International Construction Dispute Adjudication under International Federation of Consulting Engineers Conditions of Contract and the Dispute Adjudication Board
Publication: Journal of Professional Issues in Engineering Education and Practice
Volume 131, Issue 2
Abstract
The role of institutional arbitration has become significantly less commercially viable in the international construction industry as a primary means of dispute resolution because of the uniqueness of the construction process. As a result, the construction industry has developed an innovative form of primary dispute adjudication called the Dispute Adjudication Board (DAB). This paper will show the need for an efficient dispute resolution process because of the globalization of the construction industry. It will focus on the standard contract forms of the Féderation Internationale des Ingénieures-Conseils (International Federation of Consulting Engineers) (FIDIC), which are widely used in international construction projects. The paper will then discuss recent developments in the FIDIC, including the development of the DAB to address the fundamental need for a commercially viable means of construction dispute adjudication.
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Endnotes
1.
International Chamber of Commerce, Publication of Construction Arbitration Report ⟨http:∕∕www.iccwbo.org∕court∕english∕news̱archives∕2001∕bulḻ12̱2.asp⟩ (accessed September 17, 2002).
2.
On many foreign construction projects and conditions of contract, particularly the British system and the Féderation Internationale des Ingénieures-Counseils (FIDIC) or the International Federation of Consulting Engineers, the Owner is referred to as the Employer and the Architect and Engineer (A∕E) is typically referred to as the Engineer. For purposes of this paper, as is commonly used in the United States, the terms Owner and Engineer∕Architect or A∕E will be used.
3.
For examples of conditions of contract other than the FIDIC that provide for alternative forms of dispute resolution in the construction industry, see The New Engineering and Construction Contract, The Institution of Civil Engineers (ICE), 1 Great George St., London SW1P#AA U.K.; see Standard Bidding Documents for Supply and Installation of Plant and Equipment (1st Ed., 1997), The World Bank, 1818 H St., N.W., Washington, D.C. 20433.
4.
For purposes of this paper, all references to the FIDIC conditions of contract will refer to the FIDIC Conditions of Contract for Construction (1st Ed., 1999), otherwise known as the Red Book. The FIDIC produces conditions of contract for various forms of construction processes other than the traditional A∕E, Owner, and Contractor construction project found in the Red Book, including the Short Form of Contract (1st Ed. 1999), known as the Green Book for engineering and building work of relatively small capital value, Conditions of Contract for Plant and Design-Build (1st Ed. 1999), or the Orange Book, and the Conditions of Contract for EPC∕Turnkey Projects (1st Edition 1999), or the Silver Book that is recommended where one entity takes responsibility for the design and execution of an engineering project. See FIDIC, FIDIC Support and Publications ⟨http:∕∕www.fidic.org∕resources∕contracts∕default.asp?back=∕resources∕default.asp#FIDIC%20Publications⟩ (accessed October 22, 2002).
5.
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention of 1958) (June 10, 1958), ⟨http:∕∕www.un.or.at∕uncitral⟩ (accessed September 17, 2002). It is important to note that unlike court judgments in various countries that may or may not be enforceable in another country depending on the idiosyncrasies of that countries particular rule of law, the U.N. Convention referenced above provides that arbitral awards are readily enforceable and recognized by parties and signatories to the Convention. As of January 1998, 24 countries were signatories and 116 countries were parties.
6.
John B. Tieder, Jr., The Globalisation of Construction-Evolving International Standards of Construction Law, 15 Int’l Constr. L. Rev. 550, 551 (October 1998).
7.
An illustrative example of this concept is the hiring of the internationally renowned architect Frank Gehry to design the Guggenheim Museum in Bilbao, Spain. The museum has become a tourist destination for millions of museum and architectural enthusiasts around the world.
8.
See Tieder, 15 Int’l Constr. L. Rev. at 551.
9.
Id. at 552.
10.
Id. at 553.
11.
See generally FIDIC Conditions of Contract for Construction (1st Ed. 1999), FIDIC, P. O. Box 311, CH-1215 Geneva 15, Switzerland.
12.
See Tieder, 15 Int’l Constr. L. Rev. at 552.
13.
