The 2017 FIDIC Contracts, I by William Godwin

The 2017 Fidic Contracts

The Second Editions of the Red, Yellow and Silver Books

William Godwin QC

Member of the FIDIC 2017 Updates Task Group

 

 

 

 

 

 

 

 

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Foreword

Since their publication in 1999 the three FIDIC contract forms or, as also aptly named, Books, have become not just well known and respected in international infrastructure contracting in all its many guises, but a major force for international cooperation and understanding. To those who have seen the free‐for‐all that can result from the absence of accepted norms in infrastructure procurement, FIDIC is a lifeline, more successful in its quiet deliberations than other over‐politicised international bodies but exercising a major and largely unseen influence over the well‐being of international projects which can lead less developed nations towards prosperity or financial ruin. Given the now truly global reach of FIDIC it remains a matter of national pride that the body was founded and modelled on UK practices, that the official and authentic texts remain the versions in the English language and that the now multifarious committees and other bodies of FIDIC retain many of its UK representatives and experts. These include the author of this work who has been closely involved with the new task group charged with writing the second editions of these three major FIDIC publications, still known as the Red, Yellow and Silver Books.

However well regarded, there inevitably comes a time for review and updating to take account of more recent developments in contracting and to build on the substantial experience gained from use of the forms over the intervening years. While the author is a specialist construction lawyer with wide experience of legal issues generated by the forms, the drafting and review bodies also have the inestimable advantage of including many distinguished specialists in other areas covered by the forms, from engineering and management to insurance and finance, and with access to FIDIC experts and commentators from many different jurisdictions and regions. The forms therefore remain a major international and cross‐disciplinary statement of good and accepted practice in this economically vital field.

The new Books will inevitably be the subject of renewed commentary and analysis, particularly in the light of issues and disputes which will arise in as yet unpredictable circumstances. It is notable that the books are now some 50% longer and thus cover in considerably greater detail many provisions, from the extended definitions section to enhanced notice provisions. Whether they will be regarded as over prescriptive and complex remains to be seen but, as pointed out in the introduction to the book, the forms must be usable to parties and individuals whose first language in not English. Thus one of the main aims of the new editions has been to increase clarity and certainty. Another aim has been to promote improved project management and dispute avoidance, important objectives which necessarily result in greater complexity.

This book provides, with the benefit of the author's unrivalled experience, a clear overview and comprehensive guide to each of the 2017 FIDIC Books. For the detailed contract provisions the forms themselves must be read along with the commentary which shows how each Book compares and relates to the others as well as pointing out changes from earlier editions including the 2008 Gold Book, the FIDIC Design‐Build‐Operate form. The book achieves all this with remarkable concision, being somewhat shorter than the three forms themselves and well illustrated with authorities on the earlier editions. No doubt the new forms will generate fresh rounds of court decisions and commentaries but the FIDIC Books will remain at the core of the international infrastructure industry which will continue to benefit from its accumulated experience and guidance.

Professor John Uff CBE QC

Preface

In early 2016 FIDIC asked me if I would be willing to join a new task group to write the second editions of the Red, Yellow and Silver Books. Since the first editions of the three Books were published in 1999 they have become the most widely used engineering standard form contracts internationally, and among the best regarded. It was felt nevertheless that the Books needed to be reviewed and updated to take account of developments in contracting since 1999 and to build on the substantial experience gained from use of the forms over the years. Much work had already been done by the FIDIC Contracts Committee and an earlier task group, but it remained to write the new editions with a view to publication in 2017. As a specialist lawyer I welcomed the opportunity to contribute to the writing of the new contracts and felt honoured to have been asked.

I could not have been in better company. My colleagues on the task group were all highly experienced engineers and FIDIC experts: they were Simon Worley, who became our group leader, Siobhan Fahey, Contracts Committee liaison, John Greenhalgh, Leo Grutters, Aisha Nadar and, assisting throughout as secretary to the group, Shelley Adams. I would like to pay tribute to them all. I would also like to acknowledge with gratitude the close involvement throughout of William Howard, president‐elect of FIDIC and the Executive Committee's primary liaison, and Zoltan Zahonyi, chair of the Contracts Committee.

