A New FIDIC Rainbow: Red, Yellow and Silver

by White & Case LLP
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Background

Today, at the International Contract Users Conference in London, the Fédération Internationale Des Ingénieurs-Conseils (FIDIC) launched Second Editions of the Red, Yellow and Silver Books as updates to the First Edition Rainbow Suite of contracts, the pre-eminent standard form contracts between employers and contractors on international construction and engineering projects. The release of the Second Editions comes 18 years after FIDIC released its First Edition Rainbow Suite in 1999.

What are the key changes to the FIDIC Red, Yellow and Silver forms of contract?

The Second Editions seek to build on the substantial experience gained from the use of the First Editions. The Second Editions are much more comprehensive, spanning more than 200 pages each and containing 21 Clauses. Key changes include:

  • The role of the Engineer in the Red and Yellow Books: Clause 3 has been expanded into eight Sub-Clauses; of note is new Sub-Clause 3.7, which requires the Engineer to encourage discussions between the Parties in an endeavour to reach agreement; it also prescribes a detailed procedure for the Engineer to determine any matter or Claim. In addition, Sub-Clause 3.7 imposes a positive obligation on the Engineer to act "neutrally" between the Parties and provides that the Engineer shall not be deemed to act for the Employer when issuing determinations.
  • New Claims Procedure: new Clause 20 prescribes a Claims procedure that applies to both Employer and Contractor Claims. Sub-Clause 20.2, which is the longest Clause within the General Conditions, imposes greater administrative requirements on a Party when issuing a Claim.
  • Dispute Adjudication/Avoidance Boards ("DAABs"): New Clause 21 requires the Parties jointly to appoint a 'standing DAAB'; that is, a DAAB that is appointed at the start of the Contract, which visits the Site on a regular basis and remains in place for the duration of the Contract to assist the Parties in the avoidance of disputes, and in the 'real-time' resolution of Disputes, if and when they arise.
  • Exceptional Events: The Force Majeure provisions in the 1999 First Editions have been replaced with a new Clause titled "Exceptional Events" (new Clause 18). The definition of Exceptional Event is similar in nature to the Force Majeure definition found in Clause 19 of the 1999 First Editions.
  • Significant changes to the guidance notes: FIDIC strongly recommends that the Employer, the Contractor and all drafters of the Special Provisions should have due regard to five 'Golden Principles' and should ensure that any modifications to the General Conditions are limited to those necessary for the particular features of the site and the project and/or are necessary to comply with the applicable law. FIDIC also stresses that modifications should not change the fair and balanced character of a FIDIC contract and that the Contract should remain "recognisable as a FIDIC contract".
  • Significant changes to the alternative Clauses: There are now some 40 pages of alternative clauses. Notable provisions include:
    1. Limitation of Liability: FIDIC has suggested an alternative provision in which separate limits of liability for consequential losses and insured losses are included.
    2. Milestones: FIDIC has suggested that if the Employer wishes to have certain parts of the Works completed by certain times but does not wish to take over those parts of the Works when they are completed, such parts ought to be described in the Specification as "Milestones". In such circumstances, FIDIC recommends that alternative provisions be added that would entitle the Employer to Delay Damages if the Contractor fails to complete the works of the Milestone within the time for completion of the Milestone (subject, of course, to any extension of time).
    3. Amicable Settlement: FIDIC recommends that the Parties consider agreeing a longer time period than the 28 day period stated in new Sub-Clause 21.5 of the General Conditions, in an effort to arrive at an amicable settlement procedure chosen by the Parties.

Comment

The Second Editions are a significant landmark in the development of international contracting for major infrastructure projects worldwide. Care will be required in the preparation of the Particular Conditions to ensure that the terms agreed are appropriate for the needs of the individual project. Once signed, the contracts will require rigorous and pro-active administration in order to achieve effective project delivery.

This evening, Ellis Baker and Anthony Lavers will deliver the lecture "Kaleidoscope: all change in domestic and international standard forms" at the Society of Construction Law, London, in a joint event with TECBAR in which the Second Editions will be considered.

Ellis Baker and Professor Lavers co-authored FIDIC Contracts: Law and Practice in 2009.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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