Bdin (Former State Judge, São Paulo; Professor, Civil and Commercial Law, Mackenzie and GVLaw Universities, Brazil) who shared his experience on the interactions between judicial courts and arbitral tribunals, in particular concerning precautionary and urgent measures filed before courts prior the constitution of the arbitral tribunals. In his opinion, judicial courts have carefully advanced in order to respect the limits of those measures reserving the decision on the merits to the arbitral tribunal. He also made reference to requests for annulment of arbitral awards that, in his experience, are rare and with low likelihood of success. In his view, this indicates a recognition by the judicial courts that the arbitral awards produce the same effects of a decision issued by the judiciary, as set forth in article 31 of the Brazilian Arbitration Act. In the introduction to the conference, co-chair Christopher Seppälä (Partner Of Counsel, White & Case LLP, France; FIDIC’s Observer on the ICC International Court of Arbitration; Member, ICC Institute of World Business Law; Legal Advisor, Contracts Committee, FIDIC) emphasized that the ICC became the most important organization of arbitration in the world and that a significant number of its cases are connected to the construction field, among them a substantial portion is related to FIDIC contracts. He remembered that since the first conference jointly organized by the ICC and FIDIC in 2003, in Paris, both institutions have increasingly been working together pursuing to enhance the interactivity between law and engineering. In her introduction, co-chair Ana Serra e Moura (Deputy Secretary General, ICC International Court of Arbitration, Paris) welcomed the participants and supporters of the event, highlighting the representativeness of Latin America in arbitration cases, in particular, of Brazil ranked as one of the top five users of the ICC International Court of Arbitration. She informed that the establishment of an ICC case management team in São Paulo, Brazil, two and a half years ago has been a success, amounting 73 cases, which include a significant number related to the infrastructure sector. She also made reference to the 2019 International Arbitration Survey on international construction disputes conducted by the School of International Arbitration at Queen Mary University of London which indicated that the ICC was the most frequently used institution (71%) due to the collaboration of the FIDIC.

Recently launched ICC Report on Construction Industry Arbitrations: Recommended Tools and Techniques for Effective Management of Arbitrations under ICC Arbitration Rules

Members of panel: Christopher Seppälä, Stephan Adell (Partner, Squire Patton Boggs, France/Dominican Republic), Debora Visconte (Founding Partner, Visconte Advogados, Brazil) and Flávio Spaccaquerche Barbosa (Partner, Mattos Filho, Brazil) moderated by Ana Serra e Moura.

Ana Serra e Moura opened the panel by explaining that the update to the ICC report was focused on developing of cost and time-effective procedures to resolve construction arbitrations. Christopher Seppälä explained that the first edition of the ‘Final Report on Construction Industry Arbitrations’ published in 2001 has been positively received by the construction arbitration community and its recommendations have been successfully used all over the world; the narrow mandate for the update was to align the Report with the 2017 ICC Arbitration Rules and the recent developments in construction arbitration, such as the long-term contracts, multi-year projects involving billions, contracts with multiple parties. He highlighted that the Report provides guidance on a range of tools and techniques to successfully manage construction arbitrations, but there is no a unique way to conduct a construction arbitration. Although many construction arbitrations have familiar patterns, every case is different, and one should always consider whether recommendations and standard or common techniques are appropriate to the specific case. In response to Ms Serra e Moura regarding the need of terms of reference, he understands that they are still useful in construction cases, in particular, to identify new claims and define the scope of the arbitration. Stephan Adell added that limiting the claims in the terms of reference also helps in advising clients on costs.

Mr Adell then addressed the selection of arbitrators and the composition of the arbitral tribunal as key issues in construction arbitrations where the familiarity with the industry, cultural nuances, relevant laws and legal traditions are fundamental. He referred to availability and proactivity as essential characteristics to deal with the document intensive proceedings in an efficient manner together with the relevance of a diverse and balanced tribunal. Debora Visconte shared her positive experience with an arbitral tribunal where one of the co-arbitrators was an engineer, in particular regarding his inputs during the witness examination. Mr Adell also elaborated on the critical path networks and the importance of choosing a methodology for the delay or disruption analysis adequate to project and agreed by the parties. He recalled the recommendation of the report to stimulate communication between the parties and their experts to identify facts and documents, including the critical path networks, if used, that are relevant to establish an agreed baseline and methodology.