Our task group reported to the Contracts Committee and we carried out our work under its general direction. At the London Users' Conference in December 2016 a pre‐release version of the Yellow Book was circulated and received extensive comment. This was carefully considered in preparing the eventual second editions of the three Books, along with comments and suggestions received as part of a wider consultation or friendly review by a long list of interested persons and organisations. Each of the Books was subject to a legal review before approval by the Executive Committee prior to eventual publication in December 2017.

The reaction to the new Books has been broadly positive, although they have been said to be too prescriptive and complex. To some extent this criticism was inevitable. One of the main aims of the new editions was to increase clarity and certainty so that the parties and the Engineer or Employer's Representative know exactly what is expected of them and when; another was improved project management and dispute avoidance. Fulfilling these aims was always likely to result in more prescription and complexity, but whether the right balance has been struck will be for users of the contracts to decide.

An important development since publication of the new forms has been the adoption by the World Bank of the 2017 contracts, with complementary special provisions. At the London Users' Conference in December 2018, one year after the new Books were rolled out, the World Bank revealed its intention to move away from using the Multilateral Development Banks version of the Red Book (the ‘Pink Book’) in favour of the 2017 Red Book with special provisions to cover areas of particular concern, such as the environment and social and anti‐corruption matters; the Bank indicated it would do likewise with the 2017 Yellow Book. Subsequently in early 2019 the Bank entered into a licence agreement with FIDIC permitting it to use the 2017 suite with its own conditions of particular application. FIDIC expects to enter into similar agreements with other development banks.

The aim of this book is to provide a clear and comprehensive guide to each of the 2017 FIDIC Books. After providing an overview the contracts will be examined clause by clause with the aim of showing how each Book compares and contrasts with the others and how the second editions compare and contrast with the first editions. Understanding the new contracts depends on seeing how they have developed from the first editions as well as how they relate to each other. There are also important points of intersection with the 2008 Gold Book, the FIDIC Design‐Build‐Operate form.

The first chapter seeks to put the three Books in context by indicating the extent to which they evolved from earlier forms and the distinctive characteristics of each, before providing an overview of the updates, including new potential risks for both Employer and Contractor, and then going on to consider, in the second chapter, key general provisions such as the new rules on notices and limitation of liability. Chapter 3 examines the enhanced role of the Engineer in the Red and Yellow Books/Employer's Representative's function in the Silver including the new procedure for determinations as well as the Employer's obligations and contract administration. The Contractor's obligations are considered in Chapter 4 while Chapter 5 examines his responsibility for design in the Yellow and Silver Books. Chapters 6 to 14 deal respectively with plant, materials and workmanship and staff and labour; time‐related provisions in the three contracts including extensions of time, and the Employer's right to suspend the works; testing on and after completion and the Employer's taking over of the works; defects after taking over, acceptance of the works and unfulfilled obligations; measurement (in the Red Book), the Contract Price and payment; the new variations regime and adjustments to the Price; termination and suspension; care of the works and indemnities and Exceptional Events (previously, Force Majeure). An important feature of the new contracts is their increased emphasis on clarity in the claims process and on dispute avoidance. These topics are examined in the final two chapters, 15 and 16, which deal respectively with the new claims and dispute resolution provisions of the 2017 forms.

I would like finally to express my thanks and appreciation to Dr Paul Sayer at Wiley Blackwell for his encouragement and support, and to Dr Peter Boswell, who so encouraged my involvement with FIDIC and interest in the contracts.

About the Author

William Godwin QC was legal member of the FIDIC Updates Task Group responsible for drafting the 2017 (second) editions of the Red, Yellow and Silver Books. A specialist barrister whose work often involves cross‐border projects, he has extensive experience of acting as counsel in international arbitrations and sits as an arbitrator and adjudicator. He writes and speaks regularly on FIDIC contracts, construction law and arbitration and is the author of International Construction Contracts: A Handbook (Wiley Blackwell 2013).