Introductory remarks

Large international construction contracts usually rely on standard form contracts provided by professional associations, including the International Federation of Consulting Engineers – more commonly known by its French acronym FIDIC.1 The 2017 second edition of the FIDIC suite of contracts mirrors the harmonization of existing practices both in terms of contract performance and dispute resolution. In such contracts, the allocation of risk, from the moment the contract is concluded throughout its performance forms the basis of a tailored dispute process, to be adapted to each case, taking into consideration also a multi-tier mechanism in support of a real time resolution of disputes.

Since construction disputes are more of a commercial nature, parties to such contracts opted for international commercial arbitration, and often chose ICC as the optimal arbitration institution, whose rules and administrative support are of essence for the resolution of construction disputes.

In 2019, the ICC Commission for Arbitration and ADR published an update to the 2001 Report on Construction Industry Arbitrations.2 The Report includes a description of recent developments in the practice of arbitration in construction disputes and provides guidance to arbitrators and parties as to the use of tools and techniques in arbitrations administered by the ICC Court in the application of its 2012 and 2017 Rules. The Report emphasizes a large variety of procedural mechanisms which the parties, by virtue of their autonomy, may adopt for the conduct of their arbitral proceedings, both before and during the arbitration, to ensure that contractual rights and obligations are properly enforced.

The ICC Rules proved over time to provide a flexible and efficient process, particularly for complex disputes and those involving States or States entities, supported by highly qualified arbitrators and a scrutiny of the awards, which aims to ensure that arbitral awards are fully enforced and that successful setting aside proceedings avoided. Moreover, ICC Arbitration is predictable as to costs, calculated on the basis of the amount in dispute, which is appreciated by both contractors and financiers. The ICC Court also has outstanding experience in construction disputes, with an average of 40% of its caseload coming from the construction and engineering sectors.3

A compulsory alternative to FIDIC and ICC in Romania

The Romanian Civil Code of Procedure, adopted in its current version in 2013, specifically addresses arbitration (Books IV and VII) and confirms Romania as an arbitration friendly jurisdiction. There is no prohibition for any type of company or entity, either from the private or public sector, to enter into an arbitration agreement or to solve disputes through arbitration. Thus, the principle of party autonomy in arbitration is given full recognition,4 subject to mandatory and public policy rules.

According to the Romanian National Institute of Statistics,5 the volume of construction works in Romania has constantly increased between 2015 and 2020 and there were about 60,000 construction companies active in the country in 2019. The public sector in particular, represented by administrative entities or state companies, has generated most of the current needs to invest in the construction industry: road infrastructure modernization, railroads rehabilitation, maritime industrial projects or energy related infrastructure, urban planning, and modernization, are just a few of many examples of projects where the State allocates important amounts, including EU funds, to attract domestic or international investors.

As contract drafting stands on best practices in the field, on a stable and predictable legislation, the last 30 years of construction disputes in Romania saw the steady introduction of the FIDIC forms (Yellow and Red), also adopted in public procurement contracts.

Companies from the private sector, mostly international ones, often opted for an international arbitration forum like ICC. As to public sector companies, having a dual legal regime with administrative and civil laws implications, the choice of ICC as arbitral institution is subject to a statutory decision of the Government. When adopting the FIDIC contracts in 2008 and again in 2010, the Romanian Government approved these forms with an arbitration clause in favour of the ICC Court, to the extent the parties do not opt for a different arbitral institution, in accordance with the principle of party autonomy.

In early 2018, the Romanian Government issued Decision n°1/2018 (the ‘RGD’) on new general and particular conditions for public procurement contracts regarding the design and performance of construction works contracts.6 A new type of national contract replaced the FIDIC contract used so far in infrastructure public procurement projects of a value exceeding the threshold of RON 23,227,215 (approximately EUR 5 million).

These new contractual conditions are mandatory for any works contracts financed by public funds, for which the total estimated value is at least equal to or higher than the threshold provided in Article 7(1)(a) of Law no. 98/2016 on public procurement.7

The RGD reflects an adaptation of the FIDIC forms to the local reality and culture, as evidenced by its Article 68 on risk allocation. On the beneficiary’s side, references are made to delays generated by disputes on ownership title restitutions, to topographical errors or inconsistencies between cadastre specifications and ownership titles over land properties, to delays in providing the feasibility studies, to the non-observance in due time of polluted factors that may affect the initial projects and to the lack of predictability of the contractual conduct. On the entrepreneur’s side, Article 68 also refers to standard-delays and additional costs. As a result, parties to such infrastructure contracts are requested to adopt a more realistic and robust projection of the contractual performance. In addition, more transparency at the administrative level, as well as a proper balance between the financial interests and the contractual behaviour from the early stages of the contract drafting onwards, are crucial for the proper performance of these contracts.

As to the disputes between parties to such contracts, the rules provide for (i) a pre-arbitration stage with the participation of a supervisor (instead of the Dispute Avoidance and Adjudication Board required under the FIDIC 2017 second edition), (ii) mediation, or (iii) direct negotiation for settlement, followed by (iv) arbitration, administrated exclusively in accordance with the arbitration rules of the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania (CCIR).8 This substantive change regarding the rules of arbitration and the arbitral institution excludes the choice of ICC, contrary to what existed before 2018. There is no option for an alternative forum and parties are deprived from the benefit of an international institution’s procedural expertise and experience in the administration of construction disputes.

Considering the international scope of construction contracts and in light of the traditional recourse to FIDIC, some speakers and participants to the webinar expressed the view (also shared by the private Romanian business sector) that the Romanian Government should change the existing RGD, by allowing parties to choose between the local institution and an international forum and adopt the best suited arbitration rules to their dispute.


1
FIDIC(International Federation of Consulting Engineers) https://www.fidic.org; Institute of Civil Engineering http://www.ice.org.uk/; the NEC 3 (Engineering and Construction Contract) https://www.neccontract.com.

2
https://iccwbo.org/publication/construction-industry-arbitrations-report-icc-commission-arbitration-adr/. The first edition was published in 2001.

3
See the ICC 2019 Statistical Report, p. 15, available at https://iccwbo.org/publication/icc-dispute-resolution-statistics/. Also, the 2018 International Arbitration Survey of Queen Mary Institute shows that ICC is the first preferred arbitral institution in cross border arbitrations and that constructions/infrastructure are among the sectors with continuous increase interest in arbitration (http://www.arbitration.qmul.ac.uk/research/2018/).

4
The principle of party autonomy is recognized by Romanian law: Arts. 543, para.1; 576 paras.1 and 2;619 para.2, Book 7 of the 2013 Romanian Code of Civil Procedure.

5
https://insse.ro/cms/ro/tags/comunicat-lucrari-de-constructii; https://insse.ro/cms/sites/default/files/com_presa/com_pdf/actv_intrep_2019r_0.pdf.

6
Published in the Official Journal of Romania (Monitorul Oficial) no. 26/11 Jan. 2018.

7
Published in the Official Journal of Romania (Monitorul Oficial) no. 390 of 23 May 2016.

8
Taking its legacy from the 1953 established Court of International Commercial Arbitration, attached to the National Chamber of Commerce; currently, the most well-known arbitral institution of Romania (http://arbitration.ccir.ro/en/).