Reflection 7 of 14 - Chapter 7 and the implementation of a determined Claim

Introduction

Thank you, once again, friends, for subscribing to my newsletter and for your interest in this, Reflection 7 of 14. This one offers you a brief tour of Chapter 7 of my book, concerning the implementation of a formally determination Claim. The later Reflections will guide you through, in ascending order, each of the other seven chapters of the book.??

To recap, Chapter 1 introduces the 'DAAB' and Chapter 2 introduces the ‘Claim’. Chapter 3 explains how the Claim might be formally notified, initially responded to, and then detailed.?Then, Chapter 4 explains how the ‘Claim’ might be resolved amicably.?Chapter 5 describes the options for the recognition and enforcement of duly notified settlement agreements concerning Claims. Now we come to Chapter 6, which describes how attempts must be made to determine a Claim that has not been resolved amicably.?I will be writing soon about some changes that FIDIC will be introducing to the books as from January 2023 that are relevant to Chapters 1, 2, 5 and 6, and so which I will explain.

Now however we come to Chapter 7, which describes how a Claim may be implemented, and failing which, enforced, in various ways.

The binding determination

A valid determination binds the Parties unless it is revised in accordance with Clause 21 [Disputes and Arbitration] - see Chapters 10 to 13. It can be revised only if it has not become final. It will become final unless a Party gives a valid and timely Notice of Dissatisfaction (a 'NOD'). At any rate, unless it is so revised, the valid determination must be positively implemented because it is binding. And if it is not implemented by a Party then it may be enforced in one or more various ways at the instance of the other Party.

The enforcement of a determination

Introduction

The status of a determination from time to time, in terms of its finality, offers notably different routes to, and the forums for, such enforcement. Chapter 7 canvasses the various approaches to the implementation or enforcement of a determination. Firstly, it examines the obligation to implement the determination and introduces the essential concept of a provisionally binding versus a final and binding determination.

Provisional enforcement

Secondly, this chapter introduces the concept of and processes for the enforcement of a provisionally binding determination, such as the Contractor's encashment of any payment security and the Employer's encashment of any Performance Security, a claim under under a surety bond or a claim under any payment company guarantee.

Final enforcement

Thirdly, Chapter 7 introduces the enforcement of a final and binding determination, detailing the remedies available to a Party in the face of the other Party's refusal or failure to comply with one - namely:

• exclusively for the Contractor: the suspension or slowing or work and/or the termination of the Contract (with the receipt of additional payment and an EOT referable to the cure period) and encashment of any payment security;
• exclusively for the Employer: the termination of the Contract, the encashment of any Performance Security, a claim under any surety bond, and a claim under any parent company guarantee; and
• for either Party: a DAAB decision, an arbitral award or (in the absence of an arbitration agreement) a judgment and order of a court.

The 2022 Amendments

FIDIC has published Amendments to all three of the Rainbow Suite. These are incorporated in three reprints known individually as the:

• Construction Contract 2nd Ed (2017 Red Book, Reprinted 2022 with amendments);
• Plant and Design-Build Contract 2nd Ed (2017 Yellow Book Reprinted 2022 with amendments); and
• EPC/Turnkey Contract 2nd Ed (2017 Silver Book Book Reprinted 2022 with amendments).

One of these amendments, which I will discuss further in a separate note, to be published soon, alters the subject-matter jurisdiction of the DAAB. It might be of some interest to users to consider whether or not this amendment, if incorporated into a Contract, would have the effect of removing the common enforcement remedy of a DAAB decision. Would we now face something akin to the Persero conundrum again yet at the DAAB level? I will offer some views on this in the note.

Look Ahead

In the eighth edition of this newsletter, which I intend to publish in around mid January 2023, I will take you further along this book tour, taking in the now-more clearly defined concept of 'the Dispute'.

Thank you for your attention, and feel free to share this content.

Nicholas

9 December 2022