UK: The Court Of Appeal In Persero II: How To Enforce "Binding But Non-final" Dispute Board Decisions Under The FIDIC Form Of Contract

Last Updated: 11 August 2015
Article by Robbie McCrea

PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] SGCA 30

This article is a follow-up to two International Quarterly ("IQ") articles on the Persero series of cases, the first of which followed the Persero I Court of Appeal decision in Issue 01, 2011, and the second followed the Persero II High Court decision in Issue 12, 20141. As promised we have continued to monitor the progress of this influential series of cases, and we set out below our conclusions on the enforcement of non-final DAB decisions following the latest (and final) decision by the Court of Appeal in Persero II.


The 1999 FIDIC Suite of Contracts2 includes a dispute resolution mechanism that was designed to give the parties quick, costeffective and immediately binding awards through the Dispute Adjudication Board ("DAB") mechanism at Clause 20 of the Conditions of Contract.

However, an apparent oversight in the drafting of Clause 20 has left many parties with an entirely different experience from that intended by the FIDIC drafters, and even today there is no settled pathway to enforce a DAB decision where the non-complying party has prevented the decision from becoming "final".3

A DAB decision will become final if neither party provides written notification of their dissatisfaction with the decision within 28 days of receiving it (pursuant to Sub-clause 20.4). It is therefore a straightforward matter for either party to ensure a DAB decision remains "nonfinal".

Both final and non-final DAB decisions are immediately binding on the parties. However, final decisions cannot be appealed, and if a party fails to comply with a final decision Sub-clause 20.7 expressly allows the other party to refer to arbitration the discrete issue of non-compliance in order to enable the DAB decision to be enforced as an arbitral award.

Although the FIDIC drafters have stated that their intention was that non-compliance with "non-final" DAB decisions be enforceable in the same manner as "final" decisions,4 there is no express provision in the Conditions of Contract to allow it. This has led to debate as to how to enforce a binding but non-final DAB decision.

The issue has been dealt with in a multitude of ways by DABs, arbitral tribunals and legal commentators. However, because DABs and arbitration are private, there has been very little guidance from the courts.

For this reason there has been widespread interest in a series of cases involving this issue in Singapore, the "Persero" series, which culminated in the decision of the Singapore Court of Appeal in PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] SGCA 30, the reserved judgment being issued on 27 May 2015.

In a split decision, the Majority of the Court of Appeal found that binding but non-final DAB decisions could be submitted directly to arbitration on the discrete question of noncompliance.

While the Majority's decision is on face value a victory for contractors seeking the protection of a security of payment regime, the result is bittersweet. Interim enforcement of the DAB decision was obtained only after going through two sets of arbitration, High Court and Court of Appeal proceedings, and over a period of six years. A decision on the merits of the underlying dispute is still to be decided.

Furthermore, the pathway to interim relief laid down by the Majority differs from all previous judgments in the Persero series, whereas the Minority judgment held that the Conditions of Contract provide no scope whatsoever for expedited relief by enforcing non-final DAB decisions.

Parties would therefore be well advised to proceed carefully when pursuing the enforcement of non-final DAB decisions under the FIDIC Conditions of Contract.


The Persero series involves a dispute between parties to a contract based on the FIDIC Red Book, and which is governed by the law of Indonesia. A DAB was established and subsequently ordered that the employer ("PGN") pay the contractor ("CRW") in excess of US$17 million (the "DAB Decision"). PGN accordingly issued a Notice of Dissatisfaction ("NOD") pursuant to Sub-clause 20.4 and refused to comply with the DAB Decision. The Persero series is based upon CRW seeking expedited enforcement of the DAB Decision.

CRW first attempted to enforce the DAB Decision by proceeding to arbitration in 2009 under Sub-clause 20.6 on the discrete question of whether CRW was required to comply with the DAB Decision. The arbitral tribunal found in CRW's favour and held in a final award that PGN had an obligation to make immediate payment of the sum awarded in the DAB Decision. This is consistent with the stated intention of the contract drafters.

