The relationship between Arbitration and
the Dispute Adjudication Board under the
FIDIC Silver Book (EPCT)
Dr. Lic. HerfriedWöss,
LL.M. (Exeter), MCIArb. ©
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Case
 Construction of plant in a Mexican city under the FIDIC
Conditions of Contract for EPC Turnkey Projects
 Performance of plant of only 20% of the required capacity at
testing
 The Contractor has not complied with the Instructions of the
Employer to extend its Performance Security and the
software for the plant, and to deliver the As Built Documents
for Testing under Sub-Clause 9.1 EPCT
 The Contractor has not complied with a Notice to Correct
the lack of capacity of the plant under Sub-Clause 15.1 EPCT
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Case
 Employer instructed Contractor to choose one of three
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candidates as sole member of the Dispute Adjudication Board
domiciled in the Americas proposed from the FIDIC list
Contractor did not respond to such Instructions
Employer reiterated its Instructions
The appointing authority is a provincial court with no
experience in the matter
Arbitration might be significantly delayed in case a Dispute
Adjudication Board has to be appointed through the
appointing authority
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Typical sequence of Dispute Events
envisaged in Clause 20 EPCT
Party gives notice of
intention to refer a
dispute to a DAB
20.2 Parties appoint the
DAB
• <28 days
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Typical sequence of Dispute Events
envisaged in Clause 20 EPCT
20.4 Party refers the
dispute to the DAB
• Parties present
submissions to
the DAB
• <84 days
• DAB gives its
decision
• <28 days
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Typical sequence of Dispute Events
envisaged in Clause 20 EPCT
20.4 A Party may issue a
“notice of dissatisfaction”
• Amicable Settlement
• >56 days
20.6 A party may initiate
arbitration
• Arbitrator/s
appointed
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The FIDIC EPCT Dispute
Adjudication Board
 The EPCT Dispute Adjudication Board is an “ad-hoc” dispute
adjudication board, which comprises one or three members
who are only appointed if and when a particular dispute
arises and whose appointment typically expires when the DB
has issued its decision on that dispute
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Obtaining Dispute Board’s Decision
(Sub-Clause 20.4 EPCT)
 “If a dispute (of any kind whatsoever) arises between the Parties in
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connection with, or arising out of, the Contract or the execution of
the Works, including any dispute as to any certificate, determination,
instruction, opinion or valuation of the Employer,
then after a DAB has been appointed pursuant to Sub-Clauses 20.2
[Appointment of the DAB] and 20.3 [Failure to Agree DAB],
either Party may refer the dispute to the DAB for its decision,
with a copy to the other Party.
Such reference shall state that it is given under this Sub-Clause.”
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Obtaining Dispute Board’s Decision
(Sub-Clause 20.4 EPCT)
 Only a “dispute” may be referred to a DAB
 A dispute may arise from claims of the Contractor (20.1) or the
Employer (2.5), Employer’s Instructions (3.4) and
Determinations (3.5) duly contested by the other Party, for
example, through a notice of dissatisfaction under Sub-Clause 3.5
 Mere discussions are not considered a dispute
 A matter that has not yet matured into a dispute may be
considered outside the jurisdiction of the arbitral tribunal (Nael G.
Bunni, The FIDIC Forms of Contract, third edition, p. 626)
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Obtaining Dispute Board’s Decision
(Sub-Clause 20.4 EPCT)
 According to the FIDIC Contracts Guide, “a matter may be said
to have developed into a dispute: (i) after rejection of a final
determination, (ii) when discussions have been discontinued without
agreement on the matter, (iii) when a Party declines to participate in
discussions or to reach agreement under Sub-Clause 3.5, or (iv) when
so little progress is being achieved during protracted discussions that
it has become clear that agreement is unlikely to be achieved.”
