Reflection 11 of 14 - Chapter 11 (the implementation of the DAAB’s decision)

Introduction

Thank you, again, friends, for subscribing to my newsletter and for your interest in this newsletter.  Reflection 11 of 14 offers a brief tour of Chapter 11 of my book, concerning the implementation of the DAAB’s decision.

Reflection 10 introduced in outline Chapter 10, concerning the substantive grounds and procedural framework for the DAAB’s decision-making.   Chapter 10 is one of the larger chapters of the book, reflecting the relatively high level of procedural regulation of the DAAB’s functions.  Chapter 11 also covers a complex field, taking in the various modes of implementation, by means of the DAAB itself, and other means.   

The thrust of Chapter 11

The keystone provision governing the implementation of a DAAB decision is the fourth paragraph of Sub-Clause 21.4.3, which (relevantly) declares that:

“[t]he decision shall be binding on both Parties, who shall promptly comply with it whether or not a Party gives a NOD with respect to such decision under this Sub-Clause.”

This is a potent statement of intent from which numerous means and modes of enforcement flow.  Chapter 11 takes the reader through each of them.

The availability and appropriateness of the enforcement option will to some extent vary depending on whether the DAAB’s decision is:

• provisionally binding (i.e., binding but not final) - in which case effectively the decision is an interim one (which is enforceable pro tem); or
• final and binding

Consequently, the giving of a timely and valid Notice of Dissatisfaction (an 'NOD') will determine the full extent of immediate options for enforcement, the availability of any further determination on the merits, and the availability of preclusive doctrines such as estoppel and res judicata.

A Binding but not final decision

Chapter 11 begins by examining a binding but not final decision.  First it discusses the options for enforcement available to the Contractor; secondly, those available to the Employer; then those available to both.  The options available to the Contractor are discussed in turn - namely (1) suspension or slowing of work, (2) the termination of the Contract and the receipt of additional payment and an EOT, and (3) the encashment of a payment security.

For the Employer, in practice, they are potentially more numerous - namely, (1) the termination of the Contract, (2) the encashment of a Performance Security, (3) satisfaction and the discharge of loss or damage sustained by the Employer by means of a surety bond, and (4) indemnification against all damage, losses and expenses which arise from the failure to comply (by means of a parent company guarantee). 

It will be immediately apparent to the reader that none of the party-specific remedies involve direct enforcement of the decision.  Each is a self-help remedy in substitution for the counter-party’s non-compliance with the decision.

When we turn to the remedies available to both parties, however, we see a more direct relationship between the substance of the decision and that of a subsequent decision, arbitral award or court judgment or order.  The potential for homologation of sorts is noticeable. In the absence of due compliance with a decision, either party may seek (1) a further DAAB decision (i.e., resulting in successive decisions or achieved through the grant of provisional relief), (2) an arbitral award (be it a final award or an award or other decision granting interim measures), or (3) a court judgment or, where arbitration has been agreed, a court order for interim measures.

Figure 11.1 attempts to map out all the potential options for the enforcement of a decision of the DAAB.

A final and binding decision

Chapter 11 notes that, with one exception, the remedies for the enforcement of a DAAB decision that has become final and binding include those remedies for the enforcement of a provisionally binding DAAB decision.   There is an important difference however concerning the treatment of the underlying merits of the Dispute.  With a final and binding decision, the time for substantive debate is over.  The arbitral tribunal will lack jurisdiction to revisit the merits of a final and binding decision. This is illustrated (albeit in the content of the FIDIC First Edition) by the award of the arbitral tribunal in ICC Case 16435 (2013). That said, the validity of the decision (including by dint of the jurisdictional competence of the DAAB) will still need to be checked at the arbitral level.

With a final and binding decision, the time for substantive debate is over. 

Chapter 11 also discusses the distinctive difference of principle between the availability and utility of a court’s final judgment and order finally resolving the action between the Parties, and a court’s interim order.  In the presence of a valid and applicable arbitration agreement, at least where Article 8(1) of the UNICTRAL Model Law is reflected in the laws of the forum, in most national and subnational jurisdictions, the former is not available; whereas the latter is.  Taking the South African experience as a case in point, Chapter 11 concludes that perhaps in practice this is a distinction that is more honoured in the breach than in the observance.

Look Ahead

In the twelfth edition of this newsletter, I will take you further on this book tour, taking in Chapter 12, setting out an account of the amicable settlement of a Dispute following its referral to the DAAB for a decision.

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

Nicholas