​Romanian contract templates vs. FIDIC 2017 edition

The FIDIC Suite of contracts have been around for many years worldwide and were used successfully also in Romania. All the major infrastructure projects developed in Romania in recent years were implemented based on the RED or YELLOW FIDIC Books (1999 edition) – with amendments.

Highly appreciated by the industry and authorities alike, the FIDIC RED and YELLOW Books have a track record of more than 18 years. During this time, an extensive case law has been developed, which, in the end was used by the Fédération Internationale Des Ingénieurs-Conseils (FIDIC) to update the former editions.

The main goal of the RED and YELLOW updated Books was to increase clarity and certainty by implementing more prescriptive procedures to transparently state what is expected from the Engineer, Employer and Contractor.    

Therefore, the recognition of the issues raised by the FIDIC users and their implementation in the 2017 edition should lead to fewer disputes and successful projects. In fact, the 2017 edition puts an increased focus on dispute avoidance. What was Clause 20 [Claims, Disputes and Arbitration] under 1999 edition is now divided into Clause 20 [Employer’s and Contractor’s Claims] and Clause 21 [Disputes and Arbitration].

About the same period, on 11 January 2018, the Romanian Government approved two (2) contract templates – one (1) to be used for works designed by the Employer and executed by the Contractor and the other to be used for the works designed and built by the Contractor, mandatory for all investment objectives which are: (i) financed from public funds, (ii) valued at or over RON 23,227,215.00 (approx. EUR 5,050,000.00), and (iii) tendered after the 11 January 2018.

Instead of implementing the updated 2017 FIDIC edition, the Romanian authorities have chosen to implement and impose new contract templates to be used for the major infrastructure works to be developed in Romania after 11 January 2018.

Similarly to FIDIC stated goals, the Romanian authorities indicated that the new contract templates should facilitate the successful completion of the projects, by providing better and more prescriptive procedures for the Engineer, Employer and Contractor. Therefore, the same aim of dispute avoidance is desired by the Romanian authorities too.

Role of Supervisor vs Engineer

One of the fundamentals of 2017 FIDIC Books is represented by the critical role awarded to the Engineer. As a result, the 2017 edition depicts in detail the Engineer’s role in dealing with Parties’ claims and with other matters under the contracts.

To ensure that the Engineer will deliver what is expected from him/her – namely that the Engineer will equally treat both the Employer and the Contractor in its efforts to broker an agreement between the Parties or to issue a determination, it is clearly stated in the 2017 edition (which was only implied or reasonably expected in the 1999 edition) that the Engineer is required to act neutrally and not be deemed to act for the Employer.

Moreover, to further strengthen the need of a neutral and independent Engineer, the 2017 FIDIC also comprises provisions which expressly state that the Engineer shall not be required to receive Employer’s consent when dealing with Parties’ claims or matters under the contract.

The Supervisor, under the Romanian contract templates is the equivalent of the Engineer. However, although the major responsibilities are similar between the Supervisor and the Engineer, in the Romanian templates is it not clearly stated that the Supervisor shall act independently and neutrally towards the Parties.

Actually, the Supervisor is defined as economic entity or a team from the Employer, assigned by the Employer. Therefore, it appears that the view of the Romanian authorities in avoiding disputes, on this topic, is to have greater control over the Supervisor, while with the 2017 FIDIC edition the Engineer is set to act independently and neutrally.

Although it is hard at this time to identify which strategy will be more effective for the successful completion of the projects, from previous experience, a neutral, independent and well reputed Engineer/Supervisor will have more changes to broke and agreement between the Parties or issue a determination to be further adhered to by the Parties. When the Contractor must fight against the Employer or against a Supervisor/Engineer which will act as an extension of the Employer, then most probably disputes will not be avoided.

Parties’ claims and dispute avoidance

Under the new 2017 edition FIDIC RED and YELLOW Books, as well as under the Romanian adopted contract templates, the drafters have upheld similar procedures for both the Employer and Contractor.

Under this aspect, both contract forms departed from the 1999 edition, where the Contractor claims were treated differently from those of the Employer.

One important aspect regarding the claims procedure are the time limitations and the sanctions carried with the failure of serving a notice or submitting a detailed claim in the prescribed time frames. In addition to this, for the Romanian contract forms, the claimant must observe the specific requirements regarding the way the details of a claim are submitted. Failure to observe the criteria in which the details must be presented represent reason for their dismissal.

On this point, the Romanian contract forms, maybe to avoid disputes, gave an increased role to the way the claims are presented, reducing therefore the claimant flexibility in presenting its case in a manner which is more familiar to him.

On the other hand, to avoid disputes, 2017 FIDIC edition offer to the claimant the possibility to include in the detailed claim the points it considers relevant when it disagrees with or believes that are reasons for which it had failed to observe the term for issuing a notice of claim.

The FIDIC, for the RED and YELLOW updates of 2017, considered that it was more appropriate to offer to the claimant the possibility to present its arguments already in front of the Engineer, so that the latter may consider such in its effort to find agreement or when making the determination. If the claimant is still dissatisfied with the Engineer’s determination, then it can refer the issue to the DAAB for a decision.

It can be observed at this step that FIDIC drafters have considered another approach compared to the Romanian drafters. While the FIDIC considered that it would be appropriate to offer another opportunity to the Parties and Engineer to avoid a dispute over the consequences of not observing the time requirements when serving a notice of claim, the Romanian drafters have not.

Moreover, maybe what is the most important signal sent by FIDIC regarding the strive to avoid disputes between the Parties is the inclusion of the newly Sub-Clause 21.3 [Avoidance of Disputes].

To enhance the DAAB’s role – which now is standing rather than ad hoc, under this Sub-Clause 21.3, the Parties can jointly refer an issue to the DAAB for the latter to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement that may have arisen. Similarly, the General Conditions of the Dispute Avoidance/Adjudication Agreement were improved to include express provisions in respect of DAAB’s role in assisting the Parties to avoid Disputes.   

In this respect, the Romanian contract forms stayed silent. The contract forms provide for a procedure offered to the Parties to amicable settle the Dispute – but this is available after the Supervisor’s decision, or in lack of such decision the Parties are compelled to try an amicable settlement either directly or through a mediator. Although this may be viewed as a remedy to avoid arbitral proceedings, it is not, in our opinion, a genuine tool for avoidance of Disputes. Also, this opportunity is offered to the Parties in the 2017 FIDIC edition, noting that the amicable settlement period has been reduced from 56 days to 28 days.

Conclusions

Although similar in what regards the more descriptive and similar manner in which the Parties’ claims are dealt under the new 2017 FIDIC edition and the Romanian contract forms, there are still sensitive differences.

While the FIDIC is keen in offering prescriptive procedures linked to Parties’ possibility to avoid disputes, either with the help of the Engineer or the informal involvement of the DAAB, the Romanian drafters have chosen a path where sanctions are immediately enforced if the prescriptive procedures are not complied with.

When considering also the fact that the Supervisor may be an entity of the Employer, as opposed to the FIDIC where the Engineer is offered with additional representations regarding its neutrality and independence – mainly in its role of agreement facilitator or when determining a matter, it may be that under the Romanian contract forms, the Parties will be forced to declare Disputes before they can reach an independent forum – mediation or arbitration.

Publishing date: 15.05.2018