FIDIC Red Book 2017: Top 7 Changes
V&E Construction Disputes Update E-communication, February 8, 2018
On 5 December
2017, the International Federation of Consulting Engineers (FIDIC) published new
editions of its suite of contracts, reflecting long-awaited responses to the
changing needs of the construction industry. Given its general dominance in the
Middle East, the changes to the 1999 FIDIC “Red Book” will be of interest to
employers, contractors, and engineers operating in the region. While effectively
every clause in the FIDIC Red Book has been amended in the new edition, this
briefing focuses on our view of the Top 7 with the greatest impact on employers
and contractors alike.
Notices (Cl. 1.3): The 2017 Red Book includes notice requirements in
approximately 80 places. The term ‘Notice’ is now defined and distinguished
from other forms of communication; whereas the latter must reference the clause
under which it is issued, a Notice does not. In addition, all Notices and
communications must “not be unreasonably withheld or delayed.”
Profit (Cl. 1.1.20, 13.3 & 15.6): In terms of Cost Plus Profit
for relief events, unless stated otherwise, a Contractor will be entitled to a
5% profit (while under the 1999 Red Book, there was no stated figure). The 2017 Red Book also specifically entitles the Contractor
to “any loss of profit or other losses and damages suffered” for variations and
termination for convenience.
Exceptional Event (Cl. 18): Force majeure is now called “Exceptional Event,” but the
risk allocation remains the same.
Advance Warning (Cl. 8.4): For the first time, the 2017
Red Book introduces advance
warning provisions, which require each Party to advise the other “in advance of
any known or probable future events which may (a) adversely affect the work of
the Contractor’s Personnel; (b) adversely affect the performance of the Works
when completed; (c) increase the Contract Price; and/or (d) delay the execution
of the Works or a Section (if any).” There is no time limit for giving an
advance warning, nor is there any explicit sanction for failing to do so.
Extension of Time (Cl. 8.5): At least four important changes have been made to the
EOT provision. First, unlike the 1999 Red Book, the Contractor is not required
to give a separate notice of a claim for an EOT for a delay caused by a
Variation (as this notice has been built into the Variation clause at 13.3).
Second, delay for “exceptionally adverse climatic conditions” has been
qualified to be “Unforeseeable having regard to climatic data.” Third, the
Contractor has an explicit entitlement to an EOT if the delay is caused by an increase
of more than 10% of an estimated quantity. Fourth, the clause specifically
contemplates the parties adopt provisions in respect of concurrent delay.
Claims (Cl. 20): The provisions relating to Claims and Disputes have been separated and redrafted
substantially. Clause 20 (Claims) sets out a procedure for (a) Employer Claims
(“additional payment from the Contractor (or reduction in the Contract Price)
and/or to an extension of the DNP”); (b) Contractor claims for “additional
payment from the Employer and/or to EOT”; and (c) either Party for “another
entitlement or relief against the other...of any kind whatsoever…except (a) and
(b).” Notably, the existing 28-day time requirement for notifying claims now
applies to the Employer as well, and the old 42-day timeframe for the “fully
detailed claim” has been increased to 84 Days.
DAAB (Cl. 21): The newly introduced “DAAB,”
which stands for “Dispute Avoidance / Adjudication Board” (in contrast to the
previous “DAB”), brings with it a number of important procedures. First, unless
the Parties agree otherwise, the DAAB members are to be appointed within 28
days after the Contractor receives the Letter of Acceptance; there are also
detailed procedures for resignation, termination and new appointments. Second,
the DAAB may provide “Informal Assistance” if jointly requested by the Parties,
who are not bound to act on the DAAB’s advice. Third, in terms of time-bars (a)
the DAAB must give its decision within 84 days after receiving the reference;
(b) a Party must refer a Dispute to the DAAB within 42 days after giving or
receiving a Notice of Dissatisfaction with the Engineer’s determination; and
(c) a Party that is dissatisfied with the DAAB’s decision must give an NOD to
the other within 28 days or else the decision becomes final and binding on both
Parties. Fourth, arbitral tribunals are empowered to order the enforcement of a
DAAB decision, by way of summary or other expedited procedure, whether by an
interim or provisional measure or award.
It is clear that the
drafters of the new edition have gone to great lengths to address previous
criticisms from users, including greater emphasis on dispute avoidance. While
the new edition is more rigid and prescriptive than its predecessor (not to
mention, nearly double the length), which is likely to put more pressure on
employers and contractors to ensure they comply, the overall risk allocation
remains generally the same. Given its early days, it remains to be seen whether
regional owners and contractors adopt the 2017 Red Book or stick with its 18-year-old
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