The 2009 tribunal's award was subsequently set aside by the High Court of Singapore. The High Court reasoned that the tribunal could not convert the non-final DAB Decision into a final award without determining the merits of the underlying dispute. However, the Court opined that if CRW were to obtain a second DAB decision on the discrete question of non-compliance with the first DAB Decision, it could then submit the second DAB Decision to arbitration where the tribunal could decide the issue as it would be hearing the issue referred on its merits. This is known as the "two-dispute" approach.

The High Court decision was appealed to the Court of Appeal which confirmed that the 2009 Arbitral Award should be set aside. However, the Court of Appeal did not endorse the two-dispute approach. Instead, the Court considered that the tribunal would have been able to enforce the DAB Decision by way of interim relief, if CRW had also submitted the underlying dispute to the tribunal as part of the same referral. Under this approach the tribunal could first give an interim award on the issue of non-compliance with the DAB Decision, and then go on to hear the substantive dispute on its merits. This is known as the "one-dispute" approach.

CRW subsequently commenced a new arbitration under the one-dispute approach. By majority, the 2011 tribunal issued an interim award compelling PGN to give prompt effect to the DAB Decision (the "Interim Award") pending the tribunal's final determination of the underlying dispute.

The Interim Award and the one-dispute approach were upheld by the High Court in Persero II5 in its decision of July 2014, which found that Clause 20 of the Conditions of Contract establishes a "security of payment regime", the principal purpose of which is to facilitate the cash flow of contractors by requiring the employer to pay immediately, while preserving its right to argue later the substantive merits of the dispute in arbitration (i.e. "pay now, argue later"). Accordingly, the arbitral tribunal was entitled to grant a final and binding award that the DAB Decision be complied with immediately, albeit as the first step of the primary dispute being finally decided in due course.

PGN appealed Persero II to the Court of Appeal.

The Court of Appeal in Persero II

The 2015 Court of Appeal by majority ruled in favour of CRW and upheld the Interim Award. However, the Court found that neither the one-dispute approach nor the two dispute approach was strictly correct. Instead, it considered that binding but non-final DAB decisions should be enforceable by way of interim awards in and of themselves, that is, without referring the secondary dispute back to the DAB and without the need to also submit the underlying dispute to arbitration.

The Majority judgment

As a preliminary matter the Majority considered the DAB's powers under Sub-clause 20.4 and set out the following three propositions:6

(a) "A DAB decision is immediately binding once it is made. ...

(b) The corollary of a DAB decision being immediately binding once it is made is that the parties are obliged to promptly give effect to it until such time as it is overtaken or revised by either an amicable settlement or a subsequent arbitral award.

(c) The fact that a DAB decision is immediately binding once it is made and unless it is revised by either an amicable settlement or arbitral award is significant ... the issuance of an NOD [notice of dissatisfaction] self-evidently does not and cannot displace the binding nature of a DAB decision or the parties' concomitant obligation to promptly give effect to and implement it."

The Majority then considered the two-dispute approach that was preferred by the High Court in Persero I and rejected it on the basis that, in light of the above three propositions, "any requirement to refer a question as to the immediate binding effect of a binding but nonfinal DAB decision back to the DAB seems to us not only wholly superfluous, but also contrary to the express words of cl 20.4[4]".7

In respect of the one-dispute approach that was preferred by the Court of Appeal in Persero I and the High Court in Persero II, the Majority rejected the notion that all differences between the parties would need to be settled in a single arbitration. The Majority instead found that a "paying party's failure to comply with a binding but not final DAB decision is itself capable of being directly referred to a separate arbitration under cl 20.6".8

In practice, however, the Majority's decision may be less of a departure from the onedispute approach than a first glance would suggest. This is because the Majority also found that the non-complying party could, by filing a counterclaim, require that the underlying dispute also be heard as part of the same arbitration, albeit after the tribunal had first made a final award in respect of noncompliance with the DAB decision.9

The Minority judgment

In a 95-page dissenting judgment, Senior Judge Chan Sek Keong found the opposite. His Honour's opinion was that, unlike final decisions under Sub-clause 20.7, there is no scope in Sub-clause 20.6 or elsewhere in the Conditions of Contract for interim enforcement of non-final DAB decisions.

