Late last year, FIDIC published some amendments to its 2017 suite of standard form construction contracts (the Construction Contract (Red Book), Plant and Design-Build Contract (Yellow Book) and EPC/Turnkey Contract (Silver Book)), and incorporated them into “reprinted” versions of the contracts. While on their face the 2022 amendments appear relatively subtle, several will bring about some notable and positive changes as to how the contracts operate.
In a nutshell
Some of the key changes to be aware of are:
Claim vs matter
The 2017 contracts saw the introduction of the concept of a “matter” or a “matter to be agreed or determined” in Sub-Clause 3.7 in the Red and Yellow Books (Sub-Clause 3.5 in the Silver Book). A matter was distinct from a “Claim”, and the intention was to provide an alternative, less onerous process where it would be unnecessarily burdensome to require parties to follow the Claims procedure set out in Clause 20. For example, a matter was not subject to the requirement to give a Notice of Claim within 28 days (which, depending on the governing law, could amount to a time bar).
However, the contracts were silent as to what actually constituted a matter, and did not clearly distinguish it from a Claim (which was widely defined). The lack of a clear definition gave rise to a risk of a party erroneously concluding that it was not required to follow the Claims procedure with the effect that such a mistake could lead to its claim being time-barred.
The 2022 amendments address this by specifically setting out in Sub-Clause 3.7 (Sub-Clause 3.5 in the Silver Book) the clauses to which the expression “matter” applies, and explicitly excluding such matters from the definition of a “Claim”. An example of a clause listed in this way is Sub-Clause 11.2, which applies where the Contractor wishes to recover the costs of remedial works attributable to a cause for which it was not responsible.
Definition of a “Dispute”
The definition of a Dispute has been tightened to make it harder for a party to bypass the initial stage of referring a matter or Claim to the Engineer (“Employer’s Representative” in the Silver Book) for agreement/determination, and instead going straight to the Dispute Avoidance/Adjudication Board (DAAB).
For a Dispute to now arise (and therefore be referrable to the DAAB), a Notice of Dissatisfaction with the Engineer’s/Employer’s Representative’s determination must have been provided and therefore the claiming party must have previously referred that matter or Claim to the Engineer/Employer’s Representative. Prior to the 2022 amendment, rejection of the claim by the other party would have been sufficient to give rise to a Dispute as then defined.
However, Sub-Clause 21.4 sets out some limited circumstances where a party can nevertheless refer a Dispute directly to a DAAB, for example where the Engineer/Employer’s Representative fails to issue a Payment Certificate or the Employer fails to pay the amount due under a Payment Certificate.
The definition of a Dispute has also been tweaked to refer to a “Claim” (as defined) or a matter (as now described in Sub-Clause 3.7/3.5); a consequence of the changes discussed above.
Exceptional after all
Another welcome amendment is the (re)introduction of the word ‘exceptional’ to the definition of an Exceptional Event. In the 2017 contracts the term “Exceptional Event” replaced the term “Force Majeure” that had been used in the 1999 editions. However, while the definition of Force Majeure expressly required an event or circumstance to be “exceptional”, the definition of “Exceptional Event” did not, perhaps because it was considered superfluous. Its reintroduction avoids any uncertainty by affirming that an event or circumstance does still need to be exceptional.
Conflicting documents
Sub-Clause 1.5 now expressly requires any conflicts in the documents to be notified to the Engineer (or Employer in the Silver Book) for clarification or instruction. Previously, on a literal reading of the clause, this procedure had applied to ambiguities and discrepancies but not conflicts, which may have been an oversight.
Our thoughts
While the above changes do not revolutionise the FIDIC Books, they do remove some areas of uncertainty that had become apparent since the contracts were published in 2017.
The most significant obstacle to their effective implementation may be awareness. There was not huge fanfare around their publication (they are only amendments after all, and nowhere near on the same scale as the 2017 updates) so they may well not be on everyone’s radar. The same can also be said for the amendments published in 2018 and 2019, which were more minor in nature but not to be ignored.
According to FIDIC, the 2022 amendments are effective as of 1 January 2023. Whether or not they are incorporated into a contract is ultimately a matter of interpretation; parties entering into new contracts should make it clear that the amendments apply (along with those from 2018 and 2019) to avoid any uncertainty in this regard.
While it is helpful that new copies of the contracts purchased from FIDIC should now incorporate all three sets of amendments, project participants need to carefully consider on a case-by-case basis whether (and if so which) amendments apply to a particular contract.
You can view the amendments here:
