HKA Executive Director, Craig Enderbury and HKA Partner Damian Waters, highlights one of the pitfalls of a Contractor referring a dispute to a DAB for a decision on quantum where the Contractor has previously failed to provide the FIDIC Engineer with an adequately fully detailed particularised claim to support and demonstrate the quantum claimed.

Pursuant to Sub-Clause 20 of the FIDIC suite of Contracts (1999 Edition), if an Engineer’s determination is disputed, that dispute may be referred to the Dispute Adjudication Board (DAB) for its decision. Subject to any successful jurisdictional challenges that may prevent the DAB from doing so, the DAB shall adjudicate the dispute and issue a reasoned decision within 84 days or such other period as may be proposed by the DAB and approved by both Parties.

In this example, the Contractor is the Referring Party and the Employer is the Respondent. A dispute has arisen between the Contractor and the Employer in relation to an Engineer’s Sub-Clause 3.5 determination of a Contractor’s claim submitted pursuant to Sub-Clause 20 of the Contract. In very broad terms the dispute concerns opposing views as to the Contractor’s entitlement in principle and the quantum claimed.

By way of background, the Contractor submitted its notice of claim in accordance with Sub-Clause 20.1 i.e. within 28 days of becoming aware of the event. As the notice was given within the specified timescale, the claim is not time barred. The Contractor then submitted an interim claim and eventually submitted its final claim some time thereafter.

In accordance with Sub-Clause 3.5 the Engineer consulted with each Party (i.e. the Contractor and the Employer) in an endeavour to reach an agreement. No agreement was reached and as such the Engineer, in his opinion, made a fair determination in accordance with the Contract taking due regard of all relevant circumstances.

The Engineer gave notice to both Parties of the determination with supporting particulars. In summary, the Engineer determined that the Contractor had no entitlement in principle and consequently no entitlement to payment of the sums claimed. For completeness the determination also set out why, even if the Contractor’s claim had been valid in principle, the Contractor’s quantum was fundamentally flawed in that it lacked adequate and detailed particulars to demonstrate and evidence the sums claimed.

Unhappy with the Engineer’s determination, pursuant to Sub-Clause 20.4 the Contractor referred the dispute in writing to the DAB for its decision.

Following the submissions of the Statement of Case, Response to the Statement of Case, Reply and Rejoinder, the DAB issued its decision within 84 days.

In summary, the DAB decided in favour of the Contractor on matters of principle but found that the Contractor had failed to prove the extra over costs it stated it had incurred or indeed what costs it would have incurred in any event. In reaching its decision the DAB also set out its reasoning as to why the Contractor had failed on the balance of probabilities to demonstrate its quantum entitlement. In so doing the DAB gave the Contractor a steer, as to what the Contractor ought to have done in order to prove its quantum.  

Following receipt of the DAB’s decision, both Parties issued their respective notices of dissatisfaction pursuant to Sub-Clause 20.4 and set out the matter in dispute and the reason(s) for dissatisfaction. The Employer was dissatisfied that the DAB had decided the principle point in favour of the Contractor and the Contractor was dissatisfied that the DAB had decided that the Contractor had failed to establish entitlement to quantum.

“If the DAB has given its decision as to a matter in dispute to both Parties, and no notice of dissatisfaction has been given by either Party within 28 days after it received the DAB’s decision, then the decision shall become final and binding upon both Parties.”

As regular users of FIDIC will be aware, Sub-Clause 20.5 provides for a cooling off period to allow the Parties to seek to achieve amicable settlement after a notice of dissatisfaction has been served, but if amicable settlement is not reached then the dispute will be decided in Arbitration.

“Where notice of dissatisfaction has been given under Sub-Clause 20.4 above, both Parties shall attempt to settle the dispute amicably before the commencement of arbitration. However, unless both Parties agree otherwise, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of dissatisfaction was given, even if no attempt at amicable settlement has been made.”

The DAB only has jurisdiction to consider the dispute that is referred to it. It is therefore vitally important that the Contractor’s claim submission is clearly expressed and well substantiated in the first instance. A nebulous or unsubstantiated claim may lead to a DAB decision which rejects the claim in its entirety, or in part.

Damian Waters & Craig Enderbury