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Fundamental or Golden FIDIC Principles - Do they exist?

By Rechtsanwalt Dr. Götz-Sebastian Hök

I should first clarify and underline that in my view Golden FIDIC principles[1] do exist. For instance the aim to fairly allocate risk[2] belongs to the Golden principles. Also I would include the aim that FIDIC wording is user friendly, clear and coherent but also fair and equitable[3] as an obvious Golden principle. In an international context a consistent and purposive interpretation of used words is recommendable taking in account the factual matrix of events surrounding the formation of contract[4], though it would be wrong to imply that a contract accords with FIDIC´s principles if it distorts the risk allocation contained in the General Conditions[5]. Hence, it is not in line with fundamental FIDIC principles to imply terms which contradict the FIDIC risk allocation policy.

Since 1957 FIDIC forms of contract are used for "international" purposes. This has never been changed and belongs to the principles which FIDIC draftspersons usually have and should bear in mind. The words should be fit for use in various countries and are not aimed at the use in a special legal environment. On the other hand FIDIC contracts presuppose a gap filling proper law of the contract because various aspects like the dtermination of the limitation period in respect of claims or in respect of the scope of remedies (e.g. specfic performance or damages) Additionally tort law and other bodies of law (unjust enrichment provisions, quasi contract rules) may complement the governing law of the contract though the law does not automatically impose upon every contractor or sub-contractor for instance tortius or other duties of care co-extensive with the contractual terms. Also, frequently the international context may suggest to refer to the Undroit Principles of International Commercial Contracts in order to avoid the denaturing of FIDIC wording in accordance with shortcoming concepts or legal approaches in the governing law of the contract.

In the view of some authors, FIDIC forms of contract form part of an international “lex mercatoria contructionis”[6]. This cannot be said of customized FIDIC contracts which actually bear the name of FIDIC but miss the fundamental and characteristic content. Such contracts should not be headed as a FIDIC contract. Tenderers should apply diligence and care in understanding the consequences of such change.

Interestingly JICA has published a document called Check List for One Sided Contracts which observes shortcomings in proper contract drafting[7]. JICA complains about “one sided contracts” which actually affect negatively the smooth implementation of projects and consequently considers these contracts to be disadvantageous to the borrowers due, amongst other things, to the late completion of the project. For instance JICA identifies the presence of FIDIC dispute board provisions as the “most distinctive characteristic of the Red Book MDB Edition”[8]. In a similar way JICA emphasises the role of the FIDIC Engineer[9].

In the Guidance Note for Particular Conditions of the 2nd Edition 2017 of the FIDIC Rainbow (FIDIC Red Book, Yellow Book and Silver Book, 2017)it is now noted:

FIDIC strongly recommends that the Employer, the Contractor and all drafters of the Special Provisions take all due regard of the five FIDIC Golden Principles:

GP1: The duties, rights, obligations, roles and responsibilities of all the Contract Participants must be generally as implied in the General Conditions, and appropriate to the requirements of the project.

GP2: The Particular Conditions must be drafted clearly and unambiguously.

GP3: The Particular Conditions must not change the balance of risk/reward allocation provided for in the General Conditions.

GP4: All time periods specified in the Contract for Contract Participants to perform their obligations must be of reasonable duration.

GP5: All formal disputes must be referred to a Dispute Avoidance/Adjudication Board (or a Dispute Adjudication Board, if applicable) for a provisionally binding decision as a condition precedent to arbitration.

[1] Such principles have been presented to the public for instance at the recent IBC FIDIC Middle East Users´ Conference in Dubai on 16 and 17 February 2016. A new Task Group shall become established in order to collect and establish such principles which shall become marked “fundamental” as guidance for those who intend to use the FIDIC logo for the purposes of their respective contracts.

[2] Tunay Köksal, FIDIC Conditions of Contract as a Model For an International Construction Contract, [2011] International Journal of Humanities and Social Science, 140, at page 141.

[3] See for instance FIDIC Contracts Guide, 2000, at page 19; Sunil Seth and Vasanth Rajasekaran in: Edward Banyard Smith, Construction law and Practice, 1st Edition 2012, at page 100; Punit Sethi, Use of FIDIC and JVs for success in Business, http://www.academia.edu/8107079/Use_of_FIDIC_and_JVs_for_success

[4] See Charles Molineaux, Moving Toward a Construction Lex Mercatoria - A Lex Constructionis, [1997] International Arbitration, 55 at page 63; Donald Charrett, The Use of Unidroit Principles in International Construction Contracts, [2013] ICLR 507, at page 520; also Hök, FIDIC Verträge im Lichte der Unidroit Prinzipien als Vertragsstatut, ZfBR 2008, 115 et seq. (English Translation: Hök, FIDIC contracts in the light of Unidroit Principles as governing law of the contract, [2008] ZfBR 115)

[6] See Charles Molineaux, Moving Toward a Construction Lex Mercatoria - A Lex Constructionis, [1997] International Arbitration, 55 at page 63

[7] https://www.google.de/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKE

[8] Check List for One Sided Contracts, Ibid, at page 3.

[9] Check List for One Sided Contracts, Ibid, at page 4.

Dr. Hök has been involved in FIDIC projects worldwide. He has been a friendly reviewer of the FIDIC Gold Book and he is the legal advisor of the FIDIC TG 11 (Operate Design and Build) also referred to as the FIDIC Bronce Book and the FIDIC TG 9 (Design and Build Subcontract). He has operated as a member of DABs for design and build contracts in the offshore windmill industry, harbor projects, wastewater and irrigation projects and he has operated as a member of DABs in road projects in Armenia, BiH and Tanzania.  

LAW OFFICE Dr. Hök, Stieglmeier & Kollegen
Contact: Advocate Dr.Götz-Sebastian Hök
Eschenallee 22, 14050 Berlin
Tel.: 00 49 (0) 30 3000 760-0
Fax: 00 49 (0) 30 3000 760 33
e-mail: kanzlei@dr-hoek.de

WARNING: the material contained in these notes is a simplified guide to some of the major topics in international and German construction law. It is not intended as a substitute for legal advice on individual transactions, and does not necessarily stand on its own. Whilst the contents are believed to be correct, the authors cannot accept any responsibility for errors or omissions.

Contribution online since Wednesday, June 22nd, 2016     
Last updated Tuesday, February 13th, 2018     
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