With reference to the computation of claims topic, Ms Visconte explained that the report was not focused on calculation models, limitation or penalty clauses, but on case management and involves the documents related to the case, including the use of secure online platforms for storage, access and exchange of documents – she referred to the helpful guidance of the CIArb Protocol for E-disclosure in Arbitration and the IBA Rules –, as well as the evaluation, by the arbitral tribunal, of what should be investigated for the calculation and the methodology agreed by the parties. She emphasized the importance of establishing, during the case management conference, in the procedural order No.1 or as early as possible, a chronology of facts indicating the discrepancies, the rules for documents exhibition and that the evidence justifying the amount of a claim be produced with cross-references to the parties’ submissions. In this context, she also brought out the reflection of why some arbitral tribunals adopt provisional timetables only for the initial phase of the arbitration. Ms Serra e Moura commented that this practice often impacts the effectiveness and costs of the proceeding in a negative manner. On the contrary, the recommendation is to establish, during the case management conference or in the procedural order No.1, a timetable fixing the deadlines, at least, until the hearing date.

The value of having a complete timetable since the beginning of the case has a direct connection with the topics explored by Flávio Spaccaquerche Barbosa: the witnesses’ and experts’ roles and the hearing on the merits. He noted that witnesses are really necessary when the documentary evidence is not sufficient to prove what it was intended to prove, therefore, the sooner the timetable is defined, the sooner the parties will have the necessary elements to evaluate if witnesses or a certain witness will be essential. He also explained that the report recommends the submission of witnesses’ written statements – in their own words, to preserve credibility – with reasonable time before preparation for hearings, avoiding surprises and delays. Regarding the rounds of witness statements, their timing or number should be kept to a minimum. Among other efficient approaches suggested by the report, he highlighted the possibility of the arbitral tribunal to assess the relevance of the witness questioning, impose reasonable limits on time for questioning and use technology, such as video links, in order to reduce costs; the report also advises the tribunal to warn the parties that the waste of time or resources by witnesses having to attend the hearing unnecessarily may impact cost allocation. Regarding the experts, he stated that the report focused on the following main issues: the scenarios for experts – this is, when are they really necessary –, the scope of their work which includes the duties of independence and transparency, and how the party-appointed experts will cooperate with each other. A critical consideration brought by him was that experts are neither required in all cases nor in all claims. In this regard, he mentioned that the report recommends the arbitral tribunals to assess the parties’ intention on tendering evidence from expert, encourage communication between the party-appointed experts as to determine possible consensus and reserve the expert analysis exclusively to controverted topics, bearing in mind that the tribunal is not bound by the opinion of the tribunal-appointed expert. He ended his presentation with some remarks on the hearing on the merits that, in accordance with the report, ‘should be devoted to examination and cross-examination of witnesses and experts’ (Item 19.2) requiring the parties’ cooperation and the tribunal’s decision on the applicable timetable and the hearing organization, e.g. suggestions on the order of appearance of witnesses and the management of time as the ‘chess clock method’. He also mentioned the possibility of a short hearing for clarifications after the written closing submissions.

Ms Visconte further approached the topic of interim measures authorized by article 28 of the ICC Rules. According to this provision, unless the parties agree otherwise, the tribunal may order a security for costs, expressing that this power in construction arbitrations can be extremely relevant, since a party may request that tribunal order compliance with or relief from a decision issued by a dispute adjudication board. She highlighted that such provision can protect the status quo pending a decision on the merits of the dispute, for instance, during the arbitral proceedings the tribunal could define where the materials might be used on site. In those cases, the tribunals will require good reason for intervention, including that the applicant may suffer irreparable" harm if the measure is not ordered.

