Construction Law/Clause 20.4 - FIDIC Harmonized Edition
QUESTION: dear Testro
Clause 20.4 of the FIDIC Harmonized Document says'"The decision of the DB shall be binding on both parties, who shall promptly give effect to it unless and until it shall be revised in an amicable settlement or an arbitral award given below".
Kindly explain whether this (who shall promptly give effect to it) means that the parties will give effect to the decision promptly and implement it without waiting for the amicable settlement or arbitral award in case a party disagree with the decision and give notice to the other party for commencing arbitration or the implementation will be delayed till the outcome of this exercise.
Moreover, in case a party disagrees with the DB decision and notifies the other party of commencing the arbitration and do not implement promptly or partially implement the DB decision then whether the other party can consider it a fresh dispute and refer it to the DB for decision regarding the implementation of the DB decision. Is there any other course of action available to the other party as Clause 20.7 applies when the decision becomes final and binding under clause 20.4 last para.
Thanks and regards
ANSWER: Hi Abdul
The role of the Dispute Board is to issue an interim decision on a dispute between the contracting parties.
Their decision is binding on the parties unless overturned by a later arbitration.
In effect if the DB say that the Employer shall award an EoT to the Contractor then that award must be made.
UNLESS the employer decides to take the dispute to an Arbitration.
If such a notice is issued then the DB decision would be held in abeyance and the Arbitrator's award would then be binding.
In such a situation it would be wrong for the Employer to start deducting LAD's until at least the DB award has been exceeded.
---------- FOLLOW-UP ----------
QUESTION: Thanks Mike for a very prompt reply.
(i)The DB decision was regarding payment of certain amount to contractor based on his earlier claim. The Employer partially paid the amount against a Bank Guarantee from the Contractor. The reported the case as a new dispute to the DB that the Employer is not implementing the DB decision. The Employer has already notified his disagreement with the decision and asked for commencing arbitration.
(ii)Should the DB accept the Dispute while Employer and the Engineer are of the view that matter should be referred to Arbitration and that it cannot be referred to DB. Should the DB entertain the request and continue with the Hearing of Dispute.
Kindly answer both.
Since the Employer has already started arbitration proceedings there is little point in the DB making a further interim decision.
Make sure that the contractors arbitration defence includes a counterclaim for the original award plus interest on the delayed payment.