Understanding Your

Contract’s Dispute
Resolution Mechanism
Presentation to the Asian
International Arbitration Centre
(AIAC)

Kuala Lumpur

John Coghlan
Principal
C&E Legal Solutions
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Introduction: Structure
FIDIC Red 2017 AIAC SFC Construction 2019
1. Making a Claim 1. Variation
• FIDIC: Cl. 20 • AIAC: Cl. 11
2. Engineer’s Role 2. EOT
• FIDIC: Cl. 3 • AIAC: Cl. 23
3. Dispute Avoidance/Adjudication Board 3. Loss & Expense – not covered by above
• FIDIC: 21.1 • AIAC: Cl. 24
4. Amicable Settlement 4. Mediation
• FIDIC: Cl. 21.5 • AIAC: Cl. 35
5. Arbitration 5. Arbitration
• FIDIC: Cl. 21.6 • AIAC: Cl. 34
Conclude: Q&A
FIDIC: Making a Claim
• FIDIC: Clause 20 Employer’s & Contractor’s Claims
• 20.1: Arise in one of three scenarios:
• (a) Employer considers it is entitled to additional payment/reduction in Contract Price or an extension to the
Defects Notification Period

• (b) Contractor considers that it is entitled to additional payment and/or an EOT

• (c) Either Party considers that it is entitled to another right or relief of any kind whatsoever relating to the
Works e.g. specific performance – cannot include a right covered under 20.1 (a) or 20.1 (b)

• If either Party considers it is entitled to Claim under 20.1 (a) & (b) then the procedure set out in 20.2
applies
• If either Party considers it is entitled to Claim under 20.1 (c) it must give Notice and refer the Claim
to the Engineer under 3.7 - see Engineer’s Role
FIDIC: Making a Claim
• FIDIC: Clause 20.2 Claims for Payment (money) and/or EOT (time)
• 20.2.1: Notice of Claim (NOC)
• Claimant must provide the Engineer with a NOC describing the event/circumstances

• No later than 28 days after the event occurred - if Claimant fails to give Notice of Claim in 28 days
then the other party is “…discharged from any liability …”

• 20.2.4: Fully Detailed Claim

• Claimant must provide a FDC including: description / legal basis / evidence / quantify loss no later
than 84 days after the event giving rise to the Claim i.e. no later than 56 Days after the NOC

• If Claimant’s FDC fails to include the legal basis on which it relies the NOC shall be deemed to have
lapsed.

• Engineer required to inform the Claimant within 14 Days that time has lapsed. If Engineer does not
provide a Notice then the FDC is deemed valid. Other party has right to disagree and it becomes part
of the Claim for Engineer’s Determination

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FIDIC: Making a Claim
• FIDIC: Clause 20.2 Claims for Payment and/or EOT
• 20.2.5: Agreement or Determination of the Claim
• Engineer shall agree or determine the Claim and provide (1) any additional payments/reduction to
Contract Price and/or (2) EOT or extension to DNP for the Employer

• 20.2.6: Claims of Continuing Effect

• If Claim has a continuing effect then the Fully Detailed Claim is considered an “interim claim”

• Claimant shall submit further “interim claims” on monthly intervals – end of month is the best
approach

• Claimant shall submit a Final Fully Detailed Claim “…within 28 days after the end of the effects
resulting from the event of circumstances giving rise to the Claim…” – determined under 20.2.5

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FIDIC: Engineer’s Role
• FIDIC: Clause 3.7 Agreement or Determination – the “…Engineer shall act neutrally…”
• 3.7.1: Engineer’s Consultation to Reach Agreement
• Engineer consults with the Parties “promptly” to attempt to reach “agreement” of a Matter or Claim under the
Contract – Parties may inform Engineer that no “agreement” will be achieved & dispense with the process
• If Parties content and “agreement” is achieved within 42 days - Engineer provides Notice of the “agreement” – no
need for Engineer’s Determination
• 3.7.2: Engineer’s Determination
• Engineer shall make a fair determination of the Matter or Claim and give “Notice of Engineer’s Determination”
within 42 days – “binding” on the Parties until corrected under 21 (Disputes & Arbitration)
• Engineer fails to give a Notice of Determination then the Matter deemed a Dispute and referred to the Dispute
Avoidance/Adjudication Board without the need for a Notice of Dissatisfaction. If the Claim is rejected - Claimant
can provide Notice of Dissatisfaction

• 3.7.5: Dissatisfaction with Engineer’s Determination

• Either Party dissatisfied with Engineer’s Determination (ED) it may give other party a Notice of Dissatisfaction
(NOD) and copy to Engineer no later than 28 days following receipt of the ED and proceed to “Obtain DAAB’s
Decision”
• If no NOD then ED “…shall be final and binding…”