As to the emergency arbitrator, provided in article 29 and Appendix V of the ICC Rules, she indicated that according to the Report of the ICC Commission on Arbitration and ADR on Emergency Arbitrator Proceedings, half of the first 80 emergency arbitrator applications were related to the construction, engineering and energy sectors; nevertheless, the emergency relief was only granted in a minority of cases due to the very restrictive requirements of applicability, jurisdiction and admissibility. A very interesting issue that she raised was whether the emergency arbitrator provisions shall apply in cases where dispute boards are established: article 15(1) of the ICC Dispute Board Rules empowers the dispute boards to grant ‘provisional relief such as interim or conservatory measures’, while article 29(6)(c) of the ICC Rules provides that the emergency arbitrator provisions shall not apply when ‘the parties have agreed to another pre-arbitral procedure that provides for the granting of conservatory, interim or similar measures’. Considering that urgent matters, especially in construction projects, may arise anytime, even before a dispute board is established or ready to solve the urgency, she referred to an emergency arbitrator decision which noted that the parties to FIDIC agreements may opt-out from the dispute boards or exclude its power to order interim relief. For Ms Visconte, it would be constructive to consider a clarification on this matter in the next review of article 29 of the ICC Rules. Mr Seppälä added that this review is being considered.

FIDIC in Central and South America

Members of panel: Júlio César Bueno (Partner, Pinheiro Neto, Brazil; President, Brazilian Society of Construction Law (SCL Brasil); Legal Director, Brazilian Association of Consulting Engineers (ABCE)) and Roberto Hernández-García (Managing Partner, COMAD, S.C. Law Firm, Mexico).

Júlio Bueno presented a historical evolution of the FIDIC model agreements in Latin America, particularly in light of the Brazilian experience in the last 20 years. He emphasized the essential role of the ICC in the development of arbitration in Brazil in a consistent manner and of the FIDIC in the resignification of the construction agreements in this country. He explained that before the 1990’s large engineering projects were executed by governments and state-owned companies, construction agreements were inspired on administrative law, engineering and design documents were internally prepared, with no incentive to contractor’s creativity, and disputes were resolved by judicial courts. He recapped important laws and facts that marked the period after the 1990’s, such as the new Bidding Law of 1993, the Privatization Program, the Concessions Law in 1995, the Arbitration Law of 1996, all together with a pressure for foreign investments to adopt international contracting standards such as the FIDIC contracts that arrived in Brazil but not necessarily adapted to Brazilian law and culture. He remembered that the reality had changed at that time, large engineering projects were no longer a monopoly of the State and were also executed by private contractors. According to him, after 2000, the large engineering projects, influenced by international and common law concepts, were executed only by private owners with emphasis on project finance, in which new and more sophisticated construction delivery and dispute methods were required. In this context, the EPC Turnkey Lump Sum model, adopted by the FIDIC Silver Book in 1999, became a reference. However, due to the increasing demand for infrastructure at that time, contractors gained strength and avoided applying a pure FIDIC model agreement by adapting the standards. From 2010, specially in 2014 and 2015, he explained that political factors and the Car Wash operation impacted construction companies in Brazil that were no longer able to negotiate the terms of the agreements to avoid the local application of FIDIC forms. The new scenario also included international owners willing to adopt international standards, especially the FIDIC forms, due to compliance concerns. He sees the current moment as an opportunity to use the FIDIC models and the recommendation reports for best practices, as the new 2017 FIDIC forms, among them the Emerald 2019 FIDIC form.

Roberto Hernández-García shared the challenges and initiatives in Central and South America for FIDIC contracts to become more accepted and further used. He drew a parallel between the FIDIC contracts and a Ferrari in order to demonstrate that people think they cannot afford or maintain one. He explained that this is more about fear and challenges since Latin America is not familiar with model contracts. People think of FIDIC as a far away organization specialized in sophisticated matters, fear costs and time of implementation and use, and of contract administration efforts as well. According to him, most of the important projects in Latin America are government sponsored and adopts government contracts that have some challenges, such as the fact that public works have to observe the conditions of Public Works Laws. They are administered by public officers with restrictions, audited by congresses and special auditing authorities and the dispute resolution methods are still in process – how can they be adapted to the FIDIC standards? He brought three relevant cases – the Honduras Millenium Challenge Account, the El Salvador Challenge Account and the Panama Canal – in which the FIDIC contracts were used, with different government structure and training, as compared to the local government, and far from the Public Works Laws, and with international contractors with capacity and training. On the other hand, he mentioned some complications during these cases regarding engineer’s participation, administration and the understanding about the dispute resolution. He proposed some initiatives and clarifications to support the adoption of the FIDIC contracts in Latin America, such as the information that FIDIC is an organization to help the industry and not to conquer it without reason, the FIDIC contracts are highly oriented on risk management and contract administration and require training, but once it is done, it pays off. In this regard, he emphasized that the trainings should be affordable to get people connected. On this latter point, he mentioned the importance of a strong work with government officers, auditing bodies and the industry to express that the FIDIC does not sell a model contract but provides best practices for the industry. A concrete action he called ‘conviction measures’ is the case of the IDB in Costa Rica in an effort of putting together the government, the congress and the construction sector chain. He concluded by encouraging the ICC and FIDIC to be connected locally to redefine their synergy in Latin America.

