The fact that the FIDIC suite of contracts, at clause 20, provides for disputes to be resolved by dispute adjudication board (DAB) prior to commencing arbitration proceedings means that disputes arising out of FIDIC contracts rarely come before the courts. However, two recent decisions provide helpful clarification on the operation of the provisions of clause 20.
Amended FIDIC Silver Book provided for DAB and litigation
In Peterborough City Council v Enterprise Managed Services Ltd, the contract in question was a FIDIC Silver book for a project which involved the design, supply, installation, and testing of a 1.5MW solar energy plant by Enterprise Managed Services (EMS) on the roof of a building owned by Peterborough City Council (the Council). The works were completed late and failed to achieve the stipulated power output. As a result, the Council claimed it was entitled to a price reduction, a fact disputed by EMS.
In Peterborough, Clause 20 of FIDIC Silver Book provided that disputes were to be referred to a DAB, whose decision was to be final and binding unless a notice of dissatisfaction is given, following which (in an amendment to the standard wording) the dispute was to be settled by the courts of England and Wales. Following an unsuccessful attempt to resolve the dispute by mediation, EMS gave notice under the contract that it intended to refer the dispute to adjudication, whereas shortly afterwards the Council issued and served its court claim. EMS issued an application for the court proceedings to be stayed so that the dispute could be referred to the DAB.
Clause 20.2.1 provided as follows:
"Disputes shall be adjudicated by a DAB in accordance with Sub- Clause 20.4 [Obtaining Dispute Adjudication Board's Decision]. The Parties shall jointly appoint a DAB by the date 28 days after a Party gives notice to the other Party of its intention to refer a dispute to a DAB in accordance with Sub-Clause 20.4."
It is clear that the DAB was to be the 'ad hoc' variety, convened to deal with a dispute as and when it arose, not the 'standing' variety, which is in place from the outset of the project. EMS contended that the requirement for disputes to be resolved by a DAB under clause 20.2.1 was mandatory, and accordingly the Council's issue of proceedings was premature and amounted to a breach of contract. Any alternative reading would, EMS submitted, render the subsequent sub-clauses (20.2 to 20.7) redundant.
Clause 20.8.1 defined circumstances...