FIDIC around the world – November 2019

Construction Law International homepage  »  November 2019

 

Chile

Oscar Aitken, Juan Pablo Stitchkin and Eduardo Morandé
Carey, Santiago

 

1. What is your jurisdiction?

Chile.

 

2. Are the FIDIC forms of contract used for projects constructed in your jurisdiction? If yes, which of the FIDIC forms are used, and for what types of projects?

FIDIC contracts are rarely used in Chile. For local and international projects, ad hoc or bespoke contracts are customary. We have occasionally seen the use of FIDIC contracts by international energy developers in construction energy projects.

 

3. Do FIDIC produce their forms of contract in the language of your jurisdiction? If no, what language do you use?

Yes, there are FIDIC forms of contract in Spanish eg, Client/Consultant Model Services Agreement (2006 White Book, 4th ed); Short Form of Contract (1999 Green Book, 1st ed); Construction Contract (1999 Red Book, 1st ed); Plant and Design-Build Contract (1999 Yellow Book, 1st ed); and Works of Civil Engineering Construction (1987 Red Book, 4th Ed). However, in our experience, since these types of contracts are mostly seen within international projects, English versions of the same are more commonly used.

 

4. Are any amendments required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what amendments are required?

No. There are no provisions under the FIDIC forms of contract that would make the agreement voidable or ineffective under Chilean law.

 

5. Are any amendments common in your jurisdiction, albeit not required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what (non-essential) amendments are common in your jurisdiction?

Some common amendments to the FIDIC forms of contract include:

(i) adapting labour and environmental provisions to comply with Chilean laws;

(ii) adjusting the payment mechanism to adapt it to Chilean customary procedures; and

(iii) adjusting limitations of liability to improve enforceability.

 

6. Does your jurisdiction treat Sub-Clause 2.5 of the 1999 suite of FIDIC contracts as a precondition to employer claims (save for those expressly mentioned in the sub-clause)?

No. In our opinion, failure to present the claim on an ‘as soon as practicable’ basis will only make the owner liable for the damages caused by the late presentation of the claim.

 

7. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to contractor claims for additional time and/or money (not including variations)?

In our opinion, generally Section 20.1 will bar a contractor from claiming time and/or money relief (but not necessarily as a condition precedent).

 

8. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to contractor claims for additional time and/or money arising from variations?

In our opinion, generally Section 20.1 will bar a contractor from claiming time and/or money relief (but not necessarily as a condition precedent).

 

9. Are dispute boards used as an interim dispute resolution mechanism in your jurisdiction? If yes, how are dispute board decisions enforced in your jurisdiction?

Dispute boards are rarely used and there is no legislation dealing with them.

DAB decisions (and other ADR decisions different from arbitration or the Arbitration Commission) may be considered to be of contractual nature, in which case they are not directly enforceable in Chile and must be recognised by an ordinary court or an arbitral tribunal as a contractual obligation in order to be enforceable.

In our experience, contracts within major infrastructure projects (such as ports and desalinisation plants) are increasingly including an independent engineer or technical review boards to resolve disputes of a technical nature. This early dispute resolution mechanism is somewhat similar to common-law adjudication procedures; but the key difference is that this mechanism is not recognised by statute (except in some few cases).

 

10. Is arbitration used as the final stage for dispute resolution for construction projects in your jurisdiction? If yes, what types of arbitration (ICC, LCIA, AAA, UNCITRAL, bespoke, etc) are used for construction projects? And what seats?

Yes. Arbitration is commonly used as the final stage dispute resolution mechanism for construction projects.

Local parties usually include contract clauses providing for CAM arbitration (Santiago Arbitration and Mediation Center of the Santiago Chamber of Commerce) under Chilean law and based in Chile. The seat is normally Santiago. The CAM arbitration procedure is similar to the ICC procedure, with some differences in order to make it consistent with Chilean civil procedure laws.

Foreign parties often insert contract clauses providing for International Chamber of Commerce (ICC) arbitration normally under Chilean law and based in Chile.

Note that Arbitration tribunals are considered to be part of the judiciary and are systematically regulated in Chilean legislation. Arbitration awards are binding and directly enforceable.

 

11. Are there any notable local court decisions interpreting FIDIC contracts? If so, please provide a short summary.

There are none that we are aware of. Most FIDIC contracts have arbitration clauses and are normally subject to confidentiality provisions.

 

12. Is there anything else specific to your jurisdiction and relevant to the use of FIDIC on projects being constructed in your jurisdiction that you would like to share?

While the FIDIC standard forms of contract are commonly used throughout the world and several of its clauses commonly construed (or interpreted by case law), the fact that Chile is a civil law country and that case law is not binding cause uncertainty on how a matter involving a FIDIC provision will be resolved.

International developers should also consider that Chilean contractors are not familiar with FIDIC contracts, so using FIDIC contracts may increase the transaction costs and lengthen the negotiation process, which is something that the parties seek to avoid by recurring to standard forms, such as FIDIC.

 

Oscar Aitken is partner and co-head of Carey’s Construction and Engineering Group. He can be contacted at oaitken@carey.cl. Juan Pablo Stitchkin is partner at Carey, co-head of the Construction and Engineering Group, and can be contacted at jpstitchkin@carey.cl. Eduardo Morandé is an associate of Carey and member of the Construction and Engineering Group and can be contacted at emorande@carey.cl.

