New FIDIC Yellow Book dispute procedure
In December 2016 FIDIC presented a pre-release version of the new Conditions of Contracts for Plant and Design Build (“the Proposed 2017 Yellow Book”), which is due to be published during the course of 2017. As expected, FIDIC has made substantial amendments to the dispute resolution provisions in the 1999 Yellow Book which have been the source of persistent and ongoing controversy since the 1999 edition was released.
Rather than scale these provisions back, FIDIC has continued in the same direction as the 2008 Gold Book and expanded further the mandatory pre-arbitral procedure. This is in line with a worldwide trend of promoting dispute avoidance over arbitration. However, as many in the industry know only too well, whether pre-arbitral procedures do in fact provide the fast relief intended or simply add further hurdles to an enforceable decision, is another question.
"The proposed new dispute procedure provides a number of useful revisions and additions which address fairly well some of the problem areas of the 1999 Yellow Book, and which are aimed at promoting compliance with the pre-arbitration steps."
A summary of the key changes is as follows:
- Employer and Contractor claims have been consolidated into one procedure, under which both parties must progress their claims under the same core structure as clause 20.1 of the 1999 Yellow Book.
- The role of the Engineer has been expanded to include (i) facilitating a mandatory 42-day consultation period for any claim, and (ii) a further 42 days to issue a binding decision should the parties not agree.
- A new “Avoidance of Disputes” provision permits parties to jointly ask the DAB to informally discuss and/or provide assistance with any issue or disagreement. There is of course an issue of conflict in the DAB acting as both mediator and adjudicator.
- While the DAB procedure retains its core aspects, crucially non-final DAB decisions are now expressly immediately binding and able to be summarily enforced in arbitration.
The proposed new dispute procedure provides a number of useful revisions and additions which address fairly well some of the problem areas of the 1999 Yellow Book, and which are aimed at promoting compliance with the pre-arbitration steps. These include greater accountability for the Engineer, a tightened up DAB procedure, and the ability to summarily enforce non-final DAB decisions and presumably Engineer decisions via the DAB.
However, parties will need to consider carefully whether the arbitral pre-conditions really do what they say on the packet. At its best, the new procedure offers both parties the ability to obtain fast and inexpensive relief, with three tiers of binding determinations designed to prevent the need for arbitration. At its worst, it places two tiers of mandatory determinations in the way before a party can begin to obtain a final binding decision in arbitration.
For a more in-depth assessment of the New FIDIC Yellow Book dispute procedure please see my article on this subject in the Fenwick Elliott International Quarterly.