Nael G. Bunni, Recent Developments in Construction Disputology, 17(4) Journal of International Arbitration 105 n. 1 (2000).
14.
Id.
15.
Christopher R. Seppala, International Construction Contract Disputes—Commentary on ICC Awards Dealing with FIDIC International Conditions of Contract, 16 Int’l Constr. L. Rev. 339 (July 1999).
16.
Id.
17.
Id. at 340.
18.
Id.
19.
Id.
20.
Id.
21.
Bunni, 17(4) Journal of International Arbitration at 105.
22.
A. H. Graede, Jr., International Construction, 425 PLI∕Real 211, 231 (1998).
23.
Bunni, 17(4) Journal of International Arbitration at 105.
24.
Tieder, 15 Int’l Constr. L. Rev. at 574–575.
25.
See supra n. 5.
26.
Graede, 425 PLI∕Real at 232.
27.
Id.
28.
Id.
29.
Id.
30.
Bunni, 17(4) Journal of International Arbitration at 105.
31.
Id.
32.
FIDIC, Dispute Adjudication Training ⟨http:∕∕www.fidic.org∕news∕content.asp?ArticleCode=23PR&Rubrique=Practice⟩ (accessed October 30, 2002).
33.
Bunni, 17(4) Journal of International Arbitration 106 (2000).
34.
Id.
35.
Id.
36.
Richard A. Shadbolt, Resolution of Construction Disputes by Dispute Review Boards, 16 Int’l Constr. L. Rev. 101, 104 (1999).
37.
Id.
38.
Bunni, 17(4) Journal of International Arbitration at 106.
39.
Shadbolt, 16 Int’l Constr. L. Rev. at 102–03.
40.
Id. at 103.
41.
Id.
42.
Id. at 104.
43.
The writer of this paper, despite criticism that DABs add an additional level of complexity and cost to construction projects, believes that the benefits of using a standing DAB on domestic private construction projects will substantially lower the litigation costs, will lower the costs associated with discovery, will lower hidden contingency costs through the subcontractor and general contractor bidding process, and will substantially lower the financial risks that sureties and insurers are subject to in a privately financed construction project.
44.
Shadbolt, 16 Int’l Constr. L. Rev. at 104.
45.
Id.
46.
James P. Groton, Robert A. Rubin, and Bettina Quintas, A Comparison of Dispute Review Boards and Adjudication, 18 Int’l Constr. L. Rev. 275, 276 (April 2001).
47.
The Dispute Review Board Forum, Vol. 4, Iss. 1, pp. 11 and 13 (January 2000).
48.
Id.
49.
Id.
50.
Dispute Resolution Board Foundation, DRB Successes ⟨http:∕∕www.drb.org∕⟩ (accessed November 1, 2002).
51.
Id.
52.
Id.
53.
Id.
54.
See Charles Chatterjee, Settlement of Disputes Procedure and Arbitration under FIDIC, 17(3) Journal of International Arbitration 103, 113 (2000).
55.
Id. at 105.
56.
ICC Forum on International Issues and New Fields, Draft Report on Construction Industry Arbitration, Doc. 420∕21-002, p. 4 (2000).
57.
Von Holger Langer, International Construction Contracts and Arbitration ⟨http:∕∕www.ganz-recht.de∕print∕stlehreP∕constr05.htm⟩ (accessed September 7, 2002).
58.
Id.
59.
Id.
60.
Id.
61.
Richard A. Shadbolt, 16 Int’l Constr. L. Rev. at 105.
62.
Id.
63.
Id.
64.
Id.
65.
Id.
66.
6Bunni, 17(4) Journal of International Arbitration at 108.
67.
Id.
68.
Chatterjee, 17(3) Journal of International Arbitration at 103.
69.
Id. at 104.
70.
Bunni, 17(4) Journal of International Arbitration at 105.
71.
Chatterjee, 17(3) Journal of International Arbitration at 105.
72.
Id. at 103.
73.
Id. at 107.
74.
Richard A. Shadbolt, 16 Int’l Constr. L. Rev. at 105.
75.
Id.
76.
Chatterjee, 17(3) Journal of International Arbitration at 103.