An introduction to FIDIC and its Forms of Contract, including the 2017 FIDIC Suite of Contracts

Members of panel: Nelson Ogunshakin (Chief Executive Officer, FIDIC, Geneva) and Aisha Nadar (Senior Consultant, Procurement Management and Dispute Resolution, Advokatfirman Runeland, Sweden; Member, FIDIC Executive Committee and Chair of Procurement Policy Sub-Committee).

Nelson Ogunshakin explained the background of the FIDIC organization, which was established in 1913 with the mission and vision to create a legal environment for legal infrastructure. He highlighted the FIDIC as a global entity and reference of best practices that cares about social responsibility, environmental issues and quality. He explained that ever since the first Red Book published in August 1957, FIDIC contracts have evolved to the international standards that they have today. He mentioned the attention of the organization towards the future of society worldwide through infrastructure industry, projects and services, promoting sustainability, integrity and quality, highlighting the importance of training and strong communication in order to achieve a sustainable infrastructure for future generations on a global scale.

Aisha Nadar presented the FIDIC forms of contract, their background and fundamental principles. She referred to the FIDIC Procurement Procedures Guide of 2011 that covers the path to identify the need to appoint a contractor, takes a multi-disciplined approach to best practice procurement of engineering projects and focuses on establishing a procurement strategy on pre-tendering process that will help to find which FIDIC contract to use. She also gave an overview of the FIDIC’s conditions of contracts since its first standard published in 1957, the ‘original’ Red Book, focused on the development of the civil engineering works in the international field, then the 1963 Yellow Book, for mechanical and electrical works, the 1987 4th edition of the Red Book and the 3rd edition of the Yellow Book, the 1994 Update Task Force to update the Red and the Yellow Books, the 1995 Orange Book, the 1st FIDIC design-build/turnkey contract, when the Dispute Adjudication Board was introduced, then the 1999 1st edition of the FIDIC Rainbow Suite resulting from the 1994 update Task Force when the Silver Book for EPC/Turnkey projects were introduced, and, finally, the 2017 2nd edition Red, Yellow and Silver. She further pointed out the advantages that may be found in the 1999 Suite of Contracts (the Red, Yellow and Silver Books): they are all manuals of good engineering practice, that clearly define the allocation of risks, prepared for both international and domestic use and harmonized in form, wording and definitions, to the possible extent. The differentiating features between those Books, as she mentioned, were related to the allocation of design responsibility, project risks and the contract administration role. As to the 2017 FIDIC Rainbow Suite, they were, in her view, marked by evolution and innovation. They used as sources for the updated the contract user’s feedback, the international state of the market, recent developments in FIDIC contracts, such as the 2008 Gold Book and the 2010 Pink Book, and friendly reviewers’ feedback, among them employers, contractors, engineers, construction lawyers, funding institutions, professional organizations, governmental agencies and equipment suppliers. The general features, such as the manuals of good engineering practice, the compatibility with both international and domestic use, the harmonized form, wording and definitions, to the possible extent, and the focus on usage of clarity and consistency in wording remained the same, as well as their principles, for instance, the proactivity to avoid disputes and focus on early resolution. She explained that the 2017 FIDIC Rainbow Suite aimed for greater clarity, adopting a more prescriptive style and defining new terms; such as certainty of obligation and in communication, with more detailed Programme provisions; and enhanced contract administration, promoting collaboration and reciprocity between the parties, proactivity in administration by engineering and focus on dispute avoidance and management. She closed her remarks with the recommendation to the Employer, the Contractor and all drafters of the Special Provisions to take all due regard of the five FIDIC Golden Principles preserving the duties, obligations and balance/allocation of risks as implied in the General Conditions, drafting the Particular Conditions clearly and referring all formal disputes to a Dispute Adjudication Board for a provisionally binding decision as a condition precedent to arbitration.