 


 

 

Russia

Victor Varavenko
Vladivostok State University of Economics and Service, Vladivostok

 

1. What is your jurisdiction?

Russian Federation.

 

2. Are the FIDIC forms of contract used for projects constructed in your jurisdiction?

Yes, they are. FIDIC forms are used for projects where both public authorities and private entities act as employers in infrastructure, especially energy projects. Sometimes the implementation of FIDIC model contracts is specified by laws or international treaties. Russian employers and contractors use 1999 Red Book, 1999 Yellow Book and 1999 Silver Book.

 

3. Do FIDIC produce their forms of contract in the language of
your jurisdiction?

Yes, it does. All the 1999 suite of contracts are produced by FIDIC in Russian. Unfortunately, some legal notions used in the terms and conditions of FIDIC model contracts stem from common law and, as a result, do not have an equivalent when translated from English into Russian accurately and correctly. Thus, it is better to use English versions of model contracts.

 

4. Are any amendments required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction?

No, there are not. All the basic European contract law principles are recognised and protected by Russian legislation. In addition, in 2015, the Russian Civil Code was amended, and concepts such as ‘indemnity’, ‘retention money’ and ‘representation’ are now known and recognised in Russia. Thus, FIDIC model contracts and agreements may operate in the Russian legal system without any binding amendments.

 

5. Are any amendments common in your jurisdiction, albeit not required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction?

Yes, there are some amendments. Where an employer is a public authority, Clause 20 may undergo drastic changes. The employer will exclude the application of the dispute adjudication board (DAB) and replace it with the arbitration to a state court procedure by specifying related provisions in the Particular Conditions.

 

6. Does your jurisdiction treat Sub-Clause 2.5 of the 1999 suite of FIDIC contracts as a precondition to Employer claims (save for those expressly mentioned in the Sub-Clause)?

Yes, it does. Entitlements described in Sub-Clause 2.5 according to the Russian Civil Code may lead to an amendment to the terms and conditions of the contract. Any amendment shall proceed on the ground of the parties’ consent. Thus, before claiming payment or extension of the defects notification period (DNP), a party should send notice and try to negotiate the matter.

 

7. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money (not including Variations)?

Yes, it does. See the answer to question six.

 

8. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money arising from Variations?

Yes, it does. See the answer to question six.

 

9. Are dispute boards used as an interim dispute resolution mechanism in your jurisdiction?

No, they are not. DABs are not a well-known alternative dispute resolution (ADR) procedure in the Russian legal system.

 

10. Is arbitration used as the final stage for dispute resolution for construction projects in your jurisdiction?

Yes, it is. The arbitration award is final and cannot be the second-guessed by a state court. A party has to appeal to a state court only to grant an enforcement order to execute the arbitration award.

Where the employer is a private (Russian or foreign) entity, all mentioned arbitrations in addition to Hong Kong and Singapore arbitrations may be used. Where the employer is a public agency, we may expect a reference to the competence of the International Commercial Arbitration Court of the Chamber
of Trade and Commerce of the Russian Federation.

11. Are there any notable local court decisions interpreting FIDIC contracts? If so, please provide a short summary.

Yes, there are some:

• Judgment of the Thirteenth Arbitration Court of Appeal dated 30.08.2013, Case No А56-55092/2011: A state court interpreted the 1999 Silver Book as the set of trade customs used in the construction industry.

• Judgment of the Federal Arbitration Court of the Moscow Region dated 25.10.2007 No KT-A41/10942-07, Case No А41-K1-8339/07: A state court stated its incompetence to proceed with the dispute, which according to Sub-Clause 20.6 of the General Conditions of the 1999 Red Book should be resolved by the Arbitration Institute of the Stockholm Chamber of Commerce.

• Judgment of the Ninth Arbitration Court of Appeal dated 11.09.2009 No 09АП-15826/2009-ГК, Case No А40-4363/09-104-30: A state court qualified that the engineer’s avoidance of determining a matter and his references to the employer as an intentional omission under the General Conditions of the 1999 Red Book, and judged the recovery of damages.

 

12. Is there anything else specific to your jurisdiction and relevant to the use of FIDIC on projects being constructed in your jurisdiction that you would like to share?

In general, from the legal standpoint, there are no serious barriers or obstacles to using FIDIC model contracts and agreements in Russia. There are more similarities than differences between Russian civil legislation and European private law.

The contractor may expect some difficulties where the employer is a public agency because, in such a case, the State Procurement Law will be applied; however, there are some differences that lie deeper.

FIDIC forms of contract reflect the project management approach to the implementation of construction projects. The system of management in the Russian construction industry differs from that approach in many ways. One difference was demonstrated in Case No А40-4363/09-104-30, where the engineer empowered to make a determination on the ground of Sub-Clause 3.5 of the 1999 Red Book and Article 749 of the Civil Code of the Russian Federation notified the contractor that he intended to apply to the employer for determination. Thus, some lawful terms and conditions of FIDIC model contracts may not work.

 

Victor Varavenko is an associate professor of the Civil Law Department of Vladivostok State University of Economics and Service, PhD, docent. His area of scientific interest and law practice is construction contract law. He can be contacted at vevaravenko@gmail.com.

 

 

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