Reflection 5 of 14 - Chapter 5 and the enforcement of an agreed claim

Introduction 

Thank you, again, friends, for subscribing to my newsletter, and for your interest in this, Reflection 5 of 14, offering you a brief tour of Chapter 5 of my book, concerning the enforcement of an agreed Claim.  The later Reflections will guide you through, in ascending order, each of the other 9 chapters of the book. 

Chapter 2 introduces the ‘Claim’. Chapter 3 then explains how it might be formally notified, initially responded to, and then detailed.  Chapter 4 explains how the ‘Claim’ might be resolved amicably.  Then, Chapter 5 describes the options for the enforcement of duly notified settlement agreements concerning Claims, with reference to the application of a statutory regime framed on international legal instruments such as the Singapore Convention on Mediation.

The thrust of Chapter 5

Introduction

If, as one should hope, the Parties achieve the amicable resolution of a Claim by way of consultation and agreement, then, usually, actions remain to be taken to give effect to that agreement. Usually, money must pass. Sometimes certificates and/or other legal documents must be issued or returned. Specific additional physical activity or one-off actions at the Site might be required. These agreements are seldom self-enforcing. To that end, the FIDIC Second Editions provide guidelines as to how the agreement is to be positively implemented by the key players.  And if it isn’t implemented then, in the case of a binding agreement, the FIDIC Books provide non-exhaustive remedies for enforcement by one Party against the non-cooperating Party.  In this regard, the FIDIC Books are not without teeth.  They offer incentives for compliance (or conversely disincentives for noncompliance) in the form of various remedies for non-compliance available to both Parties, ranging from financial and time-based consequences to termination of the Contract itself, through to enforcement via formal dispute resolution proceedings.

Chapter 5 considers the ten ways in which an agreement by the Parties resulting from consultation may be implemented.

The modes of implementation

First, the chapter discusses the bases and methods for the positive implementation of such an agreement.

The Contractor’s remedies

Second, Chapter 5 surveys the available remedies for a refusal or failure to comply with a binding agreement, beginning with an introduction, then looking in some detail at the remedies available to the Contractor, including:

• the suspension or slowing of work,
• termination of the Contract and the receipt of additional payment and an EOT, and
• encashment of a payment security.

The Employer’s remedies

Third, Chapter 5 examines the Employer’s remedies, including:

• termination of the Contract;
• the encashment of a Performance Security;
• the satisfaction and discharge of damages sustained by the Employer (by means of a surety bond); and
• the indemnification against all damages, losses and expenses which arise from the failure to comply (by means of a parent company guarantee).

Common remedies

Finally, the chapter addresses remedies available to both Parties, including:

• enforcement of the agreement by way of a DAAB decision;
• an arbitral award (i.e., a final award or an award or other decision granting interim measures); and
• a court decree (namely, a court judgment or, where arbitration has been agreed, a court order for interim measures.

I have attempted to capture the entire panoply of options to enforce a binding agreement in one diagram - Figure 5.1 - sorry no spoiler allowed!  It covers all aspects, from self-help enforcement, and DAAB intervention, to curial/arbitral intervention (including the possible role of an emergency arbitrator under Appendix V to the ICC Rules of Arbitration).

Some of the issues discussed

Issues arise, largely at the intersection between the ruling language of the Contract and the governing law of the country (or another territory) on certain related aspects, such as the standard of ‘materiality’ of the breach required for the Contractor to either lawfully suspend work (or reduce the rate of work) or lawfully terminate the Contract, and for the Employer to lawfully terminate the Contract, based on a failure by the other Party to comply with the Contract.  Another area warranting careful consideration is how, firstly, the particular choices of language, secondly, the laws governing the adjudication, and, thirdly, those governing the arbitration, may well play a dispositive role in the nature of the powers of the DAAB, the arbitral tribunal (including an emergency arbitrator) and in turn, the State court.

Look Ahead

In the sixth edition of this newsletter, I will guide you further on this book tour, taking in the formal determination of a Claim, where we see the DAAB exercise the second dimension of its considerable problem-solving powers.  This arises where a Party has formally notified a Claim, etc., and yet, the Parties have not then amicably settled it.  Thus it stands to be determined.  In of the more voluminous parts of the book, Chapter 6 lays out for the reader the procedures by which the ‘Claim’ is formally determined and the issues and options that arise along that major pathway.

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

Nicholas

1 November 2022