Jurisdictional issues in construction arbitration

Members of panel: Gustavo Scheffer da Silveira (Counsel, Mayer Brown, Brazil), Andrea Carlevaris (Partner, Bonnelli Erede with Lombardi, Italy; former Secretary General, ICC International Court of Arbitration), Gustavo Tepedino (Partner, Gustavo Tepedino Advogados, Brazil; Professor, UERJ Law School) and Maria Claudia Procopiak (Arbitrator, Procopiak Arbitration, United Kingdom) moderated by Ana Serra e Moura.

Gustavo Scheffer brought the discussion regarding the accurate nature of the breach of the multi-tier clause: whether it would consist in a problem of admissibility or jurisdiction. He indicated that the FIDIC conditions expressly provides that before commencing arbitration the parties should appoint a DAB (Dispute Adjudication Board) and, from 2017, a DAAB (Dispute Avoidance and Adjudication Board). Despite such mandatory clauses, he noted that it is not rare to have cases in which the parties initiate an arbitration without complying with the pre-arbitral procedures set out in the contract. In those situations, and when the parties do not agree in disregarding the multi-tier clause, respondents often present an objection to the arbitration and, in his opinion, it is the target of such objection which reveals the nature of the problem: if the objection refers to who shall resolve the dispute, it is a matter of jurisdiction; if the objection refers to the claims, the issue concerns the admissibility of such claims. In his view, an objection to the jurisdiction may, in the future, be used in a lawsuit to annul decisions granted by the arbitral tribunals, whilst objections against the admissibility do not challenge jurisdiction, they observe the will of the parties to resolve their disputes in arbitration, preserving the effectiveness of the arbitration clause. He explained that the FIDIC clauses submit the disputes to arbitration and it is not reasonable to resolve them, or part of them, in courts, as a result of the breach of a multi-tier clause. In addition, he continued, due to the autonomy of the arbitration clause from the main contract, the negative and positive effects of the arbitration clause still attribute exclusive jurisdiction to arbitral tribunals to examine the validity of an arbitration agreement and grant authority to the arbitral tribunals to rule on their own jurisdiction. He concluded by encouraging the arbitral tribunals to, observed the contradictory, classify the objection and, in case of admissibility, consider the provisions set forth in article 23 of the Brazilian Mediation Law (Law 13.140/15) to suspend the arbitration until the condition of the pre-arbitral clause is implemented. Ana Serra e Moura highlighted the importance of this classification by the arbitral tribunal since different classifications have different impacts. She further noted that it is relatively common to see arbitral tribunals following the classification mentioned by the parties without necessarily issuing their own position on the matter.

In order to discuss the exercise of jurisdiction and the enforcement of decisions granted by the Dispute Adjudication Boards, Andrea Carlevaris recalled that, according to the 1999 and 2017 editions of the Red Book, such decisions are immediately binding and become final unless they are not challenged within 28 days. However, if a Notice of Dissatisfaction is given in this period, any party may commence arbitration and the arbitral tribunal will be empowered to open up, review and revise the Dispute Adjudication Board decision and no party shall be limited in the arbitration by the arguments and evidence put before the Dispute Adjudication Board or raised in the Notice of Dissatisfaction. He referred to the developments on the matter after the ‘gap’ in the 1999 FIDIC contracts, specially to the provisions set forth in sub-clause 21.7 of the 2017 Red Book – providing that in case of binding, but not final, Dispute Adjudication Board’s decision and of non-compliance, the arbitral tribunal is empowered to order the enforcement of such decision (by interim or provisional measure or an award), subject to the express reservation of the parties’ rights on the merits until they are resolved by an award – and commented some reported cases – such as the ICC 10619/AER/ACS, ICC 11813/DK and the Persero series1– to illustrate the approaches. He also discussed the causes of action to enforce the decisions issued by Dispute Adjudication Boards and whether they consist in a claim for specific performance or a claim for damages, including the obligation to pay the amount of money decided by the Dispute Adjudication Board plus interest, for instance. Among other conclusions, he expressed that there is a presumption in favor of giving effect to the decisions issued by the Dispute Adjudication Board and, at the same time, it is important that the tribunal ascertains, among others, whether the Dispute Adjudication Board was validly constituted, the referral was valid and timely and the Notice of Dissatisfaction was timely made. He closed his remarks discussing whether a Dispute Adjudication Board’s decision is enforceable under the New York Convention and noted that although this sort of decision, when final and binding, could have the same characteristics as an award, the FIDIC contract provides the possibility that a party fails to comply with this decision (even if it is final and binding) and refers, in those cases, to arbitration as the dispute resolution mechanism.