His Honour considered that the Interim Award should be set aside on one or more of the following three grounds:

  1. Failure to comply with the non-final DAB Decision did not fall within the scope of "dispute" in Sub-clause 20.4, or anywhere in the arbitration agreement, and therefore it could not be the subject of an arbitral award.
  2. The 2011 Majority Arbitrators had no mandate under Sub-clause 20.6 to issue the Interim Award pending the final adjudication of the Underlying Dispute.
  3. Even if the 2011 Majority Arbitrators did have the mandate under Sub-clause 20.6 to issue the Interim Award, the Interim Award was, and was intended to be, in substance a provisional award outside the ambit of "award" in s.2 of the Singapore International Arbitration Act ("IAA") and was not enforceable under s.19 of the IAA as a judgment.
  4. Accordingly, His Honour considered that in order to enforce the DAB Decision CRW would need to go outside the contractual machinery, for instance by seeking summary judgment in a court of competent jurisdiction.


Far from providing the much needed clarity that was hoped for (by contractors at least), the Persero series has concluded by adding yet more interpretations of the disputes mechanism at Clause 20. Prospective claimants must now consider the four potential approaches endorsed in the Persero series when considering enforcement of a non-final DAB decision, namely:

  1. Submit the issue of non-compliance with the DAB decision directly to arbitration.
  2. Obtain a second DAB decision in relation to non-compliance and refer that second DAB decision to arbitration (the twodispute approach).
  3. Submit the entire substantive dispute to arbitration, seeking in the first instance an interim award that the DAB decision be complied with immediately, on the basis that the substantive dispute will be heard on its merits in due course as part of the same referral (the one-dispute approach).
  4. Seek to enforce the DAB decision outside the contractual machinery, for instance by seeking summary judgment in a court of competent jurisdiction.

It should be noted that the Persero series were decided in Singapore under Indonesian law, and the judgments included consideration of a number of factual and jurisdiction-specific matters. These should be considered carefully before placing reliance on the Persero decisions in relation to other jurisdictions and cases.


1. These articles are both available in the IQ archive on the Fenwick Elliott website

2. The Red Book, the Yellow Book and the Silver Book.

3. Either party can prevent a DAB decision from becoming final by giving written notification of their dissatisfaction with the decision within 28 days of receiving it (pursuant to Sub-clause 20.4).

4. The FIDIC Contracts Committee issued a Guidance Memorandum on 1 April 2013 in which they sought to clarify that in the event of non-compliance with non-final DAB decisions, "the failure itself should be capable of being referred to arbitration under Sub-clause 20.6".

5. PT Perusahaan Gas Negara (Persero) TBK ("PGN") v CRW Joint Operation (Indonesia) ("CRW") [2014] SGHC 146.

6. At paragraph 57.

7. At paragraph 66. The Majority's principal rationale behind this finding was that while PGN's NOD only expressly covered its dissatisfaction with the DAB Decision, by PGN choosing not to comply with the DAB Decision its NOD also implicitly expressed dissatisfaction with the requirement that the DAB Decision be complied with, and therefore the dispute over non-compliance was already encompassed in the NOD. With respect, this reasoning is questionable.

8. At paragraph 83.

9. The Court's position was summarised at paragraph 88.

International Quarterly is produced quartely by Fenwick Elliott LLP, the leading specialist construction law firm in the UK, working with clients in the building, engineering and energy sectors throughout the world.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Robbie McCrea
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