Dispute Resolution Mechanism in FIDIC-based Construction Contracts in India
The lawsuits and conflicts that result from contract flaws are very common in the Indian construction sector. The legal sector is no stranger to high-profile court cases and numerous allegations of malfeasance by subcontractors. It is important that we carry out this effort in order to promote the Federation Internationale Des Ingenieurs (FIDIC) method of contract creation, its advantages in a nation like India, and its potential role in reducing litigation in a nation with an enormous backlog of cases.
It is crucial that India adopts a globally standard format for construction contracts in the form of FIDIC handbooks because as one of the world’s fastest developing nations, India has seen a boom in the infrastructure and construction sector, which has opened up a lucrative market for foreign investment.
What is FIDIC?
FIDIC is a French language acronym for Fédération Internationale Des Ingénieurs-Conseils, which means the international federation of consulting engineers. FIDIC has its headquarters in Geneva, Switzerland aspires to represent consulting engineering on a global scale by advancing the interests of businesses, organizations, and engineers who offer technologically based services for the built and natural environment. FIDIC, which is primarily run by volunteers, is renowned for its work in formulating Conditions of Contracts for the global construction sector.
The World Consulting Engineering Conference, seminars, and training sessions are all organized by FIDIC. Additionally, FIDIC publishes international contracts and business practice documents that are utilized all over the world as templates and guidance, in addition to operating a bookshop. Dredgers Contract, Short Form of Contract, Construction Contract, Plant and DB Contract, DBO Contract, and Engineering, Procurement and Construction (EPC) or Turnkey Contract are among the contracts offered by FIDIC.
Why use FIDIC Contracts?
Over the past 50 years, FIDIC Contracts has evolved into the global norm for the consulting industry. On all kinds of projects, they are accepted and used internationally in numerous countries. Their balanced approach to the duties and responsibilities of the important players, as well as the allocation and management of risk, is the key to their success as the industry standard. Due to this, the adoption of General Conditions of Contract, which are believed to be appropriate in all circumstances based on hundreds of globally successful projects, is the essential tenet of FIDIC contracts.
Therefore, all FIDIC contracts include instructions on how to draft Particular Conditions and examples of the areas where special clauses can be needed for a particular project. Significant deviance from these rules increases the danger of altering the contract’s balance and jeopardizing the project’s successful implementation.
According to experience in various nations and with various types of clients, altering or upsetting the risk-sharing balance in FIDIC contracts typically results in higher tender prices, completion delays, additional time and cost claims, and, in the worst cases, major protracted disputes leading to arbitration and occasionally contract termination.The usage of Particular Conditions in project-specific sub-clauses is outlined in FIDIC contracts. Therefore, it makes sense to use FIDIC contracts in dispute resolution.
Dispute resolution in FIDIC-based contracts
The parties to a dispute may seek a resolution from the Contract Engineer, the Dispute Adjudication Board, or, as a last resort, arbitration under international rules. The dispute resolution process is ultimately at the discretion of the parties, who may modify it in accordance with the Particular Conditions of the contract to fit their needs.
In accordance with the General Conditions, claims are initially filed to the Contract Engineer as a form of “first instance,” and he has 42 days to accept or deny the claim while providing a thorough rationale. The Dispute Adjudication Board, which is composed of one to three members and is chosen equally by the investor and the contractor, will take on the case if the Contract Engineer is unable to resolve it.
The Dispute Adjudication Board’s decision is final, and the parties must abide by it without delay until it is changed by a conciliation process or an arbitration ruling.
If a party disagrees with the decision, the parties should try to reach a mutually agreeable solution. If that fails, the disagreement should then be settled by arbitration, which is performed by a panel of three arbitrators in the language chosen by the parties, in accordance with the Rules of Arbitration of the International Chamber of Commerce.
For parties of many nationalities looking for a familiar and business-friendly contractual environment regulating building projects, the FIDIC forms of contract are and will surely continue to be a very helpful tool. The DAB’s role in FIDIC contracts’ dispute resolution procedure is one of the aspects that has received the most positive feedback.
If you found this article insightful, head over to the Consulting Engineers Association of India’s (CEAI) website for more such useful content.