Gustavo Tepedino presented his observations on the limits imposed by the privity of contracts in the construction projects and group of contracts. He remembered that in particular cases, marked by the complexity of the relations and interests of the parties and where the dependence between the contracts arises, the arbitration clause and the arbitral jurisdiction may be interpreted with certain flexibility. As reported in some ICC cases, the arbitration clause can be extended horizontally, regarding the negotiation and the performance of the contract, or vertically, considering the chain of controlled companies. He expressed that, at the same time, there is a challenge to respect the autonomy of assets and the will of the parties and, in specific hypothesis, admit the extension of the arbitration clause for a justified reason. He brought up two cases to illustrate his point: a decision from an arbitral tribunal and a decision issued by judicial courts2, where the arbitration clause was extended to non-signatory parties as it was found that their consent to be bound by it could be identified on their behavior. He concluded by asserting that it is not always simple to verify the element of ‘the consent’, especially because in many cases the consent is tacit, and it is not enough to consider that every negotiation or participation in the business will link people or companies to the arbitration clause: it is not a structural matter, but a true relation with the substance of the transaction. Mr Scheffer added that in the construction environment there are cases in which the hierarchy between the contractor and subcontractor, for instance, may create room for this interpretation.

Maria Claudia Procopiak closed the last panel of Day 1 with a very interesting analysis about the FIDIC Subcontract second option clause 20, according to which a dispute between the parties arising out of the Subcontract or the execution of the Subcontract Works may be considered a Related Dispute and be resolved in an arbitration under the Main Contract. In those cases, she explained that the Contractor and the Employer will be the parties to the arbitration and the Subcontractor may participate, not as a party thereto, but as a Contractor’s assistant – unless the Employer or arbitral tribunal objects –, the Contractor, in turn, shall use all reasonable endeavors to pursue the dispute including the Related Dispute on its and the Subcontractor’s behalf and for both the Contractor’s and the Subcontractor’s benefit. She also mentioned that the arbitral award, which concerns the Related Dispute, shall be deemed to be binding on the Subcontractor. After sharing an overview on this second alternative clause, she remarked that this mechanism could create conflicts, since it will depend on the satisfaction of the parties’ interest that is not always aligned. She concluded that this system seems to be a good choice to the Contractor but raised the question of whether the Subcontractor’s interest would be similarly protected. Mr Seppälä commented that this alternative clause is not the normal clause and one of the purposes was to test it in order to see whether it is viable. He explained that the idea of resolving the disputes in a single procedure is ambitious, but it does not deal with all the possibilities and, in a certain way, goes against a golden principle of arbitration to ‘keep it simple’.

Conference, Day 2

Estefanía Fierro Valle

Senior Associate, Andrade Veloz, Quito

Contract and claims administration in FIDIC contracts

Members of the panel: Cecilia Misu (CEO, CMSSQUARE, Germany), Rohit Singhal (Chief Executive Officer and Construction Dispute Expert Masin Project, India) and Nicholas Gould (Partner, Fenwick Elliot, United Kingdom) moderated by Jorge Diaz Padilla (CEO, Chair Systec, FIDIC Integrity Management Committee, Mexico).

The panelists discussed claim avoidance under the FIDIC conditions and the best practices to file claims under the FIDIC form.

Jorge Diaz Padilla introduced the panel’s topic and began the discussion on the improvements in the 2017 FIDIC edition. He emphasized the role of Engineer, his/her new responsibilities and the importance of the role to avoid disputes.

