Lawyer, Doctor of law Daniel MOREANU: New set of FIDIC Contracts have been issued at the beginning of December 2017. What are the main changes?
|Daniel MOREANU is a lawyer and doctor of law. For more information, please visit: www.moreanulaw.com|
11 December 2017
International Federation of Consulting Engineers (FIDIC) decided, following an 18 year old practical use of standard “red”, “yellow” and “silver” FIDIC Contracts, to publish a renewed edition of such agreement used in construction field at international level.
As mentioned by FIDIC, the issuing of such new set of three (3) standard-contracts represents a defining moment for the global construction market.
Under this article, we will present some of the main amendments introduced by the new edition of FIDIC Contracts.
For example, the role of the Engineer under “red” and “yellow” FIDIC underwent an essential modification, the “neutral” manner in which the Engineer shall now act having as purpose to encourage the parties in reaching an amicable agreement. Differences between the parties could consist mainly of three (3) categories of claims: additional amounts, extending the term of completion or other contractual aspects.
The new FIDIC Contracts establish that in the hypothesis of certain claims, the parties have the obligation to notify the Engineer (or the other party under “silver” FIDIC) within a period of maximum 28 days as of the date the respective party knew or should have known about the event that generated the claim, otherwise the other party shall be discharge of liability. The procedure of solving claims became more structured; until the claim can be subjected to Dispute Avoidance/Adjudication Boards (DAABs) certain consecutive steps need to be followed, that could reach up to 9 months (i.e., maximum 266 days).
Another novelty of the new FIDIC Contracts consists in the fact that DAABs are to be established right from the contract’s signing date, as permanent institution, as opposed to ad-hoc nature under FIDIC 1999 edition. The declared purpose of establishing DAABs as permanent institutions is settling claims and avoiding them to escalate to disputes.
The alternative clauses were significantly changed. The possibility of agreeing certain intermediary milestones or limitation of liability provisions for indirect damages constitutes dispositions that resulted from practice and are now situated within the framework of alternative clauses.
It is important to underline that, as it appears under the recommendations issued by FIDIC, the amendment of General Conditions through the use of Particular/Special Conditions, required in order to adapt the standard contract to the specificity of the project and the system of law in which such shall apply, must be realized in a balanced and reasonable manner.
The practical experience shows that a strongly imbalanced contract derails form its inherent purpose (that of guiding the parties throughout the practical execution of the project).
Establishing the reasonable and equitable limits within which FIDIC Contracts can be amended requires detailed knowledge of the specificity of this standard contract, as well as of the project and the national system of law. The unprofessional use of FIDIC Contracts can lead to negative major consequences.
For those interested, an in-depth analysis will be made during the “Conference regarding New FIDIC Contracts” that shall take place at the beginning of 2018. More details and registration are available at www.moreanulaw.com