77.
Id.
78.
Id. at 103–04.
79.
Id. at 103.
80.
Bunni, 17(4) Journal of International Arbitration at 105.
81.
See generally FIDIC, FIDIC President’s List of Dispute Adjudicators ⟨http:∕∕www.fidic.org∕resources∕adjudicators∕adjudicators.html⟩ (accessed November 3, 2002).
82.
Chatterjee, 17(3) Journal of International Arbitration at 110.
83.
Id.
84.
Id.
85.
Id.
86.
Id.
87.
Bunni, 17(4) Journal of International Arbitration at 110.
88.
Id.
89.
Id.
90.
Id.
91.
Id.
92.
Chatterjee, 17(3) Journal of International Arbitration at 104.
93.
See Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, Chapter 6 (Washington 1965), ⟨http:∕∕www.jus.uio.no∕lm∕icsid.settlement.of.disputes.between.states.and.nationals.of.other.states.convention.washington.1965∕doc.html⟩ (accessed November 3, 2002).
94.
Chatterjee, 17(3) Journal of International Arbitration at 108.
95.
Id.
96.
Id.
97.
Id.
98.
Id.
99.
Id.
100.
Bunni, 17(4) Journal of International Arbitration at 111.
101.
Id.
102.
Id.
103.
Id.
104.
Id.
105.
Id.
106.
Id.
107.
Id.
108.
Chatterjee, 17(3) Journal of International Arbitration at 107.
109.
Id.
110.
One should note that under the current FIDIC conditions of contract, disputes are still required to be referred to the A∕E first and then to the DAB. However, the A∕E’s decisions have no binding effect upon the parties to the international construction project under the FIDIC conditions of contract.
111.
The primary function addressing the growing concern of the commercially inefficient use of arbitration in the international construction industry as discussed supra.
112.
Von Holger Langer ⟨http:∕∕www.ganz-recht.de∕print∕stlehreP∕constr05.htm⟩.
113.
Id.
114.
Von Holger Langer ⟨http:∕∕www.ganz-recht.de∕print∕stlehreP∕constr05.htm⟩.
115.
Id.
116.
Id.
117.
Donald L. Marston, Project Based Dispute Resolution—ADR Momentum Increase Into The New Millennium, 16 Int’l Constr. L. Rev. 588 (October 1999).
118.
Von Holger Langer ⟨http:∕∕www.ganz-recht.de∕print∕stlehreP∕constr01.htm⟩.
119.
A leading case on limiting the role of the A∕E’s role as quasi-judicial arbitrator is the House of Lords decision of Sutcliffe v. Thackrah, which confirmed that an architect faces liability for negligent over certification unless the architect can show the architect was acting as an arbitrator in preparing the certificates. 1 ALL ER 859 (1974). The case provides strong precedent that the A∕E must act independently and in good faith when acting in its quasi-judicial capacity.
120.
Groton, Rubin, and Quintas, 18 Int’l Constr. L. Rev. at 283.
121.
Jeffrey Delmon, Expert Determination and the Allocation of Costs, 15 Int’l Constr. L. Rev. 276, 282 (April 1998).
122.
Paul A. Gerber, Dispute Avoidance Procedures (“DAPs”)—The changing face of Construction Dispute Management, 18 Int’l Constr. L. Rev. 122, 126 (January 2001).
123.
Id.
124.
E-mail from Daniel Ivarsson, FIDIC Managing Director, to Bryan M. Seifert, writer of this paper, FIDIC Cost Allocation Provisions, (October 17, 2002) (copy on file with the writer).
125.
Delmon, 18 Int’l Constr. L. Rev. at 283.
126.
See supra n. 120.
127.
Delmon, 18 Int’l Constr. L. Rev. at 284.
128.
Id. at 285.
129.
Id.
130.
Id. at 286.
Information & Authors
Information
Published In
Journal of Professional Issues in Engineering Education and Practice
Volume 131 • Issue 2 • April 2005
Pages: 149 - 157
Copyright
© 2005 ASCE.
History
Received: Apr 30, 2003
Accepted: Oct 21, 2004
Published online: Apr 1, 2005
Published in print: Apr 2005
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