Cecilia Misu then analyzed mechanisms to prevent claims from becoming disputes. She addressed the avoidance of disputes at the different stages of a project. Her main recommendations included understanding the market before going international, being honest about risk assessments and its impacts on the budget, the importance of keeping adequate records, and project correspondence.

Nicholas Gould continued the discussion about claims provisions and highlighted the changes incorporated in the 2017 FIDIC edition regarding notice and time bars provisions. The panelist emphasized that the 2017 FIDIC edition requires a ‘fully detailed claim’. While discussing several cases, he explained the effect of the time bar provision as a condition precedent.

Finally, Rohit Singhal considered the prevention of disputes in construction contracts. He presented the main reasons that cause international projects to get into disputes before the panelist advised the audience on ways to prevent claims from becoming disputes. Among the principal issues, he highlighted, were the improvement of contract management and execution culture.

Session 6A: The use of FIDIC contracts by State Entities: development bank perspective

Members of the panel: Jorge Luis González (Senior Procurement Specialist Inter-American Development Bank (IADB), Paraguay), Ana Grofsmacht (Senior Procurement Specialist World Bank Group, Argentina) and Aisha Nadar (Senior Consultant, Procurement Management and Dispute Resolution Advokatfirman Runeland, Sweden) moderated by Nelson Ogunshakin (Chief Executive Officer FIDIC, Geneva).

Nelson Ogunshankin provided an overview of the use of FIDIC contracts by Multilateral Development Banks (MDBs). He announced FIDIC’s efforts to work together with MDBs and mentioned existing agreements already in place with some of them.

Ana Grofsmacht presented the World Bank Group’s perspective on the use of FIDIC contracts. The panelist stressed the value-added benefits of standardization, such as transparent procedures, clear and well-known rules, monitoring and supervision. She noted that the World Bank agreed on the use of the Red Book with Conditions of Particular Application (COPA) for international bidding processes.

Jorge Luis Gonzalez further shared his perspective on the use of standardized contracts by the Inter American Development Bank in Latin America and the Caribbean, mainly in infrastructure and energy industries, which represent 50% of the bank’s portfolio. He highlighted the challenges and benefits of applying the Pink Book in the region.

Aisha Nadar finally shared the experience of FIDIC with development banks. The panelist emphasized the revisions to the Red Book (COPA) and noted FIDIC´s efforts to adapt standard contracts to a development bank’s requirements. She also stressed that the gap in knowledge between States and contractors might be a challenge for achieving standardization, which could be bridged by more training on how FIDIC contracts work.

Session 6B: The use of FIDIC contracts by State Entities: practical considerations

Members of the panel: Lyda Bier (Lawyer, Bier Advocaat, The Netherlands), Eugenia Marolla (Procuraduria Geral do Estado de São Paulo Subprocuradora Geral do Estado de São Paulo, Brazil) and Giovanni Ettore Nanni (Partner, Nanni Sociedade de Advocados, Brazil) moderated by Patrícia Ferraz (Counsel, ICC International Court of Arbitration, São Paulo).

This panel examined some practical considerations for when States Entities use FIDIC contracts.

Lyda Bier underscored that incorporating environmental and social aspects is becoming increasingly complicated in construction projects. She noted that risk-based due diligence and an environmental impact assessment are critical instruments for planning a project and mitigating future controversies. Furthermore, the panelist recommended considering environmental and social issues during contractual negotiations to make an adequate risk allocation.

Eugenia Marolla elaborated on the compatibility of FIDIC contracts and public contracts in Brazilian legislation. She highlighted that Brazilian law is the applicable default law on State public tenders. However, FIDIC contracts may be agreed upon when a multilateral agency funds the project. The panelist underlined that the role of the State´s General Comptroller and the legal culture in the country are some challenges for the use of FIDIC contracts in Brazil.

Finally, Giovannini Ettore Nanni addressed the drafting of particular conditions on FIDIC contracts. He provided a detailed explanation of the FIDIC Golden Principles published in June 2019. Applying these Principles, he gave some key aspects to consider when drafting particular conditions, specially the applicable law, hierarchy of laws. Mr. Nanni stressed some of the most common mistakes, such as combining different FIDIC suits, changing risk allocation, and full remission to applicable law.

