Reflection 4 of 14 - Chapter 4 and the amicable resolution of a Claim

Introduction

Thank you friends for subscribing to my newsletter and for your interest in this, Reflection 4 of 14, offering you a brief tour of Chapter 4 of my book, concerning the amicable resolution of a Claim. The later Reflections will guide you through, in ascending order, each of the further 10 chapters of the book.  

By way of orientation, Chapter 2 introduces the ‘Claim’ and its sources, and Chapter 3 explains how it might be formally notified, initially responded to, and then detailed. Chapter 4 explains how the ‘Claim’ might be resolved amicably. It describes how attempts must be made to resolve a notified Claim amicably - more particularly, the envisaged mode of consultation and the correct and timely recording in writing of any agreement that might have been reached. Under the FIDIC Red 2017 and FIDIC Yellow 2017, at the heart of this effort sits the Engineer sitting as a neutral facilitator of a negotiated settlement.

This is project mediation in practice.

Project mediation puts the mediation process into construction projects from the start.  Its focus is more on dispute avoidance than on resolution…

Richbell, D., 2009. Mediation of construction disputes. John Wiley & Sons., p. 126 -

But with one significant difference. The Employer hires and pays the Engineer. So, even if the Parties can validly agree to a reference to a decision maker whose “bread depends on the goodwill of one of the parties to the contract” - and I indicate in Chapter 4 where this seems possible - can the Engineer who is to facilitate agreement on additional payment and/or a time extension be, and be seen to be, neutral?

The major themes of Chapter 4

The amicable resolution of a Claim by way of consultation and agreement represents the Parties’ first formal opportunity to resolve a Claim. The FIDIC Second Editions establish a more structured consultative procedure than was apparent from the FIDIC First Editions. With this in mind, Chapter 4 affords the reader a partly textual and partly diagrammatic description of how the Parties must, with the Engineer’s assistance, attempt to resolve notified Claims amicably, the envisaged mode of consultation, and the correct and timely recording in writing of any agreement reached therein.

The following four major themes are noticeable:

First, in the interest of certainty and expeditious progress toward the avoidance or resolution of a disputed Claim, Sub-Clause 20.2.5 [Agreement or Determination of the Claim] and either Sub-Clause 3.7 of FIDIC Red 2017 and FIDIC Yellow 2017 or Sub-Clause 3.5 of FIDIC Silver 2017 collectively guide the user as to what the consultative process should entail. Those provisions go on to explain how the consultative process should be conducted, and the results should be memorialised, along with fixed timelines and deeming provisions in the event specific steps are not completed or are otherwise not successful in achieving the desired outcome.  

Secondly, as mentioned in FIDIC Red 2017 and FIDIC Yellow 2017, the consultative process is coupled with an enhanced role for the Engineer, who is now expected to act ‘neutrally’ between the Parties and is not deemed to ‘act’ for the Employer. However, this notion of neutrality does not find its way into FIDIC Silver 2017, where the Employer’s Representative remains free of any such duty.

Thirdly, whatever the particular title of the vital functionary, their responsibilities are considerable and potentially demanding. Moreover, the entire process of pursuing the amicable resolution of a Claim is intricate and strict in its prescriptions. In this regard, a concern has been expressed that the procedural focus, while helpful, might distract the Parties from engaging in meaningful consultation and will likely require an enhanced level of on-site contract management from both of the Parties, with a concomitant increase in the costs of execution of the Works for Contractors. One cannot see how the FIDIC Contracts Committee might have avoided such a result; however, undoubtedly, the key is whether the improved structure and clarity will enhance the management and resolution of Claims.

Fourthly, considerable attention is given to the documentation of any agreement achieved under Sub-Clause 3.7, involving both a recording of the agreement and a ‘Notice of the Parties’ agreement’.

These two forms of documentation perform two critical functions conducive to the honouring (failing which the enforcement) of the Parties’ agreement.

• Firstly, receipt from the Engineer, perusal and signing by each Party affords that Party an opportunity to recognise and acknowledge the agreement reached by the Parties. In those places where parliaments have promulgated legislation based faithfully on the text of the European Union Directive 2008/52/ED on Certain Aspects of Mediation in Civil and Commercial Matters, or the Singapore Convention on Mediation; or in those common law jurisdictions where authoritative case law treats a written settlement agreement reached through mediation or ‘conciliation’ as akin to a decree of a competent court, this assumption of written form will be particularly conducive to enforcement.
• Secondly, to the extent that the delivery of the written agreement to the Parties is a prerequisite to the enforceability of the Parties’ obligations set forth therein, and such delivery is not deemed automatically to occur, the giving of the Notice of the Parties’ agreement to the Parties themselves might fulfil the requirement for actual delivery. 

Chapter 4 introduces and explains the five* alternative time limits for giving the Notice of the Parties’ agreement (*when one considers the five alternative points from which the standard 42 days starts to run). Lastly, it introduces and explains the procedure by which an erroneous recording of the Parties’ agreement may be rectified.  

Look Ahead

Next month, in the fifth edition of this newsletter, I will take you on a brief tour of Chapter 5, taking in the implementation of an agreed Claim. To that end, Chapter 5 offers the first description of one of the DAAB’s special adjudicative powers - the interim or conservatory measure. Indeed, this fulsome chapter discusses the similar powers of a State court, arbitral tribunal and a Party’s contractual, self-help remedies.

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

Nicholas

1 October 2022