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Appointment of the DAB (Sub-Clause
20.2 EPCT)
 The Parties “shall jointly appoint a DAB” by the date 28 days
after a Party gives notice to the other Party of its intention to
refer a dispute to a DAB (Sub-Clause 20.2 EPCT)
 Disputes shall be adjudicated by a DAB in accordance with
Sub-Clause 20.4 EPCT [Obtaining Dispute Adjudication
Board’s Decision]
 If the Parties cannot agree upon the appointment of a person
as member of the DAB, Sub-Clause 20.3 EPCT applies
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Failure to Agree Dispute Adjudication
Board (Sub-Clause 20.3 EPCT)
 In case of failure to agree Dispute Adjudication Board, “the
appointing entity or official named in the Particular Conditions
shall, upon the request of [i] either or [ii] both of the Parties and
after due consultation with both Parties, appoint this member of the
the DAB.This appointment shall be final and conclusive.” (SubClause 20.3 EPCT)
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Expiry of Dispute Adjudication Board’s
Appointment (Sub-Clause 20.8 EPCT)
 Such Sub-Clause reads: “If a dispute arises between the Parties in
connection with, or arising out of, the Contract or the execution of
the Works and there is no DAB in place, whether by reason of the
expiry of the DAB’s appointment or otherwise:
 (a) Sub- Clause 20.4 [Obtaining Dispute Adjudication Board’s
Decision] and Sub-Clause 20.5 [Amicable Settlement] shall not
apply, and
 (b) the dispute may be referred directly to arbitration under SubClause 20.6 [Arbitration].” (Emphasis added)
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Risks
 The problem lies in the risk of possible guerrilla tactics that
may arise due to difficulties in interpretation of the Contract
as regards the right or obligation to have a Dispute
Adjudication Board in place that might affect the execution of
an arbitral award
 The arbitral tribunal might lack jurisdiction in case the
dispute has not been submitted to the Dispute Adjudication
Board
 Even if the arbitral tribunal confirms its, jurisdiction the
matter might come up again during the execution of the
arbitral award
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Legal questions
 What is the consequence of a party refusing to appoint the
Dispute Adjudication Board?
 Is the other party obligated to request the appointing entity
to appoint the Dispute Adjudication Board?
 Is the Dispute Adjudication Board procedure a right or an
obligation of the Parties? Can such right be waived? Can the
obligation be suspended by both Parties?
 How can arbitration be commenced without such risk?
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Interpretation
 The FIDIC Contracts Guide establishes that: “Under EPCT, the
first paragraph of Sub-Clause 20.2 requires a DAB to be appointed
within 28 days after a Party gives notice of intention to refer a
dispute to a DAB, and Sub-Clause 20.3 should resolve any failure to
agree the membership of the DAB.”
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Interpretation
 The FIDIC Contracts Guide further establishes that: “there
may be no DAB in place” because of a Party’s intransigence (e.g. in
respect of the first paragraph of EPCT 20.2). If a dispute arises
thereafter, either Party can initiate arbitration immediately (subject
to the first paragraph of EPCT 20.2), without having to reconvene a
DAB for a decision and without attempting amicable settlement.”
 “The Parties should thus comply with Sub-Clauses 20.2 and 20.3
before invoking Sub-Clause 20.8. If one Party prevents a DAB
becoming “in place” it would be in breach of contract. Sub-Clause
20.8 then provides a solution for the other Party, which is entitled to
submit all disputes (and this breach) directly to arbitration.”
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Interpretation
 The FIDIC Contracts Guide seems to indicate that the mere
refusal of a Party to participate in the joint appointment of a
DAB permits the application of Sub-Clause 20.8
 Such refusal to establish a Dispute Adjudication Board by a
Party accepted by the other Party could be interpreted as a
waiver by both Parties to have a Dispute Adjudication Board
in place
 Interpretation is subject to the lexcontractus
 The local court of the execution of the arbitral award has the
last word
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Solution
 In case the waiver of the right or obligation to appoint a Dispute
Adjudication Board cannot be validly or undoubtedly waived, such
obligation, if any, may be eliminated by the Employer through the
termination of the Contract under Sub-Clause 15.2 EPCT
 According to the autonomy of the arbitration agreement under the
applicable lexarbitri (Mexican law), the arbitral tribunal is
competent to rule on the termination of the Contract
 This also applies to any claims resulting thereof such as a claim for
loss of income normally not admitted under Sub-Clause 17.6
EPCT (save fraud, deliberate default or reckless misconduct of the
defaulting Party)
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Contact
Torre Esmeralda I
Blvd. Manuel Ávila Camacho 40-1606
Col. Lomas de Chapultepec
11000 México, D.F.
Tel: +52 (55) 2623-7100
Fax: +52 (55) 2623-7200
Email: hwoess@woessetpartners.com
http://www.woessetpartners.com
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