A team from Fieldfisher LLP, led by disputes partner
Colin Gibson, recently secured an enforcement of a DAB Decision in
arbitration by way of a Final Partial Award after the contractor
refused to pay.
There remains uncertainty within the industry on projects let on
the FIDIC 1999 suite of contracts as to how a Dispute Adjudication
Board (DAB) Decision which is binding, but not final and binding,
is to be enforced in the event of non-compliance. Having recently
enforced such a decision for a European construction and energy
contractor wishing to recover losses, there are a few clear lessons
for the industry.
The contractor was seeking to recover losses from the employer
that it had suffered on an electricity cable laying project
involving the extension of two power substations and the stringing
of circuit transmission lines between them. The contract was let on
an amended FIDIC EPC/Turnkey Contract, 1st Edition (the
'Silver Book'). The dispute resolutions provisions of
the contract were not amended and provided for the escalating
dispute resolution framework of DAB, amicable settlement then
The Contract Sum was €41m. The contractor sought to recover
damages for breach of contract to the sum of approximately
€12m. The contractor referred the dispute to the DAB,
which awarded the contractor the sum of €7m plus VAT. The
employer served a Notice of Dissatisfaction (NOD) in accordance
with the contract, which meant that, while the DAB Decision was
binding, it had not become final and binding. The employer
did not comply with the DAB Decision and amicable settlement
DAB Decisions are not enforceable under the New York Convention
1958, so the question arose as to how it should be enforced. Is a
party's failure to comply with a DAB Decision a new
dispute? Is it necessary to refer such non-compliance to a
second DAB before enforcement by way of arbitration? Can a
party simply enforce the original DAB Decision by way of
arbitration? Should enforcement be by way of an interim award
or a partial award? These are precisely the questions which
arose in this case.
Arbitration proceedings pursuant to Clause 20.6 of the contract
were commenced, first to enforce the DAB Decision and, second, to
determine the merits of the underlying claim. The employer
disputed the Tribunal's jurisdiction on two bases: first, that
the Tribunal was not properly constituted; and second, that the
employer's non-payment of the DAB Decision was a new dispute -
which the contract required to be referred to a second DAB before
it could be enforced by way of arbitration.
In response it was argued that both the Tribunal was properly
constituted; and the DAB Decision was binding. The parties
were bound to give effect to it pending resolution of the merits of
the underlying claim. In the event of non-compliance with the
DAB Decision, compliance should be enforced by way of a Final
Partial Award. This is an important point: awards labelled as
'interim' are not enforceable in several jurisdictions. It
is also the most time and cost-effective manner in which to
properly enforce a DAB Decision. In respect of the argument
that the DAB Decision was binding, the Persero and Persero 2
judgments in Singapore and the FIDIC Guidance Memorandum to Users
of the 1999 Conditions of Contract (1 April 2013) were key.
The Tribunal ordered a hearing on jurisdiction, at which the
parties agreed that the Tribunal should also address Phase I of the
arbitration, i.e. enforcement of the DAB Decision pending Phase II
on the merits. The Tribunal found that it was indeed properly
constituted and awarded enforcement of the DAB Decision by way of
Final Partial Award. The parties subsequently settled the
This Award shows that, where a party has a DAB Decision in its
favour which is binding, but has not become final and binding, that
party should commence arbitration proceedings under Clause 20.6 of
the contract and request that the Tribunal enforces the DAB
Decision by way of a Final Partial Award, pending a final
determination of the merits of the underlying dispute. There is no
need for a second DAB and "interim" awards should be
avoided for enforcement reasons.
Parties who let projects on the FIDIC 1999 suite of contracts,
which do not make it expressly clear that DAB decisions which are
binding but have not become final and binding may be enforced in
this manner, should take note. The Guidance Memorandum to Users
suggests a "patch" for the 1999 suite and parties should
consider using it. FIDIC has already made the position clear in the
'Gold Book' (FIDIC Conditions of Contract for Design, Build
and Operate Projects (1st Edition, 2008)), and it's understood
that this point will also be clarified in the anticipated revised
suite of FIDIC contracts.
This article first appeared in Building magazine on 6th May
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