Liability issues during the life of the project in construction disputes

Members of the panel: Shelly L. Ewald (Partner Watt Tieder Hoffar & Fitzgerald LL.P, United States), Jaime Grey (Founding Partner NPG Abogados, Peru), Erin Miller Rankin (Partner Freshfields Bruckhaus Deringer, LLP, United Arab Emirates), Leonardo Toledo da Silva (Partner, President, Professor, Toledo Marchetti Abvocados, Brazilian Institute of Constructions Law (IBDIC); FGV Direito-SP, Brazil) moderated by Aisha Nadar (Senior Consultant, Procurement Management and Dispute Resolution Advokatfirman Runeland, Sweden).

Leonardo Toledo da Silva discussed limitation periods and waivers of rights during this session which was focused on the interpretation of indirect or consequential loss and gross negligence. During his presentation, he noted that the lack of unique interpretation of the limitation of liability clauses creates uncertainty on damage compensation before advising the audience to take extra care in the drafting of contracts.

At her time, Shelly Ewald provided a snapshot of force majeure from the perspective of several applicable legislations. She analyzed the application of force majeure and the corresponding enumerated events under US Law, US EPC contracts, and the ICC Majeure Clause. Finally, she closed her address by explaining the replacement of the term ‘force majeure’ for ‘exceptional events’ in the FIDIC 2017 Edition.

Discussing third-party liability, Jaime Grey highlighted that construction contracts might involve many parties that will assume liability even without formally being part of the contract. He thus proposed to consider the use of the Project Delivery System (PDS), a tool that allows the owner to assign how the different participants of a project will be related and which type of liability each of them will assume. In a practical point of view, the use of PDS allows tracking of the different participants in a possible dispute and the type of liability for each of them.

Closing the panel, Erim Miller Rankin’s speech focused on global claims and liquidated damages. The panelist underscored the keys to establishing an acceptable global claim: good record-keeping, adequate pleadings supported by appropriate evidence, and a reasonable damages claim. Providing a comparative overview of different jurisdictions, she addressed the application of liquidated damages.

Dispute avoidance and resolution clauses in FIDIC contracts

Members of the panel: Paul Battrick (FRICS, MCIArb, CEDR Accredited Mediator, Managing Director International Driver Trett, United Kindom) David Brown (Partner, Council Member Clyde & Co; ICC Institute of World Business Law; FIDIC President’s List Adjudicators, France), Karen Gough (Barrister, Attorney-at-Law, Chartered Arbitrator 39 Essex Chambers, United Kingdom) moderated by Aisha Nadar (Senior Consultant, Procurement Management and Dispute Resolution Advokatfirman Runeland, Sweden).

The last session of the day discussed dispute avoidance in construction projects. The panelists provided an overview of disputes management tools and techniques provided for under 2017 FIDIC conditions.

Karen Gough provided an overview of the difference between the 1999 and 2017 regimes in the FIDIC Rainbow Suite and the Golden Principles regarding Dispute Boards (DB). She highlighted that the 2017 edition retains the DAAB as a mandatory pre-condition to arbitration. She concluded by providing the audience with some advice about the effective use of ADR on dispute avoidance.

David Brown shared his experience in dealing with DB as a practitioner. He highlighted the role of DB in the last 25 years, emphasizing the changes made in the 2017 FIDIC Suite Edition regarding the extension of the standing board to Yellow and Silver Books and the addition of detailed disputed power. While he recognized the role of DB as a ‘game changer’ in successful dispute avoidance, he argued for caution, mentioning some challenges that DB could face in practice as the informality of the first assessment and issues related to concerns expressed in some jurisdictions leading to separate panels for dispute avoidance and adjudication functions.

Paul Battrick closed the panel addressing a consultant view when preparing for DB. He stated that 27% of all ICC arbitration cases are related to construction and engineering matters, disputes that could be avoided through DB. He stressed that the keys to having a successful DB are preparation, certainty, selection of DB members, and satisfactory records.


1
Singapore Court of Appeal in PT Perusahaan Gas Negara v CRW Joint Operation.

2
Brazilian Superior Court of Justice, 4th Turma, Recurso Especial 1.656.613.