It’s easy when you know how

Paul Battrick - Managing Director, Driver Trett gives a ‘simple’ explanation of the ins and outs of FIDIC claims.

Earlier in the summer, about the time of the first stages of the football World Cup, I was invited to assist a client with a training workshop.  My co-presenter was their German in-house counsel and delegates came to France from around the globe, including Mexico.

Mexico had just caused the first upset of the tournament by beating Germany, the reigning World Champions, in the first of the Group matches.  The evening discussions in the bar were jovial and good natured, I was pleased to join in.

After a while one of the delegates said “Ah, but you have cricket.  How does anyone understand that game?”.  I started by saying that it was simple but soon found myself looking at the internet for assistance.  I found this:

"You have two sides, one out in the field and one in. Each man that's in the side that's in goes out, and when he's out he comes in, and the next man goes in until he's out. When they are all out, the side that's out comes in, and the side that's been in goes out, and tries to get out those coming in. Sometimes you get men still in and not out. When both sides have been in and out, including the not outs, the winner is declared...if there is one"

So, the rules of the game are quite clear and revolve around being in or out.  Any construction contract, say FIDIC, is no more than a rule book for administering the game of construction and FIDIC had clear rules for the administration of a Contractor’s claim within its 1999 Edition.  Sub-Clause 20.1 required the Contractor to provide a notice within 28 days of it becoming aware, or should have become aware, of the event or circumstance giving rise to the claim. 

Provide the notice within 28 days and the claim was in the Engineer’s in tray; failure to do so and it was in the Engineer’s out tray or more commonly known as either the waste bin or the delete button.  It was quite clear and certainty existed (which is never a bad thing) however the Obrascon¹ case softened the harsh reality that many Contractors found themselves facing. 

No doubt the drafters of the 2017 versions of FIDIC had Obrascon in mind when they considered the in or out situation contained within the heavily amended Sub-Clause 20.2 (Claims For Payment and/or EOT). 

Sub-Clause 20.2.1 (Notice of Claim) looks familiar, it states that the claiming Party (the conditions now apply to both the Contractor and the Employer) shall give a Notice, which is now a defined term and is a Notice of Claim within Clause 20, to the Engineer no later than 28 days after the claiming Party became aware, or should have become aware, of the event or circumstance.

It goes on to state that if the claiming Party fails to give a Notice of Claim within 28 days the claiming Party shall not be entitled to its claim.

Seemingly clear; the Engineer’s out tray has a new addition.  Sub-Clause 20.2.2 (Engineer’s initial response) notes that to confirm this failure the Engineer must give a Notice within 14 days after receiving the Notice of Claim stating that the Notice was time barred.

However, if the Engineer fails to comply with this 14 day time period, the Notice of Claim is deemed to be a valid Notice and the claim goes back into the in tray; but does it stay there?

Sub-Clause 20.2.2 continues to note firstly, that if the other Party disagrees with the deemed valid Notice of Claim it shall give a Notice to the Engineer including the details of the disagreement; the Engineer has to take this into account within the review when determining the Claim under Sub-Clause 20.2.5 (Agreement or determination of the Claim).  So, the Claim could again be in the out tray or in the in tray depending upon the outcome of the review.  Secondly, if the claiming Party disagrees with the Engineer and considers that there were circumstances which justified the late submission of the Notice of Claim, details of the disagreement must be included within a “fully detailed Claim” as defined within Sub-Clause 20.2.4 (fully detailed Claim).  Note that the fully detailed Claim should still be submitted although the Engineer has stated that the Notice of Claim was time barred.  So, the claim could later be back in the in tray or back in the out tray again depending upon the outcome of the review.

There are now time limits for the submission of a fully detailed Claim; unless the Claim is of “continuing effect” in which case a new set of procedures under Sub-Clause 20.2.6 (Claims of continuing effect) apply.

So, after the Engineer has given an initial response and no matter what this was the Claim could still be in either the in or out tray.

It is a requirement that the fully detailed Claim shall contain a “statement of the contractual and/or other legal basis of the Claim” and this together with all other requirements must be submitted within 84 days of the claiming Party becoming aware, or should have become aware of the event or circumstance giving rise to the Claim or another period if proposed and agreed by the Engineer.

Whichever period applies, on first glance, there is another fatal time bar.  If the claiming Party does not provide the statement of the contractual and/or other legal basis of the Claim within time, the Notice of Claim shall be deemed to have lapsed and the Claim goes back into the out tray provided the Engineer gives a Notice to that effect.

If the Engineer does not give such a Notice, the Notice of Claim is deemed to be valid and the Claim stays in the in tray, even if there is still a pending decision from the disagreement(s) under Sub-Clause 20.2.2.

The other Party can disagree with the deemed valid Notice of Claim by issuing a Notice which must include details of the disagreement i.e. noting the failure of the claiming Party to comply with the requirement to confirm the contractual/legal basis of the Claim and this shall be reviewed by the Engineer when making a determination under Sub-Clause 20.2.5.

Similarly, the claiming Party can disagree with the Engineer’s Notice rejecting the Claim and the reasons will be detailed within the fully detailed Claim (which may have already been submitted…).

The Engineer’s determination (or agreement by the Parties) will finally decide whether the Claim stayed in the in tray or was confined to the out tray; subject as before to referral to third party neutrals.

FIDIC have without doubt created a Sub-Clause that allows a claiming Party, which the vast majority of the time will be the Contractor, a few more bites of the cherry to ensure that a Claim remains in the in tray by what appears to be a complex web of the time limits and deeming provisions.

I started my explanation of cricket by saying “it’s simple” and, believe it or not, the submission of Claims under FIDIC 2018 is also simple.  Those who play the game must fully understand the rules and most importantly not “flirt with a ball wide of the stumps”² and risk the possible rejection of a Claim for failing to comply with a stated time period.  To do so Contractors (and Employers) will need adequate and competent resources to succeed with claims but it can be achieved.

Understanding the rule book is the first very important step; after all it’s not rocket science! 

¹ Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 (TCC)

² A cricketing term - explanation provided if required from paul.battrick@driver-group.com