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FIDIC: Dispute Avoidance / Adjudication Board (DAAB)
• FIDIC: Clause 21 Disputes & Arbitration
• 21.1: Constitution of DAAB
• DAAB jointly appointed 28 days following Contractor’s receipt of Letter of Acceptance – 1 or 3 members.
Decide all Disputes in accordance with 21.4 (Obtaining DAAB’s Decision)
• 21.3: Avoidance of Disputes
• Parties may agree and jointly request that the DAAB provides assistance/informally to resolve
Matter/Dispute that has arisen during performance of the Contract – not binding
• 21.4: Obtaining DAAB’s Decision
• Party refers Dispute to DAAB no later than 42 days after NOD relating to the Engineer’s Determination. Any
later - NOD deemed invalid and ED deemed to be accepted i.e. “…final and binding…”
• DAAB shall complete and provide its decision within 84 days of receiving Reference – “…binding on both
Parties who shall promptly comply with it…” any payment of a sum of money becomes “immediately due
and payable”
• Either Party may give the other Party – within 28 days after receiving the DAAB’s decision a “Notice of
Dissatisfaction with the DAAB’s Decision”. If no NOD in 28 days the DAAB’s decision become “…final and
binding…”
• Neither Party may commence Arbitration unless NOD provided under 21.4

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FIDIC: DAAB / Amicable Settlement
• 21.7: Failure to Comply with DAAB’s Decision
• If a Party fails to comply with the DAAB’s Decision than the other Party may refer the “failure” direct to
Arbitration
• No need to Obtain DAAB’s Decision nor enter Amicable Settlement – bypass the same
• Tribunal may provide an award to enforce the DABB’s Decision only in local courts

• 21.5 Amicable Settlement

“Where a NOD has been given under Sub-Clause 21.4 [Obtaining DAAB’s Decision], both Parties shall
attempt to settle the Dispute amicably before the commencement of arbitration. However, unless both Parties
agree otherwise, arbitration may be commenced on or after the twenty-eighth (28) day after the day on which
the NOD was given, even if no attempt at amicable settlement has been made.”

• Negotiation in essence

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FIDIC: Arbitration
• 21.6: Arbitration
• Final forum for Dispute Resolution states:

“…any Dispute in respect of which the DAAB’S decision…has not become final and binding shall be
finally settled by international arbitration…”

• Unless Parties agree otherwise:

• Under Rules of Arbitration of the International Chamber of Commerce (ICC) – current dated 2017

• Using one or three Arbitrators appointed in accordance with the Rules

• Arbitrator’s have full power to “…open up, review and revise any certification, [engineer’s] determination
(other than final and binding determinations)…decision of the DAAB…(other than final and binding
decision)…”

• Neither Party limited to the evidence/arguments within previous argument advanced to the DAAB

• Commenced before or after completion of the Works

• Final and binding – FIDIC uses term “finally settled” and ICC Rules 35.6 - “Every award shall be binding on
the parties”

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AIAC: Claims
• AIAC: Initial Claims raised under Specific Clauses
1. Variation: Cl. 11
2. EOT: Cl. 23
3. Loss & Expense: Cl. 24
• All provide an opportunity for Parties/Contract Administrator to resolve issues before:
4. Mediation:
• AIAC: Cl. 35
5. Arbitration
• AIAC: Cl. 34

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AIAC: Variations
• AIAC: Clause 11 Variations
• Defines Variation as any “…change in the design, quality or quantity of the Works…”

• Contract Administrator (CA) may issue instructions requiring a Variation at any time prior to the issuance of
the Certificate of Practical Completion

• CA’s functions include “…exercising his power and administering this Contract impartially…” 2.1(b)(ii)

• Contractor shall execute and be bound by each Variation unless it provides prompt notice that it cannot
readily obtain the “…goods, material, plant or equipment…” to complete the Variation

• Contractor required to complete the works within the CA’s Instructions even if they do not state that the
work is a Variation i.e. complete and dispute whether the Instructions constitute a Variation later

• 11.6 Valuation of Variations

• Contactor must submit All Documents and Particulars pertaining to the Variation to the CA within 30 days of
completing the work to value the Variation including the quantity and cost of the work

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AIAC: Variations
• 11.6: Valuation of Variations (cont.)
• If the Contractor fails to provide all Documents and Particulars relating to the Variation within 30 days it
may submit the same at the Final Account stage

• If the Parties agree with the Valuation then the “…valuation…becomes conclusive…”

• If either Party disputes the CA’s valuation of the Variation they may refer the Dispute to arbitration

• 11.9: Additional Expenses caused by Variation

• If Contractor incurs “Additional Expense” in relation to a Variation which it would not be paid under other
clause it may claim the Additional Expense

• Contractor must provide all Documents and Particulars within 28 days of completing the Variation

• Failure to provide within 28 days deemed waived rights

AIAC: Extension of Time
• AIAC: Clause 23 Extension of Time (EOT)
• 23.1: Contractor is entitled to claim an EOT if the regular progress of the Works is delayed by any of the
Time Impact Events (TIE) listed in 23.8 (Time Impact Events). CA has the authority to “…grant a fair and
reasonable EOT for the completion of the Works.”
• TIE divided into (1) Non Employer’s Events, and (2) Employer’s Events, and state that if an event occurs
the Contractor may claim an EOT
• Contractor wants to Claims it shall provide the CA with:
• a “written notice” setting out the TIE and his intention to claim no later than 28 days after it became
aware of the event/s giving rise to the EOT Claim
• “…relevant particulars” detailed EOT Claim no later than 28 days after effects ended

• If the Contractor fails to provide a “written notice” or “relevant particulars” for EOT Claim within the 28 Days
then the CA is not obliged to assess and grant the EOT “…until after the Practical Completion of the
Works…”
AIAC: Extension of Time

• 23.10: CA’s Review of EOT after Practical Completion

• Contractor may within 42 Days after PC submit its final “fully detailed” and particularised Final EOT Claim
to the CA including all the TIE and evidence to substantiate the claim
• CA shall within 42 Days following receipt of the Contractor’s Final EOT Claim provide his determination with
reasons which either (1) maintains his earlier determination or (2) provides what he considers a fair and
reasonable EOT and fixes a later Completion Date
• If Contractor fails to provide his Final EOT Claim in the 42 Days the CA may “…but is not obliged…” review
and provide an EOT if in “…his [impartial] opinion…” based on the evidence it is “fair and reasonable” to
do so
• If CA provides EOT under this clause which means that the retention sums for LADS is reduced then the
Employer shall release the surplus
• CA has “no power” to reduce the length of EOT previously granted
Loss & Expense

• AIAC: Clause 24 Loss & Expense Caused by Matters Affecting the Regular Progress of the Works
• 24.1: Contactor may make a Claim for “…direct loss and expense…” (L&E) caused by an Employer’s
Event if it “…could not be reimbursed by a payment under any other provision in the Contract…”

• Contractor’s L&E Claim adopts same procedure as EOT Claim.

• Provide the CA with;

• “written notice” of his intention to advance L&E Claim no later than 28 days after becoming aware of
event

• Detailed L&E Claim including “…relevant particulars…” and evidence no later than 28 Days after the
event has ended
Loss & Expense

• AIAC: Clause 24 Loss & Expense (Cont.)

• If Contractor fails to provide a “written notice” or “relevant particulars” within the 28 Days then “..it
shall be deemed that the Contractor has waived his rights under this Contract and/or the law…”

• If the CA is of the opinion [impartial - 2.1(b)(ii)] that the Contractor has fulfilled its obligation for an
L&E Claim then the CA sets out the reasons in his determination and the value is added to the
Contract Sum
Mediation
• AIAC: Clause 35 Mediation
• 35.1: Despite the Parties right to commence Arbitration under 34 the Parties may refer any dispute relating
to the Contract to Mediation

Advantages Disadvantages
Confidential and Parties have control Purely consensual – not required to take part as a
matter of law
Cheap and quick process – may complete in a day Parties require realistic expectations to succeed

Parities nominate and agree Mediator Relationship broken down/angry unlikely to

succeed
Flexible: Scope for non monetary remedies e.g. Not suitable where the remedy requires the Court’s
specific performance. Negotiations on assistance – no direct enforcement
WP/Confidential basis. Focus on the parties’
interests not just legal rights. Reach settlement &
save legal costs.
Arbitration
• AIAC: Clause 34 Arbitration
• 34.1: Parties have a right to commence Arbitration for any dispute relating to the contract

• The seat of Arbitration is Malaysia

• Arbitration shall be commenced after Practical Completion, Termination, Abandonment. Few exceptions –
not permitted to refer dispute to arbitrate:

• Questions of whether the CA has the power to issue instructions – 2.6 includes procedure to resolve
issue and requires Contractor to follow the instruction i.e. keep working

• Dispute or difference under 31 (Outbreak of Hostilities) or 32 (War Damage) – clauses include specific
remedies

• Questions regarding Certificates/Payment etc resolved under Construction Industry Payment and
Adjudication Act 2012 (CIPAA) i.e. Statutory Right to Adjudication

• Arbitration award is final and binding on the Parties – supported by the Malaysian Arbitration Act 2005
Thank You: Any Questions?
Contact
John Coghlan
Principal

E: johncoghlan@cels.global

UK: +44 7938 948 131

Qatar: +974 5559 3797
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