Emergency Government Ordinance no. 7/2016 on several measures
for acceleration of the implementation of trans-European transport
infrastructure projects, as well as for the amendment and
supplementation of certain legislation ("EGO
7/2016") entered in force on 18 March 2016.
EGO 7/2016 brings several new provisions on the execution of
FIDIC contracts with emphasis on the payment mechanism of amounts
awarded as a result of dispute adjudication boards
The preamble of EGO 7/2016 mentions that the rationale behind
the new provisions is to prevent the blockage of Trans-European
infrastructure projects. The "inspiration" for the
changes originated from claims filed by contractors for events
occurred under the FIDIC contracts and repeated requests for the
conclusion of addenda to the FIDIC contracts to regulate payment
mechanism of amounts awarded by DAB decisions. Improving payment
thereof eliminates the accrual of significant delay penalties and
interest for late payments between the issuance of the
DAB decision and the final solution in arbitration
Beneficiaries under the Ministry of Transportation implementing
trans-European infrastructure projects may sign an addendum to the
existing public procurement contracts setting out the enforcement
of DAB decisions. In order for the addendum to be concluded, EGO
7/2016 sets out several conditions, the most important being that
contractors accept to waive their right to delay penalties.
Another preliminary condition for the conclusion of the above
addendum is that contractors must set up a bank letter of guarantee
in favor of the beneficiary. This guarantee can be foreclosed by
the beneficiary in the event that he is successful in a DAB
arbitration and the respective contractor refuses payment or simply
fails to pay. Therefore, EGO 7/2016 ensures a swift payment to the
state authorities managing the development of trans-European
transport infrastructure projects. The validity of the bank letter
of guarantee has to be maintained by the contractor until the writ
of execution (i.e. arbitration decision) is issued.
Prior to making any payments, the beneficiaries have an
obligation to carry out all procedural remedies in the contract for
dispute adjudication. The beneficiary may propose to the main
crediting authority to waive the right to carry out all procedural
stages and this is allowed only based on substantiated grounds.
Lack of cash flow is also stated as a frequent cause for works
interruption that delays the completion of Trans-European
infrastructure projects. EGO 7/2016 introduces a legal framework
for the award, justification and retrieval of advance payments
forwarded by the beneficiaries that will hopefully ensure project
finalization on time. Beneficiaries may award up to 15% from the
total value of the contract as advance payments.
EGO 7/2016 further adds that an order shall be issued by the
Ministry of Transportation for the establishment of payment
prioritization criteria. The maximum percentage is 35% from the
value of budgetary credits approved annually by the state budget
for trans- European transport infrastructure projects.
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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